WORLD ACCESS INC /NEW/, S-4, 1998-11-10

WORLD ACCESS INC /NEW/
S-4, 1998-11-10
ELECTRONIC PARTS & EQUIPMENT, NEC

Previous: NORWEST ASSET SEC CORP MORT PASS THR CERT SER 1998-22 TRUST, 8-K, 1998-11-10

Next: CAPITAL BANK CORP, S-4/A, 1998-11-10

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

WORLD ACCESS, INC.
(FORMERLY WAXS INC.)
(Exact name of Registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
DELAWARE 3661 58-2398004
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

<TABLE>
<S> <C>
MARK A. GERGEL
945 E. PACES FERRY ROAD, SUITE 2240 945 E. PACES FERRY ROAD, SUITE 2240
ATLANTA, GEORGIA 30326 ATLANTA, GEORGIA 30326
(404) 231-2025 (404) 231-2025
(Name, address, including zip code, and telephone (Name, address, including zip code, and telephone
number, number,
area code, of Registrant's principal executive offices) area code, of agent for service)
</TABLE>

---------------------
COPIES TO:

<TABLE>
<S> <C>
STEVEN E. FOX, ESQ. LOU R. KLING, ESQ.
ROBERT C. HUSSLE, ESQ. ERIC J. FRIEDMAN, ESQ.
ROGERS & HARDIN LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
2700 INTERNATIONAL TOWER 919 THIRD AVENUE
229 PEACHTREE STREET, N.E. NEW YORK, NEW YORK 10022
ATLANTA, GEORGIA 30303 (212) 735-3000
(404) 522-4700
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after this registration statement becomes effective and
certain other conditions to the merger proposed herein are satisfied.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ] ________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED(2) PER UNIT(3) OFFERING PRICE(3) FEE(4)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share....... 8,082,282 shares $22.8164 $184,408,579 $51,266
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) This registration statement relates to shares of common stock, par value
$.01 per share, of World Access, Inc. ("World Access Common Stock") issuable
to holders of capital stock of Telco Systems, Inc., a Delaware corporation
("Telco Systems"), in the proposed merger of Telco Systems with and into a
wholly owned subsidiary of World Access, Inc. (the "Merger").
(2) The number of shares to be registered is based upon an estimate of the
maximum number of shares of common stock, par value $.01 per share, of Telco
Systems ("Telco Systems Common Stock") presently outstanding and reserved
for issuance under various plans or instruments or otherwise expected to be
issued on or before the closing date of the Merger multiplied by the
approximate exchange ratio of .5862 shares of World Access Common Stock for
each share of Telco Systems Common Stock.
(3) Calculated in accordance with Rule 457(f)(1) under the Securities Act, based
on the aggregate market value on November 6, 1998 of the shares of Telco
Systems Common Stock expected to be exchanged in connection with the Merger
and computed by dividing (i) the product of (A) the average of the high and
low prices of Telco Systems Common Stock as reported on The Nasdaq National
Market on November 6, 1998 ($13.375) and (B) 13,787,584, representing the
maximum number of shares of Telco Systems Common Stock presently outstanding
and reserved for issuance under various plans or instruments or otherwise
expected to be exchanged in connection with the Merger, by (ii) 8,082,282,
representing the maximum number of shares of World Access Common Stock
expected to be issued in connection with the Merger.
(4) The registration fee of $51,266 was calculated pursuant to Rule 457(f) under
the Securities Act as follows: $278 per $1,000,000 (or fraction thereof) of
the proposed maximum aggregate offering price. A fee of $31,980 was paid on
July 31, 1998 pursuant to Section 14(g) of the Securities Exchange Act of
1934, as amended, in connection with the filing of preliminary proxy
materials by World Access, Inc. and Telco Systems. Pursuant to Rule 457(b)
under the Securities Act, the registration fee payable herewith has been
reduced by $31,980, the amount previously paid upon filing of such
preliminary proxy materials. Accordingly, an additional fee of $19,286 is
required to be and has been paid with the initial filing of this
Registration Statement.
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

WORLD ACCESS, INC.
945 E. PACES FERRY ROAD
ATLANTA, GEORGIA 30326

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders (the
"World Access Special Meeting") of World Access, Inc. ("World Access"), to be
held at the principal offices of World Access located at 945 E. Paces Ferry
Road, Suite 2240, Atlanta, Georgia 30326, on November 30, 1998, at 10:00 a.m.,
local time.

At the World Access Special Meeting you will be asked to consider and vote
upon:

(i) A proposal to approve and adopt the Agreement and Plan of Merger and
Reorganization, dated as of June 4, 1998, as amended (as so amended, the "Merger
Agreement"), among World Access (formerly known as WAXS INC.), WA Telcom
Products Co., Inc. (formerly known as World Access, Inc.), a Delaware
corporation and a direct wholly owned subsidiary of World Access ("Old World
Access"), Telco Systems, Inc., a Delaware corporation ("Telco Systems"), and
Tail Acquisition Corporation, a Delaware corporation and a direct wholly owned
subsidiary of World Access ("Merger Sub"), which provides, among other things,
for the merger of Telco Systems with and into Merger Sub (the "Merger"), with
Merger Sub (then to be known as "Telco Systems, Inc.") continuing as the
surviving corporation and a direct wholly owned subsidiary of World Access, and
for the issuance of shares (the "Share Issuance") of World Access common stock,
and, at the election of World Access, the payment of cash (subject to certain
limitations) in exchange for shares of Telco Systems common stock in the Merger;

(ii) A proposal to approve an amendment to the World Access Certificate of
Incorporation to increase the number of authorized shares of World Access Common
Stock;

(iii) A proposal to adopt the World Access, Inc. 1998 Incentive Equity Plan;
and

(iv) A proposal to ratify and approve Indemnification Agreements with the
directors and certain officers of World Access.

THE BOARD OF DIRECTORS OF WORLD ACCESS HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER AGREEMENT, THE MERGER AND THE SHARE ISSUANCE, AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF WORLD ACCESS VOTE FOR: (I) THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER AND THE SHARE ISSUANCE; (II) THE
APPROVAL OF THE AMENDMENT TO THE WORLD ACCESS CERTIFICATE OF INCORPORATION;
(III) THE ADOPTION OF THE WORLD ACCESS, INC. 1998 INCENTIVE EQUITY PLAN; AND
(IV) THE RATIFICATION AND APPROVAL OF THE INDEMNIFICATION AGREEMENTS.

You are urged to read carefully the accompanying Joint Proxy
Statement/Prospectus for more detailed information concerning World Access,
Telco Systems, the Merger Agreement and the Merger.

Whether or not you plan to attend the World Access Special Meeting in
person, please complete, sign and date the accompanying proxy card and return it
in the enclosed prepaid envelope. You may revoke your proxy in the manner
described in the accompanying Joint Proxy Statement/Prospectus at any time
before it has been voted at the World Access Special Meeting. If you attend the
World Access Special Meeting in person, you may vote your shares personally on
all matters even if you have previously returned a proxy card. Your prompt
cooperation will be greatly appreciated.

We look forward to seeing you on November 30, 1998.

Sincerely,

Steven A. Odom
Chairman of the Board
and Chief Executive Officer

November 10, 1998
<PAGE> 3

WORLD ACCESS, INC.
945 E. Paces Ferry Road
Atlanta, Georgia 30326
---------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 30, 1998
---------------------

To the Stockholders of World Access, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "World
Access Special Meeting") of World Access, Inc., a Delaware corporation ("World
Access"), will be held at the principal offices of World Access located at 945
E. Paces Ferry Road, Suite 2240, Atlanta, Georgia 30326, on November 30, 1998,
at 10:00 a.m., local time, for the purposes described below.

The purposes of the World Access Special Meeting are as follows:

1. To approve and adopt the Agreement and Plan of Merger and
Reorganization, dated as of June 4, 1998, as amended (as so amended, the
"Merger Agreement"), among World Access (formerly known as WAXS INC.), WA
Telcom Products Co., Inc. (formerly known as World Access, Inc.), a
Delaware corporation and a direct wholly owned subsidiary of World Access
("Old World Access"), Telco Systems, Inc., a Delaware corporation ("Telco
Systems"), and Tail Acquisition Corporation, a Delaware corporation and a
direct wholly owned subsidiary of World Access ("Merger Sub"), which
provides, among other things, for the merger of Telco Systems with and into
Merger Sub (the "Merger"), with Merger Sub (then to be known as "Telco
Systems, Inc.") continuing as the surviving corporation and a direct wholly
owned subsidiary of World Access, and for the issuance (the "Share
Issuance") of shares of World Access common stock, par value $.01 per share
(the "World Access Common Stock"), and, at the election of World Access,
the payment of cash (subject to certain limitations) in exchange for shares
of Telco Systems common stock in the Merger. At the effective time of the
Merger (the "Effective Time"), each outstanding share of common stock, par
value $.01 per share, of Telco Systems (the "Telco Systems Common Stock")
(together with the right to purchase one-hundredth of a share of Series A
Participating Cumulative Preferred Stock, par value $.01 per share, of
Telco Systems) (other than (i) shares owned by Telco Systems, World Access
or Old World Access, which will be cancelled, and (ii) shares held by
persons who have perfected their appraisal rights (if applicable) under
Section 262 of the General Corporation Law of the State of Delaware) will
be converted into and become exchangeable for that number of shares of
World Access Common Stock (the "Exchange Ratio") equal to the quotient of
$17.00 divided by the average of the last reported sales prices of one
share of World Access Common Stock on The Nasdaq National Market during the
period of the 20 most recent trading days ending three business days before
the Effective Time (the "World Access Market Price") (unless the World
Access Market Price exceeds $36.00 per share, in which case each
outstanding share of Telco Systems Common Stock will be converted into
.4722 shares of World Access Common Stock, or unless the World Access
Market Price is less than $29.00 per share, in which case each outstanding
share of Telco Systems Common Stock will be converted into .5862 shares of
World Access Common Stock), provided that (i) the nominal value of the
consideration to be received by holders of Telco Systems Common Stock will
be no less than $12.00 per share (the "Minimum Nominal Value") and (ii)
World Access may elect to pay cash in lieu of issuing shares of World
Access Common Stock so long as such cash does not comprise more than 55% of
the total consideration to be received by Telco Systems stockholders (based
on the average of the high and low trading prices of World Access Common
Stock on the day the Merger is consummated). Also at the Effective Time,
each outstanding option to purchase Telco Systems Common Stock will be
assumed by World Access and converted into an option to purchase shares of
World Access Common Stock as adjusted to account for the Exchange Ratio and
the Minimum Nominal Value;

2. To approve an amendment to the World Access Certificate of
Incorporation to increase the number of authorized shares of World Access
Common Stock to 150,000,000;
<PAGE> 4

3. To adopt the World Access, Inc. 1998 Incentive Equity Plan;

4. To ratify and approve Indemnification Agreements with the directors
and certain officers of World Access; and

5. To transact such other business as may properly come before the
World Access Special Meeting or any adjournments or postponements thereof.

The Merger and the Merger Agreement, as well as the other proposals
identified above to be considered at the World Access Special Meeting, are more
fully described in the accompanying Joint Proxy Statement/Prospectus.

The Board of Directors has fixed the close of business on November 2, 1998
as the record date for determining stockholders entitled to vote at the World
Access Special Meeting and any adjournments or postponements thereof.
Accordingly, only stockholders of record on such date are entitled to notice of,
and to vote at, the World Access Special Meeting and any adjournments or
postponements thereof. A list of stockholders will be available for inspection
at the offices of World Access located at 945 E. Paces Ferry Road, Suite 2240,
Atlanta, Georgia 30326 at least ten days prior to the World Access Special
Meeting and will also be available for inspection at the World Access Special
Meeting.

THE BOARD OF DIRECTORS OF WORLD ACCESS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER AND
THE SHARE ISSUANCE, AND FOR EACH OF THE OTHER PROPOSALS DESCRIBED ABOVE.

BY ORDER OF THE BOARD OF DIRECTORS

Martin D. Kidder
Secretary

November 10, 1998

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE WORLD ACCESS SPECIAL
MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE WORLD ACCESS SPECIAL
MEETING, YOU ARE URGED TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD
AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID, SELF-
ADDRESSED ENVELOPE. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE WORLD ACCESS SPECIAL MEETING. IF YOU ATTEND THE WORLD ACCESS
SPECIAL MEETING IN PERSON, YOU MAY VOTE YOUR SHARES PERSONALLY ON ALL MATTERS
EVEN IF YOU HAVE PREVIOUSLY RETURNED A PROXY CARD.

ii
<PAGE> 5

TELCO SYSTEMS, INC.
63 NAHATAN STREET
NORWOOD, MASSACHUSETTS 02062

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders (the
"Telco Systems Special Meeting") of Telco Systems, Inc. ("Telco Systems"), to be
held at the principal offices of Telco Systems located at 63 Nahatan Street,
Norwood, Massachusetts 02062, on November 30, 1998, at 10:00 a.m., local time.

At the Telco Systems Special Meeting you will be asked to consider and vote
upon a proposal to approve and adopt the Agreement and Plan of Merger and
Reorganization, dated as of June 4, 1998, as amended (as so amended, the "Merger
Agreement"), among World Access, Inc. (formerly known as WAXS INC.), a Delaware
corporation ("World Access"), WA Telcom Products Co., Inc. (formerly known as
World Access, Inc.), a Delaware corporation and a direct wholly owned subsidiary
of World Access, Telco Systems and Tail Acquisition Corporation, a Delaware
corporation and a direct wholly owned subsidiary of World Access ("Merger Sub"),
and the transactions contemplated thereby, including the merger of Telco Systems
with and into Merger Sub (the "Merger") pursuant to the Merger Agreement.

THE BOARD OF DIRECTORS OF TELCO SYSTEMS HAS UNANIMOUSLY APPROVED AND
ADOPTED THE MERGER AGREEMENT AND APPROVED THE MERGER AND UNANIMOUSLY RECOMMENDS
VOTING FOR THE APPROVAL OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.

Whether or not you plan to attend the Telco Systems Special Meeting in
person, please complete, sign and date the accompanying proxy card and return it
in the enclosed prepaid envelope. You may revoke your proxy in the manner
described in the accompanying Joint Proxy Statement/Prospectus at any time
before it has been voted at the Telco Systems Special Meeting. If you attend the
Telco Systems Special Meeting in person, you may vote your shares personally on
all matters even if you have previously returned a proxy card. Your prompt
cooperation will be greatly appreciated.

This Joint Proxy Statement/Prospectus provides you with detailed
information about the proposed merger. We encourage you to read this document
carefully. In addition, you may obtain information about Telco Systems and World
Access from documents that we have filed with the Securities and Exchange
Commission.

Sincerely,

William B. Smith
President and Chief Executive Officer

November 10, 1998
<PAGE> 6

TELCO SYSTEMS, INC.
63 NAHATAN STREET
NORWOOD, MASSACHUSETTS 02062

---------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 30, 1998

---------------------

To the Stockholders of Telco Systems, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Telco
Systems Special Meeting") of Telco Systems, Inc., a Delaware corporation ("Telco
Systems"), will be held at the principal offices of Telco Systems located at 63
Nahatan Street, Norwood, Massachusetts 02062, on November 30, 1998, at 10:00
a.m., local time, for the following purposes:

1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger and Reorganization, dated as of June 4, 1998,
as amended (as so amended, the "Merger Agreement"), among World Access,
Inc. (formerly known as WAXS INC.), a Delaware corporation ("World
Access"), WA Telcom Products Co., Inc. (formerly known as World Access,
Inc.), a Delaware corporation and a direct wholly owned subsidiary of World
Access ("Old World Access"), Telco Systems and Tail Acquisition
Corporation, a Delaware corporation and a direct wholly owned subsidiary of
World Access ("Merger Sub"), which provides, among other things, for the
merger of Telco Systems with and into Merger Sub (the "Merger") with Merger
Sub (then to be known as "Telco Systems, Inc.") continuing as the surviving
corporation and a direct wholly owned subsidiary of World Access, and for
the issuance of shares of World Access common stock, par value $.01 per
share ("World Access Common Stock"), and, at the election of World Access,
the payment of cash (subject to certain limitations) in exchange for shares
of Telco Systems common stock in the Merger. At the effective time of the
Merger (the "Effective Time"), each outstanding share of common stock, par
value $.01 per share, of Telco Systems ("Telco Systems Common Stock")
(together with the right to purchase one-hundredth of a share of Series A
Participating Cumulative Preferred Stock, par value $.01 per share, of
Telco Systems) (other than (i) shares owned by Telco Systems, World Access
or Old World Access, which will be cancelled, and (ii) shares held by
persons who have perfected their appraisal rights (if applicable) under
Section 262 of the General Corporation Law of the State of Delaware) will
be converted into and become exchangeable for that number of shares of
World Access Common Stock (the "Exchange Ratio") equal to the quotient of
$17.00 divided by the average of the last reported sales prices of one
share of World Access Common Stock on The Nasdaq National Market during the
period of the 20 most recent trading days ending three business days before
the Effective Time (the "World Access Market Price") (unless the World
Access Market Price exceeds $36.00 per share, in which case each
outstanding share of Telco Systems Common Stock will be converted into
.4722 shares of World Access Common Stock, or unless the World Access
Market Price is less than $29.00 per share, in which case each outstanding
share of Telco Systems Common Stock will be converted into .5862 shares of
World Access Common Stock), provided that (i) the nominal value of the
consideration to be received by holders of Telco Systems Common Stock will
be no less than $12.00 per share (the "Minimum Nominal Value") and (ii)
World Access may elect to pay cash in lieu of issuing shares of World
Access Common Stock so long as such cash does not comprise more than 55% of
the total consideration to be received by Telco Systems stockholders (based
on the average of the high and low trading prices of the World Access
Common Stock on the day the Merger is consummated). Also at the Effective
Time, each outstanding option to purchase Telco Systems Common Stock will
be assumed by World Access and converted into an option to purchase shares
of World Access Common Stock as adjusted to account for the Exchange Ratio
and the Minimum Nominal Value; and

2. To transact such other business as may properly come before the
Telco Systems Special Meeting or any adjournments or postponements thereof.
<PAGE> 7

The Merger and the Merger Agreement are more fully described in the
accompanying Joint Proxy Statement/Prospectus.

The Board of Directors has fixed the close of business on November 6, 1998
as the record date for determining stockholders entitled to vote at the Telco
Systems Special Meeting and any adjournments or postponements thereof.
Accordingly, only stockholders of record on such date are entitled to notice of,
and to vote at, the Telco Systems Special Meeting and any adjournments or
postponements thereof. A list of stockholders will be available for inspection
at the offices of Telco Systems located at 63 Nahatan Street, Norwood,
Massachusetts 02062 at least ten days prior to the Telco Systems Special Meeting
and will also be available for inspection at the Telco Systems Special Meeting.

THE BOARD OF DIRECTORS OF TELCO SYSTEMS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.

BY ORDER OF THE BOARD OF DIRECTORS

William J. Stuart
Secretary

November 10, 1998

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE TELCO SYSTEMS SPECIAL
MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE TELCO SYSTEMS SPECIAL
MEETING, YOU ARE URGED TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD
AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID, SELF-
ADDRESSED ENVELOPE. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE TELCO SYSTEMS SPECIAL MEETING. IF YOU ATTEND THE TELCO SYSTEMS
SPECIAL MEETING IN PERSON, YOU MAY VOTE YOUR SHARES PERSONALLY ON ALL MATTERS
EVEN IF YOU HAVE PREVIOUSLY RETURNED A PROXY CARD.

ii
<PAGE> 8

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... 2
TRADEMARKS.................................................. 3
SUMMARY..................................................... 4
The Companies............................................. 4
World Access........................................... 4
Telco Systems.......................................... 4
Overview of the Merger.................................... 5
The World Access Special Meeting.......................... 6
The Telco Systems Special Meeting......................... 7
Recommendation of the World Access Board of Directors..... 7
Recommendation of the Telco Systems Board of Directors.... 8
Opinion of the World Access Financial Advisor............. 8
Opinion of the Telco Systems Financial Advisor............ 8
The Merger................................................ 8
Effective Time of the Merger........................... 8
Conditions to the Merger............................... 8
Termination; Termination Fees.......................... 9
Regulatory Matters..................................... 9
Appraisal Rights....................................... 9
Interests of Certain Persons in the Merger............. 9
Accounting Treatment................................... 10
Federal Income Tax Consequences........................ 10
Exchange of Share Certificates......................... 10
Operations Following the Merger........................ 10
Amendment to the Merger Agreement...................... 10
Recent World Access Developments....................... 11
MARKETS AND MARKET PRICES................................... 12
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION..... 14
World Access Selected Historical Financial Information.... 14
World Access Recent Financial Results..................... 16
NACT Selected Historical Financial Information............ 17
Telco Systems Selected Historical Financial Information... 19
Unaudited Selected Pro Forma Combined Financial
Information............................................ 21
COMPARATIVE PER SHARE DATA.................................. 23
RISK FACTORS................................................ 25
Risk Factors Concerning the Merger........................ 25
Risk Factors Concerning World Access and Telco Systems.... 25
Risk Factors Concerning World Access...................... 28
Risk Factors Concerning Telco Systems..................... 31
THE SPECIAL MEETINGS........................................ 33
The World Access Special Meeting.......................... 33
The Telco Systems Special Meeting......................... 34
Proxies................................................... 35
THE MERGER.................................................. 37
General................................................... 37
Conversion of Telco Systems Common Stock.................. 37
Background of the Merger.................................. 38
World Access Reasons for the Merger; Recommendation of the
World Access Board of Directors........................ 41
Telco Systems Reasons for the Merger; Recommendation of
the Telco Systems Board of Directors................... 42
</TABLE>

i
<PAGE> 9

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Opinion of World Access' Financial Advisor................ 44
Opinion of Telco Systems' Financial Advisor............... 49
Federal Income Tax Consequences........................... 55
Limitations on Resales by Affiliates...................... 57
Accounting Treatment...................................... 57
Interests of Certain Persons in the Merger................ 57
Regulatory Matters........................................ 60
Operations Following the Merger........................... 60
Appraisal Rights.......................................... 60
Exchange of Shares........................................ 63
THE MERGER AGREEMENT........................................ 65
Effective Time............................................ 65
Corporate Matters......................................... 65
Conversion of Securities.................................. 65
Options to Purchase Telco Systems Common Stock............ 65
Representations and Warranties............................ 66
Conduct of Business Pending the Merger.................... 66
Notices of Certain Events................................. 67
Access to Information; Confidentiality.................... 67
No Solicitation of Transactions........................... 67
Plan of Reorganization.................................... 68
Further Action; Consents; Filings......................... 68
Nasdaq Listing............................................ 69
Conditions to the Merger.................................. 69
Termination............................................... 69
Termination Fees and Expenses............................. 70
Amendment and Waiver...................................... 70
THE STOCKHOLDERS PROXY AGREEMENT............................ 72
WORLD ACCESS................................................ 73
Business.................................................. 73
Properties................................................ 79
Legal Proceedings......................................... 80
Management's Discussion and Analysis of Financial
Condition and Results of Operations of World Access.... 81
Management's Discussion and Analysis of Financial
Condition and Results of Operations of NACT............ 97
Directors and Executive Officers.......................... 105
Executive Compensation.................................... 107
Certain Relationships and Related Transactions............ 111
PRINCIPAL STOCKHOLDERS OF WORLD ACCESS...................... 112
TELCO SYSTEMS............................................... 114
Business.................................................. 114
Properties................................................ 118
Legal Proceedings......................................... 119
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 120
PRINCIPAL STOCKHOLDERS OF TELCO SYSTEMS..................... 126
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........... 128
DESCRIPTION OF WORLD ACCESS CAPITAL STOCK................... 153
General................................................... 153
World Access Common Stock................................. 153
World Access Preferred Stock.............................. 153
Delaware Business Combination Statute..................... 154
Liability of Directors.................................... 154
Transfer Agent............................................ 154
</TABLE>

ii
<PAGE> 10

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARISON OF STOCKHOLDER RIGHTS............................ 155
Authorized Capital........................................ 155
Board of Directors........................................ 156
Committees of the Board of Directors...................... 156
Newly Created Directorships and Vacancies................. 156
Removal of Directors...................................... 156
Officers.................................................. 156
Special Meetings of Stockholders.......................... 157
Quorum at Stockholder Meetings............................ 157
Stockholder Action by Written Consent..................... 157
Advance Notice of Stockholder-Proposed Business at Annual
Meetings............................................... 157
Amendment of Governing Documents.......................... 157
Fair Price Provisions..................................... 158
Rights Agreement.......................................... 159
ADDITIONAL MATTERS SUBMITTED TO A VOTE OF WORLD ACCESS
STOCKHOLDERS.............................................. 160
Additional Proposal No. 1 -- Proposal to amend the
Certificate of Incorporation of World Access to
Increase the Number of Authorized Shares of World
Access Common Stock to 150,000,000..................... 160
Additional Proposal No. 2 -- Proposal to adopt the World
Access, Inc. 1998 Incentive Equity Plan................ 161
Additional Proposal No. 3 -- Proposal to ratify and
approve Indemnification Agreements with the Directors
and Certain Officers of World Access................... 165
OTHER MATTERS............................................... 170
EXPERTS..................................................... 170
LEGAL MATTERS............................................... 171
STOCKHOLDER PROPOSALS....................................... 171
INDEX TO FINANCIAL STATEMENTS............................... F-1

APPENDIX A: Agreement and Plan of Merger and
Reorganization, as amended by the First
Amendment thereto........................... A-1
APPENDIX B: Opinion of The Robinson-Humphrey Company,
LLC......................................... B-1
APPENDIX B-1: Confirmation of Opinion of The
Robinson-Humphrey Company, LLC.............. B-3
APPENDIX C: Opinion of Broadview International LLC...... C-1
APPENDIX D: Stockholders Proxy Agreement................ D-1
APPENDIX E: Section 262 of the DGCL..................... E-1
APPENDIX F: Certificate of Amendment to Certificate of
Incorporation of World Access, Inc.......... F-1
APPENDIX G: World Access, Inc. 1998 Incentive Equity
Plan........................................ G-1
APPENDIX H: Form of Indemnification Agreement........... H-1
</TABLE>

iii
<PAGE> 11

WORLD ACCESS, INC.
AND

TELCO SYSTEMS, INC.

JOINT PROXY STATEMENT
---------------------
WORLD ACCESS, INC.
PROSPECTUS
---------------------
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
World Access, Inc., a Delaware corporation ("World Access"), in connection with
the solicitation of proxies by the board of directors of World Access for use at
the special meeting of stockholders (the "World Access Special Meeting") of
World Access to be held at the principal offices of World Access located at 945
E. Paces Ferry Road, Suite 2240, Atlanta, Georgia 30326, on November 30, 1998,
at 10:00 a.m., local time, and at any adjournments or postponements thereof, for
the purposes set forth herein and in the accompanying notice of special meeting
of stockholders of World Access.

This Joint Proxy Statement/Prospectus is also being furnished to
stockholders of Telco Systems, Inc., a Delaware corporation ("Telco Systems"),
in connection with the solicitation of proxies by the board of directors of
Telco Systems for use at the special meeting of stockholders of Telco Systems
(the "Telco Systems Special Meeting") to be held at the principal offices of
Telco Systems located at 63 Nahatan Street, Norwood, Massachusetts 02062, on
November 30, 1998 at 10:00 a.m., local time, and at any adjournments or
postponements thereof, for the purposes set forth herein and in the accompanying
notice of special meeting of stockholders of Telco Systems.

This Joint Proxy Statement/Prospectus also constitutes a prospectus of World
Access with respect to shares of common stock, par value $.01 per share, of
World Access (the "World Access Common Stock") to be issued in connection with
the merger (the "Merger") of Telco Systems with and into Tail Acquisition
Corporation, a Delaware corporation and a direct wholly owned subsidiary of
World Access ("Merger Sub"), with Merger Sub (then to be known as "Telco
Systems, Inc.") continuing as the surviving corporation and a direct wholly
owned subsidiary of World Access, pursuant to the Agreement and Plan of Merger
and Reorganization, dated as of June 4, 1998, as amended (as so amended, the
"Merger Agreement"), among Telco Systems, World Access (formerly known as WAXS
INC.), Merger Sub and WA Telcom Products Co., Inc. (formerly known as World
Access, Inc., "Old World Access"). At the effective time of the Merger (the
"Effective Time"), each outstanding share of common stock, par value $.01 per
share, of Telco Systems (the "Telco Systems Common Stock") (together with the
associated right to purchase one-hundredth of a share of Series A Participating
Cumulative Preferred Stock, par value $.01 per share, of Telco Systems (the
"Associated Rights")) (other than (i) shares owned by Telco Systems, World
Access or Old World Access, which will be cancelled, and (ii) shares held by
persons who have perfected their appraisal rights (if applicable) under Section
262 of the General Corporation Law of the State of Delaware (the "DGCL")) will
be converted into and become exchangeable for that number of shares of World
Access Common Stock equal to (the "Exchange Ratio") the quotient of $17.00
divided by the average of the last reported sale prices of one share of World
Access Common Stock on The Nasdaq National Market ("Nasdaq") during the period
of the 20 most recent trading days ending three business days before the
Effective Time (the "World Access Market Price") (unless the World Access Market
Price exceeds $36.00 per share, in which case each outstanding share of Telco
Systems Common Stock will be converted into .4722 shares of World Access Common
Stock, or unless the World Access Market Price is less than $29.00 per share, in
which case each outstanding share of Telco Systems Common Stock will be
converted into .5862 shares of World Access Common Stock), provided that (i) the
nominal value of the consideration to be received by holders of Telco Systems
Common Stock will be no less than $12.00 per share (the "Minimum Nominal Value")
and (ii) World Access may elect to pay cash in lieu of issuing shares of World
Access Common Stock so long as such cash does not comprise more than 55% of the
total consideration to be received by Telco Systems stockholders (based on the
average of the high and low trading prices of the World Access Common Stock on
the day the Merger is consummated). If World Access elects to pay cash in the
Merger in lieu of issuing shares of World Access Common Stock, then each share
of Telco Systems Common Stock will be exchanged for a pro rata portion of (i)
the aggregate amount of cash that World Access elects to pay (subject to the 55%
limitation described above) (the "Aggregate Cash Pool") and (ii) the aggregate
number of shares of World Access Common Stock to be issued in the Merger, which
will be equal to the number of shares of World Access Common Stock that would
have been issued in the Merger had World Access not elected to include cash in
the merger consideration less that number of such shares having a value (based
upon the World Access Market Price) equal to the Aggregate Cash Pool. The
consideration to be received by the Telco Systems stockholders under the Merger
Agreement is referred to herein as the "Merger Consideration". World Access will
determine and publicly announce what portion (if any) of the Merger
Consideration it will pay in cash on the third business day prior to the
Effective Time. Also at the Effective Time, each outstanding option to purchase
Telco Systems Common Stock will be assumed by World Access and converted into an
option to purchase shares of World Access Common Stock as adjusted to account
for the Exchange Ratio and the Minimum Nominal Value.

(Continued on next page)

---------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 25 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY STOCKHOLDERS OF WORLD ACCESS AND TELCO SYSTEMS.
---------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------

The date of this Joint Proxy Statement/Prospectus is November 10, 1998.
<PAGE> 12

(Continued from previous page)

The proposed Merger is contingent upon, among other things, the approval of
the holders of the requisite number of shares of World Access Common Stock and
Telco Systems Common Stock, all as described in this Joint Proxy
Statement/Prospectus. The Merger will be consummated as soon as practicable
after such approvals are obtained and the other conditions to the Merger are
satisfied or waived.

On October 28, 1998, World Access consummated its previously announced
holding company reorganization pursuant to that certain Agreement and Plan of
Merger and Reorganization dated as of February 24, 1998, as amended, by and
between World Access (formerly known as WAXS Inc.), Old World Access (formerly
known as World Access, Inc.), NACT Telecommunications, Inc., a Delaware
corporation ("NACT"), and certain other parties (the "Holding Company
Reorganization"). In accordance with Delaware law, no action or vote by the Old
World Access stockholders was necessary to consummate the Holding Company
Reorganization. As a consequence of the Holding Company Reorganization, the Old
World Access stockholders became stockholders of World Access and Old World
Access, which was renamed "WA Telcom Products Co., Inc.", became a direct wholly
owned subsidiary of World Access. As such, World Access is the successor to Old
World Access and NACT. All references herein to World Access shall mean World
Access, Inc. and its consolidated subsidiaries, unless the context otherwise
requires.

Upon consummation of the Merger (assuming that none of the Merger
Consideration will be paid in cash), the stockholders of World Access as of the
World Access Record Date (as defined elsewhere herein) will own approximately
78.6% of the then-outstanding shares of World Access Common Stock and the
stockholders of Telco Systems as of the Telco Systems Record Date (as defined
elsewhere herein) will own approximately 21.4% (or 10.9% if 55% of the Merger
Consideration is paid in cash) of the then-outstanding shares of World Access
Common Stock. Upon consummation of the Resurgens Transaction (as defined
elsewhere herein), stockholders of World Access as of the World Access Record
Date will own approximately 58.5%, the stockholders of Telco Systems as of the
Telco Systems Record Date will own approximately 15.9% (or 7.9% if 55% of the
Merger Consideration is paid in cash) and the recipients of World Access Common
Stock in the Resurgens Transaction will own approximately 25.6% of the
then-outstanding shares of World Access Common Stock.

On November 9, 1998, the last reported sale prices on Nasdaq of the World
Access Common Stock and the Telco Systems Common Stock were $23 7/8 and $13 3/8,
respectively, and on June 3, 1998, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the last reported sale
prices on Nasdaq of the World Access Common Stock and the Telco Systems Common
Stock were $29 3/4 and $9 9/16, respectively. On October 12, 1998, the last full
trading day prior to the public announcement of the companies' agreement in
principle to amend the Merger Agreement to provide for, among other things, the
Minimum Nominal Value to be received by the holders of Telco Systems Common
Stock in the Merger, the last reported sale prices on Nasdaq of the World Access
Common Stock and the Telco Systems Common Stock were $13 5/8 and $6 3/8,
respectively. If the World Access Market Price is less than $20.47 per share,
then World Access will be obligated to issue additional shares of World Access
Common Stock or pay additional cash amounts to the Telco Systems stockholders to
ensure that they receive Merger Consideration having the Minimum Nominal Value.
No assurance can be given as to the market price of World Access Common Stock if
and when the Merger is consummated. Telco Systems stockholders are urged to
obtain current market quotations for World Access Common Stock.

Under the DGCL, holders of Telco Systems Common Stock will not be entitled
to dissenting stockholders' appraisal rights in connection with the Merger
unless World Access elects to include cash as a portion of the Merger
Consideration. In order to preserve such rights, Telco Systems stockholders must
take action prior to the Telco Systems Special Meeting. See "The
Merger -- Appraisal Rights."

Following determination of the World Access Market Price and the portion of
the Merger Consideration that World Access has elected to pay in cash, which
will occur after the close of trading on the third business day prior to the
Effective Time, holders of Telco Systems Common Stock can obtain the World
Access Market Price, the approximate number of shares of World Access Common
Stock and the approximate amount of cash into which each share of Telco Systems
Common Stock will be converted in the Merger (subject to the 55% limitation
described above) by contacting either Georgeson & Company Inc. at (800) 223-2064
(toll free) or Corporate Investor Communications, Inc. at (800) 346-7885 (toll
free) (the "Information Agents"). This information also will be posted on the
world wide web sites of each of World Access (http://www.waxs.com) and Telco
Systems (http://www.telco.com). Proxies and revocation of proxies may be
delivered at any time prior to the taking of the vote at the special meeting to
which such proxy relates.

This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of World Access and Telco Systems on or
about November 10, 1998.
<PAGE> 13

AVAILABLE INFORMATION

World Access and Telco Systems are each subject to the information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy and information
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements and other
information filed with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, World Access and Telco Systems are each required to file
electronic versions of such material with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system.
The Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Electronic filings are publicly available on
the Commission's World Wide Web site within 24 hours of acceptance. The address
of such site is http://www.sec.gov. Please call the Commission at 1-800-SEC-0330
for further information. The World Access Common Stock and the Telco Systems
Common Stock are each quoted on Nasdaq. Reports, proxy and information
statements and other information filed by World Access and Telco Systems with
Nasdaq may also be inspected at the offices of the National Association
Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006.

World Access has filed with the Commission a registration statement on Form
S-4 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities to be issued by World Access to holders of Telco
Systems Common Stock. This Joint Proxy Statement/Prospectus does not contain all
the information set forth in the Registration Statement, certain portions of
which have been omitted pursuant to the rules and regulations of the Commission
and to which portions reference is hereby made. Such additional information may
be obtained from the Commission's principal office in Washington, D.C.
Statements contained in this Joint Proxy Statement/Prospectus as to the contents
of any contract or other document referred to herein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.

Certain financial information relating to Cherry Communications
Incorporated (d/b/a Resurgens Communications Group) ("RCG") and Cherry
Communications U.K. Limited ("Cherry U.K." and, together with RCG, "Resurgens")
has been obtained from Resurgens and is included herein by World Access to
comply with certain accounting rules and financial information requirements
promulgated by the Commission. Although World Access has entered into definitive
agreements to acquire Resurgens pursuant to which each of RCG and Cherry U.K.
will become a wholly owned subsidiary of World Access, World Access does not
presently control Resurgens.

Subject to the foregoing, all information contained in this Joint Proxy
Statement/Prospectus concerning Telco Systems has been supplied by Telco Systems
and all other information has been supplied by World Access. References to World
Access and Telco Systems in this Joint Proxy Statement/Prospectus mean the
respective corporations and their respective consolidated subsidiaries, except
as the context may otherwise indicate.

Questions and requests for assistance or additional copies of this Joint
Proxy Statement/Prospectus may be directed as follows:

<TABLE>
<S> <C>
TELCO SYSTEMS STOCKHOLDERS: WORLD ACCESS STOCKHOLDERS:
Corporate Investor Communications, Inc. Georgeson & Company Inc.
111 Commerce Road Wall Street Plaza
Carlstadt, New Jersey 07072 New York, New York 10005
(800) 346-7885 (800) 223-2064
(201) 804-8017 (facsimile) (212) 440-9955 (facsimile)
</TABLE>

The Information Agents will also be available to receive by facsimile
proxies and revocations of proxies from holders of World Access Common Stock and
Telco Systems Common Stock.
---------------------

2
<PAGE> 14

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING AND THE SOLICITATIONS MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY WORLD ACCESS, OLD WORLD ACCESS, MERGER
SUB OR TELCO SYSTEMS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR
THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO
WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY INFERENCE
THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF ANY OF WORLD ACCESS OR TELCO SYSTEMS SINCE THE DATE HEREOF.
---------------------

TRADEMARKS

This Joint Proxy Statement/Prospectus contains trademarks of World Access
and Telco Systems, as well as trademarks of other companies.

3
<PAGE> 15

SUMMARY

The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/ Prospectus. This summary is not, and is not intended
to be, a complete description of the matters covered in this Joint Proxy
Statement/Prospectus and is subject to and qualified in its entirety by
reference to the more detailed information contained elsewhere in this Joint
Proxy Statement/Prospectus, including the appendices hereto. Stockholders of
World Access and Telco Systems are urged to read carefully the entire Joint
Proxy Statement/Prospectus, including the appendices hereto.

Other than statements of historical fact, statements contained in this
Joint Proxy Statement/Prospectus, including statements as to the benefits
expected to be realized as a result of the Merger and as to future financial
performance, and the analyses performed by the financial advisors to World
Access and Telco Systems, constitute forward-looking statements. Holders of
Telco Systems Common Stock and World Access Common Stock are cautioned not to
place undue reliance on the forward-looking statements contained in this Joint
Proxy Statement/Prospectus, which speak only as of the date hereof. Neither
World Access nor Telco Systems undertakes any obligation to publicly release the
results of any revisions to such forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. See "The Merger -- World Access Reasons for
the Merger; Recommendation of the World Access Board of Directors," "-- Telco
Systems Reasons for the Merger; Recommendation of the Telco Systems Board of
Directors," "-- Opinion of World Access' Financial Advisor," "-- Opinion of
Telco Systems' Financial Advisor," "World Access," and "Telco Systems." There
are a number of important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements. Such factors
include those set forth in this Joint Proxy Statement/Prospectus under "Risk
Factors."

THE COMPANIES

World Access

World Access develops, manufactures and markets wireline and wireless
switching, transport and access products for the telecommunications markets.
World Access products allow telecommunications service providers to build and
upgrade their central office and outside plant networks in order to provide a
wide array of voice, data and video services to their business and residential
customers. World Access offers digital switches, billing and network
telemanagement systems, cellular base stations, fixed wireless local loop
systems, intelligent multiplexers, microwave and millimeterwave radio systems
and other telecommunications network products. The products offered by World
Access include those manufactured by World Access, as well as those manufactured
by other telecommunications equipment companies. To support and complement its
product sales, World Access also provides its customers with a broad range of
design, engineering, manufacturing, testing, installation, repair and other
value-added services. The principal office of World Access is located at 945 E.
Paces Ferry Road, Suite 2240, Atlanta, Georgia 30326, and the telephone number
at this address is (404) 231-2025.

Telco Systems

Telco Systems is a manufacturer of three major product lines, focused on
providing integrated access for network services: broadband transmission
products, network access products and bandwidth optimization products. Telco
Systems' products are deployed at the edge of the service providers' networks to
provide organizations with flexible, cost-effective means of transmitting voice,
data, video and image traffic over public or private networks. These products
are used in a wide variety of applications by network service providers, such as
long distance carriers, regional bell operating companies, independent and
competitive local access providers, as well as government agencies, electric
utilities, wireless service operators and major corporations. Telco Systems'
products perform functions that range from basic signaling and multiplexing of
DSO (64kbps) low speed data and voice traffic to digital fiber optic
transmission of high-speed, high capacity services over SONET OC-3 (155 Mbps)
networks. The principal office of Telco Systems is located at 63 Nahatan Street,
Norwood, Massachusetts 02062, and the telephone number at this address is (781)
551-0300.

4
<PAGE> 16

OVERVIEW OF THE MERGER

In the Merger, Telco Systems will be merged with and into Merger Sub, with
Merger Sub continuing as the surviving corporation (the "Surviving Corporation")
and a direct wholly owned subsidiary of World Access, and the holders of Telco
Systems Common Stock will be entitled to receive the Merger Consideration. At
the Effective Time, each outstanding share of Telco Systems Common Stock
(together with the Associated Right) (other than (i) shares owned by Telco
Systems, World Access or Old World Access, which will be cancelled, and (ii)
shares held by persons who have perfected their appraisal rights (if applicable)
under Section 262 of the DGCL) will be converted into and become exchangeable
for that number of shares of World Access Common Stock equal to the quotient of
$17.00 divided by the World Access Market Price (unless the World Access Market
Price exceeds $36.00 per share, in which case each outstanding share of Telco
Systems Common Stock will be converted into .4722 shares of World Access Common
Stock, or unless the World Access Market Price is less than $29.00 per share, in
which case each outstanding share of Telco Systems Common Stock will be
converted into .5862 shares of World Access Common Stock), provided that (i) the
nominal value of the consideration to be received by holders of Telco Systems
Common Stock is no less than the Minimum Nominal Value and (ii) World Access may
elect to pay cash in lieu of issuing shares of World Access Common Stock so long
as such cash does not comprise more than 55% of the Merger Consideration (based
on the average of the high and low trading prices of the World Access Common
Stock on the day the Merger is consummated). If World Access elects to pay cash
in the Merger in lieu of issuing shares of World Access Common Stock, then each
share of Telco Systems Common Stock will be exchanged for a pro rata portion of
(i) the Aggregate Cash Pool (which is subject to the 55% limitation described
above) and (ii) the aggregate number of shares of World Access Common Stock to
be issued in the Merger, which will be equal to the number of shares of World
Access Common Stock that would have been issued in the Merger had World Access
not elected to include cash in the Merger Consideration less that number of such
shares having a value (based upon the World Access Market Price) equal to the
Aggregate Cash Pool. World Access will determine and publicly announce what
portion (if any) of the Merger Consideration it will pay in cash following the
close of trading on the third business day prior to the Effective Time. Also at
the Effective Time, each outstanding option to purchase Telco Systems Common
Stock will be assumed by World Access and converted into an option to purchase
shares of World Access Common Stock as adjusted to account for the Exchange
Ratio and the Minimum Nominal Value. See "The Merger" and "The Merger
Agreement."

The following table sets forth the number of shares of World Access Common
Stock into which each share of Telco Systems Common Stock would be converted
upon consummation of the Merger at each of the hypothetical World Access Market
Prices set forth below assuming that none of the Merger Consideration is paid in
cash.

<TABLE>
<CAPTION>
SHARES OF WORLD
ACCESS COMMON STOCK
PER SHARE OF TELCO
WORLD ACCESS SYSTEMS COMMON
MARKET PRICE STOCK
------------ ----------------------
<S> <C>
$17.00............................................ .7059
20.00............................................ .6000*
20.47............................................ .5862**
29.00............................................ .5862**
30.00............................................ .5667
33.00............................................ .5152
36.00............................................ .4722***
</TABLE>

- ---------------

* If the World Access Market Price is below $20.47 per share, then the
Exchange Ratio will be adjusted to provide Telco Systems stockholders with
the Minimum Nominal Value.
** If the World Access Market Price is below $29.00 but equal to or above
$20.47 per share, then the Exchange Ratio would be fixed at .5862.
*** If the World Access Market Price is above $36.00 per share, then the
Exchange Ratio would be fixed at .4722.

5
<PAGE> 17

THE WORLD ACCESS SPECIAL MEETING

Date and Place of the Meeting. The World Access Special Meeting will be
held at the principal offices of World Access located at 945 E. Paces Ferry
Road, Suite 2240, Atlanta, Georgia 30326, on November 30, 1998, at 10:00 a.m.,
local time.

Stockholders Entitled to Vote. The record date for determination of
holders of World Access Common Stock entitled to vote at the World Access
Special Meeting is November 2, 1998 (the "World Access Record Date"). As of the
close of business on the World Access Record Date, 25,675,253 shares of World
Access Common Stock were outstanding, held by approximately 312 holders of
record. Only holders of record of World Access Common Stock as of the close of
business on the World Access Record Date are entitled to notice of and to vote
at the World Access Special Meeting and any adjournments or postponements
thereof.

Purpose of the Meeting. The purpose of the World Access Special Meeting is
to consider and vote upon proposals: (i) to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger and
the Share Issuance; (ii) to approve an amendment to the Certificate of
Incorporation of World Access (the "World Access Certificate") to increase the
number of authorized shares of World Access Common Stock to 150,000,000; (iii)
to adopt the World Access, Inc. 1998 Incentive Equity Plan (the "Incentive
Equity Plan"); (iv) to ratify and approve Indemnification Agreements (the
Indemnification Agreements") with the directors and certain officers of World
Access; and (v) to transact such other business as may properly come before the
World Access Special Meeting or any adjournments or postponements thereof.

Vote Required. The presence, in person or by proxy, of a majority of the
aggregate number of shares of World Access Common Stock outstanding and entitled
to vote on the World Access Record Date is necessary to constitute a quorum at
the World Access Special Meeting. The approval of the Merger Agreement and the
transactions contemplated thereby, including the Merger and the Share Issuance,
the adoption of the Incentive Equity Plan and the ratification and approval of
the Indemnification Agreements will require the affirmative vote of a majority
of the shares of World Access Common Stock present in person or represented by
properly executed proxy at the World Access Special Meeting. The approval of the
amendment to the World Access Certificate will require the affirmative vote of a
majority of the outstanding shares of World Access Common Stock. See "The
Special Meetings -- The World Access Special Meeting -- Voting; Vote Required."

Shares of World Access Common Stock that are voted "FOR," "AGAINST" or
"WITHHELD" at the World Access Special Meeting will be treated as being present
at such meeting for purposes of establishing a quorum and will also be treated
as votes eligible to be cast by the World Access Common Stock present in person
or represented by proxy at the World Access Special Meeting and entitled to vote
on the subject matter. Abstentions will be counted for purposes of determining
both the presence or absence of a quorum for the transaction of business and the
total number of votes cast with respect to a particular matter. Broker non-
votes will be counted for purposes of determining the presence or absence of a
quorum for the transaction of business but will not be counted for purposes of
determining the number of votes cast with respect to the particular proposal on
which the broker has expressly not voted. Broker non-votes with respect to
proposals set forth in this Joint Proxy Statement/Prospectus, other than with
respect to the approval of the amendment to the World Access Certificate, will
therefore not be considered votes cast and, accordingly, will not affect the
determination as to whether a majority of votes cast has been obtained with
respect to such matters. Because approval of the amendment to the World Access
Certificate will require the affirmative vote of a majority of the outstanding
shares of World Access Common Stock, broker non-votes with respect to such
proposal will have the same effect as a negative vote.

Security Ownership by Management. As of the close of business on the World
Access Record Date, directors and executive officers of World Access and their
respective affiliates may be deemed to be the beneficial owners of shares of
World Access Common Stock representing approximately 5.8% of the outstanding
voting power of World Access. Each of the directors and executive officers of
World Access has indicated that such person intends to vote or direct the vote
of all the shares of World Access Common Stock over which such person has voting
control in favor of the Merger Agreement and the transactions
6
<PAGE> 18

contemplated thereby, including the Merger and the Share Issuance, and in favor
of all of the other proposals described herein.

THE TELCO SYSTEMS SPECIAL MEETING

Date and Place of the Meeting. The Telco Systems Special Meeting will be
held at the principal offices of Telco Systems located at 63 Nahatan Street,
Norwood, Massachusetts 02062 on November 30, 1998, at 10:00 a.m., local time.

Stockholders Entitled to Vote. The record date for determination of
holders of Telco Systems Common Stock entitled to vote at the Telco Systems
Special Meeting is November 6, 1998 (the "Telco Systems Record Date"). As of the
close of business on the Telco Systems Record Date, 11,942,598 shares of Telco
Systems Common Stock were outstanding, held by approximately 379 holders of
record. Only holders of record of Telco Systems Common Stock as of the close of
business on the Telco Systems Record Date are entitled to notice of and to vote
at the Telco Systems Special Meeting and any adjournments or postponements
thereof.

Purpose of the Meeting. The purpose of the Telco Systems Special Meeting
is to consider and vote upon proposals: (i) to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger; and
(ii) to transact such other business as may properly come before the Telco
Systems Special Meeting or any adjournments or postponements thereof.

Vote Required. The approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger, will require the affirmative vote of
a majority of the outstanding shares of Telco Systems Common Stock. See "The
Special Meetings -- The Telco Systems Special Meeting -- Voting; Vote Required."

Shares of Telco Systems Common Stock that are voted "FOR," "AGAINST" or
"WITHHELD" at the Telco Systems Special Meeting will be treated as being present
at such meeting for purposes of establishing a quorum and will also be treated
as votes eligible to be cast by the Telco Systems Common Stock present in person
at the Telco Systems Special Meeting and entitled to vote on the subject matter.
Abstentions will be counted for purposes of determining both the presence or
absence of a quorum for the transaction of business and the total number of
votes cast with respect to a particular matter. Broker non-votes will be counted
for purposes of determining the presence or absence of a quorum for the
transaction of business but will not be counted for purposes of determining the
number of votes cast with respect to the particular proposal on which the broker
has expressly not voted. Abstentions and broker non-votes will have the same
effect as a vote against the approval of the Merger Agreement, which approval
will require the affirmative vote of a majority of the outstanding shares of
Telco Systems Common Stock.

Security Ownership by Certain Beneficial Owners and Management. As of the
close of business on the Telco Systems Record Date, directors and executive
officers of Telco Systems and their respective affiliates may be deemed to be
the beneficial owners of shares of Telco Systems Common Stock representing less
than 1% of the outstanding voting power of Telco Systems. Each of the directors
and executive officers of Telco Systems has indicated that such person intends
to vote or direct the vote of all the shares of Telco Systems Common Stock over
which such person has voting control in favor of the Merger Agreement and the
transactions contemplated thereby, including the Merger. In addition,
concurrently with the execution of the Merger Agreement, World Access and the
owners as of such date of approximately 8% of the outstanding Telco Systems
Common Stock (each a "Stockholder") entered into a Stockholders Proxy Agreement
pursuant to which each Stockholder granted to World Access the right to vote all
voting securities of Telco Systems held by such Stockholder in favor of the
Merger Agreement and the transactions contemplated thereby, including the
Merger. See "The Stockholders Proxy Agreement."

RECOMMENDATION OF THE WORLD ACCESS BOARD OF DIRECTORS

The board of directors of World Access has unanimously approved and adopted
the Merger Agreement and the transactions contemplated thereby, including the
Merger and the Share Issuance, and unanimously

7
<PAGE> 19

recommends that the stockholders of World Access vote FOR: (i) the approval and
adoption of the Merger Agreement and the consummation of the transactions
contemplated thereby, including the Merger and the Share Issuance; (ii) the
approval of the amendment to the World Access Certificate to increase the number
of authorized shares of World Access Common Stock to 150,000,000; (iii) the
adoption of the Incentive Equity Plan; and (iv) the ratification and approval of
the Indemnification Agreements. See "The Merger -- World Access Reasons for the
Merger; Recommendation of the World Access Board of Directors."

RECOMMENDATION OF THE TELCO SYSTEMS BOARD OF DIRECTORS

The board of directors of Telco Systems has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby,
including the Merger, and unanimously recommends that the stockholders of Telco
Systems vote FOR the approval and adoption of the Merger Agreement and the
consummation of the transactions contemplated thereby, including the Merger. See
"The Merger -- Telco Systems Reasons for the Merger; Recommendation of the Telco
Systems Board of Directors."

OPINION OF THE WORLD ACCESS FINANCIAL ADVISOR

In making its recommendation with respect to the Merger, the board of
directors of World Access considered, among other things, the written opinion,
dated October 16, 1998, and confirmed in writing on October 27, 1998, of The
Robinson-Humphrey Company, LLC ("Robinson-Humphrey"), World Access' financial
advisor, to the effect that, based upon and subject to the various assumptions
and considerations set forth in such updated opinion, as of October 16, 1998,
the consideration to be paid by World Access in the Merger was fair, from a
financial point of view, to World Access. A copy of such opinion is attached to
this Joint Proxy Statement/Prospectus as Appendix B, and a copy of the
confirmation thereof is attached to this Joint Proxy Statement/Prospectus as
Appendix B-1. Robinson-Humphrey's opinion, which sets forth the assumptions
made, procedures followed and matters considered by Robinson-Humphrey, and the
scope of Robinson-Humphrey's review, should be read carefully in its entirety.
See "The Merger -- Opinion of World Access' Financial Advisor."

OPINION OF THE TELCO SYSTEMS FINANCIAL ADVISOR

In making its recommendation with respect to the Merger, the board of
directors of Telco Systems considered, among other things, the written opinion,
dated October 26, 1998, of Broadview International LLC (formerly known as
Broadview Associates LLC, "Broadview"), Telco Systems' financial advisor, to the
effect that, as of October 26, 1998 and based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
Merger Consideration was fair, from a financial point of view, to the holders of
Telco Systems Common Stock. A copy of such opinion is attached to this Joint
Proxy Statement/Prospectus as Appendix C. Broadview's opinion, which sets forth
the assumptions made, procedures followed and matters considered by Broadview,
and the scope of Broadview's review, should be read carefully in its entirety.
See "The Merger -- Opinion of Telco Systems' Financial Advisor."

THE MERGER

Effective Time of the Merger

As promptly as practicable after the satisfaction or waiver of the
conditions set forth in the Merger Agreement, the parties thereto will file a
certificate of merger with the Secretary of State of the State of Delaware. The
Merger will become effective upon such filing. See "The Merger
Agreement -- Effective Time."

Conditions to the Merger

Consummation of the Merger is subject to the satisfaction of certain
conditions, including (i) the approval and adoption of the Merger Agreement and
the transactions contemplated thereby, including the Merger, by the requisite
vote of the stockholders of Telco Systems; (ii) the approval of the Share
Issuance by the requisite vote of the stockholders of World Access; (iii) the
absence of any restrictive court orders or any

8
<PAGE> 20

other legal restraints or prohibitions preventing or making illegal the
consummation of the Merger; (iv) the waiting period under the Hart-Scott-Rodino
Act of 1976, as amended (the "HSR Act"), having expired or been terminated; (v)
the continuing accuracy of the representations and warranties made in the Merger
Agreement at and as of the Effective Time; (vi) the receipt by World Access and
Telco Systems of opinions of counsel as to the tax-free nature of the Merger for
federal income tax purposes (except for cash in lieu of fractional shares and
except to the extent that Telco Systems stockholders receive cash if World
Access elects to pay a portion of the Merger Consideration in cash); and (vii)
the inclusion, subject to notice of issuance, in Nasdaq of the World Access
Common Stock to be issued in the Merger. The consummation of the Merger is also
subject to the World Access stockholders approving an increase in the number of
authorized shares of World Access Common Stock to 150,000,000 shares. See "The
Merger Agreement -- Conditions to the Merger" and "Additional Matters Submitted
to a Vote of World Access Stockholders -- Additional Proposal No. 1 -- Proposal
to amend Certificate of Incorporation of World Access to Increase the Number of
Authorized Shares of World Access Common Stock to 150,000,000."

Termination; Termination Fees

The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, notwithstanding the adoption and approval of the
Merger Agreement and the transactions contemplated thereby by the stockholders
of World Access and the stockholders of Telco Systems, by mutual consent, if a
governmental order prevents consummation, if the Effective Time does not occur
on or before December 31, 1998, by World Access if Telco Systems withdraws,
modifies or changes its recommendation of the Merger in a manner adverse to
World Access, by Telco Systems if World Access withdraws, modifies or changes
its recommendation of the Merger in a manner adverse to Telco Systems, if the
vote at either special meeting is resolved adverse to the Merger, if any
material uncured breach of the Merger Agreement occurs, by World Access if the
board of directors of Telco Systems recommend to the stockholders a Competing
Transaction or if the board of directors of Telco Systems fails to recommend
against a tender offer for 15% or more of outstanding Telco Systems capital
stock, by Telco Systems if the board of directors of Telco Systems determines in
good faith, after consultation with outside counsel, that it is highly probable
that by failing to accept a Superior Proposal it would be violating its
fiduciary duties to the stockholders of Telco Systems or by World Access if the
World Access Market Price is less than $12.00 per share. However, in the event
of certain terminations of the Merger Agreement, Telco Systems or World Access
(as the case may be) would be required to pay to the other a termination fee of
$5,500,000 or, in certain circumstances, $2,000,000, plus all of the other
party's reasonable expenses not to exceed $1,000,000. In the event that World
Access terminates the Merger Agreement because the World Access Market Price is
less than $12.00 per share, Telco Systems would be required to pay to World
Access a termination fee of $1,000,000. See "The Merger Agreement --
Termination" and "-- Termination Fees and Expenses".

Regulatory Matters

Under the HSR Act, and the rules promulgated thereunder, the Merger may not
be consummated until notifications have been given and certain information has
been furnished to the Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Justice Department (the "Antitrust Division") and
specified waiting period requirements have been satisfied. The waiting period
applicable to the Merger under the HSR Act was terminated by the FTC on August
28, 1998. See "The Merger -- Regulatory Matters."

Appraisal Rights

Holders of World Access Common Stock are not entitled to appraisal rights
in connection with the Merger. Under Delaware law, if World Access pays a
portion of the Merger Consideration in cash, then a Telco Systems stockholder
would be entitled to certain appraisal rights if such stockholder complied with
certain requirements of Delaware law. See "The Merger -- Appraisal Rights."

Interests of Certain Persons in the Merger

A number of directors and officers of Telco Systems have interests in the
merger as employees and/or directors that are different from, or in addition to,
those of the Telco Systems stockholders generally. Certain
9
<PAGE> 21

officers of Telco Systems will become officers of the Surviving Corporation.
Agreements exist between Telco Systems and certain of its executive officers
that would entitle them to cash severance payments as a result of a termination
of their employment following the Merger. Certain of these executive officers
have agreed to provisionally waive their rights to such severance payments in
exchange for a grant of World Access stock options. In addition, if the Merger
is completed, options to purchase Telco Systems Common Stock held by officers,
directors and employees of Telco Systems will automatically be converted into
options to acquire shares of World Access Common Stock adjusted to account for
the Exchange Ratio and the Minimum Nominal Value. Certain indemnification
arrangements and directors' and officers' liability insurance for existing
directors and officers of Telco Systems will be continued by World Access. The
Telco Systems board of directors was aware of these interests when it approved
the Merger. See "The Merger -- Interests of Certain Persons in the Merger."

Accounting Treatment

The Merger will be accounted for by World Access under the purchase method
of accounting for business combinations. See "The Merger -- Accounting
Treatment."

Federal Income Tax Consequences

The Merger will qualify as a tax-free reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, holders
of Telco Systems Common Stock will not recognize gain or loss for federal income
tax purposes by reason of the conversion of Telco Systems Common Stock into
World Access Common Stock, except in respect of cash received in lieu of
fractional shares, and gain will be recognized by Telco Systems stockholders to
the extent cash is received through World Access' election to pay a portion of
the Merger Consideration in cash. It is a condition to the obligation of World
Access and Telco Systems to consummate the Merger that they shall each have
received opinions from their respective tax counsel, which opinions shall not
have been withdrawn or modified in any material respect, to the effect that the
Merger will qualify as a tax-free reorganization under Section 368 of the Code
and that each of World Access, Merger Sub and Telco Systems will be a party to
the reorganization within the meaning of Section 368(b) of the Code. The Merger
will not have any tax consequences to World Access stockholders. See "The
Merger -- Federal Income Tax Consequences."

Exchange of Share Certificates

If the Merger becomes effective, World Access will mail a letter of
transmittal with instructions to all holders of record of Telco Systems Common
Stock as of the Effective Time for use in surrendering their stock certificates
in exchange for the Merger Consideration and a cash payment in lieu of
fractional shares. CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL IS RECEIVED. See "The Merger -- Exchange of Shares."

Operations Following the Merger

Following the Merger, the Surviving Corporation initially will be managed
by the operating management of Telco Systems and will become the Transport and
Access Systems Group of World Access. Promptly following the Merger, World
Access intends to integrate the operations of its current Transport and Access
Systems Group into, and under the supervision of, the Surviving Corporation. The
Surviving Corporation will otherwise continue the operations of Telco Systems
substantially as such operations were conducted prior to the Merger. See "The
Merger -- Operations Following the Merger."

Amendment to the Merger Agreement

On October 13, 1998, World Access and Telco Systems announced that they had
agreed in principle to amend the Merger Agreement to, among other things,
establish the Minimum Nominal Value of $12.00 to be received by the holders of
Telco Systems Common Stock in the Merger and to provide World Access with an
option to pay a portion of the Merger Consideration in cash (subject to certain
limitations). On October 27,

10
<PAGE> 22

1998, the companies executed the First Amendment to the Merger Agreement to
implement their agreement in principle (the "First Amendment").

Recent World Access Developments

On May 12, 1998, Old World Access announced that it had entered into (i) an
Agreement and Plan of Merger and Reorganization (the "Resurgens Merger
Agreement") with RCG, which is currently operating as a debtor in possession
under Chapter 11 of the Bankruptcy Code, pursuant to which World Access agreed
to acquire RCG in a merger transaction (the "RCG Merger"); and (ii) a Share
Exchange Agreement and Plan of Reorganization (the "Exchange Agreement") with
the sole shareholder (the "Shareholder") of Cherry U.K., pursuant to which World
Access agreed to acquire Cherry U.K. in a share exchange transaction (the
"Cherry Exchange").

In connection with the RCG Merger, the creditors of RCG will receive an
aggregate of 9,375,000 shares of World Access Common Stock. Of the shares of
World Access Common Stock to be issued to the RCG creditors, one third will be
issued to the RCG creditors upon consummation of the RCG Merger and two-thirds
will be held in escrow and released to the RCG creditors over the two year
period following the consummation of the RCG Merger subject to the attainment of
certain performance criteria for Resurgens.

In connection with the Cherry Exchange, the Shareholder will receive an
aggregate of 1,875,000 shares of World Access Common Stock, of which one-third
will be issued to the Shareholder upon consummation of the Exchange and the
remaining two-thirds will be issued and held in escrow and released to the
Shareholder over the two year period following the consummation of the Cherry
Exchange subject to the attainment of certain performance criteria for
Resurgens. The Exchange Agreement provides, however, that the number of shares
of World Access Common Stock to be received by the Shareholder will be reduced
to the extent that World Access is required to convert options to acquire shares
of Cherry U.K. capital stock, which options may only be granted with the
permission of World Access, into options to acquire World Access Common Stock.
It is currently expected that no such options will be granted.

World Access intends to schedule a special meeting of its stockholders to
be held in December 1998 (the "Resurgens Special Meeting") to consider and vote
upon, among other things, a proposal to acquire Resurgens. World Access has
fixed November 3, 1998 as the record date for determining which World Access
stockholders are entitled to notice of and to vote at the Resurgens Special
Meeting. Accordingly, the stockholders of Telco Systems will not be entitled to
vote at such meeting.

Each of the RCG Merger and the Cherry Exchange is subject to the
satisfaction of certain conditions customary in similar transactions, including
the approval of the stockholders of World Access. Finally, the consummation of
the RCG Merger is a condition to the consummation of the Cherry Exchange, and
the Cherry Exchange is a condition to the consummation of the RCG Merger. The
RCG Merger and the Cherry Exchange are collectively referred to herein as the
"Resurgens Transaction."

Resurgens is a facilities-based provider of international network access,
commonly referred to in the industry as a carriers' carrier. Resurgens had
consolidated revenues of approximately $165.5 million for the year ended
December 31, 1997 and $10.4 million for the six months ended June 30, 1998 and
incurred a net loss of $171.7 million for the year ended December 31, 1997 and
$29.3 million for the six months ended June 30, 1998.

11
<PAGE> 23

MARKETS AND MARKET PRICES

World Access Common Stock is quoted on Nasdaq under the symbol "WAXS." The
following table shows the high and low sales prices for the World Access Common
Stock as reported by Nasdaq for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C> <C>
CALENDAR YEAR 1996
First Quarter............................................... $10 $ 7 1/2
Second Quarter.............................................. 11 1/2 8
Third Quarter............................................... 10 1/8 7 1/2
Fourth Quarter.............................................. 9 1/4 6 7/8
CALENDAR YEAR 1997
First Quarter............................................... 9 1/4 7 1/2
Second Quarter.............................................. 23 7 5/8
Third Quarter............................................... 34 1/8 20
Fourth Quarter.............................................. 33 3/4 17
CALENDAR YEAR 1998
First Quarter............................................... 33 1/2 22 1/2
Second Quarter.............................................. 40 25 5/8
Third Quarter............................................... 30 1/2 19 1/8
Fourth Quarter (through November 9, 1998)................... 24 3/8 12
</TABLE>

World Access has not paid or declared any cash dividends on the World
Access Common Stock since its inception and anticipates that its future earnings
will be retained to finance the continuing development of its business. The
payment of any future dividends will be at the discretion of the World Access
board of directors and will depend upon, among other things, future earnings,
the success of business activities of World Access, regulatory and capital
requirements, the general financial condition of World Access and general
business conditions. World Access is restricted from paying dividends under its
revolving credit facility. See "Description of World Access Capital Stock."

Telco Systems Common Stock is quoted on Nasdaq under the symbol "TELC". The
following table sets forth the high and low sale prices for the Telco Systems
Common Stock as reported by Nasdaq for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED AUGUST 31, 1997
First Quarter............................................... $21 3/4 $15
Second Quarter.............................................. 24 3/8 12 1/2
Third Quarter............................................... 17 1/4 7 3/4
Fourth Quarter.............................................. 13 3/4 8 7/8
FISCAL YEAR ENDED AUGUST 30, 1998
First Quarter............................................... 20 8 1/2
Second Quarter.............................................. 12 3/4 8 7/8
Third Quarter............................................... 12 1/4 9
Fourth Quarter.............................................. 15 5/8 9 1/2
FISCAL YEAR ENDING AUGUST 29, 1999
First Quarter (through November 9, 1998).................... 13 5/8 3 11/16
</TABLE>

Telco Systems has not paid any cash dividends on the Telco Systems Common
Stock and has no present intention of paying cash dividends in the foreseeable
future. It is the present policy of the board of directors of Telco Systems to
retain all earnings to provide for the growth of Telco Systems.

12
<PAGE> 24

The following table sets forth (i) the closing prices per share of World
Access Common Stock and Telco Systems Common Stock on Nasdaq on June 3, 1998,
the last full trading day prior to the public announcement of the execution of
the Merger Agreement, on October 12, 1998, the last full trading day prior to
the public announcement of the agreement in principle to amend the Merger
Agreement to provide for, among other things, the Minimum Nominal Value to be
received by the holders of the Telco Systems Common Stock in the Merger and on
November 9, 1998, the latest practicable trading day prior to the printing of
this Joint Proxy Statement/Prospectus; and (ii) the equivalent market value of
Telco Systems Common Stock based on the Exchange Ratio as of June 3, 1998, on
October 12, 1998 (without giving effect to the Minimum Nominal Value) and as of
November 9, 1998 (assuming that the World Access Market Price is equal to the
closing price per share of World Access Common Stock on Nasdaq on such dates).
No assurance can be given as to the market price of World Access Common Stock if
and when the Merger is consummated. Telco Systems stockholders are urged to
obtain current market quotations for World Access Common Stock.

<TABLE>
<CAPTION>
WORLD ACCESS TELCO SYSTEMS
COMMON COMMON TELCO SYSTEMS
DATE STOCK STOCK EQUIVALENT
---- ------------ ------------- -------------
<S> <C> <C> <C>
June 3, 1998........................................... $29 3/4 $ 9 9/16 $ 17
October 12, 1998....................................... $13 5/8 $ 6 3/8 $ 8
November 9, 1998....................................... $23 7/8 $13 3/8 $ 14
</TABLE>

13
<PAGE> 25

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(In thousands, except per share data)

WORLD ACCESS SELECTED HISTORICAL FINANCIAL INFORMATION

The selected historical financial information of World Access set forth
below has been derived from and should be read in conjunction with the
consolidated financial statements and other financial information of World
Access contained elsewhere herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Sales of products.................................. $ 3,320 $ 2,776 $17,384 $34,411 $71,392 $ 34,914 $ 69,830
Service revenues................................... 12,441 12,507 12,754 16,589 21,593 9,353 13,408
------- ------- ------- ------- ------- -------- --------
Total sales...................................... 15,761 15,283 30,138 51,000 92,985 44,267 83,238
Cost of products sold.............................. 2,514 2,195 12,657 21,485 43,827 21,495 39,012
Cost of services................................... 10,642 11,112 11,118 14,520 17,018 8,089 12,189
------- ------- ------- ------- ------- -------- --------
Total cost of sales.............................. 13,156 13,307 23,775 36,005 60,845 29,584 51,201
------- ------- ------- ------- ------- -------- --------
Gross profit..................................... 2,605 1,976 6,363 14,995 32,140 14,683 32,037
Engineering and development........................ 503 581 577 892 1,862 745 2,582
Selling, general and administrative................ 2,949 2,658 3,125 6,211 9,000 4,352 7,936
Amortization of goodwill........................... 96 30 157 534 1,756 665 1,882
In-process research and development(2)............. -- -- -- -- -- -- 50,000
Special charges(3)................................. 725 -- 980 -- -- -- 3,240
------- ------- ------- ------- ------- -------- --------
Operating income (loss).......................... (1,668) (1,293) 1,524 7,358 19,522 8,921 (33,603)
Interest and other income.......................... 30 13 142 485 2,503 592 1,971
Interest and other expense......................... (422) (523) (494) (319) (1,355) (52) (3,031)
Other expense...................................... (60) (80) -- -- -- -- --
------- ------- ------- ------- ------- -------- --------
Income (loss) before income taxes and minority
interests...................................... (2,120) (1,883) 1,172 7,524 20,670 9,461 (34,663)
Income taxes(4).................................... -- -- -- 745 7,536 3,420 6,135
------- ------- ------- ------- ------- -------- --------
Income (loss) before minority interests.......... (2,120) (1,883) 1,172 6,779 13,134 6,041 (40,798)
Minority interests in earnings of subsidiary....... -- -- -- -- -- -- 1,533
------- ------- ------- ------- ------- -------- --------
Net income (loss)................................ $(2,120) $(1,883) $ 1,172 $ 6,779 $13,134 $ 6,041 $(42,331)
======= ======= ======= ======= ======= ======== ========
Net income (loss) per common share:
Basic............................................ $ (0.54) $ (0.41) $ 0.15 $ 0.52 $ 0.76 $ 0.37 $ (2.13)
======= ======= ======= ======= ======= ======== ========
Diluted.......................................... $ (0.54) $ (0.41) $ 0.12 $ 0.46 $ 0.70 $ 0.34 $ (2.13)
======= ======= ======= ======= ======= ======== ========
Weighted average shares outstanding(5):
Basic............................................ 3,765 4,631 7,859 13,044 17,242 16,478 19,895
======= ======= ======= ======= ======= ======== ========
Diluted.......................................... 3,765 4,631 9,083 14,530 18,708 17,918 19,895
======= ======= ======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
---------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents(6)............................ $ 625 $ 753 $ 1,887 $22,480 $118,065 $21,595 $ 57,653
Working capital.................................... 1,783 2,267 10,222 37,961 153,750 39,002 112,465
Total assets....................................... 8,752 8,943 28,515 60,736 225,283 89,037 268,518
Short-term debt.................................... 83 212 5,385 -- 82 4,064 4,408
Long-term debt(6).................................. 5,388 4,328 3,750 -- 115,264 213 115,529
Stockholders' equity............................... 342 1,160 14,334 52,374 91,755 70,297 98,574
</TABLE>

- ---------------

14
<PAGE> 26

(1) Includes the results of operations for the following businesses from their
respective dates of acquisition: 67.3% interest in NACT -- February 27,
1998; Advanced TechCom, Inc. ("ATI") -- January 29, 1998; Galaxy Personal
Communications Services, Inc. ("Galaxy") -- July 1, 1997; Cellular
Infrastructure Supply, Inc. ("CIS") -- January 1, 1997; Comtech Sunrise,
Inc. ("Sunrise") -- January 1, 1996; Westec Communications, Inc.
("Westec") -- October 2, 1995; and AIT, Inc. ("AIT") -- May 17, 1995. On a
pro forma unaudited basis, as if the acquisition of the 67.3% interest in
NACT and the acquisition of ATI had occurred as of January 1, 1997, World
Access' total sales, net income and net income per diluted share for the
year ended December 31, 1997 and six months ended June 30, 1998 would have
been approximately $136,517,000 and $86,399,000; $7,069,000 and $6,428,000;
and $0.34 and $0.29, respectively.
(2) Special charges in the first quarter of 1998 included $50.0 million for
in-process research and development related to the first quarter 1998
acquisition of a 67.3% interest in NACT and the acquisition of ATI. See Note
2 to the consolidated financial statements of World Access for the quarter
ended June 30, 1998. World Access expects to record an additional in-process
research and development charge of approximately $22.0 million in the fourth
quarter of 1998 in connection with the acquisition of the remaining 32.7% of
NACT.
(3) Special charges in the first quarter of 1998 included $6.6 million for costs
related to the consolidation of several operations and World Access' exit
from the contract manufacturing business. The special charges included
$3,360,000 to cost of sales for obsolete and redundant inventories and
$3,240,000 for severance benefits, lease terminations, idle equipment and
other phase-down expenses related to the consolidation program. See Note 6
to the consolidated financial statements of World Access for the quarter
ended June 30, 1998. Special charges in 1995 resulted primarily from a
write-down of test equipment and related tooling used in the company's
analog repair operations.
(4) World Access recorded no income tax expense during 1993 to 1995 due to net
losses realized and the availability of federal income tax net operating
loss carryforwards. See "World Access -- Management's Discussion and
Analysis of Financial Condition and Results of Operations of World Access"
and Note K to the consolidated financial statements of World Access for the
year ended December 31, 1997 (the "World Access Consolidated Financial
Statements").
(5) Weighted average shares outstanding exclude 1,204,000 and 995,000 shares of
World Access Common Stock for the six months ended June 30, 1998 and the
year ended December 31, 1997, respectively, that are held in escrow accounts
established in connection with certain acquisitions and a license agreement.
These shares were excluded because the conditions for release of such shares
had not yet been satisfied. See Notes A, B, and E to the World Access
Consolidated Financial Statements.
(6) In October 1997, World Access sold $115.0 million of convertible
subordinated notes. See Note G to the World Access Consolidated Financial
Statements.

15
<PAGE> 27

WORLD ACCESS RECENT FINANCIAL RESULTS

On October 26, 1998, World Access announced its unaudited financial results
for the quarter ended September 30, 1998.

World Access' third quarter 1998 sales were $53,860,427, an approximate
$26.4 million or 96% increase over the $27,453,133 in sales during the
comparable 1997 period.

For the three months ended September 30, 1998, World Access realized net
income of $7,029,665, an approximate $2.7 million or 60% increase over third
quarter 1997 net income of $4,370,863. Net income for the quarter was $.32 per
diluted share versus $.22 per diluted share for the third quarter of 1997.

Total sales for the first nine months of 1998 were $137,098,550, an
approximate $65.4 million or 91% increase over the $71,720,635 in total sales
during the comparable 1997 period. Net income before special charges for the
first nine months of 1998 was $18,658,966 or $.87 per diluted share versus
$10,411,541 or $.55 per diluted share for the first nine months of 1997. Net
loss for 1998 following special charges of $56.6 million was $35,301,034 or
$1.74 per share.

Special charges in the first quarter of 1998 included $50.0 million for
in-process research and development related to the acquisitions of ATI and a
67.3% interest in NACT. Special charges also included $6.6 million for costs
related to the consolidation and integration of several operations and the
de-emphasis of World Access' contract manufacturing business.

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ------------------
1998 1997 1998 1997
------- ------- -------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of products........................................... $46,141 $21,185 $115,970 $56,099
Service revenues............................................ 7,719 6,268 21,128 15,622
------- ------- -------- -------
Total sales............................................... 53,860 27,453 137,098 71,721
Cost of products sold....................................... 25,019 12,316 64,031 33,811
Cost of services............................................ 5,868 4,742 18,057 12,832
------- ------- -------- -------
Total cost of sales....................................... 30,887 17,058 82,088 46,643
------- ------- -------- -------
Gross profit.............................................. 22,973 10,395 55,010 25,078
Engineering and development................................. 1,798 605 4,379 1,350
Selling, general and administrative......................... 5,797 2,508 13,733 6,860
Amortization of goodwill.................................... 1,130 546 3,013 1,210
In-process research and development......................... -- -- 50,000 --
Special charges............................................. -- -- 3,240 --
------- ------- -------- -------
Operating income (loss)................................... 14,248 6,736 (19,355) 15,658
Interest and other income................................... 905 246 2,876 835
Interest expense............................................ (1,620) (45) (4,651) (95)
------- ------- -------- -------
Income (loss) before income taxes and minority
interests............................................... 13,533 6,937 (21,130) 16,398
Income taxes................................................ 5,413 2,566 11,548 5,986
------- ------- -------- -------
Income (loss) before minority interests................... 8,120 4,371 (32,678) 10,412
Minority interests in earnings of subsidiary................ 1,090 -- 2,623 --
------- ------- -------- -------
Net income (loss)......................................... $ 7,030 $ 4,371 $(35,301) $10,412
======= ======= ======== =======
Net income (loss) per common share:
Basic..................................................... $ .33 $ .22 $ (1.74) $ .56
======= ======= ======== =======
Diluted (1)............................................... $ .32 $ .22 $ (1.74) $ .55
======= ======= ======== =======
Weighted average shares outstanding:
Basic..................................................... 21,249 19,600 20,346 18,561
======= ======= ======== =======
Diluted (1)............................................... 25,144 20,224 20,346 19,076
======= ======= ======== =======
</TABLE>

- -------------------------

(1) The calculation of diluted net income per share for the three months ended
September 30, 1998, assumes the conversion of the $115.0 million convertible
subordinated notes into 3,105,485 additional shares of World Access Common
Stock and the related increase in net income of $900,000 available to common
stockholders related to the reduction of interest expense.

16
<PAGE> 28

<TABLE>
<CAPTION>
AT
SEPTEMBER 30, 1998
------------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash and equivalents...................................... $ 61,992
Working capital........................................... 130,281
Total assets.............................................. 306,408
Short-term debt........................................... 2,507
Long-term debt............................................ 122,558
Stockholders' equity...................................... 120,271
</TABLE>

NACT SELECTED HISTORICAL FINANCIAL INFORMATION

The selected historical financial information of NACT set forth below has
been derived from and should be read in conjunction with the consolidated
financial statements and other financial information of NACT contained elsewhere
herein.

<TABLE>
<CAPTION>
NINE THREE
MONTHS MONTHS SIX MONTHS ENDED
ENDED FISCAL YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
SEPT. 30, ------------------------------------ DEC. 31, -----------------
1993 1994 1995 1996 1997 1997(1) 1997 1998
--------- ------ ------- ------- ------- ----------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales........................... $2,422 $5,479 $ 7,604 $ 9,930 $21,982 $7,300 $10,812 $17,006
Network carrier sales................... -- -- 2,782 3,783 5,716 1,387 2,685 2,424
Wins sales.............................. -- -- 1,098 2,572 -- -- -- --
------ ------ ------- ------- ------- ------ ------- -------
Total revenues.......................... 2,422 5,479 11,484 16,285 27,698 8,687 13,497 19,430
Cost of goods sold:
Product................................. 788 1,845 2,645 3,942 7,141 2,158 3,229 5,141
Network carrier......................... -- -- 2,731 3,382 5,486 1,387 2,547 2,167
Wins sales.............................. -- -- 787 2,572 -- -- -- --
Amortization of acquired intangibles.... 15 185 443 362 362 170 181 340
------ ------ ------- ------- ------- ------ ------- -------
Total cost of goods sold................ 803 2,030 6,606 10,258 12,989 3,715 5,957 7,648
------ ------ ------- ------- ------- ------ ------- -------
Gross profit............................ 1,619 3,449 4,878 6,027 14,709 4,972 7,540 11,782
Operating expenses:
Research and development................ 275 677 1,183 1,352 2,385 799 1,356 1,495
Selling and marketing................... 178 457 925 954 2,505 767 1,391 1,740
General and administrative.............. 561 1,353 2,153 3,024 3,472 1,362 1,628 2,289
Amortization of acquired intangibles.... 20 257 520 573 573 143 286 286
------ ------ ------- ------- ------- ------ ------- -------
Total operating expenses................ 1,034 2,744 4,781 5,903 8,935 3,071 4,661 5,810
------ ------ ------- ------- ------- ------ ------- -------
Income from operations.................. 585 705 97 124 5,774 1,901 2,879 5,972
Other income, net......................... 31 81 189 148 517 223 274 401
------ ------ ------- ------- ------- ------ ------- -------
Income before income taxes.............. 616 786 286 272 6,291 2,124 3,153 6,373
Income taxes.............................. 157 293 206 78 2,476 850 1,261 2,549
------ ------ ------- ------- ------- ------ ------- -------
Net income.............................. $ 459 $ 493 $ 80 $ 194 $ 3,815 $1,274 $ 1,892 $ 3,824
====== ====== ======= ======= ======= ====== ======= =======
Net income per common share:
Basic..................................... $ 0.12 $ 0.08 $ 0.01 $ 0.03 $ 0.52 $ 0.16 $ 0.27 $ 0.47
====== ====== ======= ======= ======= ====== ======= =======
Diluted................................... $ 0.12 $ 0.08 $ 0.01 $ 0.03 $ 0.50 $ 0.15 $ 0.27 $ 0.46
====== ====== ======= ======= ======= ====== ======= =======
Weighted average shares outstanding:
Basic..................................... 3,847 5,998 6,114 6,114 7,351 8,122 6,923 8,130
====== ====== ======= ======= ======= ====== ======= =======
Diluted................................... 3,847 5,998 6,114 6,114 7,602 8,443 6,923 8,265
====== ====== ======= ======= ======= ====== ======= =======
</TABLE>

17
<PAGE> 29

<TABLE>
<CAPTION>
AT AT SEPTEMBER 30, AT AT JUNE 30,
SEPT. 30, ------------------------------------ DEC. 31, -----------------
1993 1994 1995 1996 1997 1997(1) 1997 1998
--------- ------ ------- ------- ------- ------------ ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash...................................... $ 352 $1,186 $ 1,122 $ 694 $ 9,947 $5,252 $10,081 $11,264
Working capital........................... 3,131 3,280 4,145 4,245 21,189 23,195 22,509 25,965
Total assets.............................. 8,474 9,072 13,178 14,685 39,755 42,547 37,233 47,314
Long-term debt, net of current portion.... 387 -- 85 58 -- -- -- --
Total stockholders' equity................ 6,094 6,969 9,630 10,210 33,004 34,436 31,931 38,280
</TABLE>

- ---------------

(1) NACT changed its year end from September 30 to December 31 effective January
1, 1998. Accordingly, selected financial data for the three month period
ended December 31, 1996 are provided for purposes of comparison to the three
month period ended December 31, 1997, presented above.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
----------------
DEC. 31, 1996(1)
----------------
(UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales.......................................... $4,780
Network carrier sales.................................. 1,610
------
Total revenues......................................... 6,390
Cost of goods sold:
Product................................................ 1,730
Network Carrier........................................ 1,558
Amortization of acquired intangibles................... 91
------
Total cost of goods sold............................... 3,379
------
Gross profit........................................... 3,011
Operating expenses:
Research and development............................... 423
Selling and marketing.................................. 357
General and administrative............................. 836
Amortization of acquired intangibles................... 143
------
Total operating expenses............................... 1,759
------
Income from operations................................. 1,252
Other income (net)........................................ 25
------
Income before income taxes............................. 1,277
Income taxes.............................................. 569
------
Net income............................................. $ 708
======
Net income per common share:
Basic..................................................... $ 0.12
======
Diluted................................................... $ 0.12
======
Weighted average shares outstanding:
Basic..................................................... 6,114
======
Diluted................................................... 6,114
======
</TABLE>

18
<PAGE> 30

<TABLE>
<CAPTION>
AT
DEC. 31, 1996(1)
----------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash...................................................... $ 552
Working capital........................................... 6,382
Total assets.............................................. 17,041
Long-term debt............................................ --
Total stockholders' equity................................ 11,416
</TABLE>

- ---------------
(1) NACT changed its year end from September 30 to December 31 effective January
1, 1998. Accordingly, selected financial data for the three month period
ended December 31, 1996 are provided for purposes of comparison to the three
month period ended December 31, 1997, presented above.

TELCO SYSTEMS SELECTED HISTORICAL FINANCIAL INFORMATION

The selected historical financial information of Telco Systems set forth
below has been derived from and should be read in conjunction with the
consolidated financial statements and other financial information of Telco
Systems contained elsewhere herein.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------
AUG. 28, AUG. 27, AUG. 25, AUG. 31, AUG. 30,
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $100,470 $89,070 $ 93,954 $117,843 $113,230
Cost of sales............................................. 55,768 48,559 57,285 74,985 71,194
-------- ------- -------- -------- --------
Gross profit............................................ 44,702 40,511 36,669 42,858 42,036
Research and development.................................. 15,955 18,207 17,991 15,355 15,485
Sales, marketing and administration....................... 23,082 22,945 30,408 29,652 24,300
Restructuring costs (credit)(1)........................... -- (420) 4,209 -- --
In-process research and development(2).................... -- -- -- -- 5,135
Gain on sales of investment(3)............................ -- -- -- (1,070) --
Amortization of intangible assets......................... 824 783 752 669 795
-------- ------- -------- -------- --------
Operating income (loss)................................. 4,841 (1,004) (16,691) (1,748) (3,679)
Interest expense.......................................... (225) -- -- -- --
Interest income........................................... 845 1,632 1,146 670 728
-------- ------- -------- -------- --------
Income (loss) before income taxes....................... 5,461 628 (15,545) (1,078) (2,951)
Income taxes.............................................. 691 -- -- -- 300
-------- ------- -------- -------- --------
Net income (loss)....................................... $ 4,770 $ 628 $(15,545) $ (1,078) $ (3,251)
======== ======= ======== ======== ========
Net income (loss) per share:
Basic................................................... $ 0.50 $ 0.06 $ (1.50) $ (0.10) $ (0.30)
======== ======= ======== ======== ========
Diluted................................................. $ 0.48 $ 0.06 $ (1.50) $ (0.10) $ (0.30)
======== ======= ======== ======== ========
Weighted average shares outstanding:
Basic................................................... 9,551 10,022 10,357 10,701 10,966
======== ======= ======== ======== ========
Diluted................................................. 9,858 10,345 10,357 10,701 10,966
======== ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
AT AT AT AT AT
AUG. 28, AUG. 27, AUG. 25, AUG. 31, AUG. 30,
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities............................. $26,208 $29,103 $15,042 $12,708 $20,987
Working capital............................................ 43,210 49,915 35,917 40,414 39,683
Total assets............................................... 82,202 82,439 79,504 78,599 77,823
Stockholders' equity....................................... 61,548 67,405 53,997 55,756 55,500
</TABLE>

- ---------------

(1) The restructuring costs in fiscal 1996 related to the consolidation of
manufacturing operations at Telco Systems' Fremont, CA facility.

19
<PAGE> 31

(2) The in-process research and development charge related to the acquisition of
Jupiter Technology in January 1998.
(3) The gain on sale of investment resulted from the liquidation of an equity
investment in an international distributor of Telco Systems' products.
(4) The net income (loss) per share amounts prior to fiscal 1998 have been
restated as required to comply with Statement of Financial Accounting
Standards No. 128, Earnings Per Share. For further discussion of earnings
per share and the impact of Statement No. 128, see the notes to the
consolidated financial statements beginning on page F-130.

20
<PAGE> 32

UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION

The unaudited selected pro forma balance sheet data of World Access as of
June 30, 1998 set forth below give effect to the Merger and certain other
transactions that World Access has completed or which are pending, as if
consummated on such date. The unaudited selected pro forma statement of
operations data of World Access for the year ended December 31, 1997 and the six
months ended June 30, 1998 set forth below give effect to the Merger and certain
transactions that World Access has completed or which are pending, as if
consummated at the beginning of 1997. The selected pro forma information set
forth below is qualified in its entirety by, and should be read in conjunction
with, the unaudited pro forma combined financial statements included herein and
the historical financial information of World Access, Telco Systems, Resurgens,
NACT and ATI included elsewhere herein.

The selected pro forma information is presented for informational purposes
only and is not necessarily indicative of the financial position or operating
results that would have occurred if the transactions given retroactive effect
therein had been consummated as of the dates indicated, nor is it necessarily
indicative of future financial conditions or operating results. See "Unaudited
Pro Forma Combined Financial Statements."

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA:
Sales of products........................................... $ 222,444 $132,049
Service revenues............................................ 192,575 24,945
--------- --------
Total sales............................................... 415,019 156,994
Cost of products sold....................................... 143,580 82,054
Cost of services............................................ 270,498 40,437
--------- --------
Total cost of sales....................................... 414,078 122,491
--------- --------
Gross profit.............................................. 941 34,503
Engineering and development................................. 23,833 11,531
Selling, general and administrative......................... 125,577 33,333
Amortization of goodwill.................................... 8,719 4,355
Special charges............................................. -- 3,240
--------- --------
Operating loss............................................ (157,188) (17,956)
Interest and other income................................... 4,635 2,351
Interest expense............................................ (18,283) (5,273)
--------- --------
Loss before income taxes.................................. (170,836) (20,878)
Income taxes................................................ -- --
--------- --------
Net loss.................................................. $(170,836) $(20,878)
========= ========
Net loss per common share(1):
Basic..................................................... $ (5.31) $ (0.62)
========= ========
Diluted................................................... $ (5.31) $ (0.62)
========= ========
Weighted average shares outstanding:
Basic..................................................... 32,153 33,498
========= ========
Diluted................................................... 32,153 33,498
========= ========
</TABLE>

- ---------------

(1) Represents diluted earnings per share including shares of World Access
Common Stock issued in connection with the Merger and certain transactions
that World Access has completed or which are pending, as if consummated at
January 1, 1997, calculated in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128.

21
<PAGE> 33

<TABLE>
<CAPTION>
AT
JUNE 30, 1998
--------------
<S> <C>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA:
Current Assets
Cash and equivalents...................................... $ 63,891
Marketable securities..................................... 5,700
Accounts receivable....................................... 62,147
Inventories............................................... 54,682
Other current assets...................................... 20,859
---------
Total Current Assets.............................. 207,279
Property and equipment...................................... 82,914
Goodwill.................................................... 155,246
Acquired technology......................................... 50,717
Other assets................................................ 61,949
---------
Total Assets...................................... $ 558,105
=========
Current Liabilities
Short-term debt........................................... $ 7,950
Accounts payable.......................................... 47,175
Other accrued liabilities................................. 41,441
---------
Total Current Liabilities......................... 96,566
Long-term debt.............................................. 115,529
Noncurrent liabilities...................................... 53,754
---------
Total Liabilities................................. 265,849
---------
Stockholders' Equity
Common and preferred stock................................ 345
Capital in excess of par value............................ 409,430
Accumulated deficit....................................... (117,519)
---------
Total Stockholders' Equity........................ 292,256
---------
Total Liabilities and Stockholders' Equity........ $ 558,105
=========
</TABLE>

22
<PAGE> 34

COMPARATIVE PER SHARE DATA

The following table sets forth certain historical per share data of World
Access and Telco Systems and combined per share data on an unaudited pro forma
basis after giving effect to the Merger, assuming that (i) the Merger
Consideration is comprised solely of approximately 6.5 million shares of World
Access Common Stock (valued at $20.47 per share), which results in an effective
Exchange Ratio of .5862; or (ii) the Merger Consideration is comprised of
approximately 2.9 million shares of World Access Common Stock (valued at $20.47
per share) and $73.4 million (representing 55% of the value of the aggregate
Merger Consideration) in cash, which results in an effective Exchange Ratio of
.2638. The pro forma per share data of World Access is presented to give effect
to the Merger, the Resurgens Transaction and the acquisition of NACT and ATI.
The historical per share data of World Access presented below is presented as of
and for the fiscal year ended December 31, 1997 and for the six months ended
June 30, 1998. Telco Systems has a fiscal year end of August 30. The historical
per share data of Telco Systems is presented as of and for the fiscal year ended
August 30, 1998 and for the six month period ended August 30, 1998. This data
should be read in conjunction with the selected historical and pro forma
financial information, the unaudited pro forma combined financial statements and
the separate historical financial statements of World Access, Telco Systems,
Resurgens, NACT and ATI and the notes thereto included elsewhere herein. No
dividends were paid by World Access or Telco Systems during the periods
presented below.

The unaudited pro forma per share data is presented for informational
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred if the transactions given retroactive
effect therein had been consummated as of the dates indicated, nor is it
necessarily indicative of the future financial condition or operating results.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C>
World Access -- Historical
Net income (loss) per share(a)
Basic.................................................. $0.76 $(2.13)
Diluted................................................ $0.70 $(2.13)
Book value per share(b)................................... $5.01 $ 4.77
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
AUGUST 30, 1998 AUGUST 30, 1998
--------------- ----------------
<S> <C> <C>
Telco Systems -- Historical
Net income (loss) per share(a)
Basic.................................................. $(0.30) $(0.07)
Diluted................................................ $(0.30) $(0.07)
Book value per share(b)................................... $ 4.99 $ 4.99
</TABLE>

23
<PAGE> 35

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C>
MERGER CONSIDERATION: APPROXIMATELY 6.5 MILLION SHARES(C)
World Access -- Pro Forma
Net loss per share
Basic................................................ $(5.31) $(0.62)
Diluted.............................................. $(5.31) $(0.62)
Book value per share(d)................................ $ 8.40 $ 8.66
Telco Systems Per Common Share Equivalent -- Pro Forma
Net loss per share
Basic................................................ $(3.11) $(0.37)
Diluted.............................................. $(3.11) $(0.37)
Book value per share................................... $ 4.93 $ 5.08
MERGER CONSIDERATION: APPROXIMATELY 2.9 MILLION SHARES AND
$73.4 MILLION IN CASH(C)
World Access -- Pro Forma
Net loss per share
Basic................................................ $(6.11) $(0.77)
Diluted.............................................. $(6.11) $(0.77)
Book value per share(d)................................ $ 9.51 $ 9.78
Telco Systems Per Common Share Equivalent -- Pro Forma
Net loss per share
Basic................................................ $(1.61) $(0.20)
Diluted.............................................. $(1.61) $(0.20)
Book value per share................................... $ 2.51 $ 2.58
</TABLE>

- ---------------

(a) Historical earnings per share data are presented on a diluted basis in
accordance with SFAS No. 128.
(b) Calculated by dividing historical stockholders' equity by the number of
outstanding common shares. The outstanding common shares do not include
shares issuable upon exercise of stock options or conversion of outstanding
convertible securities.
(c) The comparative per share data does not give effect to Telco Systems'
acquisition of Synaptyx Corporation ("Synaptyx") in October 1998 pursuant
to which Telco Systems issued approximately 576,000 shares of Telco Systems
Common Stock, placed in escrow an additional approximately 204,000 shares
of Telco Systems Common Stock, the release of which is subject to achieving
certain operating performance criteria, and issued options to acquire
approximately 368,000 shares of Telco Systems Common Stock. As a
consequence of this transaction, World Access will be required in the
Merger (i) to issue an additional approximately 457,000 shares of World
Access Common Stock and options to acquire approximately 216,000 shares of
World Access Common Stock (assuming that the Merger Consideration is
comprised solely of shares of World Access Common Stock) or (ii) to issue
an additional approximately 206,000 shares of World Access Common Stock and
options to acquire approximately 216,000 shares of World Access Common
Stock and pay approximately $5.1 million in cash (assuming that 55% of the
Merger Consideration is comprised of cash). The acquisition of Synaptyx
does not meet any of the materiality thresholds that would require it to be
given pro forma effect in this Joint Proxy Statement/Prospectus.
(d) Calculated by dividing pro forma stockholders' equity by the number of
outstanding common shares expected to be outstanding as of the consummation
of the Merger, the Resurgens Transaction and the acquisition of NACT and
ATI, which number does not include shares issuable upon the exercise of
stock options of the conversion of outstanding convertible securities.

24
<PAGE> 36

RISK FACTORS

Holders of World Access Common Stock and holders of Telco Systems Common
Stock, in evaluating whether to approve the Merger Agreement and the
transactions contemplated thereby, should carefully consider the following risk
factors, in addition to the other information included in this Joint Proxy
Statement/Prospectus. Other than statements of historical fact, statements
contained in this Joint Proxy Statement/Prospectus, including statements as to
the benefits expected to be realized as a result of the Merger and as to future
financial performance, constitute forward-looking statements. Actual results of
World Access may differ significantly from the results discussed in the
forward-looking statements contained in this Joint Proxy Statement/Prospectus.
Factors that might cause such a difference include, but are not limited to,
those discussed below. Holders of Telco Systems Common Stock and World Access
Common Stock are cautioned not to place undue reliance on the forward-looking
statements contained in this Joint Proxy Statement/Prospectus, which speak only
as of the date hereof. Neither World Access nor Telco Systems undertakes any
obligation to publicly release the results of any revisions to such
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

RISK FACTORS CONCERNING THE MERGER

Potential Effects of the Merger. The success of the Merger will depend on
many factors, including the achievement of certain operating efficiencies.
Failure to successfully achieve any of such efficiencies, including a delay in
attaining them, could adversely effect the business, financial condition and
results of operations of World Access. See "-- Potential Fluctuations in
Quarterly Operating Results."

In addition, there can be no assurance that the combining of the two
companies' businesses will result in combined results of operations superior to
what would have been achieved by each company independently or that stockholders
of World Access and Telco Systems would not achieve greater returns on
investment if the Merger were not to occur. See "The Merger -- Background of the
Merger," "-- World Access Reasons for the Merger; Recommendation of the World
Access Board of Directors," and "-- Telco Systems Reasons for the Merger;
Recommendation of the Telco Systems Board of Directors."

Management of Growth. World Access is currently experiencing a period of
rapid growth resulting from recent acquisitions and the expansion of its
operations, both of which have placed significant demands on its resources. The
success of World Access in managing its growth will require it to continue to
improve its operational, financial and management information systems and to
motivate and effectively manage its employees. If management of World Access is
unable to manage such growth effectively, the quality of the World Access
products and services, its ability to retain key personnel and its business,
financial condition and results of operations could be materially adversely
affected.

RISK FACTORS CONCERNING WORLD ACCESS AND TELCO SYSTEMS

Compliance with Government Regulations and Evolving Industry
Standards. Each company's products and services must meet a significant number
of voice and data communications regulations and standards, some of which are
evolving as new technologies are deployed. In the United States, these products
and services must comply with various regulations promulgated by the Federal
Communications Commission ("FCC"), as well as with standards established by Bell
Communications Research ("BellCore"). Internationally, these products and
services must comply with standards established by telecommunications
authorities in various countries, as well as with recommendations of the
International Telecommunications Union ("ITU"). In addition, telecommunications
service providers require that equipment connected to their networks comply with
their own standards, which may vary from industry standards. Certain regulations
currently require that products which reside on a customer's premises and
interconnect the public switched network meet certain standards to prevent harm
to the network. Other regulations currently limit the levels of electromagnetic
radiation which may emanate from an electronic device located on a customer's
premises. The failure of either company's products to comply, or delays or costs
in achieving compliance, with the

25
<PAGE> 37

various existing and evolving regulations and industry standards could have a
material adverse effect on its business, financial condition and results of
operations.

The companies expect that government regulatory policies, including the
Telecommunications Act of 1996, are likely to continue to have a major impact on
the pricing of both existing and new public network services and possibly
accelerate the entrance of new competitors and consolidation of industry
participants and, therefore, are expected to affect supply and demand for such
services and the telecommunications products that support such services. Tariff
rates, whether determined autonomously by telecommunications service providers
or in response to regulatory directives, may affect the cost-effectiveness of
deploying public network services. Tariff policies are under continuous review
and are subject to change. User uncertainty regarding future policies may also
affect demand for telecommunications products and services, including each
company's products and services.

Potential Fluctuations in Quarterly Operating Results. Each company's
quarterly operating results have varied significantly in the past and are
expected to do so in the future. As each company increases the number of its
telecommunications product and service offerings, its future quarterly operating
results may vary significantly depending on factors such as the timing and
shipment of significant orders, new product and service introductions by it and
its competitors, market acceptance of new and enhanced versions of its products
and services, changes in pricing policies by it and its competitors, the
availability of new technologies, the mix of distribution channels through which
its products and services are sold, the inability to obtain sufficient supplies
of sole or limited source components for its products, gains or losses of
significant customers, the timing of customers' upgrade and expansion programs,
changes in the level of operating expenses, the timing of acquisitions,
seasonality and general economic conditions. In response to competitive
pressures for new product and service introductions, each company may take
certain pricing or marketing actions that could materially and adversely affect
its quarterly operating results. Accordingly, each company believes that period-
to-period comparisons of its operating results should not be relied upon as an
indication of future performance. In addition, the operating results of any
quarterly period are not indicative of results to be expected for a full fiscal
year. Historically, each company also has generated a disproportionate amount of
its operating revenues toward the end of each quarter, making precise prediction
of revenues and earnings particularly difficult and resulting in risk of
variance of actual results from those forecast at any time.

Due to all of the foregoing factors, it is possible that in some future
quarter each company's results of operations could be below prior results or the
expectations of market analysts and investors. In such an event, the price of
each company's stock would likely be materially adversely affected.

The expense levels of World Access are based, in part, on its expectation
as to future sales. If future sales levels are below expectations, then World
Access may be unable to adjust spending sufficiently in a timely manner to
compensate for the unexpected sales shortfall.

Rapid Technological Development; New Products and Services; Product
Errors. The market for each company's products and services is generally
characterized by rapidly changing technology, evolving industry standards and
frequent new product and service introductions that can render existing products
and services obsolete or unmarketable. Each company's success will depend to a
substantial degree upon its ability to develop and introduce in a timely fashion
enhancements to its existing products and services and new products and services
that meet changing customer requirements and emerging industry standards. The
failure of either company to introduce new products and services and respond to
industry changes on a timely and cost effective basis could make inventory on
hand obsolete and could have a material adverse effect on such company's
business, financial condition and results of operations.

The development of new, technologically advanced products and services is a
complex and uncertain process requiring high levels of innovation and capital,
as well as the accurate anticipation of technological and market trends. The
introduction and marketing of new or enhanced products and services require
management of the transition from existing products and services in order to
minimize disruption in customer purchasing patterns. There can be no assurance
that either company will successfully manage the transition to new or enhanced
products and services. Further, there can be no assurance that products,
services or technologies developed by others will not render either company's
products, services or technologies obsolete.
26
<PAGE> 38

Products as complex as those offered by each company may contain undetected
errors or failures when first introduced or as new versions are released, and
such errors have occurred in these products in the past. There can be no
assurance that, despite testing by each company and by current and potential
customers, errors will not be found in new products after commencement of
commercial shipments. The occurrence of such errors could result in the loss or
delay in market acceptance of products, diversion of development resources,
damage to company reputation or increased service or warranty costs, any of
which could have a material adverse effect upon each company's business,
financial condition and results of operations.

From time to time, each company or its competitors may announce new
products, services, capabilities or technologies that have the potential to
replace or shorten the life cycle of its existing product and service offerings.
There can be no assurance that announcements of product enhancements or new
product or service offerings will not cause customers to defer or cancel
purchasing existing products and services or cause resellers to return products.
Any such deferrals, cancellations or returns could have a material adverse
effect on such company's business, operating results and financial condition.

Failure to introduce new products and services or product or service
enhancements effectively and on a timely basis, customer delays in purchasing
products and services in anticipation of new product or service introductions
and any inability of either company to respond effectively to technological
changes, emerging industry standards or product and service announcements by
competitors could have a material adverse effect on such company's business,
operating results and financial condition.

Limited Protection of Proprietary Rights. Each company relies on
contractual rights, trade secrets, trademarks and copyrights to establish and
protect its proprietary rights in its products. Although each company presently
holds several patents for certain of its existing products and has several
patent applications pending, not all of its products are covered by patents. The
telecommunications equipment industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of patent
infringement. Neither company has conducted a formal patent search relating
generally to the technology used in its products. In addition, since patent
applications in the United States are not publicly disclosed until the patent
issues and foreign patent applications generally are not publicly disclosed for
at least a portion of the time that they are pending, applications may have been
filed which, if issued as patents, would relate to either company's products. In
addition, software comprises a substantial portion of the technology in each
company's products. The scope of protection accorded to patents covering
software-related inventions is evolving and is subject to a degree of
uncertainty that may increase the risk and cost to either of the companies if it
discovers the existence of third party patents related to its software products
or if such patents are asserted against it in the future.

In the future, each company may be required to bring or defend against
litigation to enforce any patents issued or assigned to it, to protect
trademarks, trade secrets and other intellectual property rights owned by it, to
defend it against claimed infringement of the rights of others and to determine
the scope and validity of the proprietary rights of others. Regardless of the
ultimate outcome, any litigation could be costly and could divert management's
attention, which could have a material adverse effect on the business, financial
condition and results of operations of such company. Adverse determinations in
litigation could result in the loss of the proprietary rights of such company,
subject it to significant liabilities, require it to seek licenses from third
parties or prevent it from manufacturing or selling its products, any of which
could have a material adverse effect on the business, financial condition and
results of operations of such company.

Dependence on Key Personnel. Each company is highly dependent on the
services of several key executive officers and technical employees, the loss of
any of whom could have a material adverse effect on its business, financial
condition and results of operations. In addition, each company will need to hire
additional skilled personnel to support the continued growth of its business.
The market for skilled personnel, especially those with the technical abilities
required by each company, is currently very competitive, and each company must
compete with much larger companies with significantly greater resources to
attract and retain such personnel.

Competition. The segments of the telecommunications industry in which the
companies operate are intensely competitive. Many of each company's competitors
have significantly more extensive engineering,
27
<PAGE> 39

manufacturing, marketing, financial and technical resources than such company.
In addition, several major suppliers may compete with one or both of the
companies, such as Northern Telecom's current relationship with World Access,
with respect to the sale of certain of their products, which may adversely
affect their ability to continue to obtain such products from these suppliers in
the future.

The companies may face additional competition from the Regional Bell
Operating Companies ("RBOCs"), which have historically been prohibited from
manufacturing telecommunications equipment by the terms of the Modification of
Final Judgment entered into in connection with the divestiture of the RBOCs by
AT&T in 1984. The Telecommunications Act of 1996 contains provisions that permit
the RBOCs, subject to satisfying certain conditions designed to facilitate local
exchange competition, to manufacture telecommunications equipment. In light of
these provisions, it is possible that one or more of the RBOCs, some of which
are major customers of World Access and Telco Systems, may decide to manufacture
telecommunications equipment or to form alliances with other manufacturers. Any
of these developments could result in increased competition for each company,
which may have a material adverse effect on its business, financial condition
and results of operations.

RISK FACTORS CONCERNING WORLD ACCESS

Acquisition Risks. An element of the World Access strategy for the future
is expansion through the acquisition of companies that complement or expand its
existing businesses. Acquisitions involve a number of special risks, including
the time associated with identifying and evaluating future acquisitions, the
diversion of management's attention to the integration of the operations and
personnel of the acquired companies, the integration of acquired products and
services, possible adverse short-term effects on the operating results of World
Access, the realization of acquired intangible assets and the loss of key
employees of the acquired companies. World Access may issue equity securities
and other forms of consideration in connection with future acquisitions, which
could cause dilution to the then-existing stockholders of World Access. World
Access does not currently have any commitments or agreements with respect to any
acquisitions other than the Merger Agreement, the Resurgens Merger Agreement and
the Exchange Agreement. There can be no assurance that suitable acquisition
candidates will be found upon terms acceptable to World Access, that World
Access will have adequate resources to consummate any acquisition, that
acquisitions can be consummated successfully, or that acquired businesses will
be operated profitably or integrated successfully into the operations of World
Access.

Increased Leverage. In connection with the October 1997 sale of the World
Access 4.5% Convertible Subordinated Notes, World Access incurred approximately
$115.0 million in additional indebtedness, which significantly increased the
ratio of its long-term debt to its total capitalization from 0.3% at September
30, 1997 to 57.3% on a pro forma basis. As a result of this increased leverage,
the principal and interest obligations of World Access increased substantially.
The degree to which World Access is leveraged could adversely affect its ability
to obtain additional financing for working capital, acquisitions or other
purposes and could make it more vulnerable to economic downturns and competitive
pressures. The increased leverage of World Access could also adversely affect
its liquidity, as a substantial portion of available cash from operations may
have to be applied to meet debt service requirements and, in the event of a cash
shortfall, World Access could be forced to reduce other expenditures and forego
potential acquisitions to be able to meet such requirements.

Holding Company Risks. As a holding company without significant income
from operations, World Access is dependent upon the income from its operating
subsidiaries to meet its operating expenses. If World Access' operating
subsidiaries are unable to pay dividends or otherwise distribute amounts to
World Access sufficient to cover its operating expenses, then World Access may
be subject to liquidity problems, even if, on a consolidated basis, its
operating subsidiaries are profitable.

Dependence on Suppliers. World Access purchases substantially all of its
components and other parts from suppliers on a purchase order basis and does not
maintain long-term supply arrangements. Several components, primarily custom
hybrid integrated circuits, are available from a single source. In addition, the
operations of certain of the World Access subsidiaries depend on a consistent
supply of new or used switching products, add-on frames and related circuit
boards. Accordingly, there can be no assurance that World Access

28
<PAGE> 40

will be able to continue to obtain sufficient quantities of products or key
components as required or that such products or key components, if obtained,
will be available to World Access on commercially favorable terms. Failure to
obtain key products and key components on a timely and cost effective basis
could have a material adverse effect on the business, financial condition and
results of operations of World Access.

Customer Concentration. A small number of customers historically has
accounted for a significant percentage of World Access' and NACT's total sales.
For the six months ended June 30, 1998 and the year ended December 31, 1997, no
customer individually accounted for more than 10% of World Access' total sales
and World Access' top 10 customers accounted for 39.5% and 44.2% of total sales,
respectively. For the six months ended June 30, 1998 and the year ended
September 30, 1997, NACT's top 10 customers accounted for 44.7% and 55.7% of
total sales, respectively. JD Services, Inc. accounted for 11% of NACT's total
sales during the six months ended June 30, 1998, and no customer individually
accounted for more than 10% of NACT's total sales for the year ended September
30, 1997. World Access' and NACT's customers typically are not obligated
contractually to purchase any quantity of products or services in any particular
period. The loss of, or a material reduction in orders by, one or more of World
Access' or NACT's key customers could have a material adverse effect on World
Access' business, financial condition and results of operations.

For the year ended December 31, 1997, PT-1 Communications Incorporated
accounted for 21% of Resurgens' total sales. In addition, Resurgens' revenues
attributable to its Carrier Service Agreement with WorldCom Network Services,
Inc. ("WNS"), a wholly owned subsidiary of MCI WorldCom, Inc., for the month of
September 1998 comprised approximately 50% of Resurgens' total revenues for such
period, and Resurgens' revenues attributable to WNS comprised approximately 54%
of Resurgens' total revenues for the nine month period ended September 30, 1998.
If the Resurgens Transaction is consummated, then the loss of, or a material
reduction in orders, by, such a key customer of Resurgens could have a material
adverse effect on World Access' business, financial condition and results of
operations.

International Sales; Regulatory Standards; Currency Exchange.
International sales represented approximately 22.4% of World Access' total sales
for the six months ended June 30, 1998 and 11.3%, 1.7% and 5.0% of total sales
in the years ended December 31, 1997, 1996 and 1995, respectively. International
sales represented approximately 8.7% of NACT's total sales for the six months
ended June 30, 1998 and 14.3%, 12.9% and 6.4% of total sales in the years ended
September 30, 1997, 1996 and 1995, respectively. World Access intends to
increase its international sales efforts, which may require significant
management attention and financial resources. There can be no assurance that
World Access can increase its international sales. International sales are
subject to inherent risks, including unexpected changes in regulatory
requirements, tariffs or other barriers, difficulties in staffing and managing
foreign operations, longer payment cycles, unstable political environments,
greater difficulty in accounts receivable collection and potentially adverse tax
consequences. Moreover, gains and losses on the conversion to U.S. dollars of
receivables and payables arising from international operations may contribute to
fluctuations in World Access' results of operations, and fluctuations in
exchange rates could affect demand for World Access' products and services.

Possible Volatility of Stock Price. World Access believes factors such as
announcements of new products or technological innovations by World Access, or
third parties, as well as variations in World Access' results of operations, the
gain or loss of significant customers, the timing of acquisitions of businesses
or technology licenses, legislative or regulatory changes, general trends in the
industry, market conditions, analysts' estimates and other events or factors may
cause the market price of the World Access Common Stock to fluctuate
significantly. In addition, the stock market has experienced extreme price and
volume fluctuations that have particularly affected the market price for many
technology companies and that have often been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the World Access Common Stock.

Anti-Takeover Provisions. Certain provisions of the World Access
Certificate, the World Access Bylaws and the DGCL could, together or separately,
discourage potential acquisition proposals or delay or prevent a change in
control of World Access. Currently, those provisions include a classified board
of directors, a prohibition on written consents in lieu of meetings of the
stockholders and the authorization to issue up to 10,000,000 shares of preferred
stock and up to 40,000,000 shares of World Access Common Stock. World

29
<PAGE> 41

Access is submitting herewith to its stockholders a proposal to increase the
authorized shares of World Access Common Stock to 150,000,000. See "Additional
Matters Submitted to a Vote of World Access Stockholders -- Additional Proposal
1 -- Proposal to amend Certificate of Incorporation of World Access to Increase
the Number of Authorized Shares of World Access Common Stock to 150,000,000."
The World Access board of directors has the power to issue any or all of these
additional shares without stockholder approval, and the preferred shares can be
issued with such rights, preferences and limitations as may be determined by the
board of directors. The rights of the holders of World Access Common Stock will
be subject to, and may be adversely affected by, the commitments or contracts to
issue any additional shares of World Access Common Stock or any shares of
preferred stock. Authorized and unissued preferred stock and World Access Common
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could delay, discourage, hinder or
preclude an unsolicited acquisition of World Access, could make it less likely
that its stockholders receive a premium for their shares as a result of any such
attempt and could adversely affect the market price of, and the voting and other
rights of, the holders of outstanding shares of World Access Common Stock.

Year 2000 Issue. As a result of certain computer programs being written
using two digits rather than four to define the applicable year, any of World
Access' computer systems that have date sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000 (the "Year 2000 Issue").
This causes programs that perform arithmetic operations, comparisons or date
sorts to possibly generate erroneous results when the program is required to
process dates from both centuries. This could result in a system failure,
incorrect data and other business disruptions, including, among other things, a
temporary inability to procure materials, process transactions, send invoices
and service customers.

World Access is in the process of evaluating its operating systems to
determine what modifications are necessary to make such systems compatible with
the year 2000 requirements. These systems include business information systems,
development tools and test beds, and manufacturing equipment and processes.
World Access has recently implemented a new business information system at
several of its locations that is certified to be year 2000 compliant by its
supplier. Independent tests by World Access have verified this compliance and
the system is expected to be deployed company-wide by mid-1999. World Access
plans on engaging an outside consulting firm in November 1998 to perform a
detailed year 2000 review of its development and manufacturing systems. The
costs to ensure compliance of these systems (including computer equipment,
software upgrades and assessment fees) by mid-1999 is currently estimated at
approximately $700,000.

In addition, World Access is in the process of developing a plan whereby it
will review the year 2000 readiness of its customers and suppliers. In doing so,
it will undertake appropriate internal reviews and will contact certain of its
significant customers to assess, to the extent possible, Year 2000 Issues
related to World Access' products. In that regard, World Access has identified
that certain of its products, including NACT's NTS 1000 Billing System, are not
year 2000 compliant. NACT is in the process of modifying the NTS 1000 Billing
System to overcome the two digit limitation. This modification of the NTS 1000
software is anticipated to be completed by the first calendar quarter in 1999 at
an estimated cost of $115,000. World Access is in the process of releasing new
versions of such products and making necessary modifications to existing
products to address the Year 2000 Issue. World Access expects that many of its
customers will upgrade to the new products. However, there can be no assurance
that World Access customers will upgrade to the new year 2000 compliant products
or that the modifications planned to the certain of the existing products will
be successful or completed in a timely manner. Although World Access believes
that it can address year 2000 readiness issues related to its products, there
may still be disruptions and/or product failures that are unforeseen.

World Access also intends to request assurances from its major suppliers
that they are addressing the Year 2000 Issue and that the products and services
procured or used by World Access will function properly or be available without
interruption in the year 2000. A detailed questionnaire was mailed to all major
suppliers in September 1998. Appropriate Year 2000 warranties will be requested
from key suppliers to World Access. Nevertheless, it will be impossible to fully
assess the potential consequences if service interruptions occur from suppliers
or in infrastructure areas such as utilities, communications, transportation,
banking and government. As a result, World Access also intends to develop a
business continuity plan by mid-1999 to minimize the impact of such external
events.
30
<PAGE> 42

While World Access' efforts to address Year 2000 Issues will involve
additional costs and the time and effort of a number of employees, World Access
believes, based on currently available information, that it will be able to
properly manage its total year 2000 exposure. There can be no assurance,
however, that World Access will be successful in its effort or that the computer
systems of other companies on which World Access will rely will be timely
modified, or that a failure to modify such systems by another company, or
modifications that are incompatible with World Access' systems, would not have a
material adverse effect on World Access' business, financial condition or
results of operations.

RISK FACTORS CONCERNING TELCO SYSTEMS

Orders and Backlog. Order delays and cancellations could have a material
adverse effect on the business, financial condition and results of operations of
Telco Systems. The customers of Telco Systems may revise scheduled delivery
dates, product configuration or cancel orders. Telco Systems' backlog of orders
may not mitigate the effect of such delays and cancellations. The backlog may
not be representative of actual sales for any succeeding period because of the
timing of orders, delivery intervals, customer and product mix, the possibility
of changes in delivery schedules and additions or cancellation of orders.

Dependence on Suppliers. Telco Systems is dependent on a few suppliers to
provide certain custom-designed components, and any significant interruption in
the supply, or degradation in the quality, of components manufactured by such
suppliers could have a material adverse effect on the business, financial
condition and results of operations of Telco Systems. On-time delivery of Telco
Systems' products depends upon the availability of components manufactured by
suppliers and used in the products of Telco Systems. There can be no assurance
that such suppliers will continue to be able and willing to meet the
requirements of Telco Systems for any such components.

Telco Systems has recently begun to rely on three contract manufacturers,
Eltech Electronics, Inc., US Assemblies, New England, Inc. and SCI Technologies,
Inc. to produce its products. Delivery of Telco Systems' products by such
manufacturers may be interrupted if the manufacturers encounter production,
quality or financial problems. Moreover, Telco Systems may fail to order
sufficient quantities of its products from the manufacturers to satisfy orders
from the customers of Telco Systems. Such interruptions or failures could have a
material adverse effect on the business, financial condition and results of
operations of Telco Systems.

Concentration of Customers. Recent merger activity among some of the large
customers of Telco Systems could have a material adverse effect on the future
orders of Telco Systems as those customers reassess their strategic direction.
NYNEX Corporation ("NYNEX"), the largest customer of Telco Systems, recently
merged with Bell Atlantic Corporation. A material curtailment by Bell Atlantic
Corporation in the rate at which NYNEX Corporation ordered products from Telco
Systems, if not offset by increased sales to other customers of Telco Systems,
would reduce the revenues of Telco Systems so that Telco Systems could not cover
its current level of operating costs, having a material adverse effect on the
business, financial condition and results of operations of Telco Systems.

Telco Systems is dependent for a significant amount of its sales upon
NYNEX, Walker and Associates and Sprint Corporation, which represented
approximately 36%, 12% and 12%, respectively, of Telco Systems' sales for fiscal
1998 and 33%, 10% and 9%, respectively, for fiscal 1997. GTE Corporation
represented approximately 6% and 4% of Telco Systems' sales for fiscal 1998 and
1997, respectively. If the proposed merger of GTE Corporation and Bell Atlantic
Corporation (successor to NYNEX) is completed, then on a pro forma basis, the
combined entity would have represented approximately 42% and 37% of Telco
Systems' sales for fiscal years 1998 and 1997, respectively.

The loss of, or a material reduction in orders by, one or more of the
significant customers of Telco Systems could have a material adverse effect on
the business, financial condition and results of operations of Telco Systems.

31
<PAGE> 43

Entry into International Markets. Telco Systems has targeted the entry
into the international marketplace as an important part of its growth strategy.
International sales accounted for approximately 12% of Telco Systems' total
sales for fiscal 1998, up from 7% of its total sales for fiscal 1997 and 4% of
its total sales for fiscal 1996. International sales are subject to inherent
risks, including unexpected changes in regulatory requirements, tariffs or other
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, unstable political environments, greater difficulty in accounts
receivable collection and potentially adverse tax consequences. Also, to the
extent that any of Telco Systems' sales are denominated in foreign currencies,
Telco Systems' revenues and results of operations may also be directly affected
by fluctuations in foreign currency exchange rates.

32
<PAGE> 44

THE SPECIAL MEETINGS

THE WORLD ACCESS SPECIAL MEETING

General. This Joint Proxy Statement/Prospectus is being furnished to
stockholders of World Access in connection with the solicitation of proxies by
the board of directors of World Access for use at the World Access Special
Meeting to be held at the principal offices of World Access located at 945 E.
Paces Ferry Road, Suite 2240, Atlanta, Georgia 30326, on November 30, 1998, at
10:00 a.m., local time, and at any adjournments or postponements thereof, for
the purposes set forth herein and in the accompanying notice of special meeting
of stockholders of World Access.

Matters to Be Considered. At the World Access Special Meeting,
stockholders of record of World Access as of the close of business on the World
Access Record Date will be asked to consider and vote upon proposals: (i) to
approve and adopt the Merger Agreement and the consummation of the transactions
contemplated thereby, including the Merger and the Share Issuance; (ii) to
approve an amendment to the World Access Certificate to increase the number of
authorized shares of World Access Common Stock to 150,000,000; (iii) to adopt
the Incentive Equity Plan; (iv) to ratify and approve the Indemnification
Agreements; and (v) to transact such other business as may properly come before
the World Access Special Meeting or any adjournments or postponements thereof.

Board of Directors' Recommendation. THE BOARD OF DIRECTORS OF WORLD ACCESS
HAS DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF WORLD ACCESS AND HAS THEREFORE UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER AND THE SHARE ISSUANCE, AND UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS OF WORLD ACCESS VOTE FOR: (I) THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER AND THE SHARE ISSUANCE; (II) THE APPROVAL OF THE
AMENDMENT TO THE WORLD ACCESS CERTIFICATE; (III) THE ADOPTION OF THE INCENTIVE
EQUITY PLAN; AND (IV) THE RATIFICATION AND APPROVAL OF THE INDEMNIFICATION
AGREEMENTS.

World Access Record Date. The board of directors of World Access has fixed
November 2, 1998 as the record date for determination of holders of World Access
Common Stock entitled to notice of and to vote at the World Access Special
Meeting. As of the close of business on the World Access Record Date, 25,675,253
shares of World Access Common Stock were outstanding, held by approximately 312
holders of record. Only holders of record of World Access Common Stock as of the
close of business on the World Access Record Date are entitled to notice of and
to vote at the World Access Special Meeting and any adjournments or
postponements thereof.

Voting; Vote Required. Each holder of record of World Access Common Stock
on the World Access Record Date is entitled to cast one vote per share of World
Access Common Stock held thereby on the World Access Record Date, exercisable in
person or by properly executed proxy, on each matter properly submitted for the
vote of the stockholders of World Access at the World Access Special Meeting. A
majority of the shares of World Access Common Stock entitled to vote at the
World Access Special Meeting will constitute a quorum for the transaction of
business at the World Access Special Meeting.

The approval of the Merger Agreement, including the Merger and the Share
Issuance, the adoption of the Incentive Equity Plan and the ratification and
approval of the Indemnification Agreements each will require the affirmative
vote of a majority of the shares of World Access Common Stock, present in person
or represented by properly executed proxy at the World Access Special Meeting.
The approval of the amendment to the World Access Certificate will require the
affirmative vote of a majority of the outstanding shares of World Access Common
Stock.

33
<PAGE> 45

the transaction of business and the total number of votes cast with respect to a
particular matter. Broker non-votes (i.e., shares identified as held by brokers
or nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote that the broker or nominee does not have
discretionary power to vote on a particular matter) will be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business but will not be counted for purposes of determining the number of votes
cast with respect to the particular proposal on which the broker has expressly
not voted. Broker non-votes with respect to proposals set forth in this Joint
Proxy Statement/Prospectus, other than with respect to the approval of the
amendment to the World Access Certificate, will therefore not be considered
votes cast and, accordingly, will not affect the determination as to whether a
majority of votes cast has been obtained with respect to a particular matter.
Because approval of the amendment to the World Access Certificate will require
the affirmative vote of a majority of the outstanding shares of World Access
Common Stock, broker non-votes with respect to such proposal will have the same
effect as a negative vote.

BECAUSE APPROVAL OF THE AMENDMENT TO THE WORLD ACCESS CERTIFICATE, WHICH
APPROVAL IS INTENDED TO SATISFY ONE OF THE CONDITIONS TO THE MERGER, REQUIRES
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
WORLD ACCESS COMMON STOCK, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME
EFFECTS AS NEGATIVE VOTES. ACCORDINGLY, THE BOARD OF DIRECTORS OF WORLD ACCESS
URGES THE HOLDERS OF WORLD ACCESS COMMON STOCK TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.

Security Ownership by Certain Beneficial Owners and Management. As of the
close of business on the World Access Record Date, directors and executive
officers of World Access and their respective affiliates may be deemed to be the
beneficial owners of shares of World Access Common Stock representing
approximately 5.8% of the outstanding voting power of World Access. Each of the
directors and executive officers of World Access has indicated that such person
intends to vote or direct the vote of all the shares of World Access Common
Stock over which such person has voting control in favor of the approval and
adoption of the Merger Agreement and the transactions contemplated thereby,
including the Merger and the Share Issuance, and in favor of all other proposals
described herein.

THE TELCO SYSTEMS SPECIAL MEETING

General. This Joint Proxy Statement/Prospectus is also being furnished to
stockholders of Telco Systems in connection with the solicitation of proxies by
the board of directors of Telco Systems for use at the Telco Systems Special
Meeting to be held at the principal offices of Telco Systems located at 63
Nahatan Street, Norwood, Massachusetts 02062, on November 30, 1998, at 10:00
a.m., local time, and at any adjournments or postponements thereof, for the
purposes set forth herein and in the accompanying notice of special meeting of
stockholders of Telco Systems.

Matters to Be Considered. At the Telco Systems Special Meeting,
stockholders of record of Telco Systems as of the close of business on the Telco
Systems Record Date will be asked to consider and vote upon proposals: (i) to
approve and adopt the Merger Agreement and the consummation of the transactions
contemplated thereby, including the Merger; and (ii) to transact such other
business as may properly come before the Telco Systems Special Meeting or any
adjournments or postponements thereof.

Board of Directors' Recommendation. THE BOARD OF DIRECTORS OF TELCO
SYSTEMS HAS DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF,
THE STOCKHOLDERS OF TELCO SYSTEMS AND HAS THEREFORE UNANIMOUSLY APPROVED AND
ADOPTED THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF TELCO SYSTEMS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER.

Telco Systems Record Date. The board of directors of Telco Systems has
fixed November 6, 1998 as the record date for determination of holders of Telco
Systems Common Stock entitled to notice of and to vote at the Telco Systems
Special Meeting. As of the close of business on the Telco Systems Record Date,
11,942,598 shares of Telco Systems Common Stock were outstanding, held by
approximately 379 holders of record. Only holders of record of Telco Systems
Common Stock as of the close of business on the Telco
34
<PAGE> 46

Systems Record Date are entitled to notice of and to vote at the Telco Systems
Special Meeting and any adjournments or postponements thereof.

Voting; Vote Required. Each holder of record of Telco Systems Common Stock
on the Telco Systems Record Date is entitled to cast one vote for each share of
Telco Systems Common Stock held thereby, on the Telco Systems Record Date,
exercisable in person or by properly executed proxy, on each matter properly
submitted for the vote of the stockholders of Telco Systems at the Telco Systems
Special Meeting. A majority of the shares of Telco Systems Common Stock entitled
to vote at the Telco Systems Special Meeting will constitute a quorum for the
transaction of business at the Telco Systems Special Meeting.

The approval of the Merger Agreement and the Merger will require the
affirmative vote of a majority of the outstanding shares of Telco Systems Common
Stock at the Telco Systems Special Meeting.

Shares of Telco Systems Common Stock that are voted "FOR," "AGAINST" or
"WITHHELD" at the Telco Systems Special Meeting will be treated as being present
at such meeting for purposes of establishing a quorum and will also be treated
as votes eligible to be cast by the Telco Systems Common Stock present in person
or represented by proxy at the Telco Systems Special Meeting and entitled to
vote on the subject matter. Abstentions will be counted for purposes of
determining both the presence or absence of a quorum for the transaction of
business and the total number of votes cast with respect to a particular matter.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business but will not be counted for
purposes of determining the number of votes cast with respect to the particular
proposal on which the broker has expressly not voted. Abstention and broker
non-votes will have the same effect as a vote against the approval of the Merger
Agreement and the Merger, which approval will require the affirmative vote of a
majority of the outstanding shares of Telco Systems Common Stock.

BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF TELCO SYSTEMS COMMON
STOCK, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE
VOTES. ACCORDINGLY, THE BOARD OF DIRECTORS OF TELCO SYSTEMS URGES THE HOLDERS OF
TELCO SYSTEMS COMMON STOCK TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.

Security Ownership by Certain Beneficial Owners and Management. As of the
close of business on the Telco Systems Record Date, directors and executive
officers of Telco Systems and their respective affiliates may be deemed to be
the beneficial owners of shares of Telco Systems Common Stock representing less
than 1% of the outstanding voting power of Telco Systems. Each of the directors
and executive officers of Telco Systems has indicated that such person intends
to vote or direct the vote of all the shares of Telco Systems Common Stock over
which such person has voting control in favor of the Merger Agreement and the
Merger. In addition, the owners of approximately 8% of the outstanding Telco
Systems Common Stock have entered into a Stockholders Proxy Agreement pursuant
to which each Stockholder has granted to World Access the right to vote all
voting securities of Telco Systems held by such Stockholder in favor of the
Merger Agreement and the Merger. See "The Stockholders Proxy Agreement."

PROXIES

This Joint Proxy Statement/Prospectus is being furnished to holders of
World Access Common Stock and holders of Telco Systems Common Stock in
connection with the solicitation of proxies by and on behalf of the boards of
directors of World Access and Telco Systems for use at the World Access Special
Meeting and the Telco Systems Special Meeting, respectively. All shares of World
Access Common Stock and all shares of Telco Systems Common Stock that are
entitled to vote and are represented at the World Access Special Meeting or the
Telco Systems Special Meeting, as the case may be, by properly executed proxies
received prior to or at such meeting and not duly and timely revoked, will be
voted at such meetings in accordance with the instructions indicated on such
proxies. If no instructions are indicated, such proxies will be voted (i) in the
case of the World Access Special Meeting, FOR the approval and adoption of the
Merger Agreement and the consummation of the transactions contemplated thereby,
including the Merger and the Share Issuance, FOR

35
<PAGE> 47

the approval and adoption of the amendment to the World Access Certificate to
increase the number of authorized shares of World Access Common Stock to
150,000,000, FOR the approval and adoption of the Incentive Equity Plan and FOR
the ratification and approval of the Indemnification Agreements; and (ii) in the
case of the Telco Systems Special Meeting, FOR the approval and adoption of the
Merger Agreement and the consummation of the transactions contemplated thereby,
including the Merger.

If any other matters are properly presented for consideration at either the
World Access Special Meeting or the Telco Systems Special Meeting or any
adjournments or postponements thereof, including, among other things,
consideration of a motion to adjourn or postpone either such meeting to another
time or place (including, without limitation, for the purpose of soliciting
additional proxies), the persons named in the enclosed forms of proxy and voting
thereunder will have discretion to vote on such matters in accordance with their
best judgment; provided, however, that proxies voting against the proposals
presented in this Joint Proxy Statement/Prospectus may not be voted for
adjournment.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of World Access or Telco Systems, as the case may be, or by
delivering to the respective Information Agent via facsimile at or before the
taking of the vote at the World Access Special Meeting or the Telco Systems
Special Meeting, as the case may be, a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a later dated proxy relating to
the same shares and delivering it to the Secretary of World Access or Telco
Systems, as the case may be, before the taking of the vote at the World Access
Special Meeting or the Telco Systems Special Meeting, as the case may be, or
(iii) attending the World Access Special Meeting or the Telco Systems Special
Meeting, as the case may be, and voting in person (although attendance at the
World Access Special Meeting or the Telco Systems Special Meeting, as the case
may be, will not in and of itself constitute a revocation of a proxy). Any
written notice of revocation or subsequent proxy should be sent via facsimile to
your respective Information Agent at (212) 440-9955 for World Access
stockholders or (201) 804-8017 for Telco Systems stockholders or sent so as to
be delivered, in the case of World Access stockholders, to World Access, Inc.,
2240 Resurgens Plaza, 945 E. Paces Ferry Road, Atlanta, Georgia 30326,
Attention: Secretary, and in the case of Telco Systems stockholders, to Telco
Systems, Inc., 63 Nahatan Street, Norwood, Massachusetts 02062, Attention:
Secretary, or hand-delivered to the Secretary of World Access or Telco Systems,
as the case may be, at or before the taking of the vote at the World Access
Special Meeting or the Telco Systems Special Meeting, respectively.

All expenses of this solicitation, including the cost of preparing and
mailing this Joint Proxy Statement/Prospectus to stockholders of World Access
and Telco Systems, will be borne equally by World Access and Telco Systems. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of World Access and Telco Systems in person or
by telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. World
Access has retained Georgeson & Company Inc. and Telco Systems has retained
Corporate Investor Communications, Inc. at an aggregate cost of approximately
$15,000 to assist in their respective solicitations of proxies from brokers,
nominees, institutions and individuals. Arrangements will also be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and World Access and Telco Systems will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
---------------------

TELCO SYSTEMS STOCKHOLDERS SHOULD NOT SEND ANY
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
---------------------

36
<PAGE> 48

THE MERGER

GENERAL

The Merger Agreement provides that Telco Systems will be merged with and
into Merger Sub. As a result of the Merger, the separate corporate existence of
Telco Systems will cease and Merger Sub will continue as the surviving
corporation of the Merger and a direct wholly owned subsidiary of World Access.
The Merger will take place as promptly as practicable after the adoption and
approval of the Merger Agreement and the transactions contemplated thereby, by
the stockholders of World Access and Telco Systems and the satisfaction or
waiver of the other conditions to the Merger set forth in the Merger Agreement.
See "The Merger Agreement."

CONVERSION OF TELCO SYSTEMS COMMON STOCK

At the Effective Time, by virtue of the Merger and without any action on
the part of World Access, Old World Access, Merger Sub, Telco Systems or the
holders of Telco Systems Common Stock, each share of Telco Systems Common Stock
issued and outstanding immediately prior to the Effective Time (other than any
shares of Telco Systems Common Stock to be cancelled as described below and
shares held by persons who have perfected their appraisal rights (if applicable)
under Section 262 of the DGCL) together with the Associated Rights will
forthwith cease to exist and will be converted into and become exchangeable for
the Merger Consideration described below.

Telco Systems Common Stock. Pursuant to the Merger Agreement, each
outstanding share of Telco Systems Common Stock (together with the Associated
Rights) (other than any shares of Telco Systems to be cancelled as described
below and shares held by persons who have perfected their appraisal rights (if
applicable) under Section 262 of the DGCL) will be converted into that number of
shares of World Access Common Stock equal to the quotient of $17.00 divided by
the average of the last reported sales prices of one share of World Access
Common Stock on Nasdaq during the period of the 20 most recent trading days
ending three business days before the Effective Time (the "World Access Market
Price") (unless the World Access Market Price exceeds $36.00 per share, in which
case each outstanding share of Telco Systems Common Stock will be converted into
.4722 shares of World Access Common Stock, or unless the World Access Market
Price is less than $29.00 per share, in which case each outstanding share of
Telco Systems Common Stock will be converted into .5862 shares of World Access
Common Stock), provided that (i) the nominal value of the consideration to be
received by holders of Telco Systems Common Stock is no less than the Minimum
Nominal Value and (ii) World Access may elect to pay cash in lieu of shares of
World Access Common Stock so long as such cash does not constitute more than 55%
of the Merger Consideration (based on the average of the high and low trading
prices of the World Access Common Stock on the day the Merger is consummated).
If World Access elects to pay cash in the Merger in lieu of issuing additional
shares of World Access Common Stock, then each share of Telco Systems Common
Stock will be exchanged for a pro rata portion of (i) the Aggregate Cash Pool
(which is subject to the 55% limitation described above) and (ii) the aggregate
number of shares of World Access Common Stock to be issued in the Merger, which
will be equal to the number of shares of World Access Common Stock that would
have been issued in the Merger had World Access not elected to include cash in
the Merger Consideration less that number of such shares having a value (based
upon the World Access Market Price) equal to the Aggregate Cash Pool. World
Access will determine and publicly announce what portion (if any) of the Merger
Consideration it will pay in cash on the third business day prior to the
Effective Time.

Telco Systems Treasury Stock. Each share of Telco Systems Common Stock
held in the treasury of Telco Systems and each share of Telco Systems Common
Stock owned by World Access together with any Associated Rights, immediately
prior to the Effective Time will be cancelled and extinguished without any
conversion thereof, and no payment will be made with respect thereto.

No Fractional Shares. No fractional share certificates for World Access
Common Stock will be issued upon the surrender for exchange of certificates
evidencing shares of Telco Systems Common Stock. In lieu

37
<PAGE> 49

thereof, the Exchange Agent or World Access, as the case may be, will pay each
holder of Telco Systems Common Stock an amount in cash calculated as provided in
the Merger Agreement.

Options. At the Effective Time, each option granted by Telco Systems to
purchase shares of Telco Systems Common Stock (other than options granted to new
employees subsequent to June 4, 1998) that is outstanding and unexercised
immediately prior to the Effective Time will immediately vest in full upon the
consummation of the Merger and will be assumed by World Access and converted
into an option to purchase shares of World Access Common Stock in such number
and at such exercise price as follows and will otherwise have the same terms and
conditions as in effect immediately prior to the Effective Time: (i) the number
of shares of World Access Common Stock to be subject to the new option will be
equal to the product of (A) the number of shares of Telco Systems Common Stock
subject to the original option and (B) the Exchange Ratio (unless the Exchange
Ratio is adjusted to ensure that holders of Telco Systems Common Stock receive
the Minimum Nominal Value in the Merger, in which event the Exchange Ratio for
purposes of this determination will be equal to $12.00 divided by the World
Access Market Price); (ii) the exercise price per share of World Access Common
Stock under the new option will be equal to the quotient of (A) the exercise
price per share of Telco Systems Common Stock under the original option divided
by (B) the Exchange Ratio (unless the Exchange Ratio is adjusted to ensure that
holders of Telco Systems Common Stock receive the Minimum Nominal Value in the
Merger, in which event the Exchange Ratio for purposes of this determination
will be equal to $12.00 divided by the World Access Market Price); and (iii)
upon each exercise of options by a holder thereof, the aggregate number of
shares of World Access Common Stock deliverable upon such exercise shall be
rounded, if necessary, to the nearest whole share and the aggregate exercise
price shall be rounded up, if necessary, to the nearest cent. Under the Merger
Agreement, World Access has agreed to file a registration statement on Form S-8
with respect to the shares of World Access Common Stock subject to the Telco
Systems 1980 Stock Option Plan, the Telco Systems 1988 Non-Statutory Stock
Option Plan and the Telco Systems 1990 Stock Option Plan (collectively, the
"Telco Systems Option Plans") following the Effective Time in order for such
shares of World Access Common Stock to be sold without restriction.

Certain Adjustments. If, between the date of the Merger Agreement and the
Effective Time, the outstanding shares of Telco Systems Common Stock or World
Access Common Stock are changed into a different number of shares by reason of
any reclassification, recapitalization, split-up, combination or exchange of
shares, or any dividend payable in stock or other securities is declared thereon
with a record date within such period then the Exchange Ratio will be adjusted
accordingly to provide the holder of Telco Systems Common Stock the same
economic effect as contemplated by the Merger Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.

BACKGROUND OF THE MERGER

In April 1997, Dr. William Smith, Chief Executive Officer of Telco Systems,
Mr. Steven Odom, Chairman and Chief Executive Officer of World Access, Mr.
William Stuart, Chief Financial Officer of Telco Systems, and Mr. Hensley West,
President and Chief Operating Officer of World Access, held brief preliminary
discussions regarding the possibility of a business combination between World
Access and Telco Systems. These preliminary discussions focused on the
complementary strengths of the businesses of the two companies, developing
trends in the telecommunications industry and the acquisition strategy of World
Access. At a subsequent meeting in April 1997, senior management from both
companies discussed a potential distribution relationship between the two
companies as an alternative to a business combination. These discussions
terminated before World Access and Telco Systems exchanged any non-public
information or developed any specific plans with respect to a transaction.

In September 1997, the board of directors of Telco Systems authorized
Broadview, the financial advisor of Telco Systems, to approach certain companies
regarding their interest in exploring a business combination transaction with
Telco Systems. None of these contacts resulted in mutually acceptable
transaction proposals.

At an industry conference in late October 1997, Dr. Smith, Mr. Odom, Mr.
Stuart and Mr. West reviewed their earlier discussions concerning a business
combination of Telco Systems and World Access. In

38
<PAGE> 50

anticipation of further discussions regarding a possible business combination,
on November 7, 1997, the companies entered into a confidentiality agreement (the
"Confidentiality Agreement"), pursuant to which they agreed to exchange
non-public information. Following execution of the Confidentiality Agreement,
representatives of World Access and Telco Systems discussed and provided each
other with certain business, financial, legal, tax and accounting information
relating to World Access and Telco Systems. By late November 1997, the companies
had terminated these discussions believing that the time and circumstances were
not appropriate to effect the contemplated business combination.

In April 1998, Mr. Odom contacted Dr. Smith and suggested that they
recommence the earlier discussions of a business combination of World Access and
Telco Systems. On April 28 and 29, 1998, Dr. Smith and Mr. Stuart met with Mr.
Odom, Mr. West and Mr. Michael Mies, Vice President and Treasurer of World
Access, to discuss a possible combination of the companies. Following these
meetings and continuing through June 4, 1998, the senior management, legal
counsel, independent accountants and financial advisors of each of World Access
and Telco Systems conducted a due diligence review and continued discussions
with respect to the other company.

At a meeting of the Telco Systems board of directors held on May 18, 1998,
senior management of Telco Systems and representatives of Broadview discussed
the businesses of World Access, the rationale for the proposed merger and the
proposed principal terms and conditions of the transaction. The management of
Telco Systems also advised the Telco Systems board of directors that the
companies were reviewing the accounting treatment of the proposed transaction to
determine if pooling of interests accounting would be appropriate. Telco
Systems' legal counsel reviewed certain legal matters with the Telco Systems
board of directors, including the fiduciary duties of the Telco Systems
directors, and certain aspects of the transaction process. At this meeting,
Messrs. Odom, West and Mies addressed the Telco Systems board of directors
concerning World Access and its businesses and their view of the proposed
transaction. The Telco Systems board of directors directed management of Telco
Systems, with the assistance of Telco Systems' legal counsel and financial
advisors, to continue to pursue the proposed transaction. The management of
Telco Systems then continued to meet with Messrs. Odom, West and Mies, during
which they agreed upon the basic structure of the proposed merger and discussed
an exchange ratio based on a nominal value of $18 per share, provided that the
merger could be accounted for as a pooling of interests.

On May 21, 1998, World Access provided Telco Systems with a draft merger
agreement and related stockholders proxy agreement. Commencing on May 26, 1998,
representatives of Telco Systems and World Access began negotiating the terms of
the draft transaction agreements and continued to discuss various issues
relating to the proposed transaction, including possible difficulties in
qualifying for pooling of interest accounting treatment.

At a meeting of the Telco Systems board of directors held on June 1, 1998,
the Telco Systems management updated the Telco Systems board of directors on the
status of the due diligence review of, and the negotiations with, World Access
and discussed the then-proposed terms of the merger, which were conditioned upon
the ability to utilize pooling of interests accounting for the merger and which
would have established the merger exchange ratio based upon a nominal value of
$18 per share of Telco Systems Common Stock (instead of the $17 per share
nominal value of the Exchange Ratio as of June 4, 1998) but otherwise subject to
the same methodology as the Exchange Ratio. At the meeting, Broadview reviewed
the financial terms of the then-proposed merger, and discussed the results of
its review of the businesses of Telco Systems and World Access and certain other
matters. Telco Systems' legal counsel reviewed the status of its due diligence
review of World Access and the terms and conditions of the proposed merger
agreement and the proposed stockholders proxy agreement and reviewed relevant
aspects of applicable law. After extensive discussion regarding the terms of the
proposed merger, the unresolved issues relating to World Access' ability to
account for the merger utilizing pooling of interests accounting and the related
uncertainty that such issues presented to the proposed transaction, the Telco
Systems board of directors authorized management, with the assistance of Telco
Systems' legal counsel and financial advisors, to continue to pursue the
proposed merger and to explore the financial terms of a proposed merger with
World Access that would be accounted for utilizing the purchase method of
accounting instead of the pooling of interests method.

39
<PAGE> 51

On June 2, 1998, following further discussion among representatives of
World Access and Telco Systems, including representatives of their respective
independent accountants, and in light of continuing issues relating to World
Access' ability to account for the proposed merger utilizing pooling of
interests accounting, the companies' respective managements determined to
recommend to their board of directors that the proposed merger be accounted for
utilizing the purchase method of accounting and that the merger exchange ratio
be based upon a nominal value of $17 per share of Telco Systems Common Stock (as
of June 4, 1998) rather than the $18 per share nominal value which was discussed
in the context of a proposed merger that could be accounted for as a pooling of
interests. The other principal terms of the proposed merger would remain
unchanged.

Mr. Odom personally advised each of the directors of World Access
concerning the status of the negotiations with the management of Telco Systems
with respect to the proposed merger on a periodic basis from late April 1998 to
June 2, 1998.

At a June 2, 1998 meeting of the World Access board of directors, World
Access management updated the directors on the terms of the proposed merger and
the results of the financial and operational due diligence of Telco Systems that
had been undertaken by World Access management, and Robinson-Humphrey presented
its review and analysis of the terms of the proposed merger. After extensive
discussion regarding the terms of the proposed merger and the presentations of
management and Robinson-Humphrey, the World Access board of directors
unanimously approved the Merger and the issuance of the World Access Common
Stock upon the terms and conditions set forth in the draft of the Merger
Agreement furnished to it and authorized management to complete the negotiation
of the Merger Agreement, provided that the exchange ratio be based on a nominal
value of no more than $18 per share in the context of a merger that could be
accounted for as a pooling of interests and that World Access receive the
fairness opinion from Robinson-Humphrey.

At a telephonic meeting of the Telco Systems board of directors on June 2,
1998, Telco Systems' management updated the directors on the proposed revisions
to the financial terms of the proposed merger. After extensive discussion
regarding the revised proposal and the recent trading prices of the World Access
Common Stock, the Telco Systems board of directors authorized management to
continue to pursue the proposed transaction and requested that management seek
to modify the manner in which the lower and upper ranges of the exchange ratio
would be determined.

At a telephonic meeting of the Telco Systems board of directors on June 4,
1998, Telco Systems' management updated the Telco Systems board of directors on
the proposed upper and lower ranges of the proposed Exchange Ratio and World
Access' request that certain senior management agree to defer their right to
certain change of control payments resulting from the consummation of the
Merger. Broadview updated its financial review of the proposed merger based upon
the revised financial terms of the transaction. Telco Systems' legal counsel
then reviewed the remaining unresolved items. After lengthy discussion, the
Telco Systems board of directors unanimously (with one director absent at the
time of the vote) determined that the Merger, upon the terms and conditions set
forth in the Merger Agreement, is fair to and in the best interests of Telco
Systems and its stockholders, adopted the Merger Agreement and recommended that
Telco Systems stockholders vote in favor of approving and adopting the Merger
Agreement and the consummation of the transactions contemplated thereby,
including the Merger.

Also on June 4, 1998, following completion of final negotiations on the
Merger Agreement and agreement by certain of Telco Systems' senior management to
the requested deferral of their change of control payments, the Merger Agreement
and the Stockholders Proxy Agreement were executed and the companies publicly
announced the transaction.

On October 9, 1998, Telco Systems management and representatives of
Broadview met with World Access management and representatives of
Robinson-Humphrey and informed them that given the significant decline in the
trading price of the World Access Common Stock and its effect on the value of
the consideration to be received by the Telco Systems stockholders in the
Merger, Telco Systems believed that it would be difficult for its board of
directors to recommend that the Telco Systems stockholders vote in favor of the
Merger Agreement and that an increase in such value was appropriate. In that
regard, World Access
40
<PAGE> 52

believed that it was necessary to revise the terms of the proposed merger to
make more likely its consummation. Thereafter, management of Telco Systems and
World Access negotiated the terms of the First Amendment which provides for,
among other things, the Minimum Nominal Value. On October 13, 1998, World Access
and Telco Systems agreed in principle to terms of the First Amendment and issued
a joint press release to such effect.

On October 16, 1998, World Access management advised the boards of
directors of World Access and Old World Access of the proposed revised terms of
the Merger, and Robinson-Humphrey delivered its opinion dated October 16, 1998
with respect thereto.

A telephonic meeting of the boards of directors of World Access and Old
World Access was held on October 27, 1998. At that meeting, World Access
management and legal advisors updated the boards of directors regarding the
status of the Merger and the revised terms thereof that had been negotiated.
Robinson-Humphrey delivered written confirmation of its October 16, 1998 opinion
to the effect that the consideration to be paid in the Merger as proposed to be
amended was fair from a financial point of view to World Access and Old World
Access. After extensive discussion, the boards of directors of World Access and
Old World Access unanimously approved the First Amendment and directed
management to proceed with the Merger as proposed to be amended.

A telephonic meeting of the board of directors of Telco Systems was held on
October 26, 1998. At that meeting, Telco Systems management and legal advisors
updated the board of directors regarding the status of the Merger and the
revised terms thereof that had been negotiated. Broadview delivered its opinion
that the consideration to be received by Telco Systems stockholders in the
Merger as proposed to be amended was fair, from a financial point of view, to
such stockholders. After extensive discussions, the board of directors of Telco
Systems unanimously approved the First Amendment and directed management to
proceed with the Merger as it was proposed to be amended.

On October 27, 1998, the First Amendment was executed, and on October 28,
1998 the companies publicly announced such event.

WORLD ACCESS REASONS FOR THE MERGER; RECOMMENDATION OF THE WORLD ACCESS BOARD OF
DIRECTORS

The board of directors of World Access has carefully considered the
advisability of the Merger and believes that the terms of the Merger Agreement
are fair to, and that the Merger is in the best interests of, World Access and
its stockholders. THE BOARD OF DIRECTORS OF WORLD ACCESS HAS UNANIMOUSLY
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER AND THE SHARE ISSUANCE,
AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF WORLD ACCESS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER AND THE SHARE ISSUANCE.

In the course of its deliberations, the board of directors of World Access
reviewed, and consulted with the World Access management and financial and legal
advisors concerning, a number of factors relevant to the Merger. In particular,
the board of directors of World Access considered, among other things:

(i) the written opinion of Robinson-Humphrey, dated June 4, 1998,
which was updated on October 16, 1998 and confirmed in writing on October
27, 1998, that the consideration to be paid by World Access in the Merger
is fair, from a financial point of view, to World Access;

(ii) the business, operations and prospects of Telco Systems;

(iii) the combined company's more complete portfolio of
telecommunications products, including Telco Systems' bandwidth
optimization products which have not previously been offered by World
Access;

(iv) the opportunities for economies of scale and operating
efficiencies that may result from the Merger, particularly in terms of the
integration of office facilities, information systems and support
functions;

41
<PAGE> 53

(v) based on the relative earnings of both companies and the Exchange
Ratio, the expected accretion to the current stockholders of World Access
assuming certain potential synergies are achieved;

(vi) the terms and conditions of the Merger Agreement, including that
the Merger will be a tax-free reorganization for federal income tax
purposes, that World Access may terminate the Merger Agreement if the World
Access Market Price is less than $12.00 per share and that World Access may
elect to use cash for a portion of the Merger Consideration;

(vii) the conclusion of a review of the financial terms of certain
recent business combinations which were deemed comparable, in whole or in
part, to the proposed Merger;

(viii) the historical market prices of, and their information with
respect to, the World Access Common Stock;

(ix) the prospects for the long-term performance of World Access
Common Stock as well as the potential volatility of such stock;

(x) the ability of the Merger to better position World Access to deal
with uncertainties which may face the telecommunications industry; and

(xi) the belief of the World Access board of directors that the Merger
will enhance the combined company's product research and development
activities due, in part, to the technical expertise of Telco Systems.

The board of directors of World Access also considered a variety of
inherent risks and other potentially negative factors in its deliberations
concerning the Merger. In particular, the board of directors of World Access
considered, among other things: (i) the potential dilutive effect of the
issuance of World Access Common Stock pursuant to the Merger; (ii) the risk that
public market price of the World Access Common Stock might be adversely affected
by announcement of the Merger; (iii) the effect of the Minimum Nominal Value to
be received by the holders of Telco Systems Common Stock; and (iv) other risks
described above under "Risk Factors."

Based on the foregoing matters, and such other matters as the members of
the board of directors of World Access deemed relevant, the World Access board
of directors unanimously approved the Merger Agreement and the transactions
contemplated thereby.

The foregoing discussion of the information and factors considered and
given weight by the board of directors of World Access is not intended to be
exhaustive but is believed to include all material factors considered by such
board of directors. In addition, in reaching the determination to approve and
recommend the Merger Agreement and the transactions contemplated thereby, the
board of directors of World Access did not assign any relative or specific
weights to the foregoing factors which were considered, and individual directors
may have given different weights to different factors. The board of directors of
World Access is, however, unanimous in its recommendation to the holders of
World Access Common Stock that the Merger Agreement and the transactions
contemplated thereby be approved.

TELCO SYSTEMS REASONS FOR THE MERGER; RECOMMENDATION OF THE TELCO SYSTEMS BOARD
OF DIRECTORS

The board of directors of Telco Systems has carefully considered the
advisability of the Merger and believes that the terms of the Merger Agreement
are fair to, and that the Merger is in the best interests of, Telco Systems and
its stockholders. THE BOARD OF DIRECTORS OF TELCO SYSTEMS HAS UNANIMOUSLY
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF TELCO SYSTEMS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER.

42
<PAGE> 54

In the course of its deliberations, the board of directors of Telco Systems
reviewed, and consulted with Telco Systems' management and financial and legal
advisors concerning, a number of factors relevant to the Merger. In particular,
the board of directors of Telco Systems considered, among other things:

(i) The Telco Systems board of directors' familiarity with, and review
of, Telco Systems' business, operations, financial condition, earnings and
prospects and that, on a combined basis with World Access, the companies
will likely have greater financial stability and strength due to the
inherent increase in scale economies and the market diversification
resulting from the combination of divergent businesses.

(ii) The Telco Systems board of directors' review, based in part on
presentations by Broadview, Telco Systems' financial advisor, of (a) the
business, operations, financial condition and earnings of World Access on a
historical and prospective basis and of the combined company on a pro forma
basis, and (b) the historical market price of the World Access Common Stock
and the resulting relative interests of Telco Systems stockholders and
World Access stockholders in the equity of the combined company.

(iii) The presentations of Broadview to the Telco Systems board of
directors on June 1, 1998, June 4, 1998, October 22, 1998 and October 26,
1998 in connection with the Telco Systems board of directors' consideration
of the Merger Agreement, and the opinion dated October 26, 1998 of
Broadview that, as of such date, the Merger Consideration (after giving
effect to the First Amendment) was fair from a financial point of view to
the Telco Systems stockholders. See "-- Opinion of Telco Systems' Financial
Advisor."

(iv) The fact that (a) pursuant to the First Amendment, the nominal
value of the Telco Systems Common Stock used to calculate the Exchange
Ratio would not be less than $12.00 per share, which represented a premium
of 88.2% over the closing price of the Telco Systems Common Stock on Nasdaq
on October 12, 1998 (the last trading day prior to announcement of the
companies' agreement in principle regarding the Minimum Nominal Value), (b)
if the World Access Market Price was greater than $20.47, the Telco Systems
stockholders would receive an incremental increase in value until the World
Access Market Price reached $29.00, (c) if the World Access Market Price
was between $29.00 and $36.00, the nominal value of the Telco Systems
Common Stock to be used to calculate the Exchange Ratio would be $17.00 per
share, and (d) the $17.00 nominal value could be increased if the World
Access Market Price exceeded $36.00 per share.

(v) In response to the significant price decline in the World Access
Common Stock since the initial execution of the Merger Agreement, the fact
that the First Amendment to the Merger Agreement ensures that the Telco
Systems stockholders would receive a minimum nominal value of $12.00 for
each share of Telco Systems Common Stock.

(vi) The liquidity of the World Access Common Stock to be received by
the Telco Systems stockholders, which is required to be quoted on Nasdaq as
a condition to the consummation of the Merger.

(vii) The provisions of the Merger Agreement that permit Telco Systems
to consider alternative bona fide third-party offers to acquire Telco
Systems and permit Telco Systems to provide information to and negotiate
with such parties and to terminate the Merger Agreement, subject to the
payment of significant fees and expenses to World Access, if prior to the
Effective Time the Telco Systems board of directors terminates the Merger
Agreement or withdraws or modifies in a manner adverse to World Access its
recommendation of the Merger pursuant to the exercise by the Telco Systems
board of directors of its fiduciary duties to stockholders. See "The Merger
Agreement -- No Solicitation of Transactions", "-- Termination" and
"-- Termination Fees and Expenses".

(viii) The opportunity for Telco Systems stockholders to participate,
as holders of World Access Common Stock, in a larger company of which
former Telco Systems stockholders would hold approximately 15.9% of the
equity (after giving effect to the Resurgens Transaction) (or 7.9% if 55%
of the Merger Consideration is paid in cash), and to do so by means of a
transaction which is designed to be tax-free to Telco Systems'
stockholders.
43
<PAGE> 55

(ix) The interests that the Telco Systems management and the Telco
Systems board of directors may be deemed to have in the Merger that are in
addition to their interests as stockholders of Telco Systems generally. See
"-- Interests of Certain Persons in the Merger".

(x) Possible difficulties involved in integrating the two companies'
managements, corporate cultures and businesses.

(xi) Possible difficulties that the combined company may have in
effectively marketing its broader array of products to the combined
company's customer base.

(xii) The risks discussed above under "Risk Factors."

The foregoing discussion of the information and factors considered and
given weight by the board of directors of Telco Systems is not intended to be
exhaustive but is believed to include all material factors considered by the
board of directors of Telco Systems. The board of directors of Telco Systems
made no determination as to the future value of the World Access Common Stock in
reaching its determination that the Merger is fair to and in the best interests
of Telco Systems and its stockholders. In reaching the determination to approve
and recommend the Merger Agreement and the transactions contemplated thereby,
the board of directors of Telco Systems did not assign any relative or specific
weights to the foregoing factors which were considered. In addition, individual
members of the Telco Systems board of directors may have given different weight
to different factors.

OPINION OF WORLD ACCESS' FINANCIAL ADVISOR

Pursuant to an engagement letter dated May 21, 1998, World Access retained
Robinson-Humphrey to deliver a fairness opinion in connection with the proposed
Merger.

At the June 2, 1998 meeting of the World Access board of directors,
Robinson-Humphrey delivered its oral opinion and written analysis and
subsequently on June 4, 1998 delivered its updated written analysis and written
opinion that, based upon and subject to various considerations set forth in such
opinion, as of June 4, 1998, the Exchange Ratio was fair to World Access and Old
World Access from a financial point of view. On October 16, 1998,
Robinson-Humphrey delivered its written opinion that, based upon and subject to
various considerations set forth in such opinion, as of October 16, 1998, the
consideration to be paid by World Access in the proposed Merger pursuant to the
proposed terms of the First Amendment was fair to World Access and Old World
Access from a financial point of view. On October 27, 1998, Robinson-Humphrey
delivered its written confirmation of its October 16, 1998 opinion. No
limitations were imposed by the World Access board of directors upon
Robinson-Humphrey with respect to the investigations made or the procedures
followed by Robinson-Humphrey in rendering its opinion. All references below to
Robinson-Humphrey's opinion refer to Robinson-Humphrey's written opinion dated
October 16, 1998, unless otherwise indicated.

THE FULL TEXT OF THE OPINION OF ROBINSON-HUMPHREY, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN IN
CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS APPENDIX B TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. WORLD ACCESS
STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY.
ROBINSON-HUMPHREY'S OPINION IS ADDRESSED TO THE BOARD OF DIRECTORS OF WORLD
ACCESS, IS DIRECTED ONLY TO THE CONSIDERATION TO BE PAID IN THE MERGER AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF WORLD ACCESS AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE WORLD ACCESS SPECIAL MEETING. THE SUMMARY OF
THE OPINION OF ROBINSON-HUMPHREY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.

In arriving at its opinion, Robinson-Humphrey reviewed and analyzed (1) the
Merger Agreement and the proposed First Amendment thereto, (2) publicly
available information concerning World Access and Telco Systems, which
Robinson-Humphrey believed to be relevant to its inquiry, (3) financial and
operating information with respect to the businesses, operations and prospects
of World Access and Telco Systems furnished to Robinson-Humphrey by World Access
or Telco Systems, (4) trading histories of World Access Common Stock and Telco
Systems Common Stock and a comparison of those trading histories with those of
other companies which Robinson-Humphrey deemed relevant, (5) a comparison of the
historical financial
44
<PAGE> 56

results and present financial condition of each of World Access and Telco
Systems with those of other companies which Robinson-Humphrey deemed relevant,
(6) a comparison of the financial terms of the Merger with the financial terms
of certain other recent transactions which Robinson-Humphrey deemed relevant,
(7) certain potential pro forma effects of the Merger on World Access and (8)
certain historical data relating to percentage premiums paid in acquisitions of
publicly traded companies. In addition, Robinson-Humphrey held discussions with
the managements of World Access and Telco Systems concerning their respective
businesses, operations, assets, present conditions and future prospects and
undertook such other studies, analyses and investigations as Robinson-Humphrey
deemed appropriate.

Robinson-Humphrey relied upon the accuracy and completeness of the
financial and other information used by Robinson-Humphrey in arriving at
Robinson-Humphrey's opinion without independent verification. With respect to
the financial forecasts/projections of World Access and Telco Systems and
synergies anticipated from the Merger, Robinson-Humphrey assumed that such
information had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of World Access and Telco
Systems as to the future financial performance of World Access and Telco Systems
and synergies anticipated from the Merger. In arriving at such opinion,
Robinson-Humphrey conducted only a limited physical inspection of the properties
and facilities of World Access and Telco Systems, and Robinson-Humphrey did not
make or obtain any evaluations or appraisals of the assets or liabilities of
World Access or of Telco Systems.

Robinson-Humphrey's opinion was necessarily based upon market, economic and
other conditions as they may have existed and could be evaluated as of October
16, 1998. The financial markets in general and the markets for the common stock
of World Access and of Telco Systems, in particular, are subject to volatility,
and Robinson-Humphrey's opinion did not purport to address potential
developments in the financial markets or the markets for the common stock of
World Access and of Telco Systems after the date thereof. The opinion did not
address the underlying business decision of World Access to effect the Merger.
Robinson-Humphrey assumed that the Merger would be consummated on the terms
described in the Merger Agreement, without any waiver of any material terms or
conditions by World Access or Telco Systems.

In connection with the preparation of its fairness opinion,
Robinson-Humphrey performed certain financial and comparative analyses, the
material portions of which are summarized below. The summary set forth below
includes the financial analyses used by Robinson-Humphrey and deemed to be
material, but does not purport to be a complete description of the analyses
performed by Robinson-Humphrey in arriving at its opinion. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances, and therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In addition,
Robinson-Humphrey believes that its analyses must be considered as an integrated
whole, and that selecting portions of such analyses and the factors considered
by it, without considering all of such analyses and factors, could create a
misleading or an incomplete view of the process underlying its analyses set
forth in the opinion. In performing its analyses, Robinson-Humphrey made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
World Access or Telco Systems. Any estimates contained in such analyses are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than as set forth therein. Estimates of
values of companies do not purport to be appraisals or necessarily to reflect
the price at which such companies may actually be sold, and such estimates are
inherently subject to uncertainty. No public company utilized as a comparison is
identical to World Access or Telco Systems. An analysis of the results of such a
comparison is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public trading
values of companies to which World Access and Telco Systems are being compared.

The following is a summary of certain analyses performed by
Robinson-Humphrey in connection with rendering its opinion. Robinson-Humphrey
presented an oral opinion and the written analysis discussed below at a meeting
of the board of directors of World Access on June 2, 1998 and provided the
updated written analysis and written opinion on June 4, 1998. On October 16,
1998, Robinson-Humphrey provided the
45
<PAGE> 57

updated written opinion. On October 27, 1998, Robinson-Humphrey delivered its
written confirmation of its October 16, 1998 opinion.

Certain analyses performed by Robinson-Humphrey utilized financial
forecasts for World Access and Telco Systems. Such financial forecasts were
based upon estimates published by equity research analysts in the investment
community, including Robinson-Humphrey's research analyst.

Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which Telco Systems Common Stock has traded since January 1, 1993. In calendar
1993, the high price was $10.38, and the low price was $6.63. In calendar 1994,
the high price was $18.00, and the low price was $8.00. In calendar 1995, the
high price was $16.56, and the low price was $9.38. In calendar 1996, the high
price was $21.25, and the low price was $8.63. In calendar 1997, the high price
was $23.88, and the low price was $8.84. In calendar 1998, through June 4, 1998
(the last trading day prior to the initial announcement of the Merger), the high
price was $14.88, and the low price was $9.02. From June 4, 1998 through October
26, 1996, the high price was $15.63 and the low price was $3.69. Over the period
from January 1, 1997 through June 3, 1998, Robinson-Humphrey observed that 54.4%
of the outstanding shares of Telco Systems were traded in a price range of $9.00
to $12.00 per share, 15.7% of the outstanding shares were traded in a price
range of $12.00 to $15.00 per share, 22.4% were traded in a price range of
$15.00 to $18.00 per share, 4.9% were traded in a price range of $18.00 to
$21.00 per share and 2.5% were traded in a price range of $21.00 to $24.00 per
share. Over the period from June 3, 1998 through October 26, 1998,
Robinson-Humphrey observed that 3.4% of the outstanding shares of Telco Systems
were traded in a price range of $6.00 to $7.80 per share, 2.0% were traded in a
price range of $7.80 to $9.60 per share, 23.6% were traded in a price range of
$9.60 to $11.40 per share, 0.0% were traded in a price range of $11.40 to $13.20
per share and 71.0% were traded in a price range of $13.20 to $15.00 per share.

Based on Telco Systems' closing stock price of $11.22 per share on June 4,
1998, and the Merger's implied equity value per share for Telco Systems of
$12.00, Robinson-Humphrey calculated per share premiums of 7.0%, 17.1% and 15.7%
to Telco Systems' closing stock prices at one trading day, one week and four
weeks prior to the initial announcement date, respectively.

Comparable Public Company Analysis. Robinson-Humphrey reviewed and
compared certain publicly available financial, operating and market valuation
data for selected public companies in the telecommunications equipment industry
to the corresponding financial and operating data for Telco Systems. Robinson-
Humphrey included the following companies in its comparable public company
analysis: ADC Telecommunications, Inc., Cisco Systems, Inc., Digital Link
Corporation, General DataComm Industries, Inc., Intelect Communications, Inc.,
Larscom Incorporated, Newbridge Networks Corporation, Network Equipment
Technologies, Inc., Premisys Communications, Reltec Corporation, Tellabs, Inc.,
Verilink Corporation and World Access. Robinson-Humphrey noted that none of the
comparable public companies was identical to Telco Systems and that,
accordingly, the analysis of comparable public companies necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies reviewed and other factors that would
affect the market values of comparable companies. Robinson-Humphrey calculated
various financial ratios and multiples based upon the closing prices of the
common stock of the comparable companies as of October 26, 1998, the most recent
publicly available information for the various companies and information
concerning the projected financial results of the various companies, as
promulgated by equity research analysts of nationally recognized investment
banking firms. The following valuation ratios were used in determining ranges of
implied equity values per share of Telco Systems: (i) current market price to
latest twelve months ("LTM") earnings per share, current market price to
calendar 1998 and 1999 earnings per share estimates, based on the mean of
publicly available earnings estimates of research analysts as provided by First
Call Investor Service, and current market price to book value and (ii) firm
value (defined as equity value plus debt and preferred stock minus cash and
marketable securities) to LTM revenues, LTM earnings before interest and taxes
("EBIT") and LTM earnings before interest, taxes, depreciation and amortization
("EBITDA"). Robinson-Humphrey averaged the multiples of the publicly traded
comparable companies in order to apply these multiples to Telco Systems' values.
To accurately reflect average values for statistical purposes, Robinson-Humphrey
excluded certain outlying values that differed from the relative groupings of
the other values. Robinson-Humphrey believed that these outlying
46
<PAGE> 58

values for certain companies reflect temporary market aberrations that can skew
mean values. Robinson-Humphrey applied these valuation ratios to Telco Systems'
(i) LTM and projected calendar 1998 and 1999 adjusted net income per share, as
adjusted to give effect to tax benefits resulting from the continued use of net
operating loss carryforwards ("Adjusted Net Income Per Share"), (ii) projected
calendar 1998 and 1999 pro forma net income per share, which included pro forma
provisions for income taxes computed at an effective tax rate of 40%, which
assumes no benefits attributable to net operating loss carryforwards ("Pro Forma
Net Income Per Share") and (iii) LTM revenues, LTM EBIT and LTM EBITDA.
Robinson-Humphrey used in its analysis estimates of Telco Systems' projected
adjusted net income per share for calendar 1998 prepared by Robinson-Humphrey's
research analyst for calendar 1998, in consideration of World Access's and Telco
Systems' management's best estimates and judgments regarding future operating
results of Telco Systems. Robinson-Humphrey used in its analysis estimates of
Telco Systems projected pro forma net income per share prepared by World Access
management. Using the preceding multiples, Robinson-Humphrey calculated implied
equity values for Telco Systems ranging from $7.40 to $22.19 per share.
Robinson-Humphrey then calculated an average implied equity value for Telco
Systems of $12.03 per share. Robinson-Humphrey then applied a control premium of
33.4%, which represents the average transaction premiums paid for merger and
acquisition transactions since January 1, 1996 for comparable size transactions,
to these values to derive implied equity values for Telco Systems.
Robinson-Humphrey calculated implied equity values for Telco Systems ranging
from $9.87 per share to $29.60 per share. Robinson-Humphrey then calculated an
average implied equity value for Telco Systems of $16.04 per share.

Analysis of Selected Mergers and Acquisitions. Robinson-Humphrey reviewed
and analyzed the consideration paid in 35 selected completed and pending mergers
and acquisitions involving telecommunications equipment companies since January
1, 1996. The mergers and acquisitions reviewed by Robinson-Humphrey included
Reltec Corporation's acquisition of Positron Fiber Systems Corporation, Alcatel
Alsthom CIE's pending acquisition of DSC Communications Corporation; Tellabs,
Inc.'s acquisitions of Coherent Communications Systems Corporation and
Steinbrecher Corporation; Lucent Technologies, Inc.'s acquisitions of Yurie
Systems, Inc., Prominet Corporation, Livingston Enterprises, Inc. and Octel
Communications Corporation; Comverse Technology, Inc.'s acquisition of Boston
Technology Incorporated; Davel Communications Group, Inc.'s acquisition of
Communications Central, Inc.; GTE Corporation's acquisition of BBN Corporation,
Cisco Systems, Inc.'s pending acquisition of Summa Four, Inc., and acquisitions
of NetSpeed, LightSpeed International, Inc., Integrated Network Corporation,
Ardent Communications Corporation, Telesend, Inc., Telebit Corporation, Granite
Systems, Inc. and StrataCom, Inc.; US Order, Inc.'s acquisition of Colonial Data
Technologies Corp.; Larscom, Inc.'s acquisition of NetEdge Systems; Yurie
Systems, Inc.'s acquisition of Data Labs, Inc.; DSC Communications Corporation's
acquisition of Celcore, Inc.; McLeodUSA Incorporated's acquisition of
Consolidated Communications; Brooks Fiber Properties, Inc.'s acquisition of
Metro Access Networks, Inc.; ADC Telecommunications, Inc.'s acquisitions of Apex
Group, Inc., Pacific Communications, Photonics Applications and Skyline
Technology, Inc.; and PairGain Technologies, Inc.'s acquisition of Avidia
Systems, Inc. In addition, Robinson-Humphrey reviewed and analyzed the
consideration paid in selected prior mergers and acquisitions involving World
Access, including its acquisitions of NACT, ATI, Galaxy and CIS.
Robinson-Humphrey noted that none of the selected transactions reviewed was
identical to the Merger and that, accordingly, the analysis of comparable
transactions necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies reviewed and other factors that would affect the acquisition values of
comparable transactions. For the transactions involving target companies for
which financial information was available, Robinson-Humphrey calculated
transaction firm value as a multiple of LTM revenues, LTM EBIT and LTM EBITDA
and transaction equity value as a multiple of LTM net income and most recent
book value. In addition, for the target companies that were publicly traded
prior to being acquired, Robinson-Humphrey calculated transaction equity value
per share as a multiple of projected earnings per share, as promulgated by
industry analysts of nationally recognized investment banking firms as of the
date most immediately available prior to the transaction announcement date, and
calculated the implied transaction premiums one day, one week and four weeks
prior to the announcement date. Robinson-Humphrey averaged the multiples for the
selected merger and acquisition transactions in order to apply these multiples
to Telco Systems' values. To accurately reflect average values for statistical
purposes, Robinson-Humphrey excluded certain outlying values that differed

47
<PAGE> 59

from the relative groupings of the other values. Robinson-Humphrey believed that
these outlying values for certain transactions reflected aberrations that could
skew mean values. Robinson-Humphrey applied the resulting purchase price
multiples, projected price/earnings multiples and transaction premiums to Telco
Systems' (i) LTM revenues, EBITDA, EBIT, net income and book value at August 30,
1998, (ii) calendar 1998 Adjusted Net Income Per Share and calendar 1998 and
1999 Pro Forma Net Income Per Share and (iii) Telco Systems' stock price one
trading day, one week and four weeks prior to the announcement of the Merger
after the market close on June 4, 1998. Robinson-Humphrey derived implied equity
values for Telco Systems ranging from $10.13 to $41.67 per share using purchase
price multiples and $12.61 to $31.31 per share using projected price/earnings
multiples and transaction premiums. Robinson-Humphrey then calculated average
implied equity values per share using these valuation parameters. The purchase
price multiples analysis implied an average equity value for Telco Systems of
$21.81 per share, and the projected price/earnings multiples and transaction
premiums analysis implied an average equity value for Telco Systems of $17.79
per share.

Acquisition Premium Analysis. Robinson-Humphrey analyzed the premiums paid
for 129 mergers and acquisitions of publicly traded companies with transaction
values in the range of $150 million to $300 million that were announced since
January 1, 1996. The average premiums paid over the targets' stock prices one
trading day prior to the announcement date, one week prior to the announcement
date and four weeks prior to the announcement date were 29.4%, 33.4% and 37.8%,
respectively. Robinson-Humphrey applied these premiums to Telco Systems' stock
price as of June 4, 1998 (the trading day prior to the initial announcement of
the Merger after the market close on June 4, 1998), May 28, 1998 (one week prior
to the initial announcement date) and May 7, 1998 (four weeks prior to the
initial announcement date). The implied equity values for Telco Systems based
upon the average percent premiums paid one day, one week and four weeks prior to
the announcement date applied to Telco Systems' stock price on the corresponding
dates listed above ranged from $13.68 to $14.51 per share, with an average of
$14.16 per share.

Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis using its research analyst's financial projections for fiscal
1999 and estimates for fiscal 2000 through 2002 based upon guidance from the
managements of World Access and Telco Systems to estimate the net present value
of equity for Telco Systems. Robinson-Humphrey calculated a range of net present
values of Telco Systems' free cash flows (defined as earnings before interest
after taxes plus depreciation and amortization, less capital expenditures and
any increase in net working capital) for the fiscal years ending the last Sunday
in August 1999 through 2002 using discount rates ranging from 15% to 25%.
Robinson-Humphrey calculated a range of net present values of Telco Systems'
terminal values using the same range of discount rates and multiples ranging
from 10.0x to 12.5x projected fiscal 2002 EBIT and also using the same range of
discount rates and multiples ranging from 7.5x to 10.5x projected fiscal 2002
EBITDA. The present values of the free cash flows were then added to the
corresponding present values of the terminal values. After adding Telco Systems'
cash and cash equivalents as of August 30, 1998, Robinson-Humphrey calculated a
range of net present equity values for Telco Systems of $12.56 to $19.78 per
share based upon terminal values of EBIT multiples and a range for Telco Systems
of $11.30 to $19.22 per share based upon terminal values of EBITDA multiples.
Using a discount rate of 20% and terminal value multiples of 11.0x projected
fiscal 2002 EBIT and 9.0x projected fiscal 2002 EBITDA, Robinson-Humphrey
calculated net present equity values for Telco Systems of $15.45 and $14.74 per
share, respectively.

Pro Forma Merger Analysis. Robinson-Humphrey reviewed certain pro forma
financial effects on World Access resulting from the proposed transaction for
the projected years ending December 31, 1999 and 2000 and the projected quarters
ending December 31, 1998. Robinson-Humphrey performed this analysis using
projections for World Access and for Telco Systems provided by World Access
management, based upon World Access management's best estimates and judgments
regarding future operating results and the synergies anticipated from the
Merger. The pro forma merger analysis was based upon certain assumptions,
including, but not limited to, that the projections developed by World Access,
in consideration of estimates and judgments of the managements of World Access
and Telco Systems, were accurate. Robinson-Humphrey assumed synergies resulting
from the Merger of $10.56 million for the years ending December 31, 1999 and
2000. Robinson-Humphrey assumed that the Merger would be accounted for under the
purchase method of

48
<PAGE> 60

accounting and would be consummated as of November 30, 1998. In addition,
Robinson-Humphrey assumed a writeoff of 44% of the goodwill resulting from the
transaction as purchased research and development and the availability of tax
credits to offset future income for federal income tax purposes. Using the 20
day average closing price for World Access through October 26, 1998 to calculate
the Exchange Ratio, the Merger was determined to be accretive to World Access'
projected earnings per share for the years ending December 31, 1999 and 2000 and
dilutive to World Access' projected earnings per share for the quarter ending
December 31, 1998. Using a price of $13.00 per share for World Access, the
Merger was determined to be accretive to World Access' projected earnings per
share for the years ending December 31, 1999 and 2000 and dilutive to World
Access' projected earnings per share for the quarter ending December 31, 1998.

The summary set forth above does not purport to be a complete description
of the analyses or data presented by Robinson-Humphrey. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. Robinson-Humphrey believes that the
summary set forth above and their analyses must be considered as a whole and
that selecting portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and opinion.
Robinson-Humphrey based its analyses on assumptions that it deemed reasonable,
including assumptions concerning general business and economic conditions and
industry-specific factors. The preparation of fairness opinions does not involve
a mathematical or weighing of the results of the individual analyses performed,
but requires Robinson-Humphrey to exercise its professional judgment -- based on
its experience and expertise -- in considering a wide variety of analyses taken
as a whole. Each of the analyses conducted by Robinson-Humphrey was carried out
in order to provide a different perspective on the transaction and to add to the
total mix of information available. Robinson-Humphrey did not form a conclusion
as to whether any individual analysis, considered in insolation, supported or
failed to support an opinion as to fairness. Rather, in reaching its conclusion,
Robinson-Humphrey considered the results of the analyses in light of each other
and ultimately reached its conclusion based on the results of all analyses taken
as a whole. Robinson-Humphrey based its analyses on assumptions it deemed
reasonable, including assumptions concerning general business and economic
conditions and industry-specific factors. The other principal assumptions upon
which Robinson-Humphrey based its analyses are set forth above under the
description of each such analysis. Robinson-Humphrey's analyses are not
necessarily indicative of actual values or actual future results that might be
achieved, which values may be higher or lower than those indicated. Moreover,
Robinson-Humphrey's analyses are not and do not purport to be appraisals or
otherwise reflective of the prices at which businesses actually could be bought
or sold.

In the past, Robinson-Humphrey has been engaged by World Access as an
underwriter and financial advisor and has received customary fees for its
services. In the ordinary course of Robinson-Humphrey's business,
Robinson-Humphrey and its affiliates actively trade in the equity securities of
World Access and Telco Systems for their own accounts and for the accounts of
their customers and, accordingly, may at any time hold a long or a short
position in such securities.

World Access engaged Robinson-Humphrey to render to the Board of Directors
of World Access an opinion with respect to the fairness, from a financial point
of view, to World Access of the Exchange Ratio agreed to in the Merger. World
Access agreed to pay Robinson-Humphrey a fee of $500,000, payable upon the
delivery of the opinion by Robinson-Humphrey. World Access has agreed to
reimburse Robinson-Humphrey for reasonable expenses incurred by
Robinson-Humphrey, including fees and disbursements of counsel, and to indemnify
Robinson-Humphrey against certain liabilities in connection with its engagement,
including liabilities under the federal securities laws.

OPINION OF TELCO SYSTEMS' FINANCIAL ADVISOR

Telco Systems engaged Broadview to act as its financial advisor and
requested that Broadview render an opinion regarding the fairness, from a
financial point of view, to Telco Systems stockholders, of the consideration to
be received by such stockholders in the Merger. On June 4, 1998 Broadview
rendered an opinion as to the fairness, from a financial point of view, of the
Merger to Telco Systems stockholders. In connection with its deliberations
regarding the First Amendment, at the meeting of the Telco Systems board of
directors on Monday, October 26, 1998, Broadview rendered its opinion (the
"Broadview Opinion") that, as
49
<PAGE> 61

of October 26, 1998, based upon and subject to the various factors and
assumptions set forth in the Broadview Opinion, the Merger Consideration (giving
effect to the First Amendment) was fair, from a financial point of view, to the
Telco Systems stockholders. The Merger Consideration was determined pursuant to
negotiations between Telco Systems and World Access and not pursuant to
recommendations of Broadview.

THE TEXT OF THE BROADVIEW OPINION, WHICH SETS FORTH ASSUMPTIONS MADE,
MATTERS CONSIDERED, AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS
APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS. TELCO SYSTEMS STOCKHOLDERS
ARE URGED TO READ THE BROADVIEW OPINION CAREFULLY IN ITS ENTIRETY. THE BROADVIEW
OPINION ADDRESSES ONLY THE FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL
POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF
TELCO SYSTEMS AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE TELCO SYSTEMS
SPECIAL MEETING. IN ADDITION, BROADVIEW WILL RECEIVE A FEE FROM TELCO SYSTEMS
CONTINGENT UPON SUCCESSFUL CONCLUSION OF THE MERGER. THE SUMMARY OF THE
BROADVIEW OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.

In rendering its opinion, Broadview, among other actions: (i) reviewed the
terms of the Merger Agreement and the associated exhibits thereto dated June 4,
1998; (ii) reviewed the terms of the First Amendment; (iii) reviewed Telco
Systems' annual report and Form 10-K for the fiscal year ended August 31, 1997,
including the audited financial statements included therein, and Telco Systems
Form 10-Q for its quarterly period ended May 31, 1998, including the unaudited
financial statements included therein, and the unaudited financial information
of Telco Systems for its twelve months ended August 30, 1998 included in a Telco
Systems press release dated September 17, 1998; (iv) reviewed certain internal
financial and operating information, including projections through February 29,
2000, for Telco Systems prepared by Telco Systems management; (v) participated
in discussions with Telco Systems management concerning the operations, business
strategy, current financial performance and prospects for Telco Systems; (vi)
discussed with Telco Systems' management its view of the strategic rationale for
the Merger; (vii) reviewed the recent reported closing prices and trading
activity for the Telco Systems Common Stock; (viii) compared certain aspects of
the financial performance of Telco Systems with public companies Broadview
deemed comparable; (ix) considered the effect on Telco Systems of the possible
payment of up to $6,500,000 in the event it determined not to proceed with the
transaction contemplated by the Merger Agreement in lieu of entering into the
First Amendment; (x) analyzed available information, both public and private,
concerning other mergers and acquisitions Broadview believed to be comparable in
whole or in part to the Merger; (xi) reviewed World Access' annual report and
Form 10-K for the fiscal year ended December 31, 1997, including the audited
financial statements included therein, and World Access' Form 10-Q/A for the
three months ended June 30, 1998, including the unaudited financial statements
included therein; (xii) reviewed certain internal financial and operating
information for World Access, including projections through December 31, 2003
relating to World Access with and without the Resurgens Transaction prepared by
World Access management; (xiii) participated in discussions with World Access
management and Resurgens management concerning the operations, business
strategy, financial performance and prospects for World Access and Resurgens;
(xiv) reviewed the recent reported closing prices and trading activity for the
World Access Common Stock; (xv) discussed with World Access management its view
of the strategic rationale for the Merger; (xvi) compared certain aspects of the
financial performance of World Access with public companies Broadview deemed
comparable; (xvii) considered the total number of shares of World Access Common
Stock outstanding with and without the Resurgens Transaction and the average
weekly trading volume of World Access Common Stock; (xviii) reviewed recent
equity analyst reports covering Telco Systems and World Access; (xix) prepared
pro forma consolidated income statements through December 31, 1999 based on
forecasts through December 31, 1999 provided by the managements of World Access
and Telco Systems; (xx) assisted in negotiations and discussions related to the
Merger among Telco Systems, World Access and their financial and legal advisors;
and (xxi) conducted other financial studies, analyses and investigations as
deemed appropriate for purposes of the Broadview Opinion.

In rendering the Broadview Opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information (including, without limitation, the representations and warranties
contained in the Merger Agreement and First Amendment) that was publicly
available or

50
<PAGE> 62

furnished by Telco Systems, World Access or World Access' financial advisor.
Broadview assumed that those projections prepared and provided by the
managements of Telco Systems and World Access were reasonably prepared and
reflected the best available estimates and good faith judgments as to the future
performance of Telco Systems and World Access, respectively. Broadview did not
make or obtain an independent appraisal or valuation of any of World Access' or
Telco Systems' assets. With regard to any analyses relating to valuations of
comparable public companies, the share prices used were for the close of trading
on October 26, 1998, the last trading day before the meeting of the Telco
Systems' board of directors to consider the First Amendment.

The following is a summary explanation of the various sources of
information and valuation methodologies employed by Broadview in conjunction
with rendering the Broadview Opinion. These analyses were presented to the Telco
Systems board of directors at its meeting on October 26, 1998. The summary set
forth below includes the financial analyses used by Broadview and deemed to be
material, but does not purport to be a complete description of analyses
performed by Broadview in arriving at its opinion.

Public Company Comparables Analysis. Total Market Capitalization/Revenue
("TMC/R") and Price/Earnings ("P/E") multiples indicate the value public markets
place on companies in a particular market segment. Several companies in the
telecommunications equipment market are comparable to Telco Systems based on
market focus, business model and management structure. Broadview reviewed six
selected public company comparables in the communications equipment segment of
the Information Technology ("IT") market from a financial point of view
including each company's: Trailing Twelve Month ("TTM") Revenue; TTM Revenue
Growth; TTM Earnings Before Interest and Taxes ("EBIT") Margin; TTM Net Margin;
Net Cash; Equity Market Capitalization; TTM TMC/R ratio; TTM TMC/EBIT ratio; TTM
P/E ratio; Forward Calendar 1998 TMC/R ratio; Forward Calendar 1998 P/E ratio;
Forward Calendar 1999 TMC/R ratio; and Forward Calendar 1999 P/E ratio. The
public company comparables were selected from the Broadview Barometer, a
proprietary database of publicly-traded IT companies maintained by Broadview and
broken down by industry segment. In order of descending TTM TMC/R, the public
company comparables consist of: (i) ADTRAN, Inc.; (ii) Premisys Communications,
Inc.; (iii) Teltrend, Inc.; (iv) Verilink Corp.; (v) Network Equipment
Technologies, Inc.; and (vi) Larscom, Inc. These comparables have a TTM TMC/R
ratio range of 0.09 to 2.84 with a median of 0.52; TTM TMC/EBIT ratio range of
2.06 to 12.82 with a median of 7.70; TTM P/E ratio range 4.6 to 20.5 with a
median of 19.2; Forward Calendar 1998 TMC/R ratio range of 0.08 to 2.78 with a
median of 0.47; Forward Calendar 1998 P/E ratio range of 12.4 to 30.7 with a
median of 17.6; Forward Calendar 1999 TMC/R ratio range of 0.07 to 2.37 with a
median of 0.41; and a Forward Calendar 1999 P/E ratio range of 9.7 to 16.7 with
a median of 12.9.

The equity value per share range implied by the TTM TMC/R multiples is
$2.56 to $28.34 with a median implied value of $6.64. The equity value per share
range implied by the TTM TMC/EBIT multiples is $2.43 to $6.12 with a median
implied value of $4.37. The equity value per share range implied by the TTM P/E
multiples is $1.95 to $8.70 with a median implied value of $8.15. The equity
value per share implied by the Forward Calendar 1998 TMC/R multiples is $2.51 to
$27.80 with a median implied value of $6.17. The equity value per share implied
by the Forward Calendar 1998 P/E multiples is $4.74 to $11.74 with a median
implied value of $6.74. The equity value per share implied by the Forward
Calendar 1999 TMC/R multiples is $2.60 to $30.78 with a median implied value of
$6.72. The equity value per share implied by the Forward Calendar 1999 P/E
multiples is $11.35 to $19.47 with a median implied value of $15.10.

Evaluation of World Access. Broadview compared the ranges and medians of
several companies that are comparable to World Access, based on market focus,
revenue size, business model and management structure, with the multiples
implied by World Access' October 26, 1998 share price of $18.313, and its
current and projected performance. In order to account for the pending Resurgens
Transaction, two sets of comparable companies were used and are listed below. In
order of descending TTM TMC/R, the public company comparables in the
telecommunications equipment and systems integration market consist of: (i)
Excel Switching Corp.; (ii) ADTRAN, Inc.; (iii) Advanced Fibre Communications,
Inc.; (iv) SR Telecom, Inc.; (v); Comarco, Inc. (vi) Digital Microwave Corp.
(vii) LCC International, Inc.; and (viii) P-COM, Inc. In order of descending TTM
TMC/R, the public company comparables in the telecommunications services market
consist of: (i) Viatel, Inc.; (ii) RSL Communications, Ltd.; (iii) PRIMUS
Telecommunications Group, Inc.; (iv) STAR Telecommunications, Inc.; and (v)
Startec Global Communications Corp.
51
<PAGE> 63

Transaction Comparables Analysis. Valuation statistics from transaction
comparables indicate the Adjusted Price/Revenue ("P/R"), Adjusted Price/Earnings
Before Interest and Taxes ("P/EBIT"), and Adjusted Price/Earnings Before
Interest, Taxes, Depreciation and Amortization ("P/EBITDA") multiples acquirers
have paid for comparable companies in a particular market segment. Adjusted
Price is the acquisition consideration adjusted to add debt and subtract cash on
the seller's balance sheet at the time of the acquisition, if known. Broadview
reviewed fourteen comparable public and private company merger and acquisition
("M&A") transactions from 1996 through the present involving sellers sharing
many characteristics with Telco Systems including size, markets served and
business model. Transactions were selected from Broadview's proprietary database
of published and confidential M&A transactions in the IT industry. These
transactions represent fourteen selected sellers in the hardware equipment
segment of the IT market. In order of descending P/R multiple, the fourteen
public and private company transactions used are the acquisition of: (i) Avidia
Systems, Inc. by Pairgain Technologies, Inc.; (ii) Coherent Communications
Systems Corp. by Tellabs, Inc.; (iii) Positron Fiber Systems Corp. by Reltec
Corp.; (iv) Netvantage, Inc. by Cabletron Systems, Inc.; (v) NACT by World
Access, Inc.; (vi) Teledata Communications Ltd. by ADC Telecommunications, Inc.;
(vii) Summa Four, Inc. by Cisco Systems, Inc.; (viii) Innova Corp. by Digital
Microwave Corp.; (ix) Micom Communications Corp. by Northern Telecom Ltd.; (x)
Microcom, Inc. by Compaq Computer Corp.; (xi) Stratus Computers, Inc. by Ascend
Communications, Inc.; (xii) Centigram Communications Corp. (Customer Premises
Equipment business unit) by Mitel Corp.; (xiii) Tadiran Telecommunications Ltd
by ECI Telecom, Inc.; and (xiv) Shiva Corp. by Intel Corp.

The P/R multiples of the fourteen public and private seller transactions
range from 0.78 to 9.40 with a median of 1.97. The P/EBIT multiples of the seven
public seller transactions, where meaningful data is available, range from 11.62
to 60.95 with a median of 30.72. The P/EBITDA multiples of the seven public
seller transactions, where meaningful data is available, range from 4.55 to
30.42 with a median of 15.25.

The equity value per share range implied by the P/R multiples of the
fourteen public and private seller transaction comparables is $9.02 to $89.78
with a median implied value of $20.16. The equity value per share range implied
by the P/EBIT multiples of the seven public seller transactions, where
meaningful data is available, is $5.71 to $22.61 with a median implied value of
$12.25. The equity value per share range implied by the P/EBITDA multiples of
the seven public seller transactions, where meaningful data is available, is
$5.06 to $23.95 with a median implied value of $12.87.

Transaction Premiums Paid Analysis. An analysis of premiums paid in
comparable public transactions, while generally appropriate for public sellers,
is not as applicable for the Merger, because the price of the Telco Systems
Common Stock has been linked to the price of the World Access Common Stock as a
result of the Exchange Ratio formula established in the original Merger
Agreement. Premiums paid in comparable public seller transactions typically
indicate the amount of consideration acquirers are willing to pay above the
seller's equity market capitalization. In this analysis, the value of
consideration paid in transactions involving stock is computed using the buyer's
stock price immediately prior to announcement, while the seller's equity market
capitalization is measured one day prior. Broadview reviewed 32 comparable M&A
transactions involving selected hardware companies from January 1, 1996 to the
present with total consideration above $100 million. Transactions were selected
from Broadview's proprietary database of published and confidential M&A
transactions in the IT industry. In order of descending premium paid based on
the seller's stock price one trading day prior to announcement, the selected
hardware transactions used were the acquisition of: (i) ILC Technology, Inc. by
BEC Group, Inc.; (ii) DSC Communications Corp. by Alcatel Alsthom SA; (iii)
Norand Corp. by Western Atlas, Inc.; (iv) Microcom, Inc. by Compaq Computer
Corp.; (v) Tandem Computers, Inc. by Compaq Computer Corp.; (vi) Brooktree Corp.
by Rockwell International Corp.; (vii) Shiva Corp. by Intel Corp.; (viii) Bay
Networks, Inc. by Northern Telecom, Ltd.; (ix) Digital Equipment Corporation by
Compaq Computer Corp.; (x) MAS Technology Ltd. by Digital Microwave Corp.; (xi)
Coherent Communications Systems Corp. by Tellabs, Inc.; (xii) Augat, Inc. by
Thomas & Betts Corp.; (xiii) Advanced Logic Research by Gateway 2000, Inc.;
(xiv) Cascade Communications Corp. by Ascend Communications, Inc.; (xv) Chips &
Technologies, Inc. by Intel Corp.; (xvi) Stratacom, Inc. by Cisco Systems, Inc.;
(xvii) Positron Fiber Systems, Inc. by Reltec Corp.; (xviii) Cray Research, Inc.
by Silicon Graphics, Inc.; (xix) Cyrix Corp. by National Semiconductor Corp.;
(xx) Teledata Communications

52
<PAGE> 64

Ltd by ADC Telecommunications, Inc.; (xxi) Octel Communications Corp. by Lucent
Technologies, Inc.; (xxii) BENCHMARQ Microelectronics, Inc. by Unitrode Corp.;
(xxiii) Stratus Computers, Inc. by Ascend Communications, Inc.; (xxiv) Zycon
Corp. by Hadco Corp.; (xxv) Amphenol Corp. by Kohlberg, Kravis Roberts & Co.;
(xxvi) U.S. Robotics Corp. by 3Com Corp.; (xxvii) Zilog, Inc. by Texas Pacific
Group; (xxviii) Yurie Systems, Inc. by Lucent Technologies, Inc.; (xxix) Boston
Technology, Inc. by Comverse Technology, Inc.; (xxx) Tadiran Telecommunications
Ltd by ECI Telecom, Inc.; (xxxi) Netstar, Inc. by Ascend Communications, Inc.;
and (xxxii) Micom Communications Corp. by Northern Telecom, Inc.

Based upon Broadview's analysis of premiums paid in selected comparable
hardware transactions, Broadview found that premiums (discounts) paid to
sellers' equity market capitalizations one day prior to announcement date (using
the buyer's share price on the day prior to the announcement date of the
transaction to calculate consideration in stock transactions) ranged from
(14.3%) to 108.7% with a median of 21.5%.

The equity value per share range implied by the premiums paid to the share
price one day prior to the announcement of the companies' agreement in principle
on October 13, 1998 regarding the Minimum Nominal Value is $5.46 to $13.31 with
a median implied value of $7.75. The implied premium of the $12.00 Minimum
Nominal value reflects an 88.2% premium paid to the price of the Telco Systems
Common Stock one day prior to the October 13, 1998 announcement, which exceeds
the median of the premiums paid in selected comparable hardware transactions
despite the fact there may have already been an implied premium in price of the
Telco Systems Common Stock due to the June 4, 1998 announcement of the Merger
Agreement.

Stock Performance Analysis. For comparative purposes, Broadview examined
the weekly historical volume and trading prices and the daily relative share
prices for both World Access and Telco Systems common stock. Broadview examined
the following: (i) World Access and Telco Systems actual share prices and
trading volumes from October 17, 1997 to October 26, 1998; (ii) World Access,
Telco Systems and their respective public company comparables indexed share
prices from October 17, 1997 to October 26, 1998; (iii) relative ratio of Telco
Systems to World Access actual share prices from October 17, 1997 to October 26,
1998.

Relative Contribution Analysis. A relative contribution analysis measures
each of the merging companies' contributions to items such as Revenue and Net
Income on a percentage basis. Broadview examined the projected relative
contributions for the projected calendar year ending December 31, 1998 and the
for the calendar year ending December 31, 1999, based upon internal estimates
for World Access (assuming the Resurgens Transaction is not completed) and Telco
Systems on Revenue, EBIT, Pretax Income and Net Income bases.

Telco Systems' projected relative contribution for Revenue for the calendar
year ending December 31, 1998 and for the calendar year ending December 31, 1999
is 37.5% and 35.5%, respectively. Telco Systems' projected relative contribution
for EBIT for the calendar year ending December 31, 1998 and for the calendar
year ending December 31, 1999 is 6.5% and 23.6%, respectively. Telco Systems'
projected relative contribution for Pretax Income for the calendar year ending
December 31, 1998 and for the calendar year ending December 31, 1999 is 9.3% and
25.1%, respectively. Telco Systems' projected relative contribution for Net
Income for the calendar year ending December 31, 1998 and for the calendar year
ending December 31, 1999 is 12.8% and 28.6%, respectively.

Broadview also examined the projected relative contributions during the
calendar year ending December 31, 1999, based upon internal projections for
World Access (assuming the Resurgens Transaction is completed) and Telco Systems
on Revenue, EBIT, Pretax Income and Net Income bases. Telco Systems' projected
relative contribution for Revenue for the calendar year ending December 31, 1999
is 17.0%. Telco Systems' projected relative contribution for EBIT for the
calendar year ending December 31, 1999 is 18.2%. Telco Systems' projected
relative contribution for Pretax Income for the calendar year ending December
31, 1999 is 19.5%. Telco Systems' projected relative contribution for Net Income
for the calendar year ending December 31, 1999 is 22.8%.

53
<PAGE> 65

Relative Ownership Analysis. A relative ownership analysis measures each
of the merging companies' (assuming an all stock transaction) relative equity
ownership and relative entity values (net of cash) at various exchange ratios.
If World Access does not complete the Resurgens Transaction, the implied equity
ownership, using relative equity values, is 24.2% for Telco Systems and 75.8%
for World Access, and the implied entity ownership, using relative entity
values, is 19.7% for Telco Systems and 80.3% for World Access.

If World Access completes the Resurgens Transaction, the implied equity
ownership, using relative equity values, is 21.8% for Telco Systems and 78.2%
for World Access, and the implied entity ownership, using relative entity
values, is 17.7% for Telco Systems and 82.3% for World Access.

Pro Forma Purchase Model Analysis. A pro forma merger analysis calculates
the EPS accretion (dilution) of the pro forma combined entity taking into
consideration various financial affects which will result from a consummation of
the Merger. This analysis relies upon certain financial and operating
assumptions provided by World Access and Telco Systems management and on
publicly available data about World Access and Telco Systems. Based on
management forecasts for World Access (assuming the Resurgens Transaction is not
completed) and Telco Systems, the pro forma purchase analysis indicates EPS
accretion to World Access stockholders for the fiscal year ending December 31,
1999 of $0.07 or 4.7%.

Broadview also employed a pro forma purchase analysis to evaluate the
accretion (dilution) to the pro forma combined entity in the event the Resurgens
Transaction is completed. Based on management forecasts for World Access,
Resurgens and Telco Systems, the pro forma purchase analysis indicates EPS
accretion (dilution) to World Access stockholders for the fiscal year ending
December 31, 1999 of $0.03 or 1.9%

Consideration of the Discounted Cash Flows Valuation Methodology. While
discounted cash flows analysis is a commonly used valuation methodology,
Broadview did not employ such an analysis for the purposes of this opinion.
Discounted cash flows analysis is most appropriate for companies which exhibit
relatively steady or somewhat predictable streams of future cash flows. Given
the uncertainty in estimating both Telco Systems' future cash flows and
sustainable long-term growth rate, Broadview considered a discounted cash flows
analysis inappropriate for valuing Telco Systems.

The Telco Systems board of directors selected Broadview as its financial
advisor on the basis of Broadview's reputation and experience in the information
technology sector and the hardware industry in particular, as well as
Broadview's historical relationship with Telco Systems. Pursuant to the terms of
an engagement letter between Telco Systems and Broadview, the fees payable by
Telco Systems to Broadview upon completion of the Merger are based upon the
consideration to be received by Telco Systems pursuant to the Merger and are
approximately $1.7 million. Telco Systems paid Broadview fees totaling $400,000
in connection with rendering its opinions as to the fairness of the
consideration to be received by Telco Systems stockholders in the Merger which
will be credited to the fees payable by Telco Systems upon completion of the
Merger. In addition, retainer fees of approximately $130,000 paid by Telco
Systems to Broadview will also be credited to the fees payable by Telco Systems
upon completion of the Merger. Broadview will be reimbursed by Telco Systems for
certain of its expenses incurred in connection with its engagement. The terms of
the fee arrangement with Broadview, which Telco Systems and Broadview believe
are customary in transactions of this nature, were negotiated at arms' length
between Telco Systems and Broadview, and the Telco Systems board of directors
was aware of the nature of the fee arrangement, including the fact that a
significant portion of the fees payable to Broadview is contingent upon
completion of the Merger.

The above summary of the presentations by Broadview to the Telco Systems
board of directors does not purport to be a complete description of such
presentations or of all the advice rendered by Broadview. Broadview believes
that its analyses and the summary set forth above must be considered as a whole
and that selecting portions of its analyses, without considering all analyses,
could create an incomplete view of the process underlying the analyses set forth
in Broadview's presentations to the Telco Systems board of directors and in the
Broadview Opinion. The Broadview Opinion is necessarily based upon market,
economic, financial and other conditions as they existed and could be evaluated
as of the date of the Broadview Opinion. The Broadview Opinion expresses no
opinion as to the price at which the World Access Common Stock will trade at any
time. In performing its analyses, Broadview made numerous assumptions with
respect to hardware industry performance and general economic conditions, many
of which are beyond the control of Telco
54
<PAGE> 66

Systems or World Access. The analyses performed by Broadview are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses.

FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes the material federal income tax
consequences of the Merger to Telco Systems and holders of Telco Systems Common
Stock and to World Access. The discussion is based on current law and summarizes
the opinions of Rogers & Hardin LLP, counsel to World Access, and Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to Telco Systems. The discussion does not
address aspects of federal taxation other than income taxation, nor does it
address all aspects of federal income taxation, including, without limitation,
aspects of federal income taxation that may be applicable to particular
stockholders, such as stockholders who are dealers in securities, foreign
persons or those who acquired their Telco Systems Common Stock in a compensation
transaction. The discussion also does not address the federal income tax
consequences of the Merger to holders of options to purchase Telco Systems
Common Stock or any state, local or foreign tax consequences of the Merger.

HOLDERS OF TELCO SYSTEMS COMMON STOCK ARE URGED TO CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE TELCO SYSTEMS MERGER.

World Access and Telco Systems each have received opinions (the "Tax
Opinions") from their respective tax counsel, Rogers & Hardin LLP and Skadden,
Arps, Slate, Meagher & Flom LLP, to the effect that, on the basis of certain
representations, and subject to certain assumptions and limitations, stated in
the Tax Opinions, the Merger will qualify as a tax-free reorganization under
Section 368 of the Code and that each of World Access, Merger Sub and Telco
Systems will be a party to the reorganization within the meaning of Section
368(b) of the Code. It is a condition to World Access' and Telco Systems'
obligations to effect the Merger that the Tax Opinions shall have been reissued
in substantially the same form as of the Effective Time. Although the condition
to receive the Tax Opinions at the closing of the Merger is waivable, if the
condition to receive the Tax Opinions at the closing of the Merger is waived by
either World Access or Telco Systems, then the stockholders for whose benefit
such opinion was initially sought shall be re-solicited.

No ruling has been or will be obtained from the Internal Revenue Service
(the "IRS") with respect to the Merger. The Tax Opinions are not binding on the
IRS or the courts, and no assurance can be given that the IRS would not be able
to successfully challenge the conclusions expressed in the Tax Opinions.

Consequences to Holders of Telco Systems Common Stock. If, in accordance
with the opinions referred to above, the Merger is treated as a reorganization
within the meaning of Section 368(a) of the Code, and World Access, Merger Sub
and Telco Systems is each a party to that reorganization under Section 368(b) of
the Code, then, in the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, the
following is a summary of the material federal income tax consequences of the
Merger to a holder:

The federal income tax consequences of the Merger to a holder of Telco
Systems Common Stock will depend on whether the holder exchanges its Telco
Systems Common Stock for solely World Access Common Stock, or a combination of
cash and World Access Common Stock.

Exchange Solely for World Access Common Stock. If pursuant to the Merger a
holder exchanges all of the shares of Telco Systems Common Stock actually owned
by such holder solely for shares of World Access Common Stock, such holder will
not recognize any gain or loss except in respect of cash received in lieu of a
fractional share of World Access Common Stock (as discussed below). The
aggregate adjusted tax basis of the shares of World Access Common Stock received
in that exchange will be equal to the aggregate adjusted tax basis of the shares
of Telco Systems Common Stock surrendered therefor, and the holding period of
such World Access Common Stock will include the period during which such shares
of Telco Systems Common Stock were held. If a holder has differing bases and/or
holding periods in respect of such holder's shares of Telco Systems Common
Stock, such holder should consult his or her tax advisor prior to the exchange
with regard to identifying the bases and/or holding periods of the particular
shares of World Access Common Stock received in the exchange.

55
<PAGE> 67

Exchange for World Access Common Stock and Cash. If pursuant to the Merger
a holder exchanges all of the shares of Telco Systems Common Stock actually
owned by such holder for a combination of World Access Common Stock and cash,
such holder will realize gain or loss equal to the difference between (i) the
sum of cash and the fair market value of World Access Common Stock received and
(ii) such holder's adjusted tax basis in the shares of Telco Systems Common
Stock surrendered. Any such gain will only be recognized to the extent of the
cash received. However, any such loss will not be recognized, but will be
reflected in the tax basis of the World Access Common Stock received.
Accordingly, a holder generally will be able to recognize any such loss as an
offset to the amount realized upon a subsequent sale or exchange of such World
Access Common Stock. For this purpose, gain or loss must be calculated
separately for each identifiable block of shares surrendered in the exchange,
and a loss recognized on one block of shares of Telco Systems Common Stock
cannot be used to offset a gain recognized on another block of shares of Telco
Systems Common Stock. Any such recognized gain will be treated as capital gain
unless the cash received has the effect of the distribution of a dividend, in
which case the gain would be treated as a dividend to the extent of the holder's
ratable share of Telco Systems' accumulated earnings and profits.

In general, the determination as to whether the gain recognized in that
exchange will be treated as capital gain or dividend income depends upon whether
and to what extent that exchange reduces the holder's deemed percentage stock
ownership of World Access. For purposes of that determination, a holder is
treated as if such holder first exchanged all of such holder's shares of Telco
Systems Common Stock solely for shares of World Access Common Stock and then
World Access immediately redeemed (the "deemed redemption") a portion of such
World Access Common Stock in exchange for the cash the holder actually received.
The gain recognized in that exchange will be treated as capital gain if the
deemed redemption is (i) "not essentially equivalent to a dividend" or (ii)
"substantially disproportionate" with respect to the holder.

Whether the deemed redemption is "not essentially equivalent to a dividend"
with respect to a holder will depend upon the holder's particular circumstances.
At a minimum, however, in order for the deemed redemption to be "not essentially
equivalent to a dividend," the deemed redemption must result in a "meaningful
reduction" in the holder's deemed percentage stock ownership of World Access. In
general, that determination requires a comparison of (i) the percentage of the
outstanding World Access Common Stock the holder is deemed actually and
constructively to have owned immediately before the deemed redemption and (ii)
the percentage of the outstanding World Access Common Stock actually and
constructively owned by the holder immediately after the deemed redemption. The
deemed redemption will be "substantially disproportionate" with respect to a
holder if the percentage described in (ii) above is less than 80% of the
percentage described in (i) above. The IRS has ruled that a reduction in the
percentage stock ownership of a minority stockholder in a publicly held
corporation whose relative stock interest is minimal and who exercises no
control with respect to corporate affairs is a "meaningful reduction."

In applying the foregoing tests, under certain attribution rules proscribed
in Section 318 of the Code, a stockholder is deemed to own stock owned and, in
some cases, constructively owned by certain family members, by certain estates
and trusts of which the holder is a beneficiary, and by certain affiliated
entities, as well as stock subject to an option actually or constructively owned
by the shareholder or such other person. As these rules are complex, each holder
that believes he or she may be subject to these rules should consult his or her
tax advisor.

Under the foregoing tests, in most circumstances, gain recognized by a
holder that exchanges its shares of Telco Systems Common Stock for a combination
of shares of World Access Common Stock and cash will be treated as capital gain,
and will be long-term capital gain if the holding period for such shares was
greater than one year as of the date of the exchange.

The aggregate tax basis of the shares of World Access Common Stock received
by a holder that exchanges shares of Telco Systems Common Stock for a
combination of shares of World Access Common Stock and cash pursuant to the
Merger, will be the same as the aggregate tax basis of the shares of Telco
Systems Common Stock surrendered therefor, decreased by the cash received and
increased by any recognized gain (whether capital gain or dividend income). The
holding period of the shares of World Access

56
<PAGE> 68

Common Stock will include the holding period of the shares of Telco Systems
Common Stock surrendered therefor.

If such a holder has differing bases and/or holding periods in respect of
his or her shares of Telco Systems Common Stock, such holder should consult his
or her tax advisor prior to the exchange with regard to identifying the
particular shares of Telco Systems Common Stock to be surrendered in the
exchange and the particular bases and/or holding periods of the particular
shares of World Access Common Stock such holder receives in the exchange.

Cash Received in Lieu of a Fractional Share. Cash received in lieu of a
fractional share of World Access Common Stock will be treated as received in
redemption of such fractional share and gain or loss will be recognized,
measured by the difference between the amount of cash received and the portion
of the basis of the share of Telco Systems Common Stock allocable to such
fractional interest. Such gain or loss will constitute capital gain or loss, and
will be long-term capital gain or loss if the holding period for such shares of
Telco Systems Common Stock was greater than one year as of the date of the
exchange.

Backup Withholding. Payments in respect of Telco Systems Common Stock may
be subject to informational reporting to the IRS and to a 31% back-up
withholding tax. Backup withholding will not apply, however, to a payment to a
holder of Telco Systems Common Stock or other payee if such holder or payee
completes and signs the substitute Form W-9 that will be included as part of the
letter of transmittal to be mailed to the stockholders of Telco Systems or
otherwise proves to World Access and the Exchange Agent (as defined below) that
it is exempt from backup withholding.

Consequences to Companies. If, in accordance with the opinions referred to
above, the Merger is treated as a reorganization within the meaning of Section
368(a) of the Code, and World Access, Merger Sub, and Telco Systems is each a
party to that reorganization under Section 368(b) of the Code, then, in the
opinion of Rogers & Hardin LLP, no gain or loss will be recognized by World
Access, Merger Sub or Telco Systems in the Merger.

LIMITATIONS ON RESALES BY AFFILIATES

All shares of World Access Common Stock received by Telco Systems
stockholders in the Merger will be freely transferable, except that shares of
World Access Common Stock received by persons who are deemed to be "affiliates"
of Telco Systems prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 ("Rule 145") or Rule 144 (in the
case of such persons who become affiliates of World Access), each as promulgated
under the Securities Act, or otherwise in compliance with (or pursuant to an
exemption from) the registration requirements of the Securities Act. Persons
deemed to be "affiliates" of Telco Systems or World Access are those individuals
or entities that control, are controlled by, or are under common control with,
such party and generally include executive officers and directors of such party
as well as certain principal stockholders of such party. The Merger Agreement
requires Telco Systems to use all reasonable efforts to cause each of its
affiliates to execute a written agreement to the effect that such person will
not offer or sell or otherwise dispose of any of the shares of World Access
Common Stock issued to such person in or pursuant to the Merger except in
compliance with the Securities Act and the rules and regulations promulgated by
the Commission thereunder. This Joint Proxy Statement/Prospectus does not cover
any resales of World Access Common Stock received by affiliates of Telco Systems
in the Merger.

ACCOUNTING TREATMENT

The Merger will be accounted for by World Access under the purchase method
of accounting for business combinations.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendation of the Telco Systems board of directors
with respect to the Merger, stockholders of Telco Systems should be aware that,
as described below, certain members of Telco Systems' management and board of
directors may have interests in the Merger that are different from, or in
addition to,

57
<PAGE> 69

the interests of stockholders of Telco Systems generally, and these differences
may create potential conflicts of interest. In addition, one executive officer
of Telco Systems, Dr. William Smith, is a member of the Telco Systems board of
directors. The Telco Systems board of directors was aware of these interests
when it approved the Merger and the Merger Agreement. Except as described below,
such persons have, to the knowledge of Telco Systems and World Access, no
material interest in the Merger apart from those of stockholders of Telco
Systems generally.

World Access Board of Directors. The size of the World Access board of
directors is currently fixed at six members, five of whom are the current board
members with one position vacant. Pursuant to the terms of the Merger Agreement,
the vacancy on the World Access board of directors will be filled at the
Effective Time by a person selected by mutual agreement of Telco Systems and
World Access. As of the date of this Joint Proxy/Prospectus, no determination
has been made by the companies as to who will fill such vacancy.

Telco Systems Officers. Pursuant to the terms of the Merger Agreement, the
officers of Telco Systems immediately prior to the Effective Time will be the
initial officers of Telco Systems, as the Surviving Corporation.

Telco Systems Stock Options. All of the executive officers and directors
of Telco Systems hold options to purchase shares of Telco Systems Common Stock.
In accordance with the terms of the various director and employee stock option
plans maintained by Telco Systems and the terms of the Merger Agreement, all
options to purchase shares of Telco Systems Common Stock outstanding as of June
4, 1998 will vest in full upon consummation of the Merger and all outstanding
options to purchase shares of Telco Common Stock will be converted into similar
stock options with respect to World Access Common Stock, adjusted to account for
the Exchange Ratio and the Minimum Nominal Value. As of the Telco Systems Record
Date, all executive officers of Telco Systems as a group held unexercisable
options to purchase an aggregate of 132,982 shares of Telco Systems Common
Stock, and all directors of Telco Systems as a group held unexercisable options
to purchase an aggregate of 47,147 shares of Telco Systems Common Stock.

Telco Systems Senior Executive Termination Benefits Agreements. Telco
Systems is a party to a Senior Executive Termination Benefits Agreement with its
President and Chief Executive Officer, Dr. William Smith (the "Smith
Agreement"), and is a party to Senior Executive Termination Benefits Agreements
(each, a "Severance Agreement" and, together with the Smith Agreement, the
"Agreements") with each of William Stuart, Vice President and Chief Financial
Officer, Richard Nardone, Vice President, Corporate Resources, David LeBeau,
Vice President of Sales, and Daniel Bettencourt, Vice President of Operations
(each, an "Executive"), which Agreements provide for certain severance payments
to be made and benefits to be provided to each of Dr. Smith and the Executives
upon a qualifying termination of his employment following a "Change in Control"
of Telco Systems. Stockholder approval of the Merger will constitute a Change in
Control under the Agreements.

In accordance with the terms of the Smith Agreement, in the event Dr.
Smith's employment is terminated within three years following a Change in
Control (i) by Telco Systems for any reason other than death, Disability (as
defined in the Smith Agreement) or for Cause (as defined in the Smith Agreement)
or (ii) by Dr. Smith for any of the reasons set forth in the Smith Agreement
(including the assignment to Dr. Smith of any duties which are (as determined by
him in good faith) substantially inconsistent with his positions, duties,
responsibilities or status with Telco Systems immediately prior to the Change in
Control (such assignment referred to herein as "Good Reason")), Dr. Smith will
be entitled to the following: (a) a lump sum cash payment equal to the sum of
(i) 1.5 times Dr. Smith's annual base salary as of the date of termination and
(ii) an amount equal to the highest annual bonus paid or payable to Dr. Smith
with respect to any consecutive 12-month period during the three years prior to
the date of termination; and (b) the continuation of employee welfare benefits
(including, without limitation, to life, accident, disability, health and dental
insurance plans) for 18 months following the date of termination. If Dr. Smith's
employment is terminated in a manner that gives rise to the severance payments
described herein, he will be entitled to receive a cash severance payment
approximately equal to $600,000.

In accordance with the terms of the Severance Agreements, in the event an
Executive's employment is terminated within 18 months following a Change in
Control (i) by Telco Systems for any reason other than
58
<PAGE> 70

death, Disability (as defined in the Severance Agreements) or for Cause (as
defined in the Severance Agreements) or (ii) by the Executive for the reasons
set forth in the Severance Agreements (including Good Reason), the Executive
will be entitled to the following: (a) thirteen payments, each equal to the sum
of (i) one-twelfth times the Executive's annual base salary as of the date of
termination and (ii) one-twelfth times the highest annual bonus paid or payable
to the Executive with respect to any consecutive 12-month period during the
three years prior to the date of termination; and (b) the continuation of
employee welfare benefits (including, without limitation, short-term,
disability, health, dental and executive medical insurance coverage) for
thirteen months following the date of termination. An Executive may elect to
receive the payments described in clause (a) above in a single lump sum payment.
If each Executive's employment is terminated in a manner that gives rise to the
severance payments described herein, the following Executives would be entitled
to receive the following approximate cash severance payments: Mr. Stuart,
$263,000; Mr. Nardone, $195,000; Mr. LeBeau $256,000; and Mr. Bettencourt,
$178,000.

In the Merger Agreement, World Access has acknowledged and agreed that Dr.
Smith and the Executives will be entitled, as a result of the Merger and the
related change in their job responsibilities, to terminate their employment with
Telco Systems for Good Reason and receive the termination benefits under the
Agreements. However, in connection with the execution of the Merger Agreement,
World Access has entered into agreements with Dr. Smith and each Executive other
than Mr. Stuart (each, a "World Access Agreement"), pursuant to which World
Access agreed to grant to each of Dr. Smith and Messrs. Bettencourt, Nardone and
LeBeau, as of the Effective Time, an option (each, an "Option") to purchase
150,000, 30,000, 20,000 and 100,000 shares of World Access Common Stock,
respectively, at an exercise price per share subject to the Option equal to the
lesser of (a) the fair market value of a share of World Access Common Stock on
the Closing Date and (b) $32.00. These options vest at a rate of 25% per year
upon each of the four anniversaries of the date of grant. In consideration for
the grant of the Option, each of Dr. Smith and Messrs. Bettencourt, Nardone and
LeBeau has agreed that he will not terminate his employment for Good Reason
following stockholder approval of the Merger if Good Reason results solely from
the fact that, upon consummation of the Merger, Telco Systems will be a wholly
owned subsidiary of a publicly traded company. However, each of Dr. Smith and
Messrs. Bettencourt, Nardone and LeBeau may forfeit the unvested portion of the
Option at any time between the 180th day and the 210th day (between the 360th
and 390th day, in the case of Dr. Smith) following the Closing Date and,
notwithstanding the World Access Agreement, may terminate his employment and
receive the termination benefits in accordance with the terms of the applicable
Agreement. It is currently expected that, upon consummation of the Merger, Mr.
Stuart will exercise his rights under his Severance Agreement.

Indemnification; Insurance. Under the Merger Agreement, World Access has
agreed that the certificate of incorporation of the Surviving Corporation in the
Merger will contain the indemnification provisions set forth in the Telco
Systems certificate of incorporation (the "Telco Systems Certificate") and that
such provisions will not be amended, repealed or otherwise modified for a period
of six years from the Effective Time in any manner that would adversely affect
the rights thereunder of individuals who at the Effective Time were directors,
officers, employees, fiduciaries, or agents of Telco Systems. World Access has
also agreed that from and after the Effective Time, World Access and the
Surviving Corporation shall indemnify and hold harmless each present and former
director and officer of Telco Systems against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that Telco Systems would have been permitted under
Delaware law and its charter documents (each as in effect on June 4, 1998) to
indemnify such persons. Finally, World Access has also agreed to provide for six
years after the Effective Time liability insurance covering acts or omissions
occurring prior to the Effective Time with respect to those persons who were
covered by Telco Systems' directors' and officers' liability insurance policy on
terms with respect to such coverage and amounts no less favorable than those in
effect on the date of the Merger Agreement, provided that World Access will not
be required to pay more than 150% of the current amount paid by Telco Systems to
maintain such insurance. In connection with its obligation as described in the
immediately foregoing sentence, World Access is permitted under the Merger
Agreement to substitute
59
<PAGE> 71

policies of World Access or its subsidiaries containing terms with respect to
coverage and amount no less favorable to the directors and officers in question.

REGULATORY MATTERS

Under the HSR Act and the rules promulgated thereunder by the FTC, certain
acquisition transactions may not be consummated unless notice has been given and
certain information has been furnished to the Antitrust Division and the FTC and
specified waiting period requirements have been satisfied. World Access and
Telco Systems each filed with the Antitrust Division and the FTC a Notification
and Report Form with respect to the Merger on July 31, 1998. The required
waiting period under the HSR Act was terminated by the FTC on August 28, 1998.
At any time before or after the Effective Time, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the Merger or
seeking the divestiture of Telco Systems by World Access, in whole or in part,
or the divestiture of substantial assets of World Access, Telco Systems or their
respective subsidiaries. State attorneys general and private parties may also
bring legal actions under the federal or state antitrust laws under certain
circumstances.

OPERATIONS FOLLOWING THE MERGER

Following the Merger, the Surviving Corporation initially will be managed
by Telco Systems' operating management and will become the Transport and Access
Systems Group of World Access. Promptly following the Merger, World Access
intends to integrate the operations of its current Transport and Access Systems
Group into, and under the supervision of, the Surviving Corporation. In doing
so, World Access may relocate certain of the operations of its current
subsidiaries, including ATI and Sunrise, to Telco Systems' facilities in
Norwood, Massachusetts and Fremont, California. The Surviving Corporation will
otherwise continue its operations substantially as such operations were
conducted by Telco Systems prior to the Merger.

APPRAISAL RIGHTS

Holders of Telco Systems Common Stock will not have the right to elect to
have the fair value of their shares of Telco Systems Common Stock judicially
appraised and paid to them in cash in connection with the Merger unless World
Access elects to pay a portion of the Merger Consideration in cash. Section 262
of the DGCL ("Section 262") provides appraisal rights to stockholders of
Delaware corporations in connection with certain mergers and consolidations.
Under Section 262, appraisal rights are not available to the stockholders of a
corporation that is a party to a merger if the corporation's stock is listed on
a national securities exchange or quoted on Nasdaq as of the record date set to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to approve the merger so long as the consideration to be
received by such stockholders in the merger consists of (i) shares of the
capital stock of the surviving corporation in the merger, (ii) shares of the
capital stock of any other corporation provided that such stock is listed on a
national securities exchange or quoted on Nasdaq as of the date on which the
merger becomes effective, (iii) cash in lieu of fractional shares or (iv) a
combination of the foregoing.

If World Access elects to pay a portion of the Merger Consideration in
cash, holders of Telco Systems Common Stock who (i) have delivered to Telco
Systems, prior to the vote being taken on the Merger Agreement at the Telco
Systems Special Meeting, their written notice of their intent to demand
appraisal rights if the Merger is effected, and (ii) have not voted in favor of
the Merger Agreement at the Telco Systems Special Meeting will be entitled to
seek appraisal rights under Section 262.

THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262 WHICH IS ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS
AS APPENDIX E. ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A
"STOCKHOLDER" ARE TO THE RECORD HOLDER OF THE SHARES AS TO WHICH APPRAISAL
RIGHTS ARE ASSERTED. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF TELCO
SYSTEMS COMMON STOCK HELD OF

60
<PAGE> 72

RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT
PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW
PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS.

Under the DGCL, holders of Telco Systems Common Stock who follow the
procedures set forth in Section 262 will be entitled to have their shares of
Telco Systems Common Stock appraised by the Delaware Court of Chancery and to
receive payment of the "fair value" of such shares, exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, as determined by such Court.

Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Telco Systems Special Meeting,
the corporation, not less than 20 days prior to the meeting, must notify each of
its stockholders entitled to appraisal rights that such appraisal rights are
available and include in such notice a copy of Section 262. This Joint Proxy
Statement/Prospectus will constitute such notice to the holders of shares of
Telco Systems Common Stock, and the applicable statutory provisions are attached
to this Joint Proxy Statement/Prospectus as Appendix E. Any holder of shares of
Telco Systems Common Stock who wishes to exercise such appraisal rights or who
wishes to preserve such holder's right to do so should review the following
discussion and Appendix E carefully because failure to timely and properly
comply with the procedures specified will result in the loss of appraisal rights
under the DGCL.

A holder of Telco Systems Common Stock wishing to exercise appraisal rights
must deliver to Telco Systems, before the vote on the Merger Agreement at the
Telco Systems Special Meeting, a written demand for appraisal and must not vote
in favor of the Merger Agreement. Because a duly executed proxy which does not
contain voting instructions will, unless revoked, be voted for the Merger
Agreement, a holder of shares of Telco Systems Common Stock who votes by proxy
and who wishes to exercise appraisal rights must either (1) vote against the
Merger Agreement or (2) abstain from voting on the Merger Agreement. A vote
against the Merger Agreement, in person or by proxy, will not in and of itself
constitute a written demand for appraisal satisfying the requirements of Section
262. In addition, a holder of Telco Systems Common Stock wishing to exercise
appraisal rights must hold of record such shares of Telco Systems Common Stock
on the date the written demand for appraisal is made and must continue to hold
such shares until the Effective Time. If any holder of shares of Telco Systems
Common Stock fails to comply with any of these conditions and the Merger becomes
effective, the holder of shares of Telco Systems Common Stock will be entitled
to receive the Merger Consideration.

Only a holder of record of Telco Systems Common Stock is entitled to assert
appraisal rights for the shares of Telco Systems Common Stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
holder of record, fully and correctly, as such holder of record's name appears
on such holder of record's stock certificates, and must state that the
stockholder intends thereby to demand appraisal of such stockholder's shares of
Telco Systems Common Stock in connection with the Merger. If the shares of Telco
Systems Common Stock are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the shares of Telco Systems Common Stock are owned of record by
more than one person, as in a joint tenancy and tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including two or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker who holds
shares of Telco Systems Common Stock as nominee for several beneficial owners
may exercise appraisal rights with respect to the shares of Telco Systems Common
Stock held for one or more beneficial owners while not exercising such rights
with respect to the shares of Telco Systems Common Stock held for other
beneficial owners. Stockholders who hold their shares of Telco Systems Common
Stock in brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for making a demand for appraisal by such a nominee.

All written demands for appraisal pursuant to Section 262 should be sent or
delivered to Telco Systems, Inc. at 63 Nahatan Street, Norwood, Massachusetts
02062, Attention: Chief Financial Officer.

61
<PAGE> 73

Within 10 days after the Effective Time, Merger Sub, as the surviving
corporation, must notify each holder of shares of Telco Systems Common Stock who
has complied with Section 262 and has not voted in favor of or consented to the
Merger Agreement of the date that the Merger has become effective. Within 120
days after the Effective Time, but not thereafter, Merger Sub or any holder of
shares of Telco Systems Common Stock who is entitled to appraisal rights under
Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of such holder's shares of Telco Systems Common
Stock. Notwithstanding the foregoing, at any time within 60 days after the
Effective Time, any stockholder has the right to withdraw his demand for
appraisal and to accept the terms offered in respect of the Merger. Merger Sub
is under no obligation to and has no present intention to file such a petition.
Accordingly, it is the obligation of the holders of shares of Telco Systems
Common Stock to initiate all necessary action to perfect their appraisal rights
within the time prescribed in Section 262.

Within 120 days after the Effective Time, any holder of shares of Telco
Systems Common Stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from Merger
Sub a statement setting forth the aggregate number of shares of Telco Systems
Common Stock not voted in favor of the Merger and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares of Telco Systems Common Stock. Such statement must be mailed to the
stockholders within ten days after a written request therefor has been received
by Merger Sub or within ten days after the expiration of the period for delivery
of demands for appraisal, whichever is later.

If a petition for an appraisal is timely filed by a holder of shares of
Telco Systems Common Stock and a copy thereof is served upon Merger Sub, Merger
Sub will then be obligated within 20 days after such service to file with the
Delaware Register in Chancery a duly verified list containing the names and
addresses of all holders of shares of Telco Systems Common Stock who have
demanded an appraisal of their shares of Telco Systems Common Stock and with
whom agreements as to the value of their shares of Telco Systems Common Stock
have not been reached. After notice to such stockholders as required by the
Court, the Delaware Court of Chancery is empowered to conduct a hearing on such
petition to determine those holders of shares of Telco Systems Common Stock who
have complied with Section 262 and who have become entitled to appraisal rights
thereunder. The Delaware Court of Chancery may require the holders of shares of
Telco Systems Common Stock who demanded payment for their shares of Telco
Systems Common Stock to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceeding; and
if any stockholder fails to comply with such direction, the Court of Chancery
may dismiss the proceedings as to such stockholder.

After determining the holders of shares of Telco Systems Common Stock
entitled to appraisal, the Delaware Court of Chancery will appraise the "fair
value" of their shares of Telco Systems Common Stock, exclusive of any element
of value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value. Holders of shares of Telco Systems Common Stock considering
seeking appraisal should be aware that the fair value of their shares of Telco
Systems Common Stock as determined by Section 262 could be more than, the same
as or less than the consideration they would receive pursuant to the Merger if
they did not seek appraisal of their shares of Telco Systems Common Stock and
that investment banking opinions as to fairness from a financial point of view
are not necessarily opinions as to fair value under Section 262. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The Court of Chancery will also determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose shares of Telco
Systems Common Stock have been appraised. The costs of the action may be
determined by the Court and taxed upon the parties as the Court deems equitable.
The Court may also order that all or a portion of the expenses incurred by any
stockholder in connection with an appraisal, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all the shares of
Telco Systems Common Stock entitled to be appraised.

62
<PAGE> 74

Any holder of shares of Telco Systems Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote the shares of Telco Systems Common Stock subject to such demand
for any purpose or be entitled to the payment of dividends or other
distributions on those shares of Telco Systems Common Stock (except dividends or
other distributions payable to holders of record of shares of Telco Systems
Common Stock as of a date prior to the Effective Time).

If any stockholder who demands appraisal of such stockholder's Telco
Systems Common Stock under Section 262 fails to perfect, or effectively
withdraws or loses, such stockholder's right to appraisal, as provided in the
DGCL, the shares of Telco Systems Common Stock of such stockholder will be
converted into the right to receive the Merger Consideration pursuant to the
Merger Agreement (without interest). A stockholder will fail to perfect, or
effectively lose or withdraw, such stockholder's right to appraisal if no
petition for appraisal is filed by such holder within 120 days after the
Effective Time, or if the stockholder delivers to Merger Sub a written
withdrawal of his, hers or its demand for appraisal and an acceptance of the
Merger, except that any such attempt to withdraw made more than 60 days after
the Effective Time will require the written approval of Merger Sub and, once a
petition for appraisal is filed, the appraisal proceeding may not be dismissed
as to any holder absent court approval. It is not necessary that each holder of
shares of Telco Systems Common Stock properly demanding appraisal file a
petition for appraisal in the Delaware Court of Chancery. Rather, a single valid
petition suffices for the petitioning and non-petitioning holders of shares of
Telco Systems Common Stock who have properly demanded appraisal.

FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH
EVENT A STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE MERGER CONSIDERATION IN
ACCORDANCE WITH THE MERGER AGREEMENT FOR EACH SHARE OF TELCO SYSTEMS COMMON
STOCK OWNED BY SUCH STOCKHOLDER).

Under the DGCL, holders of World Access Common Stock are not entitled to
appraisal rights in connection with the Merger.

EXCHANGE OF SHARES

At or prior to the Effective Time, World Access will appoint, and will
retain an exchange agent (the "Exchange Agent") to effect the exchange of shares
of Telco Systems Common Stock for the Merger Consideration in connection with
the Merger. From time to time after the Effective Time, World Access shall
deposit or cause to be deposited, certificates representing World Access Common
Stock and cash, if any, payable under the Merger Agreement for conversion of
shares of Telco Systems Common Stock in accordance with the Merger Agreement.

Commencing immediately after the Effective Time and until the appointment
of the Exchange Agent is terminated, each holder of a certificate or
certificates theretofore evidencing shares of Telco Systems Common Stock may
surrender the same to the Exchange Agent, and, after the appointment of the
Exchange Agent has been terminated, any such holder may surrender any such
certificate to World Access. Such holder will be entitled upon such surrender to
receive in exchange therefor a certificate or certificates representing the
number of full shares of World Access Common Stock into which the shares of
Telco Systems Common Stock theretofore represented by the certificate or
certificates so surrendered have been converted pursuant to the Merger, together
with a cash payment in lieu of fractional shares, if any, and cash payable in
respect of such shares of Telco Systems Common Stock pursuant to the Merger
Agreement, and such Merger Consideration will be deemed to have been issued at
the Effective Time. Until so surrendered and exchanged, each outstanding
certificate which, prior to the Effective Time, represented issued and
outstanding shares of Telco Systems Common Stock will be deemed for all
corporate purposes of World Access, other than the payment of dividends and
other distributions, if any, to evidence Merger Consideration, into which the
shares of Telco Systems Common Stock theretofore represented thereby have been
converted at the Effective Time.

Until certificates representing shares of Telco Systems Common Stock are
surrendered, no dividend or other distribution, if any, payable to the holders
of record of World Access Common Stock as of any date subsequent to the
Effective Time will be paid to the holder of such certificate. Upon the
surrender of any such

63
<PAGE> 75

certificate representing shares of Telco Systems Common Stock, however, the
record holder of the certificate or certificates representing shares of World
Access Common Stock issued in exchange therefor will receive from the Exchange
Agent or from World Access, as the case may be, payment of the amount of
dividends and other distributions, if any, which as of any date subsequent to
the Effective Time and until such surrender will have become payable with
respect to such number of shares of World Access Common Stock. No interest will
be payable with respect to the payment of any cash amounts constituting a
portion of the Merger Consideration or such presurrender dividends upon the
surrender of certificates theretofore representing shares of Telco Systems
Common Stock.

No fractional share certificates for World Access Common Stock will be
issued upon the surrender for exchange of certificates evidencing shares of
Telco Systems Common Stock. In lieu thereof, the Exchange Agent or World Access,
as the case may be, will pay each holder of Telco Systems Common Stock an amount
in cash calculated as provided in the Merger Agreement.

Risk of loss and title to certificates representing shares of Telco Systems
Common Stock will pass only upon proper delivery of such certificates to the
Exchange Agent.

At the Effective Time, the stock transfer books of Telco Systems with
respect to shares of Telco Systems Common Stock will be closed, and there will
be no further registration of transfers of shares of Telco Systems Common Stock
thereafter on the records of any such stock transfer books. In the event of a
transfer of ownership of shares of Telco Systems Common Stock that is not
registered in the stock transfer records of Telco Systems, at the Effective
Time, a certificate or certificates representing the number of full shares of
World Access Common Stock into which such shares of Telco Systems Common Stock
have been converted will be issued to the transferee, together with a cash
payment in lieu of fractional shares, if any, and cash, if any, payable under
the Merger Agreement and a cash payment in the amount of any presurrender
dividends, if any, if the certificate or certificates representing such shares
of Telco Systems Common Stock is or are properly surrendered as described above,
accompanied by all documents required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer tax.

64
<PAGE> 76

THE MERGER AGREEMENT

The following is a description of the material provisions of the Merger
Agreement, as amended by the First Amendment thereto. A copy of the Merger
Agreement, as amended by the First Amendment, is attached hereto as Appendix A
and is incorporated herein by reference. The following summary is qualified in
its entirety by reference to the complete text of the Merger Agreement and the
First Amendment.

EFFECTIVE TIME

The Merger will become effective by the filing of a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware. However, there can be no assurance that the conditions to the Merger
will be satisfied or that the Merger Agreement will not be terminated.

CORPORATE MATTERS

At the Effective Time, the certificate of incorporation and by-laws of
Merger Sub, as in effect immediately prior to the Effective Time, will become
the certificate of incorporation and by-laws of the Surviving Corporation, the
directors of Merger Sub immediately prior to the Effective Time will become the
initial directors of the Surviving Corporation and the officers of Telco Systems
immediately prior to the Effective Time will become the initial officers of the
Surviving Corporation.

CONVERSION OF SECURITIES

At the Effective Time, by virtue of the Merger and without any action on
the part of World Access, Merger Sub, Telco Systems, the holders of Telco
Systems Common Stock or the holders of common stock, par value $.01 per share,
of Merger Sub ("Merger Sub Common Stock"), (i) each share of Telco Systems
Common Stock issued and outstanding immediately prior to the Effective Time
(together with the Associated Rights) will be converted into the Merger
Consideration as described above under "The Merger -- Conversion of Telco
Systems Common Stock", and (ii) each share of Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time and all rights in respect
thereof will be converted into and become exchangeable for one newly and validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.

OPTIONS TO PURCHASE TELCO SYSTEMS COMMON STOCK

At the Effective Time, each option granted by Telco Systems to purchase
shares of Telco Systems Common Stock (other than options granted to new
employees subsequent to June 4, 1998) which is outstanding and unexercised
immediately prior to the Effective Time, will immediately vest in full and will
be assumed by World Access and converted into an option to purchase shares of
World Access Common Stock in such number and at such exercise price as described
below and otherwise having the same terms and conditions as in effect
immediately prior to the Effective Time (except to the extent that such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the Merger). The number of shares of World Access Common Stock to be
subject to the new option will be equal to the product of (i) the number of
shares of Telco Systems Common Stock subject to the original option and (ii) the
Exchange Ratio (unless the Exchange Ratio is adjusted to ensure that holders of
Telco Systems Common Stock receive the Minimum Nominal Value in the Merger, in
which event the Exchange Ratio for purposes of this determination shall be equal
to $12.00 divided by the World Access Market Price). The exercise price per
share of World Access Common Stock under the new option will be equal to the
quotient of (i) the exercise price per share of Telco Systems Common Stock under
the original option divided by (ii) the Exchange Ratio (unless the Exchange
Ratio is adjusted to ensure that holders of Telco Systems Common Stock receive
the Minimum Nominal Value in the Merger, in which event the Exchange Ratio for
purposes of this determination shall be equal to $12.00 divided by the World
Access Market Price). Upon each exercise of options by a holder thereof, the
aggregate number of shares of World Access Common Stock deliverable upon such
exercise will be rounded, if necessary, to the nearest whole share and the
aggregate exercise price will be rounded up, if necessary, to the nearest cent.

65
<PAGE> 77

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains certain customary representations and
warranties on the part of Telco Systems, World Access, Old World Access and
Merger Sub, including, without limitation, representations and warranties as to
(i) organization and qualification and subsidiaries; (ii) organizational
documents; (iii) capitalization; (iv) authority relative to the Merger
Agreement; (v) no conflict and required filings and consents; (vi) permits and
compliance with laws; (vii) Commission filings and financial statements; (viii)
absence of certain changes or events since the end of the previous fiscal year;
(ix) employee benefit plans and labor matters; (x) accounting and certain tax
matters; (xi) contracts and debt instruments; (xii) litigation; (xiii)
environmental matters; (xiv) intellectual property; (xv) taxes; (xvi) Rule 145
affiliates; (xvii) brokers; (xviii) certain business practices; (xix)
transaction expenses; (xx) interested party transactions; and (xxi)
anti-takeover provisions and state takeover statutes.

CONDUCT OF BUSINESS PENDING THE MERGER

The Merger Agreement provides that, between the date of the Merger
Agreement and the Effective Time, Telco Systems and World Access (and Old World
Access) must conduct their respective businesses in the ordinary course
consistent with past practice and use all reasonable efforts to preserve
substantially intact their respective business organizations. The Merger
Agreement also provides that neither Telco Systems (and its subsidiaries) nor
World Access (and its subsidiaries) may, without the prior written consent of
the other party, between the date of the Merger Agreement and the Effective
Time, (i) amend its certificate of incorporation or by-laws; (ii) declare or pay
any dividend or other distribution with respect to any of its capital stock,
except that subsidiaries of Telco Systems and World Access may pay dividends or
make distributions to Telco Systems or World Access; (iii) reclassify, combine,
split or subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock; (iv) sell, transfer, license, sublicense
or otherwise dispose of any material assets; (v) knowingly take any action that
would prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code; or (vi) authorize or enter into any
formal or informal agreement or otherwise make any commitment to take any action
prohibited by the Merger Agreement or take any action which would make any of
its representations or warranties contained in the Merger Agreement untrue or
incorrect in any material respect or prevent it from performing or cause it not
to perform its covenants under the Merger Agreement or result in any of the
conditions to the Merger not being satisfied. In addition, the Merger Agreement
prohibits World Access from acquiring or entering into any agreement to acquire
all or substantially all of the capital stock or assets of any other person or
business unless, upon advice of counsel, such transaction would not reasonably
be expected to materially delay or impede the consummation of the Merger.

The Merger Agreement further provides that Telco Systems may not (i) issue
any shares of Telco Systems Common Stock, except (A) pursuant to outstanding
Associated Rights, (B) pursuant to the Telco Systems Employee Stock Purchase
Plan and the Telco Systems 1997 Foreign Employee Stock Purchase Plan, (C) for
issuances of Telco Systems Common Stock pursuant to options outstanding on June
4, 1998, and (D) for employee stock option grants to non-executive officers and
directors of Telco Systems, provided (w) that such grants are at fair market
value, at a level consistent with past practice, have vesting schedules
consistent with past practice and World Access has received notice of Telco
Systems' intention to grant such options, (x) the aggregate amount of such
shares does not exceed 150,000 shares of Telco Systems Common Stock, (y) no
person shall receive a grant in excess of 7,000 shares of Telco Systems Common
Stock and (z) the vesting of such granted options shall not be accelerated as a
result of the Merger; (ii) sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber any shares of Telco Systems Common Stock or any
capital stock of any subsidiary or any of its property or assets; (iii) acquire
any interest in any corporation, partnership, other business organization or
person or any division thereof; (iv) except for borrowings under existing credit
facilities, incur any indebtedness for borrowed money or issue any debt
securities; (v) terminate, cancel, request or agree to any material change in
any material contract, or enter into such a material contract; (vi) make or
authorize any capital expenditures, other than in the ordinary course of
business consistent with past practices that have been budgeted and that are
not, in the aggregate, in excess of $750,000; (vii) amend or change the period
(or permit any acceleration, amendment or change) of

66
<PAGE> 78

exercisability of options granted under any of the Telco Systems Option Plans or
authorize cash payments in exchange for any stock options granted under such
Plans; (viii) increase the compensation payable to its directors, officers,
consultants or employees, except for increases for non-officer employees that
are in the ordinary course of business consistent with past practices, or grant
any rights to severance or termination pay to, or enter into any employment or
severance agreement which provides benefits upon a change in control that would
be triggered by the Merger with, any of its directors, officers, consultants or
other employees, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, or other similar plan or arrangement for the
benefit of any director, officer, consultant or employee of Telco Systems,
except to the extent required by applicable law or the terms of a collective
bargaining agreement, or enter into or amend any contract, agreement, commitment
or arrangement between Telco Systems and any of its directors, officers,
consultants or employees; (ix) pay, discharge, settle or satisfy any claims,
liabilities or obligations, other than in the ordinary course of business and
consistent with past practice; (x) take any action with respect to accounting
policies or procedures, other than actions in the ordinary course of business
consistent with past practice or as required by United States generally accepted
accounting principles; (xi) make any tax election or settle or compromise any
material income tax liability, other than those made in the ordinary course of
business consistent with past practice and those for which specific reserves
have been recorded on its consolidated balance sheet as of August 31, 1997 and
only to the extent of such reserves; or (xv) enter into or amend any contract,
agreement, commitment or arrangement with, or enter into any transaction with,
or make any payment to or on account or behalf of, other than any such
transactions previously disclosed to World Access, any affiliate of Telco
Systems or any stockholder of Telco Systems who is a party to the Stockholders
Proxy Agreement.

NOTICES OF CERTAIN EVENTS

The Merger Agreement provides that each of World Access and Telco Systems
must give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the Merger; (ii) any notice or other communication from any
governmental entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting World Access or Telco
Systems that relate to the consummation of the Merger; (iv) the occurrence of a
default or event that, with the giving of notice or lapse of time or both, would
become a default under any material contract of such party; and (v) any change
that could reasonably be expected to have a material adverse effect on Telco
Systems or World Access or to delay or impede the ability of either Telco
Systems or World Access to perform its obligations pursuant to the Merger
Agreement and to effect the consummation of the Merger.

ACCESS TO INFORMATION; CONFIDENTIALITY

The Merger Agreement provides that, from the date of the Merger Agreement
to the Effective Time, each of World Access and Telco Systems must (i) provide
to the other access at reasonable times to its officers, employees, agents,
properties, offices and other facilities and to the books and records thereof;
and (ii) furnish promptly such information concerning its and its subsidiaries'
business, properties, contracts, assets, liabilities and personnel as the other
party may reasonably request. In addition, the obligations of World Access and
Telco Systems under the Confidentiality Agreement remain in effect.

NO SOLICITATION OF TRANSACTIONS

The Merger Agreement provides that Telco Systems may not, directly or
indirectly, solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction (as
described below), or enter into or maintain or continue discussions or negotiate
with any person in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any of Telco Systems's officers, directors or employees, or any

67
<PAGE> 79

investment banker, financial advisor, attorney, accountant or other
representative retained by Telco Systems, to take any such action. However, the
Merger Agreement provides that the board of directors of Telco Systems may (i)
comply with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer; (ii) consider and negotiate an unsolicited bona fide
written acquisition proposal which (A) was not received in violation of the
Merger Agreement, (B) if executed or consummated would be a Competing
Transaction, (C) is not subject to financing or financing is, in the good faith
judgment of the board of directors of Telco Systems after consultation with its
financial advisors, highly likely of being obtained if the board determines in
good faith, after receiving the advice of outside counsel, that it is highly
probable that failing to do so would violate its fiduciary duties; and (iii)
approve and recommend to Telco Systems' stockholders an unsolicited bona fide
written acquisition proposal which (A) was not received in violation of the
Merger Agreement, (B) if executed or consummated would be a Competing
Transaction, (C) is not subject to financing or financing is, in the good faith
judgment of the board after consultation with its financial advisors, highly
likely of being obtained, and (D) the board determines in good faith, after
advice from its financial advisor to such effect, would result in a transaction
more favorable to Telco Systems' stockholders than the Merger (any such
proposal, a "Superior Proposal") if the board determines in good faith, after
receiving the advice of outside counsel, that it is highly probable that failing
to do so would violate its fiduciary duties. The Merger Agreement requires that
Telco Systems must notify World Access and Merger Sub promptly if any proposal
or offer, or any inquiry or contact with any person with respect thereto,
regarding such an acquisition proposal or a Competing Transaction is made.

For purposes of the Merger Agreement, "Competing Transaction" means, with
respect to Telco Systems or any of its subsidiaries whose business constitutes
30% or more of the net revenues,net income or assets of Telco Systems and its
subsidiaries taken as a whole, (i) any merger, consolidation, share exchange,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 15% or more of the
assets of Telco Systems, in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 15% or more of the outstanding
voting securities of Telco Systems or the filing of a registration statement
under the Securities Act in connection therewith.

PLAN OF REORGANIZATION

The Merger is intended to constitute a tax-free reorganization within the
meaning of the income tax regulations promulgated under the Code. Pursuant to
the Merger Agreement, Telco Systems and World Access have agreed that, from and
after the date of the Merger Agreement, they will use all reasonable efforts to
cause the Merger to qualify, and will not take any actions or cause any actions
to be taken which could reasonably be expected to prevent the Merger from
qualifying, as a tax-free reorganization under the Code.

FURTHER ACTION; CONSENTS; FILINGS

The Merger Agreement provides that each of Telco Systems and World Access
must use all reasonable efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable law or otherwise to consummate and make effective the
Merger, (ii) obtain from governmental entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
World Access, Old World Access, Merger Sub, Telco Systems or the Surviving
Corporation in connection with the authorization, execution and delivery of the
Merger Agreement and the consummation of the Merger and (iii) make all necessary
filings, and thereafter make any other required or appropriate submissions, with
respect to the Merger Agreement and the Merger required under the rules and
regulations of Nasdaq, the Securities Act, the Exchange Act and any other
applicable federal or state securities laws and any other applicable law. Telco
Systems and World Access are also required to promptly give any notices
regarding the Merger, the Merger Agreement or the transactions contemplated
thereby to third parties required under applicable law or by any contract,
license, lease or other agreement to which it is bound, and to use all
reasonable efforts to obtain any third party consents required under any such
contract, license, lease or other agreement in connection with the consummation
of the Merger or the other transactions contemplated by the Merger Agreement.

68
<PAGE> 80

NASDAQ LISTING

Telco Systems and World Access have each agreed to use all reasonable
efforts to obtain, prior to the Effective Time, the approval for inclusion on
Nasdaq, effective upon official notice of issuance, of the shares of World
Access Common Stock into which the shares of Telco Systems Common Stock will be
converted pursuant to the Merger.

CONDITIONS TO THE MERGER

Conditions to the Obligations of Each Party. The obligations of both World
Access and Telco Systems to consummate the Merger are subject to the
satisfaction or waiver of certain conditions, including, without limitation, (i)
the continuing effectiveness of the Registration Statement of which this Joint
Proxy Statement/Prospectus forms a part; (ii) the approval of the Merger
Agreement and the Merger by the requisite vote of stockholders of Telco Systems;
(iii) the approval of the Share Issuance and the increase in the number of
authorized shares of World Access Common Stock to 150,000,000 shares by the
World Access stockholders; (iv) the absence of any injunction or order making
the Merger illegal or otherwise prohibiting its consummation; (v) the
termination of any waiting period applicable to the consummation of the Merger
under the HSR Act or any other applicable competition, merger control or similar
law; (vi) the receipt of all material consents, approvals and authorizations
legally required to be obtained to consummate the Merger; and (vii) including on
Nasdaq, subject to official notice of issuance, the shares of World Access
Common Stock into which shares of Telco Systems Common Stock will be converted
pursuant to the Merger Agreement. The approval of the proposal to amend the
World Access Certificate is intended to satisfy the condition specified in
clause (iii) above.

Conditions to the Obligations of Telco Systems. The obligations of Telco
Systems to consummate the Merger are subject to the satisfaction or waiver of
certain additional conditions, including, without limitation, (i) the accuracy
at and as of the Effective Time of each of the representations and warranties of
World Access contained in the Merger Agreement; (ii) the performance or
compliance by World Access with all material agreements and covenants required
by the Merger Agreement to be performed or complied with by it on or prior to
the Effective Time; and (iii) the receipt from Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel to Telco Systems, of its opinion to the effect that
the Merger will be treated for federal income tax purposes as a tax-free
reorganization.

Conditions to the Obligations of World Access. The obligations of World
Access to consummate the Merger are subject to the satisfaction or waiver of
certain additional conditions, including, without limitation, (i) the accuracy
at and as of the Effective Time of each of the representations and warranties of
Telco Systems contained in the Merger Agreement; (ii) the performance or
compliance by Telco Systems with all material agreements and covenants required
by the Merger Agreement to be performed or complied with by it on or prior to
the Effective Time; and (iii) the receipt from Rogers & Hardin LLP, counsel to
World Access, of its opinion to the effect that the Merger will be treated for
federal income tax purposes as a tax-free reorganization.

TERMINATION

The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, notwithstanding the adoption
and approval of the Merger Agreement by the stockholders of World Access and the
stockholders of Telco Systems, (i) by mutual written consent duly authorized by
the boards of directors of each of World Access and Telco Systems; (ii) by
either World Access or Telco Systems, if the Effective Time does not occur on or
before December 31, 1998, provided that if the Effective Time has not occurred
solely because of any waiting period applicable to the consummation of the
Merger under the HSR Act or any failure to obtain any material consents,
approvals and authorizations legally required to be obtained to consummate the
Merger, then World Access or Telco Systems may extend the Termination Date until
January 31, 1999; (iii) by either World Access or Telco Systems, if any
governmental order, writ, injunction or decree preventing the consummation of
the Merger is entered by any court of competent jurisdiction and becomes final
and nonappealable; (iv) by World Access, if prior to the Telco

69
<PAGE> 81

Systems Special Meeting (A) the board of directors of Telco Systems withdraws,
modifies or changes its recommendation of the Merger Agreement or the Merger in
a manner adverse to World Access or its stockholders or resolves to do so, (B)
the board of directors of Telco Systems recommends to the stockholders of Telco
Systems a Competing Transaction or resolves to do so, or (C) a tender offer or
exchange offer for 15% or more of the outstanding shares of capital stock of
Telco Systems is commenced and the board of directors of Telco Systems fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the acceptance of
such tender offer or exchange offer by its stockholders); (v) by Telco Systems,
if prior to the World Access Special Meeting the board of directors of World
Access withdraws, modifies or changes its recommendation of the Merger Agreement
or the Merger in a manner adverse to Telco Systems or its stockholders or
resolves to do so; (vi) by World Access or Telco Systems, if (A) the Merger
Agreement and the Merger fail to receive the requisite votes for approval at the
Telco Systems Special Meeting or any adjournment or postponement thereof or (B)
the Share Issuance fails to receive the requisite votes for approval at the
World Access Special Meeting or any adjournment or postponement thereof; (vii)
by World Access, upon a material uncured breach of any representation, warranty,
covenant or agreement on the part of Telco Systems set forth in the Merger
Agreement; (viii) by Telco Systems, upon a material uncured breach of any
representation, warranty, covenant or agreement on the part of World Access set
forth in the Merger Agreement; (ix) by Telco Systems at any time prior to the
Telco Systems Special Meeting, if as a result of a Superior Proposal by a third
party the board of directors of Telco Systems determines in good faith after
consulting with outside counsel that it is highly probable that the board of
directors would violate its fiduciary duties if it failed to accept the Superior
Proposal; and (x) by World Access if the World Access Market Price is less than
$12.00 per share.

TERMINATION FEES AND EXPENSES

The Merger Agreement provides that (i) if World Access terminates the
Merger Agreement pursuant to clause (iv) in the immediately preceding paragraph
or if Telco Systems terminates the Merger Agreement pursuant to clause (ix) in
the immediately preceding paragraph or if World Access terminates the Merger
Agreement pursuant to clause (vi)(A) in the immediately preceding paragraph, and
at the time of the failure of Telco Systems' stockholders to approve of the
Merger there exists a Competing Transaction and Telco Systems enters into a
definitive agreement with respect to any Competing Transaction within 12 months
of termination thereunder, then Telco Systems must pay to World Access an amount
equal to $5,500,000 plus all of the reasonable out-of-pocket expenses of World
Access incurred in connection with the Merger in an amount no greater than
$1,000,000; (ii) if Telco Systems terminates the Merger Agreement pursuant to
clause (vi)(B) in the immediately preceding paragraph, then World Access must
pay to Telco Systems an amount equal to $2,000,000 plus all of the reasonable
out-of-pocket expenses of Telco Systems incurred in connection with the Merger
Agreement and the Merger in an amount no greater than $1,000,000; (iii) if Telco
Systems terminates the Merger Agreement pursuant to clause (v) in the
immediately preceding paragraph, then World Access must pay to Telco Systems an
amount equal to $5,500,000 plus all of the reasonable out-of-pocket expenses of
Telco Systems incurred in connection with the Merger Agreement and the Merger in
amount no greater than $1,000,000; (iv) if World Access terminates the Merger
Agreement pursuant to clause (vi)(A) of the immediately preceding paragraph and
World Access is not otherwise entitled to payment of a termination fee from
Telco Systems, then Telco Systems must pay to World Access an amount equal to
$2,000,000 plus all of the reasonable out-of-pocket expenses of World Access
incurred in connection with the Merger Agreement and the Merger in an amount no
greater than $1,000,000; and (v) if World Access terminates the Merger Agreement
pursuant to clause (x) of the immediately preceding paragraph, then Telco
Systems must pay to World Access an amount equal to $1,000,000.

AMENDMENT AND WAIVER

The Merger Agreement may be amended by the parties thereto by action taken
by or on behalf of their respective boards of directors at any time prior to the
Effective Time; provided, however, that, after the approval of the Merger
Agreement by the stockholders of Telco Systems or the stockholders of World
Access, as the case may be, no amendment may be made, except such amendments as
shall have received the requisite

70
<PAGE> 82

approval and such amendments as are permitted to be made without approval under
the DGCL. The Merger Agreement may not be amended except by an instrument in
writing signed by the parties thereto.

At any time prior to the Effective Time, any party to the Merger Agreement
may (i) extend the time for or waive compliance with the performance of any
obligation or other act of any other party thereto or (ii) waive any inaccuracy
in the representations and warranties contained in the Merger Agreement or in
any document delivered pursuant thereto. Any such extension or waiver will be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.

71
<PAGE> 83

THE STOCKHOLDERS PROXY AGREEMENT

Contemporaneous with the execution of the Merger Agreement and as a
condition to the willingness of World Access to enter into the Merger Agreement,
World Access entered into a Stockholders Proxy Agreement (the "Telco Systems
Proxy Agreement"), dated as of June 4, 1998, with Dean C. Campbell, Steward A.
Flaschen, Edward J. Fontenot, Sheldon Horing, William B. Smith, William J.
Stuart, Richard J. Nardone, Philip B. Wilson, David A. LeBeau, LeRoy C. Kopp,
LeRoy C. Kopp Individual Retirement Account, Kopp Investment Advisors, Inc.
Profit Sharing Trust, Kopp Family Foundation and Kopp Investment Advisors, Inc.,
for itself and as attorney-in-fact for certain of its clients, (each a
"Stockholder" and, together, the "Stockholders"), collectively owners of
approximately 8% of the outstanding shares of Telco Systems Common Stock.
Pursuant to the Telco Systems Proxy Agreement, each Stockholder agreed to vote,
and granted to World Access an irrevocable proxy to vote, all voting securities
of Telco Systems held by such Stockholder in favor of approval of the Merger
Agreement and the Merger.

The following is a description of the material provisions of the Telco
Systems Proxy Agreement, a copy of which is attached as Appendix D to this Joint
Proxy Statement/Prospectus. The following summary is qualified in its entirety
by reference to the complete text of the Telco Systems Proxy Agreement.

The Telco Systems Proxy Agreement provides that, during the term thereof,
each Stockholder will not (i) sell, pledge or otherwise dispose of any of its
shares of Telco Systems Common Stock, (ii) deposit its shares of Telco Systems
Common Stock into a voting trust or enter into a voting agreement with respect
to such shares, or (iii) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of any Telco Systems Common Stock.

The Telco Systems Proxy Agreement further provides that each Stockholder,
with respect to those shares of Telco Systems Common Stock that such Stockholder
owns of record, appoints World Access, or any nominee of World Access, during
the term thereof, as its true and lawful proxy, to vote all of the shares of
Telco Systems Common Stock held by such Stockholder at every annual, special or
adjourned meeting of the stockholders of Telco Systems (i) in favor of the
adoption of the Merger Agreement and approval of the Merger and any other
transactions contemplated by the Merger Agreement, (ii) against any proposal for
any recapitalization, merger, sale of assets or other business combination
between Telco Systems and any other person or entity (other than the Merger) or
any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Telco Systems
under the Merger Agreement or which could result in any of the conditions to
Telco Systems's obligations under the Merger Agreement not being fulfilled, and
(iii) in favor of any other matter relating to consummation of the transactions
contemplated by the Merger Agreement. Each Stockholder further agreed to cause
the shares of Telco Systems Common Stock owned by it beneficially to be voted in
accordance with the Telco Systems Proxy Agreement.

The Telco Systems Proxy Agreement expires by its terms on the earlier of
(i) the Effective Time and (ii) the date of termination of the Merger Agreement
pursuant to its terms.

72
<PAGE> 84

WORLD ACCESS

BUSINESS

Overview. World Access develops, manufactures and markets wireline and
wireless switching, transport and access products for the global
telecommunications markets. World Access products allow telecommunications
service providers to build and upgrade their central office and outside plant
networks in order to provide a wide array of voice, data and video services to
their business and residential customers. World Access offers digital switches,
billing and network telemanagement systems, cellular base stations, fixed
wireless local loop systems, intelligent multiplexers, microwave and
millimeterwave radio systems and other telecommunications network products. The
products offered by World Access include those manufactured by World Access, as
well as those manufactured by other telecommunications equipment companies. To
support and complement its product sales, World Access also provides its
customers with a broad range of design, engineering, manufacturing, testing,
installation, repair and other value-added services.

The global telecommunications industry has undergone significant
transformation and growth in recent years due to domestic deregulation,
technological innovation and growth in international markets. In addition,
business and residential demand for voice, data and video telecommunications
services has increased the need for additional systems capacity and network
bandwidth to accommodate the provision of such services by telecommunications
providers. World Access believes that these market forces will intensify in the
foreseeable future and that an increased number of telecommunications service
providers, the availability of new services and strong international demand for
the deployment of basic telephone service will provide World Access with
extensive opportunities to sell its wireline and wireless switching, transport
and access products in the United States and in international markets.

Products and Services. World Access offers wireline and wireless
switching, transport and access products for the global telecommunications
marketplace. These products allow telecommunications service providers to build
and upgrade their networks to provide a wide range of voice, data and video
services to business and residential customers. To date, a significant portion
of the products sold by World Access has been Northern Telecom switching
products and reengineered cellular base stations and related mobile network
equipment. Through acquisitions, technology license agreements and internal
development, World Access expects to manufacture an increasing proportion of its
products in the future.

Switching Products. World Access markets digital telephone switching
products that are used for local, tandem, toll and cellular applications. The
switches offered by World Access have line capacities ranging from 100 to
120,000 subscribers and 30 to 60,000 inter-exchange trunks. Switching products
historically offered by World Access have been primarily developed and
manufactured by other telecommunications equipment companies, including Northern
Telecom and Lucent Technologies. These products include complete switching
systems as well as add-on frames, line cards and modified circuit boards for
either newly constructed networks or upgrades to existing networks.

Pursuant to a long-term technology license agreement, World Access
manufactures and markets the Compact Digital Exchange Switch ("CDX"), a
microprocessor-based, modular, digital central office switch. The CDX utilizes
extensive large scale integrated circuit technology to provide advanced
telephony services such as call waiting, call forwarding and conference calling,
and requires reduced power and floorspace compared with alternative products.
The current switch serves applications up to 5,000 subscriber lines and is
designed to be expandable to over 60,000 lines through future software
enhancements. The CDX is targeted for use in the international marketplace due
to its compatibility with international standards, "plug and play" installation
features and tolerance of a wide range of environmental conditions.

With World Access' acquisition of a majority stake in NACT in the first
quarter of 1998 and its acquisition of the remainder of NACT in October 1998 in
connection with the Holding Company Reorganization, World Access has
significantly expanded its offering of proprietary, advanced technology
switching products and software applications.

NACT's STX Switching System ("STX") consists of an integrated application
switching platform and a suite of applications software. World Access sells an
optional companion Master Control Unit ("MCU") to

73
<PAGE> 85

integrate and service multiple STXs and to add redundancy to the network. World
Access believes that the STX offers value added features and capacity at price
points typically below those offered by its competitors. The STX hardware
platform can operate on a standalone basis with a port capacity of 1,344. An
optional MCU can link up to three STXs, which can be served by a common database
for a total system capacity of 4,032 ports. The STX is also designed to work
seamlessly with NACT's NTS 1000 billing system.

NACT's suite of STX applications software consists of over one million
lines of code. This software supports major application features that are fully
integrated and interoperable. The major applications features include: equal
access calling (1+), automated operator (0+), live operator service provider
support (0-), real-time validation of credit card and billing numbers, prepaid
debit cards, prepaid cellular, international call back, phone centers, real-time
rating, fraud minimization, external computer application programming
interfaces, call reorigination, and integrated audio with twenty two languages.
Interoperability enables several applications packages to be used in conjunction
with each other. Almost all features are implemented in software, allowing
unlimited capability for enhancement and customization.

The NTS 1000 Billing System ("NTS 1000") is a call rating, accounting,
switch management, invoicing and traffic engineering system designed to process
the day-to-day operations of a small-to-medium sized long distance company. The
NTS 1000 can collect calls from most major switching platforms, including the
STX, and can rate all types of call traffic and, using a sophisticated rating
engine, provide the owner with a highly flexible and completely customized
rating capability. The accounting system handles all of the required information
for managing a long distance customer base including configuration of
authorization codes, accounts receivable, and management of delinquent accounts.
A major feature of the NTS 1000 is its switch management capability. When
coupled with the STX, information that has been entered into the NTS 1000 can be
electronically transferred into the STX, thereby minimizing data entry needs.
The NTS 1000 also has complete international call back/reorigination and prepaid
debit card management support, as well as a complete invoicing package that
supports multiple invoice styles and options for summary reports. It has a
sophisticated traffic engineering reporting package that provides the ability to
generate over 20 types of reports with a user specified beginning and ending
time range.

Current users of World Access' switching products are primarily local
exchange carriers, inter-exchange carriers, competitive access providers,
private network operators and other telecommunications service providers. World
Access intends to expand its United States customer base for switching products
and to actively market the CDX to public and private network providers in Latin
America and other international markets.

Transport Products. World Access develops, manufactures and markets a
variety of wireline and wireless transport products, which are used for
high-capacity connectivity between points within a communications network. These
products are primarily digital and provide for the movement of any combination
of voice, data and video traffic across wireline or wireless media. World
Access' transport products include intelligent multiplexers (devices which
combine or aggregate several channels or linkages carrying voice or data signals
into a higher speed link), protection switching equipment (which protect voice
and data links against failure by rerouting circuits to maintain continuity),
mini-repeater housings (enclosures used to protect electronic repeaters from the
elements), asynchronous and fractional data cards, microwave and millimeterwave
radio equipment and sophisticated high speed modems used to carry voice and data
in wireline or wireless networks.

World Access' T-1 multiplexers include features such as local and remote
loopbacks, built-in bit error rate detection, line code selection and built-in
performance monitoring. World Access has developed and is currently testing an
E-1 multiplexer designed for the international markets. This new proprietary
product can combine 60 channels of voice and data into a single E-1 circuit.

With World Access' acquisition of ATI in the first quarter of 1998, World
Access has significantly expanded its offering of proprietary, advanced
technology wireless voice, data and/or video transport products.

ATI develops, manufacturers and markets a complete family of high
performance, technologically advanced digital radios for point-to-point
transmission of data and voice for short and long haul applications. The
majority of ATI's historical sales have been to customers operating outside the
United States. ATI's

74
<PAGE> 86

product lines are offered in a wide range of data rates and frequency bands,
including 1.5 GHz to 38 GHz and DS1/E1 to DS3/E3.

Current users of World Access' transport products are primarily an RBOC and
private network users. World Access intends to expand its current customer base
for transport products by broadening the features of its current products,
increasing its marketing efforts in the United States and developing new
products for the emerging international markets.

Access Products. World Access offers access products for the local loop
(i.e., that portion of the public telecommunications network which extends from
the service provider's switch to the individual home or business end-user). With
the acquisition of CIS in the first quarter of 1997, World Access also offers
its customers cellular base stations and related mobile network equipment.
Although substantially all of the equipment sold by CIS is manufactured by other
telecommunications equipment companies, CIS provides a full range of highly
technical, value-added services such as deinstallation, system design, equipment
tuning and installation.

In the first quarter of 1997, World Access released a new internally
developed access product, the WX-5501 Remote POTS/Remote Universal Voice Grade
("RPOT/RUVG") line card. The WX-5501 is compatible with the Lucent Technologies
SLC(R) Series 5 subscriber loop carrier system, which is widely deployed in
telephone networks across the United States.

In the second quarter of 1997, World Access introduced its Wireless Local
Loop 2000 ("WLL-2000"), a fixed wireless point-to-multipoint system offering
toll quality telephone service to subscribers in urban and suburban areas and
remote communities. To take advantage of existing market opportunities, World
Access reached an agreement in 1997 with another telecommunications equipment
company to private label its point-to-multipoint radio system and exclusively
market it within certain Latin American countries. The current WLL-2000
integrates World Access's CDX and the private label radio. The integrated switch
provides customers with the ability to switch local calls at the WLL-2000 base
station, thus providing superior service and reducing expensive back-haul costs
to a central office. The CDX and WLL-2000 for the first time provide World
Access with an integrated family of proprietary switching and wireless access
products for the international market.

In 1997, World Access also executed a technology licensing agreement that
grants World Access the perpetual right to incorporate spread spectrum
CDMA-based wireless technology into World Access' products sold throughout the
world. Under the terms of the agreement, World Access also has the rights to use
the technology covered by seven patents, all of which address digital data
signals and wireless communication systems. World Access currently intends to
use this technology as the platform for several new products.

As a result of the acquisition of Sunrise in 1996, World Access
manufactures and markets a digital loop carrier (which permits network operators
to provide more reliable, basic and enhanced services at a lower cost) and DS-3
telemetry equipment (used primarily by the military for range communications
applications to multiplex telemetry, digital video, T-1, LAN, WAN and other
signals into a DS-3 signal transmitting at 45 megabits per second). World Access
has recently developed and is currently testing a commercial version of its DS-3
product, the Ultra-45. This advanced multiplexer provides a solution for current
and future telecommunications applications requiring simultaneous delivery of
high speed data, video, LAN, voice and telemetry services.

Current users of World Access' access products are primarily local exchange
carriers, inter-exchange carriers, competitive access providers, cable
television companies and the United States military. World Access intends to
expand its current customer base for access products by broadening the features
of its current products, increasing its marketing efforts in the United States
and developing new products for emerging international markets.

Related Services. World Access offers a full range of complementary
design, manufacturing, installation, testing and repair services. World Access
also offers its customers ongoing systems maintenance and monitoring services,
including asset management services, which allow customers to reduce their
investment in spare and surplus plug-in circuit boards by relying on World
Access' inventories and management

75
<PAGE> 87

information systems. By providing these services, World Access believes it is
better able to offer its customers more comprehensive telecommunications
solutions.

World Access repairs a broad range of switching and transmission plug-in
circuit boards originally manufactured by other telecommunications equipment
companies. World Access' wireless equipment repair business consists principally
of the repair and upgrade of amplitude modulation equipment typically used by
cable television companies. World Access' engineers also provide customers with
a full range of support services for wireless transmission equipment, including
system design, site survey, path calculations, installation and maintenance.

In the third quarter of 1997, World Access completed its acquisition of
Galaxy, a provider of system design, implementation, optimization and other
value-added radio engineering and consulting services to PCS, cellular and other
wireless telecommunications service companies. The background and experience of
Galaxy's management and staff of RF engineers will be utilized to support World
Access' customers as they build new, or upgrade existing, telecommunications
networks throughout the world.

Other Products and Services. World Access' other products and services
include the refurbishment and upgrade of AT&T pay telephones to like-new
condition and the sale of related pay telephone products, such as stainless
steel custom logo vault doors, handsets and dial assemblies. To date,
substantially all of these refurbishment services and product sales have been
provided to four RBOCs.

Sales and Marketing. As of October 31, 1998, World Access' domestic sales
and marketing group consisted of 52 sales professionals and assistants who are
divided into individual sales and marketing teams for each of World Access'
product lines and related services. Each team is responsible for obtaining a
thorough technical knowledge of its products or services, soliciting new
customers and maintaining relationships with existing customers. Each team is
supervised at the corporate level by World Access' Executive Vice President of
Business Development, who coordinates the sales and marketing of multi-product
line sales and is responsible for advertising, trade show appearances and other
company-wide marketing efforts. In connection with the acquisitions completed
during the last few years, World Access has acquired product sales professionals
who have brought technical product knowledge and long-term customer
relationships to World Access.

In 1996, World Access formed a dedicated international sales and marketing
group to pursue the sale of all of World Access' products and services outside
of the United States. As of October 31, 1998, this group consisted of 8 sales
professionals and assistants. World Access has an established network of
independent agents and representatives covering the Caribbean Basin and Latin
America. These agents and representatives, whose compensation consists primarily
of commissions based on sales, actively promote and market World Access'
products and services and receive bid tenders issued within their territory.

During 1997, World Access' international sales increased to approximately
11.3% of total company sales as compared to 2.0% in 1996. World Access intends
to continue to focus significant sales and marketing efforts on emerging
international markets.

Customers. World Access sells its products and services to over 200
telecommunication service providers, including the RBOCs, other local exchange
carriers, inter-exchange carriers, wireless service

76
<PAGE> 88

providers, competitive access providers, cable television companies and other
telecommunications service providers. The following table sets forth a
representative list of World Access' major customers and end-users.

<TABLE>
<CAPTION>
SWITCHING PRODUCTS TRANSPORT PRODUCTS ACCESS PRODUCTS SERVICES
------------------ ------------------ --------------- --------
<S> <C> <C> <C>
Ameritech ADC Telecom Ameritech Alltel
Cable & Wireless Lockheed-Martin Bell Atlantic Bell Atlantic
Frontier Communications Optel BellSouth BellSouth
Bell Atlantic Pacific Bell Cellular One Century Telephone
Puerto Rico Telephone Comcast Cellular GTE
SBC Communications SNET Puerto Rico Telephone
Sprint Price Cellular SBC Communications
Teleglobe International US West
</TABLE>

For the year ended December 31, 1997, no customer of World Access
individually accounted for 10.0% of World Access' total sales. World Access' top
10 customers accounted for 44.2% of total sales. For the year ended December 31,
1996, Cable & Wireless accounted for 10.9% of World Access' total sales, and
World Access' top 10 customers accounted for 54.2% of total sales. World Access'
customers typically are not obligated contractually to purchase any quantity of
products or services in any particular period.

Manufacturing, Assembly and Test. World Access provides a broad range of
electronic manufacturing, assembly and test services to support its product
sales. The majority of these support services have been historically performed
at World Access' Orlando, Florida facility, where state-of-the-art manufacturing
and test equipment is maintained. Historically, this equipment has been used
primarily to perform contract manufacturing services for third parties,
primarily to large technology companies that require a high level of
professional materials management, quality "turn-key" manufacturing and complete
electronic and functional product testing. During 1997, World Access began
utilizing its manufacturing capacity to build new company products as well as
servicing third party contract manufacturing customers.

As a result of the recent growth in sales of World Access' internally
developed products, including additional products from the acquisitions of NACT
and ATI, World Access opened a new manufacturing facility in Alpharetta,
Georgia. The Orlando facility was closed during the second quarter of 1998 as
World Access exited from the third party contract manufacturing business.

World Access' new Alpharetta manufacturing operation has state-of-the-art
surface mount manufacturing and automated testing equipment. This equipment
includes a surface mount assembly line, including advanced "pick-and-place"
equipment and a 3-D vision screen printer. This equipment is currently operating
at less than 50% of the line's capacity. World Access has also recently acquired
new board test systems that provide for high performance, automated testing of
analog, digital, mixed signal and memory devices resident on printed circuit
boards. When combined with World Access' existing testing equipment, the new
equipment gives World Access an extensive software library and technical
capacity to test integrated circuits, capacitors, resistors and related
electronic components, and ensures the quality of electronic products
manufactured.

In addition to the relocation of its manufacturing facility, World Access
also took additional actions during the first half of 1998 to streamline
operations, improve efficiency and better service its customers. In the second
quarter of 1998, four facilities in Lakeland, Florida and the existing circuit
board repair operations in Orlando, Florida moved to a new facility in Orlando.
World Access' AIT operations, which include the testing of Northern Telecom
switching equipment and verification of the configuration and integration of
add-on frames and custom systems, and World Access' circuit board repair
business is conducted in the new Orlando facility under one management team.

At ATI's facility in Wilmington, Massachusetts, World Access utilizes
sophisticated RF test and tuning equipment to manufacture and service it
microwave radio systems. In the second quarter of 1998, World Access relocated
its Westec operations from Scottsdale, Arizona to Wilmington to improve
operating efficiencies and reduce administrative costs.

77
<PAGE> 89

NACT currently conducts its manufacturing operations consisting primarily
of final assembly, test and quality control of subassemblies and completed
systems, in its new manufacturing facility in Provo, Utah.

World Access has an experienced Director of Quality who, along with a staff
of quality assurance professionals, oversees the quality of World Access'
products and services. World Access' Orlando and Wilmington operations are ISO
9002 and ISO 9001 certified, respectively. World Access expects its Alpharetta
and Provo operations to become ISO certified in the first quarter of 1999. ISO
9000 is an international quality certification process, developed in the
European Common Market and adopted in the United States as the method by which
companies can demonstrate the functionality of their quality control system.

In connection with its manufacturing and test services, World Access
generally provides warranties on its products and services ranging from three
months to five years. A one to two year warranty is typically provided on
switching, transport and access products.

World Access believes that it currently has the equipment, personnel and
experience necessary to efficiently manufacture high quality telecommunications
products in-house. This should assist World Access in controlling the costs,
quality and delivery of its products and allow World Access to bring new
products to market on a timely basis.

Suppliers. Products manufactured by World Access typically require the
procurement of printed circuit boards, electronic components, cable assemblies,
fabricated metal, plastic parts and other materials, of which electronic
components are the most costly. World Access purchases electronic components
from numerous sources, including original manufacturers and parts distributors.

World Access purchases substantially all of its components and other parts
from suppliers on a purchase order basis and does not maintain long-term supply
arrangements. Most of the components used in World Access' products and related
services are available from multiple sources. However, several components,
primarily custom hybrid integrated circuits, are currently obtained from a
single source. To date, World Access has been able to obtain adequate supplies
of these components. World Access' inability in the future to obtain sufficient
quantities of limited-source components, or to develop alternative sources
therefor, could result in delays in product delivery and increased component
cost, either of which could have a material adverse effect on World Access'
business, financial condition and results of operations.

Although World Access manufactures its own switching products, a
significant portion of the switching products sold to date by World Access has
been new or used Northern Telecom switching systems, add-on frames and circuit
boards, and reengineered mobile network equipment. The major sources for such
products are deinstallations by primary users, asset recovery operations of
telephone companies, auctions by Northern Telecom and other original equipment
manufacturers, repossessions by leasing companies and formal distribution or
consignment agreements. World Access currently has formal consignment agreements
with Ameritech, SNET and Century Telephone, pursuant to which World Access
inventories Northern Telecom, Lucent Technologies and other circuit boards for
resale by World Access.

Engineering and Development. Historically, World Access' engineering,
development and technical support efforts have focused on the repair of
switching, transport and access products and on electronic manufacturing
processes. World Access has significant experience in developing automated test
systems, diagnostic programs and repair procedures for electronic circuitry
typically found within telecommunications switching equipment. World Access'
engineers have also used their expertise and experience to create new revenue
sources for World Access by developing upgrades and enhancements to existing
products, including those developed and manufactured by other telecommunications
equipment companies.

World Access' engineering efforts have become more focused on developing
new switching, transport and access products and enhancing the features and
capabilities of current products. The acquisitions of NACT and ATI have enhanced
World Access' engineering and development capabilities of switching and
transport products with the addition of approximately 50 development engineers.
World Access' engineers have significant experience in switching systems
configurations, transmission and access applications and wireless technology
such as spread spectrum CDMA, radio path calculations, field performance
measurement and
78
<PAGE> 90

frequency licensing. World Access expects that, as it continues to manufacture
and sell more sophisticated telecommunications equipment, it will continue to
make further significant investments in research and product development.

As of October 31, 1998, World Access' engineering and development group
consisted of 130 persons, including 48 RF engineers added through the Galaxy
acquisition, 70 in product development, and 12 in repair service development,
systems integration and manufacturing process and operations support. These
employees are organized into teams corresponding to World Access' product lines,
and each team is responsible for providing technical support to World Access'
customers and for developing and enhancing products. World Access' internal
engineering resources permit World Access to continually reduce the production
cost and improve the functionality of its products.

Competition. The segments of the telecommunications industry in which
World Access operates are intensely competitive. World Access' ability to
compete is dependent upon several factors, including price, quality, product
features and timeliness of delivery. Many of World Access' competitors have
significantly more extensive engineering, manufacturing, marketing, financial
and technical resources than World Access. In addition, World Access currently
competes with several of its major suppliers, including Northern Telecom, with
respect to the sale of certain of its products, which may adversely affect its
ability to continue to obtain such products from these suppliers in the future.

In the sale of switching, transport and access products, World Access
competes with companies such as Northern Telecom and Lucent Technologies. World
Access believes it competes favorably against these companies by providing high
quality products, comprehensive support services, competitive prices and
shortened product delivery times. As World Access increases its international
sales efforts, it also expects to compete with other established
telecommunications equipment companies such as Ericsson, Fujitsu, Siemens and
Alcatel Network Systems.

Employees. As of October 31, 1998, World Access had 537 full-time
employees, including 130 in engineering and development, 46 in technical service
and support, 60 in sales and marketing, 137 in manufacturing, warehousing and
quality assurance, 80 in repair and refurbishment and 84 in general management,
finance, administration and other support services. From time to time, World
Access also uses part-time employees in its manufacturing operations to
accommodate changes in production levels. None of World Access' employees is
represented by any collective bargaining agreements, and World Access has never
experienced a work stoppage. World Access considers its employee relations to be
good.

PROPERTIES

World Access' executive offices are located in Atlanta, Georgia, where it
occupies approximately 4,000 square feet under a lease expiring in October 2000.
World Access leases certain office, manufacturing and warehouse facilities under
operating leases which expire at various dates during the next five years. The
following provides a summary of the significant operating facilities currently
leased or owned by World Access.

<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASE EXPIRES
- -------- -------------- -------------
<S> <C> <C>
Orlando, Florida............................................ 72,000 April 2002
Wilmington, Massachusetts................................... 64,000 November 2000
Dallas, Texas............................................... 54,000 February 2003
Provo, Utah................................................. 40,000 Owned facility
Alpharetta, Georgia......................................... 62,000 December 2001
South Bend, Indiana......................................... 22,000 July 2002
Other warehouses and offices................................ 30,000 Various
-------
Total............................................. 344,000
=======
</TABLE>

World Access' existing facilities are adequate for its current operations,
and World Access believes that convenient, additional facilities are readily
available should the business need arise.

79
<PAGE> 91

LEGAL PROCEEDINGS

From time to time, World Access is involved in various legal proceedings
relating to claims arising in the ordinary course of its business. Neither World
Access nor any of its subsidiaries is party to any legal proceeding, the outcome
of which, individually or in the aggregate, is expected to have a material
adverse effect on World Access' financial condition or results of operations.

80
<PAGE> 92

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF WORLD ACCESS

Overview

World Access develops, manufactures and markets wireline and wireless
switching, transport and access products for the global telecommunications
markets. The products offered by World Access include those manufactured by
World Access as well as those manufactured by other telecommunications equipment
manufacturers. To support and complement its product sales, World Access also
provides its customers with a broad range of design, engineering, manufacturing,
testing, installation, repair and other value-added services.

During 1995 and 1996, World Access completed strategic and financial
restructuring programs to strengthen its management team, reposition World
Access as a provider of telecommunications products, improve its financial
condition, reduce its operating costs and position World Access for future
growth. These programs were undertaken following the significant losses incurred
by World Access in the early 1990s, primarily due to a discontinued smart pay
telephone business, and to take advantage of the significant growth
opportunities within World Access' existing customer base and related markets.
In November 1994, World Access began to rebuild its management team and change
its strategic focus. World Access strengthened its management team by appointing
a new Chief Executive Officer and by recruiting and hiring a new President and
Chief Operating Officer, Executive Vice President of Business Development and
experienced product development and manufacturing professionals. These
individuals, together with other key managers recruited into World Access, have
brought significant experience in manufacturing and marketing telecommunications
equipment to World Access.

World Access acquired five businesses during 1995 to 1997 in an effort to
broaden its line of switching, transport and access products, enhance its
product development capabilities and strengthen its technical base. Effective
May 1995, World Access acquired AIT, a full service provider of Northern Telecom
switching systems, add-on frames and related circuit boards; effective October
1995, World Access acquired Westec, a provider of wireless products and services
primarily to the cable television industry; effective January 1996, World Access
acquired Sunrise, a developer and manufacturer of intelligent transport and
access products; effective January 1997, World Access acquired CIS, a provider
of mobile network equipment and related design, installation and technical
support services to cellular, PCS and other wireless service providers; and
effective August 1997, World Access acquired Galaxy, a RF engineering firm that
provides system design, implementation, optimization and other value-added radio
engineering and consulting services to the wireless service markets. The markets
served by CIS and Galaxy complement World Access' traditional telephone service
provider and private network operator markets.

In the first quarter of 1998, World Access acquired ATI, a manufacturer of
digital point-to-point microwave radio systems for short and long haul
applications and a majority stake in NACT, a provider of advanced
telecommunications switching platforms with integrated applications software. In
May 1998, World Access signed definitive agreements to acquire Resurgens, a
facilities-based provider of international network access, commonly referred to
in the industry as carriers' carrier. In June 1998, World Access signed a
definitive agreement to acquire Telco Systems, a manufacturer of asynchronous
fiber optic systems and intelligent channel banks for the integrated access,
high capacity multiplexer and Frame Relay/ATM access markets. These acquisitions
have positioned World Access to offer its customers a complete
telecommunications network solution, including proprietary equipment, planning
and engineering services and access to international long distance.

World Access realized significant improvements in its sales and operating
results since 1994 as a result of the acquisitions and internal growth
initiatives. World Access' total sales increased by 82.3% in 1997, 69.2% in 1996
and 97.2% in 1995. Total sales for the first six months of 1998 increased by
41.5% over the last six months of 1997. As World Access increased its product
sales from 18.2% of total sales in 1994 to 79.0% of total sales in the first six
months of 1998, its gross profit margin before special charges increased from
12.9% in 1994 to 21.1% in 1995, 29.4% in 1996, 34.6% in 1997 and 44.1% in the
first six months of 1998. As a percentage of total sales, World Access'
operating income (loss) before special charges increased from (8.5%) in 1994 to
5.0% in 1995, 14.4% in 1996, 21.0% in 1997 and 27.6% in the first six months of
1998. World Access

81
<PAGE> 93

will continue to seek further improvements in gross profit margin over time as
product offerings include more internally developed, acquired and licensed
products containing proprietary technology.

Although World Access has aggressively pursued acquisitions in recent
years, approximately 50% of World Access' total sales growth since 1994 has come
from internal growth initiatives. World Access has had considerable success in
growing businesses subsequent to their acquisition, due in part to World Access'
ability to provide working capital, an extensive base of telecommunications
customers and a broad range of support services.

Since January 1, 1995, World Access has significantly strengthened its
balance sheet through improved operating results, a $115.0 million sale of
convertible subordinated notes, a $26.2 million secondary public equity
offering, stock warrant and option exercises, and a five-year $10.0 million
credit facility. World Access has used this capital for acquisitions and to
support the working capital requirements associated with World Access' growth.
World Access' working capital and stockholders' equity have increased from $2.3
million and $1.2 million, respectively, at December 31, 1994 to $116.1 million
and $98.6 million, respectively, at June 30, 1998.

Results of Operations For Years Ended December 31, 1997, 1996 and 1995

The following table sets forth certain financial data expressed as a
percentage of total sales represented by each line item in World Access'
consolidated statements of operations, except other data, which is expressed as
a percentage of the applicable revenue type:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of products......................................... 76.8% 67.5% 57.7%
Service revenues.......................................... 23.2 32.5 42.3
----- ----- -----
Total sales....................................... 100.0 100.0 100.0
Cost of products sold..................................... 47.1 42.1 42.0
Cost of services.......................................... 18.3 28.5 36.9
----- ----- -----
Total cost of sales............................... 65.4 70.6 78.9
----- ----- -----
Gross profit...................................... 34.6 29.4 21.1
Engineering and development............................... 2.0 1.7 1.9
Selling, general and administrative....................... 9.7 12.2 10.4
Amortization of goodwill.................................. 1.9 1.1 0.5
Special charges........................................... -- -- 3.3
----- ----- -----
Operating income.................................. 21.0 14.4 5.0
Interest and other income................................. 2.7 1.0 0.5
Interest expense.......................................... (1.5) (0.6) (1.6)
----- ----- -----
Income before income taxes........................ 22.2 14.8 3.9
Income taxes.............................................. 8.1 1.5 --
----- ----- -----
Net income........................................ 14.1% 13.3% 3.9%
===== ===== =====
OTHER DATA:
Gross Margin:
Products............................................... 38.6% 37.6% 27.2%
Services............................................... 21.2 12.5 12.8
</TABLE>

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Sales. Total sales increased $42.0 million, or 82.3%, to $93.0 million in
1997 from $51.0 million in 1996. Product sales increased to 76.8% of total sales
in 1997 from 67.5% in 1996.

82
<PAGE> 94

Product sales increased $37.0 million, or 107.5%, to $71.4 million in 1997
from $34.4 million in 1996. The increase related to $26.2 million of mobile
network equipment sold by CIS, which was acquired effective January 1, 1997, an
additional $6.4 million of switching products sold by AIT and approximately $6.9
million in sales of World Access' new international products, the CDX and
WLL-2000. Product sales for 1996 included approximately $4.8 million in one-time
sales of a distributed product.

Service revenues increased $5.0 million, or 30.2%, to $21.6 million in 1997
from $16.6 million in 1996. The increase related to $2.0 million of engineering
services performed by Galaxy, which was acquired effective July 1, 1997, and an
additional $5.2 million in pay telephone refurbishment revenues. This increase
was partially offset by a decline in electronic manufacturing revenues resulting
from a strategic decision to begin utilizing World Access' manufacturing
capacity for new products rather than servicing external contract manufacturing
customers.

Gross Profit. Gross profit increased $17.1 million, or 114.3%, to $32.1
million in 1997 from $15.0 million in 1996. Gross profit margin increased to
34.6% in 1997 from 29.4% in 1996. The improved performance resulted from
economies of scale associated with the 82.3% increase in total sales and the
change in sales mix to products, which generally carry a higher gross profit
margin than service revenues.

Gross profit margin on products sold increased to 38.6% in 1997 from 37.6%
in 1996. The improved margins related to the $26.2 million of CIS sales and
sales of the CDX, all of which generally carry margins in excess of 40.0%. World
Access' switching products experienced declines in gross margin during 1997
primarily related to margin pressure on sales of Northern Telecom add-on frames
and related circuit boards.

Gross profit margin on service revenues increased to 21.2% in 1997 from
12.5% in 1996. The improvement was due to the addition of Galaxy consulting
revenues and improved margins on pay telephone refurbishment revenues.

Engineering and Development. Engineering and development expenses
increased $970,000, or 108.7%, to $1.9 million in 1997 from $892,000 in 1996.
The increase in expenses was attributable to the formation of a corporate
product development group during the third quarter of 1996 and the continued
expansion of the development group during 1997. Engineering and development
expenses increased to 2.0% of total sales in 1997 from 1.7% of total sales in
1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.8 million, or 44.9%, to $9.0 million in
1997 from $6.2 million in 1996. The increase related primarily to expenses
associated with the operations of CIS and Galaxy, which were acquired effective
January 1, 1997 and July 1, 1997, respectively, and World Access' establishment
of a dedicated international sales and marketing group and corporate business
development function in March 1996. In addition, World Access recorded
approximately $960,000 of incentive compensation expense in 1997 as compared to
a provision of approximately $300,000 in 1996. As a percentage of total sales,
selling, general and administrative expenses decreased to 9.7% in 1997 from
12.2% in 1996.

Amortization of Goodwill. Amortization of goodwill increased $1.2 million
to $1.8 million in 1997 from $534,000 in 1996, primarily as a result of goodwill
recorded in connection with the AIT, CIS and Galaxy acquisitions.

Operating Income. Operating income increased $12.2 million, or 165.3%, to
$19.5 million in 1997 from $7.4 million in 1996. Operating income margin
increased to 21.0% in 1997 from 14.4% in 1996.

Interest and Other Income. Interest and other income increased $2.0
million to $2.5 million in 1997 from $484,000 in 1996 due to a significant
increase in cash balances of World Access, resulting primarily from the sale of
$115.0 million convertible subordinated notes in October 1997 and proceeds
received from a $26.2 million secondary public equity offering completed in
October 1996.

Interest and Other Expense. Interest expense increased $1.0 million to
$1.4 million in 1997 from $320,000 in 1996. The increase is primarily due to the
sale of $115.0 million convertible subordinated notes in October 1997 which bear
interest at 4.5%.

83
<PAGE> 95

Income Taxes. World Access' effective income tax rate increased to 36.5%
in 1997 from 9.9% in 1996. The Company's 1996 effective rate was favorably
impacted by the recognition of a $4.1 million deferred tax asset during the year
to reflect the benefits of World Access' remaining net operating loss
carryforward.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Sales. Total sales increased $20.9 million, or 69.2%, to $51.0 million in
1996 from $30.1 million in 1995. Product sales increased to 67.5% of total sales
in 1996 from 57.7% in 1995.

Product sales increased $17.0 million, or 97.9%, to $34.4 million in 1996
from $17.4 million in 1995. The increase related primarily to an additional
$16.1 million of switching products sold by AIT, which was acquired as of May
1995, and $3.6 million of transport and access products sold by Westec and
Sunrise, which were acquired as of October 1995 and January 1996, respectively.
The increases noted above were partially offset by a decrease in the sales of
pay telephone parts in 1996 due to a large one-time order received in 1995.

Service revenues increased $3.8 million, or 30.0%, to $16.6 million in 1996
from $12.8 million in 1995. The increase related to $1.2 million of Westec
repair revenues following its acquisition, $1.7 million of increased circuit
board repair revenues generated by the introduction of new repair services and a
new repair agent contract executed with Century Telephone in July 1995, and
increased contract manufacturing revenues of approximately $1.4 million.

Gross Profit. Gross profit increased $8.6 million, or 135.7%, to $15.0
million in 1996 from $6.4 million in 1995. Gross profit margin increased to
29.4% in 1996 from 21.1% in 1995. The improved performance resulted from
economies of scale associated with the 69.2% increase in total sales and the
change in sales mix to products, which generally carry a higher gross profit
margin than service revenues.

Gross profit margin on products sold increased to 37.6% in 1996 from 27.2%
in 1995. Excluding the sale of distributed products, gross profit margin for
products sold in 1996 and 1995 was 41.9% and 33.4%, respectively. The improved
margin performance for non-distributed products related primarily to the $16.1
million, or 207.2%, increase in switching products sold by AIT and $2.8 million
of transport and access products sold by Sunrise.

Gross profit margin on service revenues decreased to 12.5% in 1996 from
12.8% in 1995. World Access' gross profit margin for service revenues is subject
to wide fluctuations depending on the sales mix (i.e., circuit board repair and
pay telephone refurbishment have targeted gross profit margins significantly
higher than those of electronic manufacturing services). In addition, circuit
board repair margins declined during 1995 due to increased out-sourced repair
revenues associated with new "one-stop" repair agent programs.

Engineering and Development. Engineering and development expenses
increased $315,000, or 54.6%, to $892,000 in 1996 from $577,000 in 1995. The
increase in expenses was attributable to the research and product development
activities acquired in connection with the Sunrise acquisition and the formation
of a product development group during the third quarter of 1996. As a result of
the 69.2% increase in total sales, engineering and development expenses
decreased to 1.7% of total sales in 1996 from 1.9% of total sales in 1995.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.1 million, or 98.7%, to $6.2 million in
1996 from $3.1 million in 1995. The increase related primarily to operating
expenses associated with acquisitions, additional salary and related costs for
World Access' Chairman (who received no salary during 1995) and its new
President, and World Access' establishment of a dedicated international sales
and marketing group and corporate business development function in the first
quarter of 1996. As a percentage of total sales, selling, general and
administrative expenses increased to 12.2% in 1996 from 10.4% in 1995.

Amortization of Goodwill. Amortization of goodwill increased $377,000 to
$534,000 in 1996 from $157,000 in 1995 as a result of the goodwill acquired in
connection with acquisitions.

Operating Income. Operating income increased $5.8 million to $7.4 million
in 1996 from $1.5 million in 1995. As a percentage of total sales, operating
income increased to 14.4% in 1996 from 5.0% in 1995.
84
<PAGE> 96

Interest and Other Income. Interest and other income increased $341,000 to
$484,000 in 1996 from $143,000 in 1995 due to an increase in invested cash
balances during 1996, resulting primarily from proceeds received from the $26.2
million secondary public equity offering completed in October.

Interest Expense. Interest expense decreased $175,000 to $319,000 in 1996
from $494,000 in 1995. The decrease resulted primarily from a decrease in
average debt outstanding in 1996. In October 1996, World Access paid off a $3.9
million term loan with its bank using proceeds received from the secondary
public offering. A reduction in the interest rate on World Access' bank debt due
to the lender's reinstatement of a LIBOR-based interest rate option in July 1995
and an additional one percentage point reduction obtained with World Access' new
bank agreement in March 1996 also contributed to the decrease in interest
expense.

Income Taxes. World Access' effective income tax rate was 9.9% in 1996.
World Access' 1996 effective rate was significantly impacted by the recognition
of a $4.1 million deferred tax asset during the year to reflect the benefits of
World Access' remaining net operating loss carryforward. No income tax expense
was recorded in 1995 due to the partial recognition of benefits associated with
World Access' net operating loss carryforward.

Salary Incentive Program. In December 1996, World Access implemented a
voluntary salary reduction program designed to improve World Access' cash flow
during 1997, further align the objectives of World Access' management and
salaried employees with those of World Access' stockholders and potentially
provide World Access with significant future tax deductions. Under the program,
72 exempt salaried employees agreed to forego approximately $826,000 of their
1997 compensation in exchange for 413,019 non-qualified options to purchase
shares of World Access Common Stock at $8.00 per share, its then-current market
value (i.e., one stock option for every $2.00 of compensation). The vesting was
tied to World Access meeting specific operational objectives in 1997, including
pre-defined levels of internal sales growth, ISO 9002 certification and specific
cash management objectives, as well as the installation of certain upgraded
information systems. As of December 31, 1997, these options had become fully
vested.

Under the 1997 program, employees could participate to a maximum level of
50% of their 1997 salaries. World Access' Chairman, President and Chief
Financial Officer each elected to forego 50% of their salary under this program.
This program also provided that if certain levels of pre-tax income were
achieved for 1997, a partial or full repayment of salaries would be made.
Compensation expense related to this program of approximately $250,000, or 30%
of the salaries deferred, was recorded in 1997.

Summary. World Access' improved operating performance and completion of
the sale of $115.0 million of convertible subordinated notes due 2002 (the
"Notes") has significantly enhanced its financial strength and improved its
liquidity. World Access believes that existing cash balances, available
borrowings under World Access' line of credit and cash projected to be generated
from operations will provide World Access with sufficient capital resources to
support its current working capital requirements and business plans for at least
the next 12 months.

Year 2000

As a result of certain computer programs being written using two digits
rather than four to define the applicable year, any of World Access' computer
systems that have date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000 (the "Year 2000 Issue"). This causes
programs that perform arithmetic operations, comparisons or date sorts to
possibly generate erroneous results when the program is required to process
dates from both centuries. This could result in a system failure, incorrect data
and other business disruptions, including, among other things, a temporary
inability to procure materials, process transactions, send invoices and service
customers.

85
<PAGE> 97

and the system is expected to be deployed company-wide by mid-1999. World Access
plans on engaging an outside consulting firm in November 1998 to perform a
detailed year 2000 review of its development and manufacturing systems. The
costs to ensure compliance of these systems (including computer equipment,
software upgrades and assessment fees) by mid-1999 is currently estimated at
approximately $700,000.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 establishes standards for reporting and disclosure of
comprehensive income and its components. This statement will be effective for
the year ended December 31, 1998. Management believes this statement will not
have a material impact on World Access' financial statements.

86
<PAGE> 98

Results of Operations for Three Months Ended June 30, 1998 and 1997 and Six
Months Ended June 30, 1998 and 1997

The following table sets forth items in World Access' Consolidated
Statements of Operations as a percentage of total revenues.

World Access' sales during the first six months of 1998 included
approximately $30.0 million from its AIT and CIS subsidiaries. AIT sells new and
used Northern Telecom switching systems, add-on frames and circuit cards. CIS
sells re-engineered cellular base stations and related mobile network equipment.
These operations depend on a consistent supply of equipment to sustain their
revenue levels. Additionally, individual sales by AIT and CIS are relatively
large ($500,000 to $2.0 million), which subjects World Access to the risk of
revenue fluctuations in the event that customers adjust the timing of their
orders.

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1998 1997 1998 1997
------ ------ ----- -----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of products.................................... 87.6% 81.0% 83.9% 78.9%
Service revenues..................................... 12.4 19.0 16.1 21.1
----- ----- ----- -----
Total sales................................... 100.0 100.0 100.0 100.0
Cost of products sold................................ 46.8 48.0 46.9 48.5
Cost of services..................................... 10.0 16.7 14.6 18.3
----- ----- ----- -----
Total cost of sales........................... 56.8 64.7 61.5 66.8
----- ----- ----- -----
Gross profit.................................. 43.2 35.3 38.5 33.2
Engineering and development.......................... 3.8 1.8 3.1 1.7
Selling, general and administrative.................. 9.9 10.1 9.6 9.8
Amortization of goodwill............................. 2.1 1.6 2.3 1.5
In process research and development.................. -- -- 60.0 --
Special charges...................................... -- -- 3.9 --
----- ----- ----- -----
Operating income (loss)....................... 27.4 21.8 (40.4) 20.2
Interest and other income............................ 1.5 0.9 2.4 1.3
Interest expense..................................... (3.2) -- (3.6) (0.1)
----- ----- ----- -----
Income (loss) before income taxes and minority
interest................................... 25.7 22.7 (41.6) 21.4
Income taxes......................................... 10.3 8.4 7.4 7.8
----- ----- ----- -----
Income (loss) before minority interests....... 15.4 14.3 (49.0) 13.6
Minority interests in earnings of subsidiary......... 1.8 -- 1.8 --
----- ----- ----- -----
Net income (loss)............................. 13.6% 14.3% 50.8% 13.6%
===== ===== ===== =====
OTHER DATA:
Gross margin (before special charges)
Products........................................... 46.5% 40.7% 44.1% 38.4%
Services........................................... 19.4 12.4 34.2 13.5
</TABLE>

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997

Sales. Total sales increased $23.5 million, or 97.8%, to $47.5 million in
the second quarter of 1998 from $24.0 million in the second quarter of 1997. The
percentage of product sales to total sales increased to 87.6% in the second
quarter of 1998 from 81.0% in the second quarter of 1997.

Product sales increased $22.2 million, or 113.9%, to $41.6 million in the
second quarter of 1998 from $19.4 million in the second quarter of 1997. The
increase related to sales generated by ATI and NACT which

87
<PAGE> 99

were acquired effective February 1, 1998 and March 1, 1998, respectively, and
increases in sales of World Access' international switching product, the CDX,
and it's WX-5501 line card.

Service revenues increased $1.3 million, or 29.2%, to $5.9 million in the
second quarter of 1998 from $4.6 million in the second quarter of 1997. The
increase related to additional revenues attributable to the Galaxy acquisition,
which was acquired effective July 1, 1997. This increase was offset by a decline
in electronic manufacturing revenues resulting from a strategic decision to
begin utilizing World Access' manufacturing capacity for new World Access
products rather than service outside contract manufacturing customers.

Gross Profit. Gross profit increased $12.0 million, or 141.7%, to $20.5
million in the second quarter of 1998 from $8.5 million in the second quarter of
1997. Gross profit margin increased to 43.2% in the second quarter of 1998 from
35.3% in the second quarter of 1997. The improved performance resulted from
economies of scale associated with the 97.8% increase in total sales and the
change in sales mix to products, which generally carry a higher gross profit
margin than service revenues.

Gross profit margin on products sold increased to 46.5% in the second
quarter of 1998 from 40.7% in the second quarter of 1997. The improved margins
related to the NACT and ATI sales of proprietary equipment and systems and the
increase in sales of CDX equipment, all of which generally carry margins in
excess of 45%. World Access' refurbished switching products experienced declines
in gross margin during the second quarter of 1998 primarily related to margin
pressure on sales of Northern Telecom add-on frames and related circuit boards.

Gross profit margin on service revenues increased to 19.4% in the second
quarter of 1998 from 12.4% in the second quarter of 1997. The improvement was
due to the addition of revenues from Galaxy.

Engineering and Development. Engineering and development expenses
increased $1.4 million, or 318.5%, to $1.8 million in the second quarter of 1998
from $429,000 in the second quarter of 1997. The increase in expenses was
attributable to the acquisitions of NACT and ATI and the continued expansion of
World Access' development group during 1998. Total engineering and development
expenses increased to 3.8% of total sales in the second quarter of 1998 from
1.8% of total sales in the second quarter of 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.3 million, or 92.2%, to $4.7 million in the
second quarter of 1998 from $2.4 million in the second quarter of 1997. The
increase related primarily to expenses associated with the operations of NACT,
ATI and Galaxy, which were acquired subsequent to the second quarter of 1997. As
a percentage of total sales, selling, general and administrative expenses
decreased to 9.9% in the second quarter of 1998 from 10.1% in the second quarter
of 1997.

Amortization of Goodwill. Amortization of goodwill increased $638,000 to
$1.0 million in the second quarter of 1998 from $380,000 in the second quarter
of 1997, as a result of the goodwill acquired in connection with the NACT, ATI,
and Galaxy acquisitions and additional goodwill recorded related to earnout
performances for the CIS, AIT and Galaxy acquisitions.

AIT, CIS, Galaxy, ATI and NACT (collectively representing approximately 95%
of the net goodwill of World Access) are all operating at profitability levels
in excess of management's expectations and the related risk of impairment in the
foreseeable future is believed to be low. Westec and Sunrise are operating below
management's expectations and may have difficulty achieving future sales growth.
Although management believes there has been no permanent impairment in the value
of the Westec and Sunrise goodwill to date, management will continue to monitor
closely the value of Westec and Sunrise goodwill throughout 1998 and 1999.

Operating Income. Operating income increased $7.8 million, or 148.3%, to
$13.0 million in the second quarter of 1998 from $5.2 million in the second
quarter of 1997. Operating income margin increased to 27.4% in the second
quarter of 1998 from 21.8% in the second quarter of 1997.

Interest and Other Income. Interest and other income increased $476,000,
or 211.6%, to $701,000 in the second quarter of 1998 from $225,000 in the second
quarter of 1997 due to increased invested cash balances of

88
<PAGE> 100

World Access, resulting primarily from proceeds received from a $115.0 million
convertible note offering completed in October 1997.

Interest Expense. Interest expense increased to $1.5 million in the second
quarter of 1998 from $24,000 in the second quarter of 1997. The increase is due
to the $115.0 million convertible note offering.

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

Sales. Total sales increased $38.9 million, or 88.0%, to $83.2 million in
the first six months of 1998 from $44.3 million in the first six months of 1997.
The percentage of product sales to total sales increased to 83.9% in the first
six months of 1998 from 78.9% in the first six months of 1997.

Product sales increased $34.9 million, or 100.0%, to $69.8 million in the
first six months of 1998 from $34.9 million in the first six months of 1997. The
increase related to sales generated by ATI and NACT which were acquired
effective February 1, 1998 and March 1, 1998, respectively, and increases in
sales of World Access' international switching product, the CDX, and it's
WX-5501 line card.

Service revenues increased $4.0 million, or 43.3%, to $13.4 million in the
first six months of 1998 from $9.4 million in the first six months of 1997. The
increase related to additional revenues attributable to the Galaxy acquisition.
This increase was offset by a decline in electronic manufacturing revenues
resulting from a strategic decision to begin utilizing World Access'
manufacturing capacity for new World Access products rather than service outside
contract manufacturing customers and in World Access' circuit board repair
business.

Gross Profit. Gross profit increased $17.3 million, or 118.2%, to $32.0
million in the first six months of 1998 from $14.7 million in the first six
months of 1997. Gross profit margin increased to 38.5% in the first six months
of 1998 from 33.2% in the first six months of 1997. The improved performance
resulted from the 88.0% increase in total sales and the change in sales mix to
products, which generally carry a higher gross profit margin than service
revenues.

Gross profit margin on products sold increased to 44.1% in the first six
months of 1998 from 38.4% in the first six months of 1997. The improved margins
related to the NACT and ATI sales of proprietary equipment and systems and the
increase in sales of CDX equipment, all of which generally carry margins in
excess of 45%. World Access' refurbished switching products experienced declines
in gross margin during the first six months of 1998 primarily related to margin
pressure on sales of Northern Telecom add-on frames and related circuit boards.

Gross profit margin on service revenues was 9.1% in the first six months of
1998 as compared to 13.5% in the first six months of 1997. Gross profit margin
excluding the special charge was 34.2% in the first six months of 1998. The
improvement was due to the addition of revenues from Galaxy, which was acquired
effective July 1, 1997.

Engineering and Development. Engineering and development expenses
increased $1.8 million, or 246.6%, to $2.6 million in the first six months of
1998 from $745,000 in the first six months of 1997. The increase in engineering
and development expenses was attributable to the acquisitions of NACT and ATI
and the continued expansion of World Access' development group during 1998.
Total engineering and development expenses increased to 3.1% of total sales in
the first six months of 1998 from 1.7% of total sales in the first six months of
1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.5 million, or 82.3%, to $7.9 million in the
first six months of 1998 from $4.4 million in the first six months of 1997. The
increase related primarily to expenses associated with the operations of NACT,
ATI and Galaxy, which were acquired subsequent to the second quarter of 1997. As
a percentage of total sales, selling, general and administrative expenses
decreased to 9.6% in the first six months of 1998 from 9.8% in the first six
months of 1997.

Amortization of Goodwill. Amortization of goodwill increased $1.4 million
to $2.0 million in the first six months of 1998 from $592,000 in the first six
months of 1997, as a result of the goodwill acquired in
89
<PAGE> 101

connection with the NACT, ATI, and Galaxy acquisitions and additional goodwill
recorded related to earnout performances for the CIS, AIT and Galaxy
acquisitions.

Operating Income Before Special Charges. Operating income before special
charges increased $14.1 million to $23.0 million in the first six months of 1998
from $8.9 million in the first six months of 1997. Operating income margin
before special charges increased to 27.6% in the first six months of 1998 from
20.2% in the first six months of 1997.

Interest and Other Income. Interest and other income increased $1.4
million, or 232.7%, to $2.0 million in the first six months of 1998 from
$592,000 in the first six months of 1997 due to increased invested cash balances
of World Access, resulting primarily from proceeds received from a $115.0
million convertible note offering completed in October 1997.

Interest Expense. Interest expense increased to $3.0 million in the first
six months of 1998 from $53,000 in the first six months of 1997. The increase is
due to the $115.0 million convertible note offering.

Purchased In-Process R&D

Special charges in the first quarter of 1998 included $50.0 million for
in-process research and development related to the first quarter 1998
acquisitions of a 67.3% interest in NACT and ATI. Purchased in-process research
and development, which consists of the value of NACT and ATI products in the
development stage that are not considered to have reached technological
feasibility, were expensed in accordance with applicable accounting rules. World
Access expects to record an additional in-process research and development
charge of approximately $22.0 million in the fourth quarter of 1998 in
connection with the acquisition of the remaining 32.7% of NACT.

The Income Approach was utilized to value the acquired research and
development technologies in the NACT Acquisition. The Income Approach values
technologies by projecting the potential cash flows related to those
technologies and discounting the cash flows to their present values using a
discount rate reflective of the risk of achieving the cash flows. The projected
cash flows include estimates of the remaining costs to complete the in-process
technologies.

NACT provides advanced telecommunications switching platforms with
integrated applications software and network telemanagement capabilities. NACT
designs, develops, and manufacturers all hardware and software elements
necessary for a fully integrated, turnkey telecommunications switching solution.
The nature of the in-process research and development was such that
technological feasibility had not been attained as of the date of acquisition.
Failure to attain technological feasibility, especially given the high degree of
customization required for complete integration into the NACT solution, would
have rendered partially designed hardware and software useless for other
applications. Incomplete design of hardware and software coding would create a
non-connective, inoperable product that would have no alternative use.

NACT had nine principal projects in the development pipeline at the time of
acquisition. Most major projects had several ongoing sub-projects (e.g., a
hardware design project and a software design project). These projects included
significant redevelopment of some existing products and the creation of new
products. The research and development projects were at various stages of
development. Most new or redeveloped products were scheduled for release in
1998, while several others were scheduled for release in 1999. None of the
in-process projects considered in the write-off had attained technological
feasibility.

For all in-process technologies, management estimated remaining costs to
complete. These estimates were $3.3 million for 1998, and $1 million for 1999.
The expected sources of funding were scheduled research and development expenses
from the operating budget of NACT provided by the operating assets and
liabilities of NACT.

90
<PAGE> 102

The Income Approach was also used to value the acquired research and
development technologies in the ATI acquisition.

ATI develops and manufactures a series of high-performance digital
microwave/millimeter radio equipment. Their products reach across all frequency
bands and data rates and offer numerous features. The nature of the in-process
research and development was such that technological feasibility had not been
attained as of the date of acquisition. Failure to attain technological
feasibility would have rendered partially designed equipment useless for other
applications. ATI's products are designed for specific frequency bandwidths and,
as such, are highly customized to those bandwidths and the needs of customers
wishing to operate in them. Products only partially completed for certain
bandwidths cannot be used in other bandwidths.

At the time of acquisition, ATI's primary product lines were FSK+, Compact,
and QAM. ATI's management determined the following percentages of each product
line were in-process technologies:

<TABLE>
<S> <C>
FSK+: 15.0% of units in development
Compact: 95.0% of units in development
QAM: 100.0% of units in development
</TABLE>

For all in-process products, management estimated remaining costs to
complete to be $3.1 million for 1998, $7.2 million for 1999, $7.6 million for
2000, $5.1 million for 2001, and $1.1 million for 2002. The expected sources of
funding were scheduled R&D expenses from the operating budget of ATI provided by
the operating assets and liabilities of ATI.

Special Charges

In January 1998, World Access' senior management decided that the following
actions were necessary to streamline operations and position World Access to
service anticipated sales growth:

- Close down the existing Orlando, Florida manufacturing and repair
facility. Move the manufacturing of certain World Access products to the
company's Alpharetta, Georgia manufacturing facility.

- Exit the contract manufacturing business.

- Close down four Lakeland, Florida facilities and move AIT operations to a
new facility in Orlando, Florida. Repair operations would be integrated
with AIT in this new facility.

- Close down Westec's facility in Scottsdale, Arizona and integrate its
operations into ATI's facility in Wilmington, Massachusetts.

Shortly thereafter, senior management informed the operating management of
the applicable divisions. All Orlando and Lakeland employees were informed in
January and Westec employees were informed in February (subsequent to the
closing of the ATI acquisition).

Management carefully reviewed the provisions of EITF 94-3 in determining
which costs related to the above actions should be included in a first quarter
special charge. No costs were included in the charge that would derive future
economic benefit to World Access, e.g., relocation of existing employees,
recruiting and training of new employees and facility start-up costs. The
special charge consisted of:

<TABLE>
<S> <C>
Obsolete and redundant inventories........................ $3,360,000
Severance and termination benefits........................ 550,000
Idle facility costs....................................... 1,340,000
Idle equipment costs...................................... 1,350,000
----------
$6,600,000
==========
</TABLE>

91
<PAGE> 103

Severance and termination benefits were clearly communicated up front to
the approximately 60 employees who lost their jobs as a direct result of the
consolidations. Affected employees were notified shortly after the January and
February employee meetings. Benefits were determined consistent with World
Access' severance policy of one week of pay for each full year of service
(minimum of two weeks) and continued benefits through the month severance pay is
exhausted. Approximately 10 of these employees were involuntarily terminated in
February and March, approximately 40 employees were involuntarily terminated in
April and approximately 10 employees were involuntarily terminated in June. The
Orlando and Lakeland facilities were closed in April and the Scottsdale facility
was closed in June. The actual severance and termination benefit costs incurred
by World Access were not materially different from the $550,000 recorded in the
special charge.

The idle facility and equipment portion of the special charge included the
write-off of "old Orlando", Lakeland and Scottsdale leasehold improvements,
provisions for the estimated costs to terminate idle facility and equipment
leases, the write-off of Orlando manufacturing equipment not relocated to the
company's Alpharetta facility and certain phase-down expenses associated with
the six facilities closed down. As of the date of this Joint Proxy
Statement/Prospectus, World Access does not expect the actual costs for these
items to be materially different from amounts recorded in the special charge.

As previously noted, all activities that resulted in the first quarter
special charge were completed by World Access as of June 30, 1998. Of the
$3,240,000 special charge, approximately $1.4 million related to assets directly
written-off of amounts charged to the reserve in the first quarter. As of June
30, 1998, the accrual for special charges was approximately $600,000, which
consisted primarily of lease termination losses expected to be incurred.

Liquidity and Capital Resources

Overview. Cash management is a key element of World Access' operating
philosophy and strategic plans. Acquisitions to date have been structured to
minimize the cash element of the purchase price and ensure that appropriate
levels of cash are available to support the increased product development,
marketing programs and working capital normally associated with the growth
initiatives of acquired businesses. As of June 30, 1998, World Access had $61.2
million of cash and investments and $5.7 million in borrowings available under
its credit line to support its current working capital requirements and
strategic growth initiatives.

Operating Activities. Cash provided from operating activities was $3.0
million in the first six months of 1998 as compared to cash used by operations
of $2.6 million in the first six months of 1997.

Accounts receivable increased $21.5 million, or 106.4%, to $41.8 million at
June 30, 1998 from $20.3 million at December 31, 1997. This was due to the
acquisitions of NACT, ATI and Galaxy and increased sales activity at World
Access (second quarter 1998 sales were $47.5 million as compared to fourth
quarter 1997 sales of $21.3 million). Average days sales outstanding at June 30,
1998, March 31, 1998 and December 31, 1997 were approximately 80 days, 90 days
and 81 days, respectively. World Access' transition into equipment sales has
caused an increase in days sales outstanding. World Access' equipment sales tend
to include longer payment terms than the historical repair and refurbishment
businesses. In addition, World Access' sales to international customers have
increased during the last twelve months. International sales generally have
payment terms of 90 to 120 days. World Access also has recently begun to enter
into long-term notes receivable with selected customers. To maximize cash flow,
World Access sells the notes where possible on either a non-recourse or recourse
basis to a third party financing institution.

Inventories increased $12.1 million, or 53.7%, to $34.5 million at June 30,
1998 from $22.4 million at December 31, 1997. This increase was due to the
acquisitions of NACT and ATI, a planned build-up of CDX switching and WX-5501
inventories related to the closure of World Access' Orlando manufacturing
facility and an increase in AIT and CIS inventories to support future orders.
The increases above were offset by the $3.4 million provision for obsolete and
redundant inventories related to the consolidation program initiated in the
first quarter of 1998 (see "Special Charges").

92
<PAGE> 104

Investing Activities. Cash used by investing activities, primarily for the
acquisitions of businesses, was $69.8 million and $4.6 million for the first six
months of 1998 and 1997, respectively.

On December 31, 1997, World Access entered into a stock purchase agreement
with GST and GST USA to acquire 5,113,712 shares of NACT common stock owned by
GST USA, Inc. ("GST USA"), representing approximately 63% of the outstanding
shares of NACT common stock (the "NACT Stock Acquisition"). On February 27,
1998, the NACT Stock Acquisition was completed with GST USA receiving $59.7
million in cash and 1,429,907 restricted shares of World Access Common Stock.
These shares had an initial fair value of approximately $26.9 million. This
transaction increased World Access' ownership of NACT to 67.3%.

On February 24, 1998 World Access entered into a merger agreement with NACT
pursuant to which World Access agreed to acquire all of the shares of NACT
common stock not already then owned by World Access or GST USA. Pursuant to the
terms of the merger agreement, each share of NACT common stock was converted
into 1.0469 shares of World Access Common Stock. This merger was consummated on
October 28, 1998.

On December 24, 1997, World Access entered into an agreement to acquire
ATI. On January 29, 1998, the transaction was completed in its final form
whereby ATI was merged with and into CIS (the "ATI Merger"). In connection with
the ATI Merger, the stockholders of ATI received approximately $300,000 and
424,932 restricted shares of World Access Common Stock. These shares had an
initial fair value of approximately $6.5 million.

In addition to the 424,932 shares noted above, the stockholders of ATI were
issued 209,050 restricted shares of World Access Common Stock. These shares were
immediately placed into escrow and will be released to the stockholders of ATI
contingent upon the realization of predefined levels of pre-tax net income from
ATI's operations during calendar years 1998 and 1999.

In December 1997, World Access loaned ATI approximately $4.5 million. ATI
used $2.6 million of the proceeds to pay off its line of credit with a bank and
the remainder for working capital purposes. The note receivable from ATI is
included in Other assets on World Access' December 31, 1997 balance sheet.
During the first quarter of 1998, the note receivable was included in World
Access' purchase price of ATI.

During the first six months of 1998 and 1997, World Access invested $5.9
million and $1.1 million, respectively, in capital expenditures. World Access
has invested approximately $3.7 million during 1998 related to the establishment
of the new manufacturing facility in Alpharetta, Georgia. The remaining
expenditures during 1998 were primarily for computer network and related
communications equipment designed to upgrade World Access' management
information systems and facilitate the integration of acquisitions, and facility
improvements required in connection with World Access' growth.

World Access began capitalizing software development costs in the fourth
quarter of 1997. Software development costs are capitalized upon the
establishment of technological feasibility of the product. During the first six
months of 1998, World Access capitalized approximately $1.8 million of software
development costs.

Financing Activities. Cash provided from financing activities was $6.4
million and $5.4 million for the first six months of 1998 and 1997,
respectively.

On October 1, 1997, Old World Access sold $100.0 million in aggregate
principal amount of Notes under Rule 144A of the Securities Act of 1933. The
Notes bear interest at the rate of 4.5% per annum, are convertible into World
Access Common Stock at an initial price of $37.03 per share and mature on
October 1, 2002. Interest on the Notes is payable on April 1 and October 1 of
each year, commencing on April 1, 1998. The Notes are general unsecured
obligations of Old World Access and are subordinate in right of payment to all
existing and senior indebtedness. The Notes have been guaranteed by World
Access. The Company received $97.0 million from the sale of the Notes, after the
initial purchasers' discount fees of $3.0 million.

In addition to the Notes sold on October 1, 1997, World Access granted the
initial purchasers an option to purchase up to an additional $15.0 million in
Notes to cover over-allotments. On October 28, 1997, the

93
<PAGE> 105

initial purchasers exercised the over-allotment option in full and World Access
received an additional $14.6 million, after the application of the initial
purchasers' discount fees.

The total discount fees of $3,450,000, along with approximately $550,000 of
legal, accounting, printing and other expenses (the "Debt issuance costs") are
being amortized to expense over the five year term of the Notes. Debt issuance
costs of approximately $3.4 million, net of amortization, are included in Other
assets on World Access' June 30, 1998 balance sheet.

As of June 30, 1998, World Access had borrowings of $4.3 million
outstanding under its $10.0 million revolving line of credit. Borrowings under
World Access' line of credit are secured by a first lien on substantially all
the assets of World Access. The bank agreement, which expires in March 2001,
contains standard lending covenants, including financial ratios, restrictions on
dividends and limitations on additional debt and the disposition of company
assets. Interest is paid at the rate of prime plus 1 1/4% or LIBOR plus 2 1/2%,
at the option of World Access. As of the date hereof, there were no amounts
outstanding under World Access' line of credit.

During the first six months of 1998 and 1997, World Access received
approximately $7.3 million and $2.6 million, respectively, in cash, including
related federal income tax benefits, from the exercises of incentive and
non-qualified stock options and warrants by World Access' directors and
employees.

Income Taxes. As a result of the exercises of non-qualified stock options
and warrants by World Access' directors and employees, World Access has realized
a federal income tax benefit of approximately $4.2 million for the first six
months of 1998. Although this tax benefit does not have any effect on World
Access' provision for income tax expense, it represents a significant cash
benefit to World Access. This tax benefit is accounted for as a decrease in
current income taxes payable and an increase in capital in excess of par value.

Summary. World Access' improved operating performance and completion of
the sale of $115.0 million of Notes in 1997 has significantly enhanced its
financial strength and improved its liquidity. World Access believes that
existing cash balances, available borrowings under World Access' line of credit
and cash projected to be generated from operations will provide World Access
with sufficient capital resources to support its current working capital
requirements and business plans for at least the next 12 months.

94
<PAGE> 106

Quarterly Operating Results

The following table presents unaudited quarterly operating results for each
of World Access' last ten quarters. This information has been prepared by World
Access on a basis consistent with World Access' audited consolidated financial
statements and includes all adjustments, consisting only of normal recurring
accruals, that World Access considers necessary for a fair presentation in
accordance with GAAP. Such quarterly results are not necessarily indicative of
future operating results. This information should be read in conjunction with
World Access' consolidated financial statements and notes thereto included
elsewhere herein.

The following includes the results of operations for businesses acquired
from their respective dates of acquisition as follows: CIS as of January 1, 1997
and Galaxy as of July 1, 1997. Net income per share is presented on a diluted
basis.

World Access' quarterly operating results have fluctuated significantly in
the past. As World Access increases its number of telecommunications product
offerings, its future quarterly operating results may vary significantly
depending on factors such as the timing and shipment of significant orders, new
product offerings by World Access and its competitors, market acceptance of new
and enhanced versions of World Access' products, changes in pricing policies by
World Access and its competitors, the availability of new technologies, the mix
of distribution channels through which World Access' product are sold, the
inability to obtain sufficient supplies of sole or limited source components for
World Access' products, gains or losses of significant customers, the timing of
customers' upgrade and expansion programs, changes in the level of operating
expenses, the timing of acquisitions, seasonality and general economic
conditions.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
--------- -------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Sales of products........ $ 8,354 $ 7,682 $ 8,125 $10,250 $15,470 $19,444
Service revenues......... 4,039 3,881 4,294 4,375 4,781 4,572
------- ------- ------- ------- ------- -------
Total sales...... 12,393 11,563 12,419 14,625 20,251 24,016
Cost of products sold.... 6,215 4,597 4,810 5,863 9,970 11,525
Cost of services......... 3,403 3,541 3,591 3,985 4,083 4,006
------- ------- ------- ------- ------- -------
Total cost of
sales.......... 9,618 8,138 8,401 9,848 14,053 15,531
------- ------- ------- ------- ------- -------
Gross profit..... 2,775 3,425 4,018 4,777 6,198 8,485
Engineering and
development............ 177 193 243 280 316 429
Selling, general and
administrative......... 1,277 1,430 1,679 1,824 1,918 2,435
Amortization of
goodwill............... 111 111 142 170 284 380
In process research and
development............ -- -- -- -- -- --
Special charges........ -- -- -- -- -- --
Operating income
(loss)............... 1,210 1,691 1,954 2,503 3,680 5,241
Interest and other
income................. 103 55 24 303 367 225
Interest expense......... (103) (104) (101) (11) (29) (24)
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes and
minority interests... 1,210 1,642 1,877 2,795 4,018 5,442
Income taxes............. -- 224 234 287 1,406 2,014
Income (loss) before
minority interests... 1,210 1,418 1,643 2,508 2,612 3,428
Minority interests in
earnings of
subsidiary............. -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net income
(loss)......... $ 1,210 $ 1,418 $ 1,643 $ 2,508 $ 2,612 $ 3,428
======= ======= ======= ======= ======= =======
Net income (loss)
per common
share.......... $ 0.09 $ 0.10 $ 0.12 $ 0.15 $ 0.15 $ 0.18
======= ======= ======= ======= ======= =======

<CAPTION>
QUARTER ENDED
-------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1997 1997 1998 1998
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales of products........ $21,185 $15,293 $ 28,229 $41,601
Service revenues......... 6,268 5,971 7,502 5,906
------- ------- -------- -------
Total sales...... 27,453 21,264 35,731 47,507
Cost of products sold.... 12,316 10,016 16,772 22,239
Cost of services......... 4,742 4,186 7,428 4,762
------- ------- -------- -------
Total cost of
sales.......... 17,058 14,202 24,200 27,001
------- ------- -------- -------
Gross profit..... 10,395 7,062 11,531 20,506
Engineering and
development............ 605 512 788 1,794
Selling, general and
administrative......... 2,508 2,139 3,256 4,680
Amortization of
goodwill............... 546 546 864 1,018
In process research and
development............ -- -- 50,000 --
Special charges........ -- -- 3,240 --
Operating income
(loss)............... 6,736 3,865 (46,617) 13,014
Interest and other
income................. 227 1,688 1,269 701
Interest expense......... (26) (1,280) (1,515) (1,515)
------- ------- -------- -------
Income (loss) before
income taxes and
minority interests... 6,937 4,273 (46,863) 12,200
Income taxes............. 2,566 1,550 1,255 4,880
Income (loss) before
minority interests... 4,371 2,723 (48,118) 7,320
Minority interests in
earnings of
subsidiary............. -- -- 683 849
------- ------- -------- -------
Net income
(loss)......... $ 4,371 $ 2,723 $ 48,801 $ 6,471
======= ======= ======== =======
Net income (loss)
per common
share.......... $ 0.22 $ 0.14 $ (2.52) $ 0.30
======= ======= ======== =======
</TABLE>

95
<PAGE> 107

The following table sets forth the above unaudited quarterly financial
information as a percentage of total sales:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of products......... 67.4% 66.4% 65.4% 70.1% 76.4% 81.0% 77.2% 71.9%
Service revenues.......... 32.6 33.6 34.6 29.9 23.6 19.0 22.8 28.1
----- ----- ----- ----- ----- ----- ----- -----
Total sales....... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of products sold..... 50.1 39.8 38.7 40.1 49.2 48.0 44.8 47.1
Cost of services.......... 27.5 30.6 29.0 27.2 20.2 16.7 17.3 19.7
----- ----- ----- ----- ----- ----- ----- -----
Total cost of
sales........... 77.6 70.4 67.7 67.3 69.4 64.7 62.1 66.8
----- ----- ----- ----- ----- ----- ----- -----
Gross profit...... 22.4 29.6 32.3 32.7 30.6 35.3 37.9 33.2
Engineering and
development............. 1.4 1.7 2.0 1.9 1.6 1.8 2.2 2.4
Selling, general and
administrative.......... 10.3 12.3 13.5 12.5 9.4 10.1 9.2 10.0
Amortization of
goodwill................ 0.9 1.0 1.1 1.2 1.4 1.6 2.0 2.6
In process research and
development............. -- -- -- -- -- -- -- --
Special charges........... -- -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Operating income
(loss).......... 9.8 14.6 15.7 17.1 18.2 21.8 24.5 18.2
Interest and other
income.................. 0.8 0.5 0.2 2.1 1.6 0.9 0.8 7.9
Interest expense.......... (0.8) (0.9) (0.8) (0.1) -- -- (0.1) (6.0)
----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before income
taxes and
minority
interests....... 9.8 14.2 15.1 19.1 19.8 22.7 25.2 20.1
Income taxes.............. -- 1.9 1.9 2.0 6.9 8.4 9.3 7.3
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
minority interests...... 9.8 12.3 13.2 17.1 12.9 14.3 15.9 12.8
Minority interests in
earnings of
subsidiary.............. -- -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss).......... 9.8% 12.3% 13.2% 17.1% 12.9% 14.3% 15.9% 12.8%
===== ===== ===== ===== ===== ===== ===== =====

<CAPTION>
QUARTER ENDED
--------------------
MARCH 31, JUNE 30,
1998 1998
--------- --------
<S> <C> <C>
Sales of products......... 79.0% 87.6%
Service revenues.......... 21.0 12.4
------ -----
Total sales....... 100.0 100.0
Cost of products sold..... 46.9 46.8
Cost of services.......... 20.8 10.0
------ -----
Total cost of
sales........... 67.7 56.8
------ -----
Gross profit...... 32.3 43.2
Engineering and
development............. 2.2 3.8
Selling, general and
administrative.......... 9.1 9.9
Amortization of
goodwill................ 2.4 2.1
In process research and
development............. 140.0 --
Special charges........... 9.1 --
------ -----
Operating income
(loss).......... (130.5) 27.4
Interest and other
income.................. 3.5 1.5
Interest expense.......... (4.2) (3.2)
------ -----
Income (loss)
before income
taxes and
minority
interests....... (131.2) 25.7
Income taxes.............. 3.5 10.3
------ -----
Income (loss) before
minority interests...... (134.7) 15.4
Minority interests in
earnings of
subsidiary.............. 1.9 1.8
------ -----
Net income
(loss).......... (136.6)% 13.6%
====== =====
</TABLE>

96
<PAGE> 108

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF NACT

Overview

NACT provides advanced telecommunications switching platforms with
integrated applications software and network telemanagement capabilities. During
the period from 1987 through 1989, NACT developed and began selling its LCX 120C
switch application product and NTS 1000 billing system. During the period from
1990 through 1995, NACT developed enhancements to the LCX, including T-1
capability, enhancement of its prepaid debit card services, automated operator,
international call back and call reorigination. During the same period, NACT
also developed the Master Control Unit. In May 1996, NACT completed development
of and began selling the STX, an integrated digital tandem switching system that
includes proprietary systems software that enables standard applications such as
1+ and optional advanced applications such as international call
back/reorigination, prepaid debit card and prepaid cellular.

NACT sells its products in the United States to enhanced telecommunications
network service providers through a direct sales force. During the fourth
quarter of fiscal 1997, NACT sold its first STX switching and NTS billing
systems outside the United States. NACT intends to continue to expand the
marketing of its products both domestically and internationally. Currently, NACT
also provides long distance network carrier service to facilities management
customers with operations primarily in Brazil and Eastern Europe.

In response to customer demand, in fiscal 1995, NACT began offering
facilities management and network carrier services. Facilities management
services enable a customer to concentrate on marketing its products while NACT
maintains such customer's switch(es) in NACT's facilities for a fee. Such
services can include network carrier usage in addition to the management of a
switch. NACT provides network carrier usage at competitively priced domestic and
international rates. Revenues associated with such facilities management
services, including network carrier usage, are presented in NACT's financial
statements as network carrier sales. The gross profit associated with such sales
are substantially lower than those associated with product sales. In addition,
given the small number of customers and the high volume of revenues generated
from an individual customer through network carrier sales, the loss or gain of
one or more customers could cause a significant fluctuation in NACT's quarterly
revenues.

In 1995, NACT formed Wins, Inc., a wholly-owned subsidiary ("Wins"), to
provide specialized long distance services (e.g., prepaid debit card and
international call back/reorigination) to potential switching system customers
who wanted to enter the specialized long distance service market before making a
major capital investment in switching equipment. NACT's financial statements for
the fiscal year ended September 30, 1995 include the accounts of NACT and Wins.
On September 30, 1995, NACT transferred ownership and operation of Wins to GST
USA in the form of a dividend accounted for at historical cost. From October 1,
1995 through September 30, 1996, NACT provided carrier services to GST USA for
the Wins operation. NACT ceased providing carrier services to Wins on September
30, 1996. Therefore, no revenue has been recognized by NACT from the Wins
operation after September 30, 1996.

GST USA acquired a 100% interest in NACT's common stock, $.01 par valve
(the "NACT Common Stock"), through a series of purchases of newly issued shares
and shares owned by former stockholders of NACT from September 1993 through
September 30, 1995. GST USA accounted for the acquisition using the purchase
method of accounting. The excess of the purchase price over the fair value of
the assets acquired was accounted for by GST USA as product support contracts,
software development costs, and goodwill. In accordance with the requirements of
the Commission, NACT's financial statements reflect these intangible assets on
its balance sheet, with related amortization recorded in cost of goods sold and
other operating expense in the respective years. Product support contracts and
software development costs are being amortized over a five-year straight-line
period and goodwill is being amortized over a 20-year straight-line period.

In the second quarter of fiscal 1997, NACT completed an initial public
offering of its common stock, pursuant to which NACT and its parent company, GST
Telecommunications, Inc. ("GST"), sold two million and one million shares,
respectively, of NACT Common Stock, resulting in net proceeds to NACT and GST of
approximately $18.1 million and $10.0 million, respectively. As a result of this
initial public offering, GST's interest in NACT was reduced to approximately
63%.

97
<PAGE> 109

On September 30, 1997, GST announced that it had retained Hambrecht & Quist
LLC to explore alternatives for monetizing its 63% interest in NACT, including a
potential sale of some or all of GST's shares of NACT's capital stock to one or
more strategic investors. On December 31, 1997, GST and GST USA entered into the
NACT Stock Purchase Agreement with World Access, and on February 27, 1998, World
Access purchased from GST USA all of the shares of NACT Common Stock held by GST
USA.

Fiscal 1997 Compared to Fiscal 1996

Results of Operations

Total Revenues. Revenues increased by 70.1% from $16.3 million in fiscal
1996 to $27.7 million in fiscal 1997. Product sales increased by 121.4% from
$9.9 million in fiscal 1996 to $22.0 million in fiscal 1997 primarily due to
sales of the STX switching systems, which NACT began selling in May 1996.
Network carrier sales increased by 51.1% from $3.8 million in fiscal 1996 to
$5.7 million in fiscal 1997 due to increased carrier usage volumes from existing
network carrier customers. NACT generated $2.6 million in revenues from sales of
network carrier usage to Wins in 1996. On October 1, 1996, NACT discontinued
providing network carrier usage to Wins.

Gross Profit

Product Sales. Gross profit on product sales increased 147.8% from $6.0
million in fiscal 1996 to $14.8 million in fiscal 1997 due to increases in sales
volumes and gross profit per unit from the sale of larger port capacity STX
switching systems. Gross profit on product sales as a percentage of product
sales increased from 60.3% in fiscal 1996 to 67.5% in fiscal 1997 primarily due
to sales of larger port capacity STX switching systems, which have higher gross
profit margins, in fiscal 1997 and due to lower margins on STX switching systems
in fiscal 1996 as a result of special pricing on its initial sales of STX
switching systems and the discounting of LCX systems prior to the release of the
STX system in May 1996.

Network Carrier Sales. Gross profit on network carrier sales decreased
42.6% from $0.4 million in fiscal 1996 to $0.2 million in fiscal 1997 due to a
decrease in the prices charged for international carrier traffic to NACT's
network carrier customers and due to the non-recognition of profit on network
carrier sales during the fourth quarter of fiscal 1997 to Overseas Telecom (a
network carrier customer).

Wins. In fiscal 1997, there were no sales to GST USA for the Wins
operations. In fiscal 1996, NACT provided network carrier services at cost to
GST USA for the Wins operations.

Overall. Gross profit increased 144.0% from $6.0 million in fiscal 1996 to
$14.7 million in fiscal 1997 primarily due to increases in sales volumes and
gross profit per unit from the sale of larger port capacity STX switching
systems. Gross profit as a percentage of net revenues increased from 37.0% in
fiscal 1996 to 53.1% in fiscal 1997 primarily due to sales of larger port
capacity STX switching systems, which have higher gross profit margins, in
fiscal 1997 and due to lower margins on STX switching systems in fiscal 1996 as
a result of special pricing on initial sales of STX switching systems and the
discounting of LCX systems prior to the release of the STX system in May 1996.

Research and Development. Research and development expenses increased by
76.4% from $1.4 million in fiscal 1996 to $2.4 million in fiscal 1997 primarily
due to the expansion of NACT's engineering staff and an increase in expenditures
for planning and implementation of several hardware and software research and
development projects designed to enhance the STX switching and NTS billing
systems. Capitalized software development costs were $0.4 million and $0.8
million in fiscal 1996 and 1997, respectively.

Selling and Marketing. Selling and marketing expenses increased by 162.7%
from $1.0 million in fiscal 1996 to $2.5 million in fiscal 1997 due to the
hiring of additional senior sales personnel, the opening of new domestic sales
offices, increased advertising and trade show expenditures, and increased
commissions paid to sales personnel as a result of the increase in NACT's
product sales.

General and Administrative. General and administrative expenses increased
14.8% from $3.0 million in fiscal 1996 to $3.5 million in fiscal 1997 primarily
due to the hiring of new personnel in NACT's technical

98
<PAGE> 110

support, training, finance, and administrative departments to support NACT's
increased sales, shipments, and installations of STX switching and NTS billing
systems. Also, in fiscal 1997, additional expenses were incurred by NACT as a
result of the construction of and move into the Company's new headquarters/
manufacturing facility on July 1, 1997.

Amortization of Acquired Intangibles. NACT has included amortization of
acquired intangibles as a component of both cost of sales and operating
expenses. These intangibles arose as a result of the acquisition of NACT by GST
USA. GST USA accounted for the acquisition using the purchase method of
accounting. The excess of the purchase price over the fair value of the assets
acquired was assigned by GST USA as product support contracts, software
development costs and goodwill and, in accordance with requirements of the
Commission, has been included in the balance sheet of NACT with related
amortization recorded in cost of goods sold and other operating expenses.
Product support contracts and software development costs are being amortized
over a five-year straight-line period and goodwill is being amortized over a
20-year straight-line period.

Other Income and Expense. Other income, net of $0.1 million in fiscal
1996, increased to $0.5 million in fiscal 1997 due to an increase in interest
income during fiscal 1997 resulting from investing the cash proceeds received
from the initial public offering completed in March of 1997.

Income Taxes. NACT recorded provisions for income taxes with effective
rates of 28.8% and 39.4% of income before taxes for fiscal 1996 and 1997,
respectively. The increase in the effective tax rate in 1997 is primarily a
result of increased profitability. Future effective tax rates are expected to be
in excess of statutory rates during the amortization period of the acquired
goodwill from GST USA because the goodwill is not deductible for tax purposes.

Fiscal 1996 Compared to Fiscal 1995

Results of Operations

Total Revenues. Revenues increased by 41.8% from $11.5 million in fiscal
1995 to $16.3 million in fiscal 1996. Product sales increased by 30.6% from $7.6
million in fiscal 1995 to $9.9 million in fiscal 1996 primarily due to the
introduction of NACT's new STX switching system in May 1996. Network carrier
sales increased by 36.0% from $2.8 million in fiscal 1995 to $3.8 million in
fiscal 1996 due to increased carrier usage volumes from existing network carrier
customers. Wins generated $1.1 million in revenues in fiscal 1995. Revenues
generated from Wins network carrier sales in fiscal 1996 were $2.6 million.

Gross Profit

Product Sales. Gross profit on product sales increased 20.8% from $5.0
million in fiscal 1995 to $6.0 million in fiscal 1996 due to an increase in
product sales resulting from the introduction of the STX in May 1996. Gross
profit on product sales as a percentage of product sales decreased from 65.2% in
fiscal 1995 to 60.3% in fiscal 1996 primarily due to lower margins resulting
from an emphasis on promoting the STX. Margins on initial STX sales were lower
due to special STX upgrade pricing provided to NACT's current customers through
June 1, 1996.

Network Carrier Sales. Gross profit on network carrier sales increased
from $0.1 million in fiscal 1995 to $0.4 million in fiscal 1996 due to increased
network carrier sales volume. Gross profit on network carrier sales as a
percentage of network carrier sales increased from 1.8% in fiscal 1995 to 10.6%
in fiscal 1996 due to increased volume discounts received from the underlying
carriers as a result of increased network carrier usage. NACT began its network
carrier operations in fiscal 1995.

Wins. Wins generated $0.3 million of gross profit in fiscal 1995 or 28.3%
of Wins sales. NACT transferred ownership and operations of Wins to GST USA on
October 1, 1995 and provided carrier services at cost to GST USA for the Wins
operations in fiscal 1996.

Overall. Gross profit increased 23.6% from $4.9 million in fiscal 1995 to
$6.0 million in fiscal 1996 due to an increase in both product and network
carrier sales volume. Gross profit as a percentage of net revenues

99
<PAGE> 111

decreased from 42.5% in fiscal 1995 to 37.0% in fiscal 1996 primarily due to
lower margins resulting from an emphasis on the STX switching system and lower
margins on initial sales of the STX switching systems.

Research and Development. Research and development expenses increased by
14.3% from $1.2 million in fiscal 1995 to $1.4 million in fiscal 1996 primarily
due to the move to more rapidly develop the STX switching system and to maintain
ongoing research and development of NACT's existing hardware and software
product lines. NACT's capitalized software development costs were $0.2 million
and $0.4 million in fiscal 1995 and 1996, respectively.

Selling and Marketing. Selling and marketing expenses increased 3.1% from
$0.9 million in fiscal 1995 to $1.0 million in fiscal 1996 primarily due to
continued expansion of NACT's sales and marketing staff. Fiscal 1996 selling and
marketing expenses were offset by the transfer of certain salary and fringe
benefit expenses to general and administrative when the Director of Sales and
Marketing was promoted to Executive Vice President and then to President and
Chief Executive Officer.

General and Administrative. General and administrative expenses increased
by 40.5% from $2.2 million in fiscal 1995 to $3.0 million in fiscal 1996
primarily due to an increase in the provision for bad debt, continued expansion
of the manufacturing and technical support departments, the expansion of the
finance department and implementation of a company-wide quality assurance
program. The increase in the provision for bad debt was a result of increased
sales volume and the addition of a $310,000 reserve for accounts receivable due
from Overseas Telecom (a network carrier customer), which was transferred to a
note receivable.

Income Taxes. NACT recorded provisions for income taxes with effective
rates of 71.9% and 28.8% of income before taxes for fiscal 1995 and 1996,
respectively. The decrease in the effective tax rate is a result of additional
amortization of goodwill, which is not deductible for income tax purposes.
Future effective tax rates are expected to be in excess of statutory rates
during the amortization period of the acquired goodwill from GST USA because the
goodwill is not deductible for tax purposes.

Three Months Ended December 31, 1997 Compared to Three Months Ended December 31,
1996

Results of Operations

Total Revenues. NACT's revenues increased 35.9% from $6.4 million for the
three months ended December 31, 1996 to $8.7 million in the equivalent 1997
quarter. Product sales, which include switching application systems, software
and factory support, increased 52.7% from $4.8 million for the three months
ended December 31, 1996 to $7.3 million in the equivalent 1997 quarter,
primarily due to sales of STX and NTS switching and billing systems into the
international market and sales of larger port capacity STX switches. Network
carrier sales decreased 13.9% from $1.6 million for the three months ended
December 31, 1996 to $1.4 million in the equivalent 1997 quarter primarily due
to decreased carrier usage volumes from existing network carrier customers.

Gross Profit

Product Sales. NACT's gross profit increased 65.1% from $3.0 million for
the three months ended December 31, 1996 to $5.0 million in the equivalent 1997
quarter due to an increase in product sales resulting from sales of the higher
margin, larger port capacity STX switches. Gross profit on product sales as a
percent of product sales was 63.8% and 70.4% for the three months ended December
31, 1996 and 1997, respectively.

Network Carrier Sales. NACT's gross profit decreased 100.0% from $52,000
for the three months ended December 31, 1996 to $0 in the equivalent 1997
quarter primarily due to a decrease in network carrier sales and higher carrier
usage costs from NACT's long distance carriers. Gross profit on network carrier
sales as a percent of network carrier sales was 3.2% and 0.0% for the three
months ended December 31, 1996 and 1997, respectively.

Research and Development. NACT's research and development expenses
increased 88.9% from $423,000 for the three months ended December 31, 1996 to
$799,000 in the equivalent 1997 quarter. The increase is primarily due to an
increase in personnel and other expenditures for completion of several hardware

100
<PAGE> 112

and software research and development projects designed to enhance the STX
switching platform and upgrade the NTS billing system to a new hardware and
software platform. Capitalized software development costs were approximately
$125,000 and $187,000 for the three months ended December 31, 1996 and 1997,
respectively.

Sales and Marketing. NACT's sales and marketing expenses increased 114.8%
from $357,000 for the three months ended December 31, 1996 to $767,000 in the
equivalent 1997 quarter primarily due to the hiring of additional sales
personnel, the opening of new domestic sales offices, increased advertising and
trade show expenditures, and increased commissions paid as a result of the
increase in product sales.

General and Administrative. NACT's general and administrative expenses
increased 62.9% from $836,000 for the three months ended December 31, 1996 to
$1,362,000 in the equivalent 1997 quarter primarily due to the hiring of new
finance, technical support, training and facilities management personnel to
support NACT's increased sales, shipments and installations of STX switching and
NTS billing systems, and the additional overhead expenses of NACT's new
headquarters/manufacturing facility which was completed on July 1, 1997.

Amortization of Acquired Intangibles. NACT has included amortization of
acquired intangibles as a component of both cost of sales and operating
expenses. These intangibles arose as a result of the acquisition of NACT by GST
USA through a series of purchases of newly issued shares and shares owned by
former stockholders of NACT. Such purchases occurred from September 1993 through
December 1994. GST USA accounted for the acquisition using the purchase method
of accounting. The excess of the purchase price over the fair value of the
assets acquired was assigned by GST USA as product support contracts, software
development costs and goodwill and, in accordance with requirements of the
Commission, has been included in the balance sheet of NACT with related
amortization recorded in cost of goods sold and other operating expenses.
Product support contracts and software development costs are being amortized
over a five year straight-line period and goodwill is being amortized over a 20
year straight-line period. In addition, NACT acquired the customer list of its
Eastern Europe network carrier customer in September 1997. This customer list
was recorded on NACT's books at the lower of fair market value or cost as an
intangible asset and is being amortized to cost of sales over a three year
period.

Income Taxes. NACT's effective tax rate for the three months ended
December 31, 1997 was 40.0%. This is higher than the respective statutory
federal and state tax rates due to amortization of goodwill. This higher
effective tax rate is expected to continue during the amortization period of the
acquired goodwill from GST USA.

Fluctuations in Quarterly Operating Results. Operating results have in the
past fluctuated and may in the future fluctuate due to factors such as the
timing of new product introductions by NACT and its competitors, delays in new
product introductions by NACT, market acceptance of new or enhanced versions of
NACT's products, changes in the product or customer mix, changes in the level of
operating expenses, competitive pricing pressures, the gain or loss of
significant customers, increased research and development and sales and
marketing expenses associated with new product introductions and economic
conditions in general and in NACT's industry. Due to the high unit price and
long lead times associated with revenues derived from equipment orders, NACT's
financial results may fluctuate significantly depending upon the time of the
actual shipment of such orders. All of the above factors are difficult for NACT
to forecast, and these or other factors can materially adversely affect NACT's
business, financial condition and results of operations for one quarter or a
series of quarters. NACT's expense levels are based in part on its expectations
regarding future sales and are fixed in the short term to a large extent.
Therefore, NACT may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in sales. Any significant decline in
demand relative to NACT's expectations or any material delay of customer orders
could have a material adverse effect on NACT's business, financial condition and
results of operations.

101
<PAGE> 113

Six Months Ended June 30, 1998 and 1997

Results of Operations

Total Revenues. NACT's revenues increased 44.3% from $7.2 million for the
three months ended June 30, 1997 to $10.4 million in the equivalent 1998
quarter. Product sales, which includes switching application and billing
systems, software, consulting, and factory support, increased 68.7% from $5.7
million for the three months ended June 30, 1997 to $9.7 million in the
equivalent 1998 quarter primarily due to sales of larger port capacity STX
switches and NTS billing systems to new and existing customers and STX
application system upgrades to existing customers. Network carrier sales
decreased 51.2% from $1.5 million for the three months ended June 30, 1997 to
$0.7 million in the equivalent 1998 quarter primarily due to one customer moving
a substantial portion of network carrier traffic to another carrier.

NACT's revenues increased 44.0% from $13.5 million for the six months ended
June 30, 1997 to $19.4 million in the equivalent 1998 period. Product sales,
which includes switching application and billing systems, software, consulting,
and factory support, increased 57.3% from $10.8 million for the six months ended
June 30, 1997 to $17.0 million in the equivalent 1998 period. The increase
results primarily from sales of larger port capacity STX switches and NTS
billing systems to new and existing customers and STX application system
upgrades to existing customers. Network carrier sales decreased 9.7% from $2.7
million for the six months ended June 30, 1997 to $2.4 million in the equivalent
1998 period primarily due to one customer moving a substantial portion of
network carrier traffic to another carrier.

Gross Profit

Product Sales. NACT's gross profit increased 61.8% from $4.3 million for
the three months ended June 30, 1997 to $6.9 million in the equivalent 1998
quarter due to an increase in product sales resulting from sales of the higher
margin, larger port capacity STX switches and lower manufacturing costs per
unit. Gross profit on product sales as a percent of product sales was 74.6% and
72.1% for the three months ended June 30, 1997 and 1998, respectively.

NACT's gross profit increased 56.3% from $7.5 million for the six months
ended June 30, 1997 to $11.8 million in the equivalent 1998 period due to an
increase in product sales resulting from sales of the higher margin, larger port
capacity STX switches and lower manufacturing costs per unit. Gross profit on
product sales as a percent of product sales was 70.1% and 69.8% for the six
months ended June 30, 1997 and 1998, respectively.

Network Carrier Sales. NACT's gross profit increased 20.5% from $78,000
for the three months ended June 30, 1997 to $94,000 in the equivalent 1998
quarter, primarily due to lower network carrier rates paid by NACT. Gross profit
on network carrier sales as a percent of network carrier sales was 5.3% and
13.1% for the three months ended June 30, 1997 and 1998, respectively.

NACT's gross profit increased 86.2% from $138,000 for the six months ended
June 30, 1997 to $257,000 in the equivalent 1998 period primarily due to lower
network carrier rates paid by NACT. Gross profit on network carrier sales as a
percent of network carrier sales was 5.1% and 10.6% for the six months ended
June 30, 1997 and 1998, respectively.

Research and Development. NACT's research and development expenses
increased 2.2% from $740,000 for the three months ended June 30, 1997 to
$756,000 in the equivalent 1998 quarter primarily due to an increase in
expenditures for planning, design, and completion of several hardware and
software research and development projects designed to enhance the STX switching
platform and introduce a new billing system. Capitalized software development
costs were $212,000 and $271,000 for the three months ended June 30, 1997 and
1998, respectively.

NACT's research and development expenses increased 10.3% from $1.4 million
for the six months ended June 30, 1997 to $1.5 million in the equivalent 1998
period primarily due to an increase in personnel and other expenditures for
planning, design, and completion of several hardware and software research and
development

102
<PAGE> 114

projects. Capitalized software development costs were $629,000 and $480,000 for
the six months ended June 30, 1997 and 1998, respectively.

Sales and Marketing. NACT's sales and marketing expenses increased 8.6%
from $824,000 for the three months ended June 30, 1997 to $895,000 in the
equivalent 1998 quarter primarily due to increased advertising and trade show
expenditures, and increased commissions paid as a result of the increase in
product sales.

NACT's sales and marketing expenses increased 25.1% from $1.4 million for
the six months ended June 30, 1997 to $1.7 million in the equivalent 1998 period
primarily due to the hiring of additional senior sales personnel, international
marketing and selling efforts, increased advertising and trade show
expenditures, and increased commissions paid as a result of the increase in
product sales.

General and Administrative. NACT's general and administrative expenses
increased 16.4% from $891,000 for the three months ended June 30, 1997 to
$1,037,000 in the equivalent 1998 quarter primarily due to increased legal
expenses related to the patent infringement lawsuit.

NACT's general and administrative expenses increased 40.6% from $1.6
million for the six months ended June 30, 1997 to $2.3 million in the equivalent
1998 period primarily due to increased legal expenses related to the patent
infringement lawsuit, accounting, and investment banking expenses related to the
NACT Stock Purchase Agreement and the NACT Merger Agreement.

Amortization of Acquired Intangibles. NACT has included amortization of
acquired intangibles as a component of both cost of sales and operating
expenses. These intangibles arose as a result of the acquisition of NACT by GST
USA through a series of purchases of newly issued shares and shares owned by
former stockholders of NACT. Such purchases occurred from September 1993 through
December 1994. GST USA accounted for the acquisition using the purchase method
of accounting. The excess of the purchase price over the fair value of the
assets acquired, was assigned by GST USA as product support contracts, software
development costs and goodwill. In accordance with requirements of the SEC,
these amounts have been included in the balance sheets of NACT with related
amortization recorded in cost of goods sold and other operating expenses.
Product support contracts and software development costs are being amortized
over a five year straight-line period. Goodwill is being amortized over a 20
year straight-line period. In addition, NACT acquired the customer list of its
Eastern Europe network carrier customer in September 1997. This customer list
was recorded on NACT's books at the lower of fair market value or cost as an
intangible asset, and is being amortized to cost of sales over a three-year
period.

Income Taxes. NACT's effective tax rate for the six months ended June 30,
1998 was 40.0%. This is higher than the respective statutory federal and state
tax rates due to amortization of goodwill. This higher effective tax rate is
expected to continue during the amortization period of the acquired goodwill
from GST USA.

Fluctuations in quarterly operating results. Operating results have in the
past and may in the future fluctuate due to factors such as the timing of new
product introductions by NACT and its competitors, delays in new product
introductions by NACT, market acceptance of new or enhanced versions of NACT's
products, changes in the product or customer mix, changes in the level of
operating expenses, competitive pricing pressures, the gain or loss of
significant customers, increased research and development and sales and
marketing expenses associated with new product introductions and economic
conditions in general and in NACT's industry. Due to the high unit price and
long lead times associated with revenues derived from equipment orders, NACT's
financial results may fluctuate significantly depending upon the time of the
actual shipment of such orders. All of the above factors are difficult for NACT
to forecast, and these or other factors can materially adversely affect NACT's
business,financial condition and results of operations for one quarter or a
series of quarters. NACT's expense levels are based in part on its expectations
regarding future sales and are fixed in the short term to a large extent.
Therefore, NACT may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in sales. Any significant decline in
demand relative to NACT's expectations or any material delay of customer orders
could have a material adverse effect on NACT's business, financial condition and
results of operations.

103
<PAGE> 115

Liquidity and Capital Resources

NACT currently finances its operations, and normal reoccurring capital
expenditures through cash flow from operations and its current cash and
short-term investment balances. For the six months ended June 30, 1998,
operating activities provided cash of $3.2 million.

As of June 30, 1998, NACT had cash, cash equivalents and marketable
securities totaling $14.8 million an increase of $2.3 million from December 31,
1997 primarily due to an increase in cash flow from operations.

NACT maintains an unsecured bank line of credit expiring in February 1999
that provides borrowings up to $1.0 million at the bank's prime rate plus one
point. There were no outstanding draws under the line of credit as of June 30,
1998.

NACT acts as a guarantor on financing of some customer transactions
executed under repurchase agreements with two financial institutions. In
accordance with the terms of one of the repurchase agreements, NACT maintains a
$6.0 million unrestricted cash balance. As of June 30, 1998, NACT was
contingently liable under these repurchase agreements for approximately $7.6
million.

NACT believes that the June 30, 1998 cash and marketable securities
balances, anticipated cash flows from operations and its line of credit will
satisfy NACT's working capital and capital expenditure requirements for at least
the next twelve months. However, there can be no assurance that NACT will not be
required to seek additional capital sooner or, if so required, that adequate
capital will be available on terms acceptable to NACT, or at all.

Year 2000

NACT currently sells the NTS 1000 billing system which will require
upgrading by the year 2000 due to its existing limitation of using only two
digits to identify the year in the date field. NACT is planning release of its
new billing system, the NTS 2000, by the first calendar quarter of 1999, which
overcomes the two digit limitation currently experienced on the NTS 1000.
Furthermore, NACT is in the process of modifying the NTS 1000 software to
overcome the two digit limitation. This modification of the NTS 1000 software is
anticipated to be completed by the first calendar quarter in 1999 at an
estimated cost of $115,000. NACT anticipates the majority of customers will
upgrade to the NTS 2000. No assurance can be made that any of NACT's customers
will upgrade to the NTS 2000 or that the modification to the NCT 1000 software
will be successful or competed on time. In the event that a significant number
of NACT's customers do not upgrade to the NTS 2000 or the NTS 1000 software
modification is not successful, NACT may incur expenses and potential loss of
ongoing service revenues.

In addition, NACT is in the process of evaluating its computer systems to
determine what modifications (if any) are necessary to make such systems
compatible with the year 2000 requirements. However, because many of NACT's
computer systems have been put into service within the last several years, NACT
does not expect any such modifications to have a material adverse effect on
NACT's financial position or results of operations. There can be no assurance,
however, that the computer systems of other companies on which NACT's systems
rely will be timely modified, or that a failure to modify such systems by
another company, or modifications that are incompatible with NACT's systems,
would not have a material adverse effect on NACT.

104
<PAGE> 116

DIRECTORS AND EXECUTIVE OFFICERS

Board of Directors of World Access

The World Access board of directors is divided into three classes. The
directors in each class serve staggered three-year terms expiring in 1998, 1999
and 2000, respectively. There is currently one vacancy in the class with the
term expiring in 1999.

Set forth below is certain information, as of October 31, 1998, concerning
each of the directors of World Access.

Directors whose terms expire in 1998

Stephen J. Clearman. Mr. Clearman (age 47) has served as a director of
World Access since 1988. Mr. Clearman co-founded Geocapital Partners. Since
1984, he has served as a general partner of four Geocapital venture capital
partnerships. Two of these partnerships (Geocapital Ventures and Geocapital II,
L.P.) were formerly principal stockholders of World Access. Mr. Clearman
currently serves as a director of Expert Software, Inc., MemberWorks
Incorporated, SeaMED Corporation and several private companies, all of which
principally provide computer software or information services.

Stephen E. Raville. Mr. Raville (age 50) has served as a director of World
Access since 1994. Mr. Raville has been Chairman of the Board and Chief
Executive Officer of Pointe Communications Corporation, an operator of
international communications networks, since October 1996. Mr. Raville is also
President and controlling shareholder of First Southeastern Corp., a private
investment company he formed in 1992. In 1983, Mr. Raville founded TA
Communications ("TA"), a long-distance telephone company, and served as its
President. In 1985, in conjunction with a merger between TA and Advanced
Telecommunications Corporation ("ATC"), he became Chairman and Chief Executive
Officer of ATC until the merger of ATC into WorldCom, Inc. ("WorldCom") in late
1992. He currently serves on the board of advisors of First Union National Bank
of Atlanta and the board of directors of Eltrax Systems, Inc. and several
private companies.

Director whose term expires in 1999

Hensley E. West. Mr. West (age 53) joined World Access in January 1996 as
President and Chief Operating Officer and was elected a director in January
1996. From January 1994 to December 1995, he was Group Vice President for the
Access Systems Group of DSC Communications Corporation ("DSC"), a manufacturer
of digital switching, transmission and access telecommunications equipment.
During his nine year tenure with DSC, he held six sales and general management
positions, including Senior Vice President of North American Sales from July
1993 to December 1993, Vice President of Access Products Division from March
1992 to July 1993, Vice President of RBOC Sales from October 1991 to March 1992
and Vice President of Business Development from March 1990 to October 1991.
Prior to joining DSC, Mr. West held general, engineering and sales management
positions with California Microwave, Inc., ITT Telecommunications, Inc. and
Western Electric Co.

Directors whose terms expire in 2000

Steven A. Odom. Mr. Odom (age 45) joined the board of directors of World
Access in October 1994. In November 1994, he was appointed to the newly created
position of Chairman of the Board. In August 1995, he became Chairman and Chief
Executive Officer of World Access. From 1983 to 1987, he founded and served as
Chairman and Chief Executive Officer of Data Contract Company, Inc. ("DCC"), a
designer and manufacturer of intelligent data PBX systems, pay telephones and
diagnostic equipment. From 1987 to 1990, he was Vice President for the Public
Communications Division of Execution Information Systems, Inc., a public company
that acquired DCC in 1987. Mr. Odom formerly served as a director for Telematic
Products, Inc., a manufacturer of telephone central office equipment, and
Resurgens Communications Group, Inc. ("Old Resurgens"), a provider of long
distance operator services that later merged with WorldCom.

John D. Phillips. Mr. Phillips (age 55) has served as a director of World
Access since 1994. In October 1997, Mr. Phillips was named Chairman and Chief
Executive Officer of Resurgens. He was President, Chief

105
<PAGE> 117

Executive Officer and a director of Metromedia International Group, Inc.
("Metromedia"), a global media, entertainment and communications company, from
November 1995 until December 1996. Metromedia was formed in November 1995
through the merger of The Actava Group, Inc. ("Actava"), Orion Pictures
Corporation, MCEG Sterling Incorporated and Metromedia International
Telecommunications, Inc. Mr. Phillips served as President, Chief Executive
Officer and a director of Actava from April 1994 until November 1995. In May
1989, he became Chief Executive Officer of Old Resurgens and served in this
capacity until September 1993 when Old Resurgens merged with Metromedia
Communications Corporation and WorldCom.

Executive Officers of World Access

Set forth below is certain information with respect to each person who is
an executive officer of World Access.

Steven A. Odom. Information regarding Mr. Odom is set forth above.

Hensley E. West. Information regarding Mr. West is set forth above.

Mark A. Gergel. Mr. Gergel (age 41) has served as Vice President and Chief
Financial Officer since he joined World Access in April 1992 and was appointed
Executive Vice President of World Access in January 1997. From 1983 to March
1992, Mr. Gergel held five positions of increasing responsibility with Federal-
Mogul Corporation, a publicly-held manufacturer and distributor of vehicle
parts, including International Accounting Manager, Assistant Corporate
Controller, Manager of Corporate Development and Director of Internal Audit.
Prior to joining Federal-Mogul, Mr. Gergel spent four years with the
international accounting firm of Ernst & Young. Mr. Gergel is a Certified Public
Accountant.

Scott N. Madigan. Mr. Madigan (age 41) joined World Access in March 1996
as Vice President of Business Development. Mr. Madigan spent the prior four
years with DSC as Vice President of Marketing for the Access System Group and
Vice President of Litespan International Operations and Wireless Access
Marketing. From 1987 to 1992, he held product and account management positions
with Northern Telecom, where he was responsible for identification, assessment
and development of new business opportunities for Northern Telecom's switching,
transport and access products. Prior to 1987, Mr. Madigan held engineering and
operations management positions with California Microwave, Inc. and ITT
Telecommunications, Inc.

Hatch Graham. Mr. Graham (age 38) joined World Access in April 1997 as
President of the Transport and Access Systems Group. From 1995 to 1997, Mr.
Graham held executive management positions with TCSI Corporation, a leading
provider of digital Code Division Multiple Access and Time Division Multiple
Access cellular and PCS products. From 1987 to 1995, Mr. Graham held various
product development and executive management positions with Stanford Telecom
Corporation, including Vice President of the ASIC and Custom Products Division
and Corporate Vice President and General Manager of the Telecom Products Group.
Prior to 1987, Mr. Graham held engineering management positions with American
Microsystems, Inc. and Zoran Corporation.

Proposed Changes to Management of World Access

It is anticipated that, upon consummation of the Resurgens Transaction, Mr.
Phillips and W. Tod Chmar will become senior executive officers of World Access
having such titles and duties as may be assigned to them by the board of
directors.

The Merger Agreement provides that the existing vacancy on the World Access
board of directors is to be filled upon consummation of the Merger by a person
mutually acceptable to the boards of directors of World Access and Telco
Systems.

106
<PAGE> 118

EXECUTIVE COMPENSATION

Compensation of Directors. Non-employee directors of World Access receive
no cash compensation from World Access for their service as directors. Their
compensation is in the form of stock warrants as discussed below. The directors
are reimbursed for out-of-pocket travel and related expenses incurred in
connection with their attendance at meetings of the board of directors or its
committees and at other company events to which they are invited.

In December 1994, in an effort to attract and retain experienced executives
to serve as outside directors for World Access, the board of directors adopted
the World Access, Inc. Outside Directors' Warrant Plan (the "Warrant Plan"). The
stockholders of World Access approved the Warrant Plan at the 1995 Annual
Meeting of Stockholders.

The purposes of the Warrant Plan are to attract and retain the best
available personnel for service as directors of World Access, to provide
additional incentive to the persons serving as directors of World Access, to
align director and stockholder long-term interests and to encourage continued
service on the board of directors. Warrants may be granted under the Warrant
Plan only to directors of World Access who are neither employees of World Access
nor of any of its affiliates. The aggregate number of shares of World Access
Common Stock authorized to be issued pursuant to the Warrant Plan is 1,200,000,
subject to adjustment in certain instances as described below. The Warrant Plan
provides that each eligible non-employee director elected to serve as a director
of World Access on or after October 1, 1994 may be granted, in the discretion of
the board of directors, warrants to purchase no more than 450,000 shares of
World Access Common stock in the aggregate. The initial exercise price of the
warrants will be not less than the fair market value of the Common Stock subject
to the warrant on the date of grant.

In December 1994, three new outside directors of World Access, Messrs.
O'Reilly, Phillips and Raville, each received warrants entitling him to purchase
150,000 shares of World Access Common Stock on or prior to December 15, 1999.
These warrants, now fully vested, are exercisable at a price of $1.50 per share
with respect to 50,000 shares, $2.25 per share with respect to 50,000 shares and
$4.00 per share with respect to 50,000 shares. At the time these warrants were
granted, the fair market value of the World Access Common Stock was $1.25 per
share. During 1997, Mr. O'Reilly and Mr. Phillips exercised 150,000 and 50,000
warrants, respectively, and Mr. Phillips donated 32,660 warrants to charitable
organizations. During 1998, Mr. Raville exercised 150,000 warrants.

Concurrent with the above initial grant, Mr. Clearman, the fourth outside
director of World Access, was awarded warrants to purchase 126,000 shares of
World Access Common Stock. The terms of this grant were identical to those
described above except the number of shares exercisable at the $1.50 exercise
price was set at 26,000 instead of 50,000. During 1997, Mr. Clearman exercised
all of these warrants.

In December 1994, the board of directors awarded Steven A. Odom, who joined
the board of directors in October 1994 and became Chairman in November 1994,
warrants under the Warrant Plan to purchase 450,000 shares of World Access
Common Stock. The warrants, now fully vested, entitle Mr. Odom to purchase
450,000 shares of World Access Common Stock on or prior to December 15, 1999 at
an exercise price of $1.50 per share with respect to 150,000 shares, $2.25 per
share with respect to 150,000 shares and $4.00 per share with respect to 150,000
shares. During 1997, Mr. Odom exercised 150,000 of these warrants. During 1998,
Mr. Odom exercised the remaining 300,000 warrants.

In December 1994, the board of directors also adopted the Directors'
Warrant Incentive Plan (the "Incentive Plan") pursuant to which the board of
directors may grant, beginning in February 1997, to each non-employee director
on an annual basis warrants to purchase up to 50,000 shares of World Access
Common Stock at an exercise price per share equal to no less than 110% of the
fair market value of the stock at the date of grant. No warrants may be granted
under the Incentive Plan in a given year unless World Access Common Stock has
appreciated by a compounded annual average rate of return in excess of 35% for
the four year period preceding the year of grant. The aggregate number of shares
of World Access Common Stock authorized to be issued pursuant to the Incentive
Plan is 600,000 subject to adjustment in certain instances as described below.

107
<PAGE> 119

Warrants granted under the Warrant Plan and the Incentive Plan become
exercisable in one or more installments, as the board of directors may
determine, six months and one day after the date of the grant and expire on the
fifth anniversary following the date of grant, provided that if the Director has
not attended at least 75% of the meetings of the board of directors for the year
in which an installment first becomes exercisable, then such installment may not
be exercised.

On March 26, 1997, the board of directors granted the four outside
Directors of World Access warrants to each purchase 50,000 shares of World
Access Common Stock with an exercise price of $9.21. These warrants became fully
vested and exercisable on December 31, 1997. During 1998, Mr. O'Reilly and Mr.
Raville each exercised 50,000 warrants.

On February 27, 1998, the board of directors granted the four outside
directors of World Access warrants to each purchase 50,000 shares of Common
Stock with an exercise price of $25.85. The warrants granted to Mr. O'Reilly
were forfeited upon his resignation. The remaining 150,000 warrants will be
exercisable on or after December 31, 1998 provided that the Director attends at
least 75% of the Board and Applicable Committee meetings held during 1998.

Notwithstanding the foregoing, the Warrant Plan and the Incentive Plan
provide that warrants awarded pursuant to these plans will become immediately
exercisable (i) if World Access is to be consolidated with or acquired by
another entity in a merger, (ii) upon the sale of substantially all of World
Access assets or the sale of at least 90% of the outstanding World Access Common
Stock to a third party, (iii) upon the merger or consolidation of World Access
with or into any other corporation or the merger or consolidation of any
corporation with or into World Access (in which consolidation or merger the
stockholders of World Access receive distributions of cash or securities as a
result thereof), or (iv) upon the liquidation or dissolution of World Access.
The Merger does not constitute a change of control for purposes of the Warrant
Plan or the Incentive Plan.

Compensation of Executive Officers

Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded or paid by World Access for services rendered
during each of the years in the three year period ended December 31, 1997 to its
Chief Executive Officer and other executive officers whose compensation exceeded
$100,000 ("Named Executives").

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS (1)-(5)
ANNUAL COMPENSATION -------------- ALL OTHER
------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS (#) ($)(6)-(8)
--------------------------- ---- --------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Steven A. Odom........................ 1997 $143,000 $165,000 424,000 $ 4,273
Chairman and Chief Executive Officer 1996 200,000 100,000 105,000 --
1995 -- -- 250,000 --
Hensley E. West....................... 1997 125,125 142,500 320,000 10,100
President and Chief Operating
Officer 1996 175,000 87,500 91,875 35,000
1995 -- -- 443,750 --
Mark A. Gergel........................ 1997 97,500 115,000 216,000 28,013
Executive Vice President and 1996 110,000 110,000 37,500 780
Chief Financial Officer 1995 90,000 35,000 74,000 495
Scott N. Madigan...................... 1997 96,000 57,500 35,000 1,638
Executive Vice President 1996 81,500 30,000 110,000 20,000
of Business Development 1995 -- -- -- --
Hatch Graham.......................... 1997 110,000 33,000 150,000 --
President, Transport and 1996 -- -- -- --
Access Systems Group 1995 -- -- -- --
</TABLE>

108
<PAGE> 120

- ---------------

(1) Long-Term Compensation Awards for 1997 include non-qualified stock options
granted in December 1997 from the World Access 1998 Incentive Equity Plan.
The securities underlying options for 1997 under this grant include: Mr.
Odom -- 400,000 shares; Mr. West -- 300,000 shares; and Mr.
Gergel -- 200,000 shares. These options, which are subject to stockholder
approval, vest 25% on each of the first four anniversaries from the date of
grant and are exercisable at $19.00 per share, the market price as of the
date of grant. The date the stockholders approve the 1998 Incentive Equity
Plan will become the measurement date for purposes of computing compensation
expense, if any. If the stock price as of the measurement date exceeds
$19.00, then the total compensation impact will be the difference between
the stock price at the measurement date and $19.00. World Access will record
that expense ratably over a period of four years.
In connection with voluntary salary reduction/incentive programs in 1996 and
1995, which were offered to all salaried employees of World Access, the
Named Executives elected to forego salary in exchange for options to
purchase shares of World Access Common Stock at the then current market
prices of $8.00 and $7.00 per share, respectively. The securities underlying
options for 1996 for this program include: Mr. Odom -- 55,000 shares; Mr.
West -- 48,125 shares; Mr. Gergel -- 37,500 shares; and Mr.
Madigan -- 10,000 shares. The securities underlying options for 1995 for
this program include: Mr. Odom -- 50,000 shares; Mr. West -- 43,750 shares;
Mr. Gergel -- 24,000 shares; and Mr. Madigan -- 10,000 shares. Stock options
issued in connection with these programs are now fully vested.
(2) Mr. Odom joined the World Access board of directors in October 1994 and was
elected Chairman in November 1994. He was appointed Chairman and Chief
Executive Officer in August 1995. Mr. Odom elected to not receive a salary
in 1995. In December 1995, he was awarded non-qualified stock options to
acquire 200,000 shares of World Access Common Stock at $7.00 per share, the
then current market price. These options vested 50% on each of the first two
anniversaries from the date of grant.
(3) Mr. West joined World Access in January 1996 as its new President and Chief
Operating Officer. In August 1995, in connection with his acceptance of the
World Access offer of employment, he was awarded non-qualified stock options
to acquire 400,000 shares of World Access Common Stock at $3.78 per share,
the then current market price. These options vest 25% on each of the first
four anniversaries from his effective date of employment.
(4) Mr. Madigan joined World Access in March 1996 as its new Vice President of
Business Development. He was awarded non-qualified stock options to acquire
80,000 shares of World Access Common Stock at $7.81 per share, the then
current market price. These options vest 25% on each of the first four
anniversaries from the date of grant.
(5) Mr. Graham joined World Access in March 1997 as its new President, Transport
and Access Systems Group. He was awarded non-qualified stock options to
acquire 150,000 shares of World Access Common Stock at $8.06 per share, the
then current market price. These options vest 25% on each of the first four
anniversaries from the date of grant.
(6) During 1997, Mr. Gergel was paid a flat sum allowance of $25,000 and during
1996, Mr. West and Mr. Madigan were paid flat sum allowances of $35,000 and
$20,000, respectively, for the relocation of their households to Atlanta,
Georgia.
(7) During 1997, Mr. West was paid $7,000 for life insurance benefits provided
to him by World Access.
(8) Except as noted above, All Other Compensation represents matching
contributions by World Access under its 401(k) Plan.

1997 Aggregate Option Exercises and Year-End Option Values. The following
table sets forth information concerning the value of director warrants and
employee options exercised by the Named Executives during 1997 and the value at
December 31, 1997 of unexercised warrants and options held by each such officer.
The value of unexercised warrants and options reflects the increase in market
value of World Access Common Stock from the date of grant through December 31,
1997, when the closing price was $23.88 per share.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY(2)
WARRANTS AND WARRANTS AND
NUMBER OF OPTIONS OPTIONS
SHARES AT 12-31-97 AT 12-31-97
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED (1) UNEXERCISABLE UNEXERCISABLE
---- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Steven A. Odom (3).............. 150,000 $3,816,000 679,000/400,000 $12,208,625/1,950,000
Hensley E. West................. 87,500 1,613,500 168,125/600,000 2,870,984/7,491,000
Mark A. Gergel.................. 60,250 1,331,069 128,875/223,875 2,021,297/1,442,047
Scott N. Madigan................ 17,500 279,170 25,000/102,500 398,680/1,343,238
Hatch Graham.................... -- -- --/150,000 --/2,372,250
</TABLE>

- ---------------

(1) The "value realized" represents the difference between the exercise price of
the shares and the market price of the shares on the date the warrants and
options were exercised. The value realized was determined without
considering any taxes which may have been owed.
(2) "In-the-Money" warrants and options have an exercise price less than $23.88
per share, the closing price of World Access Common Stock as of December 31,
1997.
(3) Includes securities underlying warrants issued to Mr. Odom pursuant to the
Warrant Plan.

109
<PAGE> 121

Stock Option Grant Table. The following table sets forth information
regarding the grant of stock options to the Named Executives during the year
ended December 31, 1997.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE($) AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
--------------------------------------------------------------- PRICE APPRECIATION FOR
% TOTAL EXERCISE OPTION TERM
NUMBER OF SECURITIES OPTIONS GRANTED PRICE PER -----------------------
UNDERLYING OPTIONS EMPLOYEES SHARE EXPIRATION 5% 10%
NAME GRANTED(1) IN FISCAL YEAR (2) DATE (3) (3)
---- -------------------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Odom....... 400,000 20.5% $19.00 12/29/02 $4,588,000 $7,780,000
24,000 1.2 19.00 12/29/02 275,280 466,800
Hensley E. West...... 300,000 15.3 19.00 12/29/02 3,441,000 5,835,000
20,000 1.0 19.00 12/29/02 229,400 389,000
Mark A. Gergel....... 200,000 10.2 19.00 12/29/02 2,294,000 3,890,000
16,000 0.8 19.00 12/29/02 183,520 311,200
Scott N. Madigan..... 25,000 1.3 19.00 12/29/02 286,750 486,250
10,000 0.5 9.75 04/30/02 207,200 287,000
Hatch Graham......... 150,000 7.7 8.06 03/26/02 3,361,500 4,558,500
</TABLE>

- ---------------

(1) Individual grants in 1997 include the following non-qualified stock options
issued in connection with the World Access 1998 Incentive Equity Plan: Mr.
Odom -- 400,000; Mr. West -- 300,000; and Mr. Gergel -- 200,000. See
"Summary Compensation Table, note (1)" for terms of these options granted.
The remainder of Mr. Odom's, Mr. West's and Mr. Gergel's options were
granted in December 1997 and vested immediately. Mr. Madigan's and Mr.
Graham's options vest at 25% each on the first four anniversaries from the
date of grant.
(2) The exercise price represents the fair market value of the shares at dates
of grant.
(3) The 5% and 10% appreciation rates are set forth in the Securities and
Exchange Commission rules and no representation is made that World Access
Common Stock will appreciate at these assumed rates or at all.

Severance Protection Agreements. World Access entered into a Severance
Protection Agreement with each of Messrs. Odom, West and Gergel (each an
"Executive") as of November 1, 1997 (the "Severance Agreements"). Each Severance
Agreement is effective for an initial term of two years and is automatically
renewed for additional consecutive one-year terms unless timely notice of
non-renewal is given by either World Access or the Executive. Generally, each
Severance Agreement provides that if the Executive's employment is terminated
within 12 months after a "change of control" (as defined in the Severance
Agreement) (i) by World Access other than for "cause" (as defined in the
Severance Agreement), or (ii) by the Executive for "good reason" (as defined in
the Severance Agreement), the Executive is entitled to a lump sum payment equal
to the sum of (a) accrued and unpaid salary, expenses, vacation pay and bonuses,
(b) two times the Executive's annual base salary and bonus and (c) the excess of
the actuarial equivalent of retirement benefits to which the Executive would be
entitled under World Access's supplemental and other retirement plans had the
Executive remained in the employ of World Access for an additional two years of
credited service over the actual actuarial equivalent benefits to which the
Executive is entitled under such plans. In addition, upon any such termination
World Access is obligated to continue, at its expense, for a 24 month period the
medical, disability and life insurance benefits enjoyed by the Executive prior
to termination, to provide the Executive with outplacement services, reasonable
office space and secretarial assistance, and the restrictions on outstanding
stock options and similar incentive awards lapse and such options and awards
become immediately vested and exercisable to the extent that they would have
been vested and exercisable within two years of the date of the Executive's
termination. Payments under the Severance Agreements are subject to limitations
to the extent they would be subject to an excise tax imposed under the Code or
would not be deductible by World Access.

World Access Compensation Committee Interlocks and Insider Participation in
Compensation Decisions. The World Access Compensation Committee is currently
comprised of Stephen J. Clearman. William P. O'Reilly was also a member of the
Compensation Committee until his resignation effective as of April 22, 1998.
There are no Compensation Committee Interlocks.

110
<PAGE> 122

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In October 1997, Mr. Phillips, a director of World Access, entered into a
series of agreements whereby, among other things, he became the new chairman and
chief executive officer of Resurgens. Resurgens was shortly thereafter placed
into bankruptcy under Chapter 11 of the United States Bankruptcy Code. WorldCom,
a major customer and vendor of Resurgens, subsequently agreed to provide
Resurgens up to $28 million in financing in the form of a debtor in possession
facility and other credits.

During the fourth quarter of 1997, World Access shipped switching equipment
to Resurgens. The cost of this equipment was approximately $3.8 million. On
February 12, 1998, World Access executed a letter of intent to acquire
Resurgens. The equipment shipped to Resurgens is included in World Access
inventory at December 31, 1997. During the second quarter of 1998, this
switching equipment was returned to World Access.

In April 1998, the Company purchased approximately $3.6 million of
switching equipment which has been consigned to Resurgens. Upon its acquisition
of Resurgens, the Company will account for this equipment as part of its
investment in Resurgens. If the acquisition is not consummated, the Company
expects to negotiate an arms-length sale of the equipment to Resurgens or
another customer. This equipment is included in Other assets on World Aceess'
June 30, 1998 balance sheet.

See "Summary -- The Merger -- Recent World Access Developments" for a
description of the Resurgens Transaction.

111
<PAGE> 123

PRINCIPAL STOCKHOLDERS OF WORLD ACCESS

World Access' only issued and outstanding class of voting securities is the
World Access Common Stock. At the close of business on November 2, 1998, there
were 25,675,253 shares of World Access Common Stock issued and outstanding.

The following table sets forth information as of November 2, 1998 regarding
the beneficial ownership of World Access Common Stock by (i) each person known
by World Access to beneficially own more than of 5% of the World Access Common
Stock, (ii) each director individually, (iii) each executive officer who would
be a "named executive officer" of World Access under Rule 402 of Regulation S-K
and (iv) all directors and executive officers as a group.

<TABLE>
<CAPTION>
SHARES UNDER
EXERCISABLE OPTIONS TOTAL SHARES PERCENTAGE
NAME SHARES OWNED(1) AND WARRANTS(2) BENEFICIALLY OWNED OWNED
- ---- --------------- ------------------- ------------------ ----------
<S> <C> <C> <C> <C>
FMR Corp.(3)......................... 2,327,945 -- 2,327,945 9.1%
Pilgrim Baxter & Associates,
Ltd.(4)............................ 1,843,640 -- 1,843,640 7.2
Hambrecht & Quist Group(5)........... 1,429,907 -- 1,429,907 5.5
Steven A. Odom+++(6)(7).............. 767,410 279,000 1,046,410 4.0
Stephen E. Raville+.................. 268,000 50,000 318,000 1.2
Hensley E. West+++(7)................ 215,321 143,125 358,446 1.4
Stephen J. Clearman+(8).............. 178,210 100,000 278,210 1.1
Mark A. Gergel++(7).................. 57,953 177,500 235,453 *
John D. Phillips+.................... -- 167,340 167,340 *
Scott N. Madigan++(7)................ 2,143 56,250 58,393 *
Hatch Graham++....................... -- -- -- *
All directors and executive officers
as a group(8 persons).............. 1,489,037 973,215 2,462,252 9.2
</TABLE>

- ---------------

* Less than one percent
+ Director
++ Executive Officer
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Exchange Act ("Rule 13d-3"). Unless otherwise noted, World Access
believes that all persons named in the table have sole voting and investment
power with respect to all shares of World Access Common Stock beneficially
owned by them.
(2) Includes shares which may be acquired by the exercise of stock options and
warrants granted by World Access and exercisable on or before January 1,
1999.
(3) Based upon its Schedule 13G filed May 10, 1988, Fidelity Management &
Research Company ("Fidelity"), 82 Devonshire Street, Boston, Massachusetts
02109, a wholly-owned subsidiary of FMR Corp. and an investment advisor
registered under section 203 of the Investment Advisers Act of 1940, as
amended, is the beneficial owner of shares of World Access Common Stock
listed above as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940, as amended. The amount listed above includes 641,345 shares of
World Access Common Stock issuable upon conversion of the 4.5% Convertible
Subordinated Notes of World Access held by Fidelity or its affiliates.
(4) Based upon its Schedule 13G filed on February 17, 1998, Pilgrim Baxter &
Associates, Ltd. ("Pilgrim Baxter") is an investment advisor registered
under Section 203 of the Investment Advisers Act of 1940, as amended. Its
principal place of business is 825 Duportail Road, Wayne, Pennsylvania
19087. Of the total shares of World Access Common Stock beneficially owned
by it, Pilgrim Baxter has sole power to vote or to direct the vote of only
1,601,340 shares of World Access Common Stock.

112
<PAGE> 124

(5) Based on its Schedule 13G filed on March 9, 1998, Hambrecht & Quist Group
("H&Q Group") may be deemed to own the shares of World Access Common Stock
owned by Hambrecht & Quist California ("H&Q California"), a wholly-owned
subsidiary of H&Q Group. H&Q Group's and H&Q California's principal place of
business is One Bush Street, San Francisco, California 94104.
(6) Includes 18,000 shares held in the aggregate by two minor children of Mr.
Odom.
(7) Includes the following number of shares acquired through voluntary employee
contributions to World Access' Profit Sharing and Retirement Savings Plan
(the "401(k) Plan") and contributed to the 401(k) Plan by World Access under
a matching contribution feature offered to substantially all employees of
World Access: Mr. Odom-800 shares; Mr. West-621 shares; Mr. Gergel-2,828;
and Mr. Madigan-143 shares.
(8) Includes an aggregate of 126,000 shares owned by Geocapital II, L.P. and
Geocapital Ventures, of which Mr. Clearman may be deemed a beneficial owner
under Rule 13d-3 because he has shared investment and voting power.

113
<PAGE> 125

TELCO SYSTEMS

BUSINESS

General. Telco Systems was incorporated in California on September 7, 1972,
and reincorporated in Delaware on December 17, 1986. Its principal office is
located at 63 Nahatan Street, Norwood, Massachusetts 02062 (telephone number is
(781) 551-0300). Telco Systems is a supplier of three major product lines,
focused on providing integrated access for network services: the broadband
transmission products, referred to as "Broadband"; the network access products,
referred to as "Access"; and the bandwidth optimization products, referred to as
"Bandwidth Optimization".

Telco Systems' products are deployed at the edge of the service providers'
networks to provide organizations with a flexible, cost-effective means of
transmitting voice, data and video traffic over public or private networks.
These products are used in a wide variety of applications by network service
providers, such as long distance carriers, RBOCs, independent and competitive
local exchange providers ("CLEC"), as well as government agencies, electric
utilities, wireless service operators, and major corporations. Its products,
which can be found most often in telephone company central offices and in
private communications networks, perform functions that range from basic
signaling and multiplexing of DS0 (64kbps) low speed data and voice traffic to
digital fiber optic transmission of high-speed, high-capacity services over
SONET OC-3 (155Mbps) networks.

In January 1983, Telco Systems acquired the fiber optics transmission
business from Raytheon Company, which evolved into the Broadband product line.
Sales of broadband transmission products in fiscal year 1998 comprised
approximately 52% of Telco Systems' total revenue. In August 1984, Telco Systems
acquired TeleBit, Inc., a manufacturer of digital transmission systems based in
Lombard, Illinois. Later, the products from this acquisition were merged with
Telco Systems' Voice Frequency products which together evolved into the Access
product line. In fiscal 1998, sales of access products were 45% of total sales.
In May 1992, Telco Systems acquired Magnalink Communications Corporation, a
developer and manufacturer of high speed data compression and bandwidth
optimization products, which evolved into the Bandwidth Optimization product
line. In fiscal 1998, bandwidth optimization products represented 3% of sales.

In January 1998, Telco Systems acquired Jupiter Technology, Inc. This
acquisition brought frame relay and asynchronous transfer mode (ATM) technology
to enhance the features and interfaces available in the Telco Systems' product
portfolio.

Telco Systems has continued to focus on and grow its revenues in the access
market, while reducing its costs of doing business in that highly competitive
market over the last four quarters.

In the second quarter of fiscal year 1998, Telco Systems introduced its
EdgeLink 100 product which aggregates and consolidates traffic from various T1
lines over a more cost-effective T3 line. This product is marketed to major
carriers as well as competitive local exchange providers interested in reducing
their cost of access and delivery of services to customers.

On October 26, 1998, Telco Systems acquired Synaptyx, a developer of
integrated access solutions focusing on new service providers in the local loop
services market. The Synaptyx product is a next generation integrated access
device for bundled IP (Internet Protocol), Frame Relay and TDM (Time Division
Multiplexer) services.

For fiscal 1998, Telco Systems reported sales of $113.2 million and a net
loss of $3.3 million or $.30 per share. The net loss included a charge for the
write off of in-process technology in connection with the acquisition of Jupiter
Technology of $5.1 million or $.47 per share. Working capital at year end
amounted to $39.7 million, including cash and marketable securities of $21.0
million. For a more complete discussion of the results of operations, please
refer to " -- Management Discussion and Analysis of Results of Operations and
Financial Condition" below.

Broadband Products. Primary customers of Telco Systems' Broadband products
are RBOCs and major independent telephone companies as well as competitive and
alternate access providers. Products are sold as

114
<PAGE> 126

either complete systems or as stand-alone equipment installed by Telco Systems,
third party installers, or by Telco Systems' customers. A complete system may
include the fiber optic cable, which is not manufactured by Telco Systems but is
purchased from a number of suppliers.

The most common application of Telco Systems' Broadband transmission
products is for cost-effective delivery of high capacity T1 (1.544Mbps) and T3
(45Mbps) services in the local loop applications between the telephone company
central office or hubbing sites and customers' business premises. These services
are delivered over both fiber optic technology, as well as copper-based
technology. Telco Systems believes that such local loop applications will
continue to grow due to the Telecommunications Reform Act of 1996 as the local
access market opens to competition.

Fiber Optic Terminals and Multiplexers: These systems typically consist of
a digital multiplexer and a fiber optic transmitter/receiver integrated into one
functional unit. The multiplexer portion of the terminal unit combines digital
inputs from multiple sources into one digital output. Multiplexers can be
combined in order to achieve higher transmission rates. The basic function of
the transmitter portion of a terminal is to convert electronic input into a
series of light pulses for transmission over optical fiber. The receiver
function of a terminal reconverts the light pulses received over the fiber into
digital electronic signals. To meet the various needs of the public and private
telephone networks, Telco Systems offers products for transmitting at different
capacities.

Telco Systems offers modular fiber optic terminals that enable the customer
to upgrade its system by adding modules as increased capacity is required. Telco
Systems' terminals, depending on bit-rate and other design configurations, can
accommodate transmission over distances of up to 60 kilometers. Prices for a
typical system are dependent on configuration and accordingly can range from
$5,000 to $30,000 per terminal.

The broadband transmission multiplexers support speeds ranging from T1
(1.544Mbps) to SONET OC3 (155Mbps). These systems can connect into asynchronous
or SONET digital cross-connect systems in a service provider's central office.

Access Products. Primary customers of Telco Systems' access products are
long distance service providers, competitive and alternate local access
providers, RBOCs, government agencies, electric utilities and wireless service
operators. In many cases, the products are purchased by the service providers
and are installed on customer premises or are leased to private network users.
These products comply with both North American and international standards for
specific applications, and are sold worldwide.

Telco Systems' network access products are designed for the digital
multiplexing of voice and data traffic of up to T1 and E1 rates. The trend
towards increased use of public network services for voice, data and video
applications has created greater demand for customer premises access
multiplexers. Telco Systems' access servers enable integration of multiple
slower-speed lines and services onto a single or multiple, high-speed, T1/E1
access facility, ultimately saving access line charges for end users. They
support interfaces for various types of telephony and data services, such as
Plain Old Telephone Service (POTS), Centrex extensions, P-Phones, switched data,
Integrated Services Digital Network (ISDN) and frame relay. In addition, Telco
Systems provides a network management system which is designed to control its
intelligent transmission products.

Typical prices for network access equipment range from $5,000 to $15,000.

Network Access Servers: Telco Systems' Access45 and Access60 network
access servers provide highly reliable digital access to public, private and
hybrid networks. They integrate multiple business applications through
cost-effective connections to dedicated, switched and packet network services,
and support multiple networking functions such as T1/E1 add/drop multiplexing,
grooming and digital cross-connection. They also support advanced services such
as ISDN and frame relay. The products provide complete redundant architecture
for fail-safe operation, a must for service providers. Access45 was introduced
during fiscal 1997, and is a smaller version of Access60 representing a lower
price point. It is designed to meet a key requirement for the CLEC marketplace,
which is to provide a high number of service ports in a very small form factor.
It is completely compatible with Access60, and uses the same interface cards to
deliver the same services.

115
<PAGE> 127

Digital Multiplexer Products: Telco Systems' products use digital
technology and provide over 40 different plug-in printed circuit cards to
support a large variety of analog and digital voice, data, and video
applications. The products provide conversion of analog signals into digital
information, combine them with additional digital data inputs and enable them to
be processed and transmitted at high speed over copper wires. Telco Systems
provides a full range of products from cost effective digital channel banks to
high-functionality DSU/CSU.

Network Management and Control System: Telco Systems offers a
standards-based SNMP network management system, the MVX. This system is designed
to control all major products in the Telco Systems portfolio. This system
remotely manages voice and data mix, bandwidth allocation, and selective access
to special services offered by T1 carriers. In addition, it can be used to
modify the network as user requirements change.

Bandwidth Optimization Products. Primary customers for Telco Systems'
Bandwidth Optimization products are private network users at major corporations
worldwide. These products interconnect geographically remote local area networks
(LANs) through wide area networks (WANs), with an emphasis on optimizing the
utilization of WAN links. In LAN/WAN applications, WAN links have the lowest
throughput, the highest expense, the lowest reliability, and the least security.
The Bandwidth Optimization products increase the throughput of WAN links by two
to six times (depending on the type of data traffic) via data compression;
reduce expense of WAN links by enabling usage of lower-speed links at higher
throughput; and offer features for improved redundancy, fault tolerance,
security and privacy. Typical units are in the $3,000 to $9,000 price range. The
Optimizer product line also supports compression for frame relay data, and can
be connected to any standard frame relay service offering. It is approved in the
leading frame relay service offerings, such as AT&T, WorldCom and Sprint.

Marketing and Customers. Telco Systems is engaged in a single business
segment constituting the development, manufacturing, marketing and service of
integrated access solutions for the telecommunications industry. Primary users
of Telco Systems' products are the RBOCs, independent telephone companies,
interexchange carriers, competitive and alternate access providers, electric
utilities, wireless service operators, government agencies and private network
end users.

Telco Systems' broadband transmission products and network access products
are generally sold to specialized common carriers and telephone operating
companies on an off-the-shelf basis. Typically, the products have been evaluated
by such customers and approved for purchase in advance. Both network access and
broadband products are manufactured by Telco Systems based on forecasted usage.
Sales to the RBOCs accounted for 41% of sales in fiscal 1998, 39% of sales in
fiscal 1997 and 37% of sales in fiscal 1996. RBOC sales include sales to Bell
Atlantic of 36% of total Telco Systems in fiscal 1998, 33% in fiscal 1997 and
31% in fiscal 1996. Bell Atlantic continues to be a significant customer of the
Broadband Business Unit. If Bell Atlantic and GTE complete their contemplated
merger, the combined entity will become a large customer of Telco Systems for
broadband and network access products. A material curtailment in the Bell
Atlantic order rate, if not offset by sales to other customers, would result in
insufficient gross margin to cover the current level of operating costs and
would adversely impact total company results. Other significant customers
include Walker and Associates and Sprint which each represented 12% of sales in
fiscal 1998. MCI Communications and Walker and Associates represented 11% and
10% of sales in fiscal 1997, respectively. In fiscal 1998 British Telecom, a
major European carrier, represented 8% of Telco Systems' revenues. In fiscal
1996, Sprint and Walker and Associates each represented 13% and 11%,
respectively. International revenue represented 12% of total revenue in fiscal
1998, 7% of total revenue in fiscal 1997 and 4% in fiscal 1996.

Telco Systems markets its products through a combination of its own sales
force, value-added resellers and distributors. Installation is primarily
performed by third party providers. Telco Systems has technical support and
applications engineering personnel and offers training of customer personnel.

Orders and Backlog. In fiscal 1998, Telco Systems received orders totaling
$105.0 million. Of this amount, $59.7 million was for broadband transmission
products, $41.8 million was for network access products, and $3.5 million was
for bandwidth optimization products. During the first quarter of fiscal 1998,
Telco Systems was notified by a major customer, MCI Communications, of its
intention to cancel an order for
116
<PAGE> 128

Access60 products in the amount of $6.9 million. Had this cancellation been
reflected in fiscal 1997, total orders in fiscal 1997 would have been $107.5
million. Firm backlog shippable within a twelve-month period was approximately
$12.2 million at the end of fiscal 1998, compared to approximately $21.2 million
at the end of fiscal 1997. Firm backlog would have been $14.3 million if the
previously discussed cancellation occurred in fiscal 1997. Broadband
transmission products comprised 43% of the backlog for fiscal year 1998 and 26%
for fiscal 1997. Network access products represented 56% of backlog at fiscal
1998 year end, 72% at fiscal 1997 year end. Telco Systems' order trend is
characterized by short customer-scheduled delivery cycles. Accordingly, a
substantial portion of sales in each fiscal quarter are derived from orders
received in the quarter. In Telco Systems' experience, its backlog at a given
time is not necessarily indicative of prospective sales volume. In addition to
the short delivery cycles, customers may revise scheduled delivery dates, revise
product configuration or cancel orders.

Competition. Telco Systems competes in its markets based upon
price/performance advantages offered by a number of its products, certain
product features, and its ability to meet customer delivery requirements on a
timely basis. Most of Telco Systems' competitors have greater financial,
technological and personnel resources than Telco Systems. Telco Systems'
competitors in the broadband transmission market are predominantly large,
full-line, integrated manufacturers of telecommunications equipment, such as
Lucent Technologies, Fujitsu, Northern Telecom Limited, Alcatel, NEC and ADC
Telecommunications. Many of these competitors have introduced newer SONET
transmission products which the telephone operating companies are deploying in
public networks. The availability of such SONET products by competitors provides
a distinct product advantage for them in certain customer applications. However,
the higher cost of the SONET products, typically 20-50% more expensive than the
asynchronous transmission products, is providing a continued strong demand for
Telco Systems' asynchronous transmission products in certain customer
applications. Telco Systems' principal competitors with respect to the network
access product market include Premisys Communications, Verilink Corp., Newbridge
Networks, Tellabs and Carrier Access Corp. Telco Systems' believes that it has
substantially strengthened its competitive position in this market with the
availability of new features for the Access60 product, introduction of the new
EdgeLink 100 and Access45 products and new products from the Jupiter Technology
and Synaptyx acquisitions, as well as with a stronger network of distributors.
Telco Systems also believes that the redundancy, high-density application and
the fail-safe nature of the Access60 architecture makes the product more
suitable for the service providers market. Primary competitors for bandwidth
optimization products are Fastcom and Symplex, which focus on data compression
technologies for lower data rates in the range of 64Kbps. Telco Systems believes
that its data compression technology has significant cost and performance
advantages for higher data rates in the range of 256Kbps and 1.544Mbps.

Research and Development. Telco Systems maintains four technology centers
for research and development located in Norwood, Massachusetts, Waltham,
Massachusetts, Germantown, Maryland and Fremont, California. In the broadband
transmission product area, Telco Systems is concentrating its research and
development efforts on new products for delivering more cost-effective solutions
for DS3-based systems in the local loop distribution portion of the telephone
network. In the network access product area, development programs continue for
further enhancements and newer features for digital loop access and data
services applications for Access45 and Access60 Network Access servers. In both
areas, a significant portion of the R&D investment is going towards development
of lower-cost designs to improve gross margins of existing products. Programs
for new products are based on market analysis and estimates of customer demand
which are subject to continuing change. Therefore, there can be no assurance
that sales of such products will meet current expectations.

Spending on research and development activities of $15.5 million
represented 14% of sales in fiscal 1998. This compares with $15.4 million in
fiscal 1997 and $18.0 million in fiscal 1996 which represented 13% and 19% of
sales in each year, respectively. Telco Systems expects to maintain the fiscal
1998 level of spending for research and development into fiscal 1999.

From time to time Telco Systems has employed consultants to perform
research and development functions. Telco Systems plans to continue this
practice as a means of augmenting its internal research and development
capabilities.
117
<PAGE> 129

Employees. As of August 30, 1998, Telco Systems had 301 employees, of whom
84 were in sales, sales support and marketing, 95 in product development, 75 in
manufacturing and 47 in administration. Competition for highly skilled
engineering, managerial, sales, marketing and product development personnel is
very intense. Telco Systems believes that its future success will depend in
large part on its ability to attract and retain such individuals. Accordingly,
the loss of key personnel could materially and adversely affect Telco Systems'
business, results of operations and financial condition. There can be no
assurance that Telco Systems will be successful in attracting and retaining the
personnel required to engineer, manage, market or develop its products and
conduct its operations successfully. Telco Systems considers its employee
relations to be excellent and is not a party to any collective bargaining
agreement.

Manufacturing. Telco Systems uses major contract manufacturers to supply
final products, including US Assemblies, New England, Inc. and SCI Technologies,
Inc. Telco Systems' contract manufacturing process primarily involves the
assembly of electronic components onto custom-designed printed circuit boards,
incorporating these boards into larger system packages, and testing the finished
products to assure their proper functioning in accordance with product
specifications. Most components used in the process are standard electrical,
electronic and mechanical parts available from many suppliers.

Some inspection, final test and system assembly functions are performed at
Telco Systems' Norwood, Massachusetts facility. In addition, Telco Systems
produces customer configured rack systems and performs repair and warranty
functions for customers.

Telco Systems presently maintains a favorable relationship with its
contract manufacturers and its other suppliers and does not presently anticipate
any difficulties that would prevent timely procurement of scheduled product.

Although Telco Systems has not experienced significant difficulty in
obtaining desired quantities from any of its single sources or other vendors,
business could be adversely affected if components used in its products were not
available on a timely basis.

Regulatory and Legislative Matters. Regulations of the Federal
Communications Commission affect various products of Telco Systems. Certain
regulations require that products which reside on a customer's premises and
interconnect the public switched network meet certain standards to prevent harm
to the network. Other regulations limit the levels of electromagnetic radiation
which may emanate from an electronic device located on a customer's premise.
Telco Systems currently complies with these regulations and believes it will be
able to comply with these regulations in the future. Changes in existing laws
and regulations which govern the telecommunications industry could affect the
business of Telco Systems.

Patents. Telco Systems currently holds several patents and has patent
applications pending. Management believes, however, that timely implementation
of technological advances, responsiveness to market requirements, depth of
technical expertise and a high level of customer service and support are more
important to its success than patent rights.

PROPERTIES

Telco Systems' corporate offices and manufacturing operations are located
in Norwood, Massachusetts. Engineering, sales and marketing activities are
located in Norwood and Waltham, Massachusetts, Germantown, Maryland and Fremont,
California.

Telco Systems leases a 216,000 square foot manufacturing, research and
administration facility in Norwood, Massachusetts, that is owned by a limited
partnership in which Telco Systems has a 50% partnership interest. Approximately
60% of this facility is utilized by Telco Systems. Excess costs associated with
idle portions of the facility have been included in the restructuring charge
recorded by Telco Systems in fiscal 1993. On November 11, 1994, Telco Systems
entered into an agreement for the lease of an 118,000 square foot manufacturing,
research and administration facility in Fremont, California. During fiscal 1996,
portions of this facility were identified as excess following the consolidation
of manufacturing operations into the Norwood, Massachusetts facility. The
consolidation plan was completed during fiscal 1997.

118
<PAGE> 130

Telco Systems leases additional facilities, primarily for sales and sales
support in: Overland Park, Kansas; Dallas, Texas; The United Kingdom; Hong Kong;
and primarily for research and development in: Waltham, Massachusetts and
Germantown, Maryland under one to five-year leases, each facility being between
500 and 5,000 square feet. Telco Systems believes that its present facilities
are adequate for its current level of operations.

Telco Systems owns substantially all of its equipment except for certain
equipment purchased by Telco Systems within the eighteen month period prior to
August 31, 1997. This equipment is leased to Telco Systems as discussed in Note
6 to Telco Systems consolidated financial statements included herein. See "Index
to Financial Statements."

LEGAL PROCEEDINGS

From time to time, Telco Systems is involved in various legal proceedings
relating to claims arising in the ordinary course of its business. Neither Telco
Systems nor any of its subsidiaries is party to any legal proceeding, the
outcome of which, individually or in the aggregate, is expected to have a
material adverse effect on Telco Systems' financial condition or results of
operations.

119
<PAGE> 131

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Fiscal 1998 Compared with Fiscal 1997. Sales in fiscal 1998 decreased 3.9%
to $113.2 million compared with $117.8 million in fiscal 1997. Increased sales
of Telco Systems' new network access products and broadband products were not
sufficient to offset declining sales of older network access and asynchronous
products.

In fiscal 1998, broadband transmission product sales represented 52% of
total sales reflecting a decrease of 9% compared with fiscal 1997. Demand for
asynchronous products declined during fiscal 1998 resulting in a 15% decrease in
sales of these products. This decrease was partially offset by sales of Telco
Systems' new Edgelink100 multiplexer. Approximately 80% of Telco Systems' sales
of these products are used by telephone company customers to provide high
bandwidth fiber optic services in the feeder or distribution section of the
public telephone network. Sales to one RBOC represented 70% and 60% of sales of
broadband transmission products in fiscal 1998 and fiscal 1997, respectively. As
a percent of total sales, this RBOC represented 36% and 33% in fiscal 1998 and
fiscal 1997, respectively. In fiscal 1998, access product sales represented 45%
of total sales reflecting an increase of 4% compared with fiscal 1997. Growth in
this product group can be attributed to sales of Telco Systems' new Access 60
server which increased 41% compared with fiscal 1997 and was partially offset by
sales of older low-end access products which declined 37% compared with last
year. The Access 60 product represented 63% of access product sales in fiscal
1998 compared with 46% in fiscal 1997. In fiscal 1998, sales of bandwidth
optimization products represented 3% of total sales compared with 5% in fiscal
1997.

Total orders booked in fiscal 1998 amounted to $105.0 million, reflecting a
decrease compared with fiscal 1997 orders of $114.4 million. Backlog at the end
of fiscal 1998 decreased to $12.2 million compared with $21.2 million at the end
of the previous year. During the first quarter of fiscal 1998, Telco Systems was
notified by a major customer, MCI Communications, of its intention to cancel an
order for Access 60 products in the amount of $6.9 million. Had this
cancellation been reflected in fiscal 1997, total orders would have been $107.5
million. Firm backlog would have been $14.3 million if this order cancellation
had occurred in fiscal 1997.

Telco Systems' major customers include telephone operating companies and
long distance carriers. Sales to RBOC and other major telephone companies
represented 41% of total sales compared with 43% in fiscal 1997. The major long
distance carriers represented 12% of sales in fiscal 1998 compared with 20% in
fiscal 1997. International revenue represented 12% of total revenue in fiscal
1998 compared with 7% in fiscal 1997.

In fiscal 1998 Telco Systems recorded a net loss of $3.3 million or $.30
per share compared with a net loss in fiscal 1997 of $1.1 million or $.10 per
share. Expenses related to the pending Merger and the write off of $5.1 million
of purchased research and development resulted in a larger net loss in fiscal
1998 compared with fiscal 1997.

Gross profit in fiscal 1998 was $42.0 million and represented 37% of sales.
In fiscal 1997, gross profit was $42.9 million or 36% of net sales. This
decrease in gross profit resulted from lower sales and was offset by an increase
in gross profit percentage as the product revenue mix shifted towards higher
margin products and Telco Systems' cost reduction efforts, primarily in the
access products group. Additionally, gross profit percent improved due in part
to the benefits gained from Telco Systems' manufacturing outsource strategy
announced in the second quarter of fiscal 1998.

Research and development expense amounted to $15.5 million which was
substantially even with fiscal 1997. Spending continued on new product
development efforts in the access products area and the broadband products area.
Research and development expense represented 14% of sales in fiscal 1998
compared with 13% of sales in fiscal 1997.

In January 1998, Telco Systems acquired substantially all the assets of
Jupiter Technology, Inc., a privately held developer of network access products,
for $6.2 million in cash and Telco Systems common stock. Of this amount, $5.1
million was allocated to purchase in-process research and development, which
consists of the value of Jupiter Technology products in the development stage
that were not considered to have reached technological feasibility as of the
acquisition date. The $5.1 million was immediately expensed in accordance with
applicable accounting rules.

120
<PAGE> 132

The Income Approach was utilized to value the acquired research and
development technologies in the Jupiter Technology acquisition. The Income
Approach values technologies by projecting the potential cash flows related to
those technologies and discounting the cash flows to their present values using
a discount rate reflective of the risk of achieving the cash flows. The
projected cash flows include estimates of the remaining costs to complete the
in-process technologies.

Jupiter Technology development efforts as of the acquisition date were
concentrated on a next generation network access product that utilizes Frame
Relay and asynchronous transfer mode ("ATM") technologies. This new Jupiter
product is expected to broaden Telco Systems' integrated access product
offerings and improve its competitive position. According to various industry
analysts, the ATM access equipment market is expected to be approximately $1
billion by the year 2000. Public network carriers have been building out their
core ATM infrastructure over the past several years. What ATM technology offers
is an economical way to provide access to that infrastructure. Moreover, with
the increase of voice, video and data traffic over public networks, there is a
growing need for carriers to integrate multiple communication transport
mechanisms and gain bandwidth efficiencies.

At the acquisition date, Telco Systems' management estimated that
technological feasibility would be determined on the new Jupiter product within
six months, at an estimated cost to complete of $1.8 million. Telco Systems'
management currently estimates that the product will be commercially viable
during the latter part of fiscal 1999. Estimated costs to complete this product
development are $1.5 million for fiscal 1999. The expected sources of funding
were scheduled research and development expenses from the operating budget of
Telco Systems provided by the operating assets and liabilities of Telco Systems.

Sales, marketing and administration expense was $24.3 million in fiscal
1998 compared with $29.7 million in fiscal 1997. The fiscal 1997 period included
expenses related to the realignment of certain selling and marketing activities.
In general, the lower level of spending in fiscal year 1998 compared with fiscal
year 1997 is reflective of Telco Systems' overall goal of reduced sales, general
and administrative spending and productivity improvements.

During the first quarter of fiscal 1997, Telco Systems liquidated its
equity position in an international distributor of Telco Systems' products due
to certain changes in strategic objectives. The sale of this investment,
originally made in fiscal 1995, yielded a one-time gain of $1.1 million.

Amortization expense relates to the acquisition of the broadband family of
products in 1983, certain channel bank products in 1984, the acquisition of
Magnalink Communications Corporation in 1992, and the acquisition of Jupiter
Technology, Inc. in January 1998. In fiscal 1998, amortization expense was $.8
million compared with $.7 million in fiscal 1997.

Interest income was $.7 million in both fiscal 1998 and fiscal 1997.

In fiscal 1998, Telco Systems recorded $.3 million of income tax expense
relating to timing differences between Telco Systems' net operating loss and
taxable income.

Fiscal 1997 Compared with Fiscal 1996. Sales in fiscal 1997 increased 25%
to $117.8 million compared with $94.0 million in fiscal 1996. Increased
shipments of Access 60 network access products and broadband transmission
products more than offset decreased sales of older network access products.

In fiscal 1997, broadband transmission product sales represented 54% of
total sales reflecting an increase of 35% compared with fiscal 1996. Telco
Systems continued to experience increased demand for asynchronous products
exceeding the 30% growth rate experienced in fiscal 1996. Approximately 80% of
Telco Systems' sales of these products are used by telephone company customers
to provide high bandwidth fiber optic services in the feeder or distribution
section of the public telephone network. Sales to one RBOC represented 60% and
61% of sales of broadband transmission products in fiscal 1997 and fiscal 1996,
respectively. As a percent of total sales, this RBOC represented 33% and 31% in
fiscal 1997 and fiscal 1996, respectively. In fiscal 1997, access product sales
represented 41% of total sales reflecting an increase of 18% compared with
fiscal 1996. Substantially all of this growth can be attributed to sales of
Telco Systems' new Access 60 server which increased 87% compared with fiscal
1996. The Access 60 product represented 46% of access product sales in fiscal
1997 compared with 29% in fiscal 1996. This increase was partially offset by a
decline in sales of older low-end access products. In fiscal 1997, sales of
bandwidth optimization products represented 5% of total sales and remained
substantially even with fiscal 1996.

121
<PAGE> 133

Total orders booked in fiscal 1997 amounted to $114.4 million, slightly
ahead of fiscal 1996 orders of $113.5 million. Backlog at the end of fiscal 1997
decreased to $21.2 million compared with $24.8 million at the end of the
previous year. During the first quarter of fiscal 1998, Telco Systems was
notified by a major customer, MCI Communications, of its intention to cancel an
order for Access 60 products in the amount of $6.9 million. Had this
cancellation been reflected in fiscal 1997, total orders would have been $107.5
million. Firm backlog would have been $14.3 million if this order cancellation
had occurred in fiscal 1997.

Telco Systems' major customers include telephone operating companies and
long distance carriers. Sales to RBOC and other major telephone companies
represented 43% of total sales compared with 42% in fiscal 1996. The major long
distance carriers represented 20% of sales on fiscal 1997 compared with 19% in
fiscal 1996. International revenue represented 7% of total revenue in fiscal
1997 compared with 4% in fiscal 1996.

In fiscal 1997 Telco Systems recorded a net loss of $1.1 million or $.10
per share compared with a net loss in fiscal 1996 of $15.5 million or $1.50 per
share. The fiscal 1996 net loss included a net restructuring charge of $4.2
million or $.41 per share which is discussed in note 7 to the financial
statements. Additionally, fiscal 1996 included non-recurring charges associated
with the transfer of manufacturing operations from Fremont, California to
Norwood, Massachusetts. Increased revenues and lower operating expenses were
primarily responsible for the improved operating results compared with fiscal
1996.

Gross profit in fiscal 1997 was $42.9 million and represented 36% of sales.
In fiscal 1996, gross profit was $36.7 million or 39% of net sales. This
decrease in gross profit percentage resulted in part as the product revenue mix
shifted towards lower margin products, primarily in the access products group.
To reverse this trend, efforts are continuing into fiscal 1998 to reduce product
cost through manufacturing process improvements and product enhancements.

Research and development expense amounted to $15.4 million and represented
a decrease of 15% compared with fiscal 1996. This decrease resulted as
development efforts for certain broadband products were curtailed. Remaining
resources were focused on new product efforts in the access products area.
Research and development expense represented 13% of sales in fiscal 1997
compared with 19% of sales in fiscal 1996.

Sales, marketing and administration expense was $29.7 million in fiscal
1997 compared with $30.4 million in fiscal 1996. Lower spending in fiscal 1997
resulted from Telco Systems' consolidation actions which occurred in the third
quarter of fiscal 1996. This favorable spending variance was partially offset by
additional costs relating to certain selling activity realignments which
occurred in the third quarter of fiscal 1997.

Amortization expense relates to the acquisition of the broadband family of
products in 1983, certain channel bank products in 1984 and the acquisition of
Magnalink Communications Corporation in 1992. In fiscal 1997, amortization
expense was $.7 million in fiscal 1997 compared with $.8 million in fiscal 1996.

Interest income was $.7 million and $1.1 million in fiscal 1997 and fiscal
1996, respectively. This decrease resulted as operating requirements for cash
reduced the amounts available to generate interest income.

In fiscal 1997, Telco Systems' operating loss did not generate currently
available tax benefits.

Liquidity and Capital Resources. During fiscal 1998, cash and marketable
securities increased by $8.3 million resulting in a year-end balance of $21.0
million compared with $12.7 million at the end of fiscal 1997. Cash of $14.2
million was provided by operating activities, which included decreased inventory
of $16.4 million. Cash was used by investing activities for the acquisition of
Jupiter Technology for $4.3 million. In addition, capital expenditures of $2.5
million were principally related to new product development tools and improved
product testing capability. Proceeds from the sale of Telco Systems common stock
under various stock option and purchase plans provided cash in the amount of
$2.0 million.

Working capital at August 30, 1998 was $39.7 million, compared with $40.4
million at August 31, 1997. The ratio of current assets to current liabilities
at fiscal year end was 2.9 which remained unchanged from the end of fiscal 1997.

122
<PAGE> 134

Telco Systems maintains a $20.0 million secured line of credit with Fleet
Bank which is available to fund working capital requirements through December
31, 1998. Although Telco Systems did not utilize any of its financing
alternatives in fiscal 1998, approximately $0.4 million was reserved to cover
various guarantees in effect at August 30, 1998 relating to European Community
customs and duties.

Management believes that its cash and marketable securities and the
availability of its various financing arrangements will be sufficient to fund
operating cash requirements and future growth for the foreseeable future.

Telco Systems' practice has been to retain cash provided by operations to
fund future growth. Accordingly, Telco Systems has never declared or paid a cash
dividend on its capital stock.

Year 2000 Issue. The year 2000 will pose a unique set of challenges to
those industries reliant on information technology. As a result of methods
employed by early programmers, many software applications and operational
programs may be unable to distinguish the year 2000 from the year 1900. If not
effectively addressed, this problem could result in the production of inaccurate
data, or, in the worst cases, complete system failure.

In April 1998, Telco Systems formally adopted a plan to address year 2000
compliance in its computer systems and applications. In accordance with the
plan, management estimates the total cumulative costs will be approximately
$1,100,000. During fiscal 1998, approximately $100,000 was expended towards year
2000 compliance.

Telco Systems' products have been either tested and found to be year 2000
compliant, or deemed not subject to the testing requirement because they do not
contain a real-time clock. The third phase of the plan includes a process to
evaluate the readiness of its major suppliers. As of August 30, 1998, the plan
is on schedule and is expected to be completed in mid-1999.

Management believes that the expenditures required to bring Telco Systems'
systems into compliance will not have a materially adverse effect on Telco
Systems' ability to operate beyond the year 1999. However, the year 2000 problem
is pervasive and complex and can potentially affect any computer process.
Accordingly, no assurance can be given that year 2000 compliance can be achieved
without additional unanticipated expenditures and uncertainties that might
affect future financial results.

Factors That May Affect Future Financial Results. Discussions in this
Joint Proxy Statement/ Prospectus include statements concerning Telco Systems'
future products, expenses, revenue, liquidity and cash needs as well as Telco
Systems' future operations and financial results. These forward-looking
statements are based on current expectations. Accordingly, Telco Systems assumes
no obligation to update this information. Numerous factors, including but not
limited to the factors described under "Risk Factors" above as well as the
pending Merger, economic and competitive conditions, incoming order levels,
shipment volumes, and product margins, could cause actual results to differ from
those described in these statements. Prospective investors and stockholders
should carefully consider the foregoing factors, as well as those set forth
below in evaluating these forward-looking statements.

Telco Systems' backlog may not be representative of actual sales for any
succeeding period because of the timing of orders, delivery intervals, customer
and product mix, the possibility of changes in delivery schedules, and additions
or cancellation of orders. Historically, a significant portion of Telco Systems'
sales in any quarter result from orders received in the same period; thus, order
delays could have an immediate and materially adverse impact on sales and
profit. Recent merger activity among some of Telco Systems' large customers
could adversely affect future orders as those customers reassess their strategic
direction. NYNEX, Telco Systems' largest customer merged with Bell Atlantic in
fiscal 1997. Although Telco Systems believes that its products continue to offer
a competitive advantage to Bell Atlantic, there can be no assurance that their
historic order level will continue. If Bell Atlantic and GTE complete their
contemplated merger, the combined entity will become a large customer of Telco
Systems.

Telco Systems operates in a highly competitive environment and in a highly
competitive industry, which include significant pricing pressures. These
competitive pressures could cause reduced demand for Telco Systems' products. If
Telco Systems was not successful in winning future business opportunities, there
could be insufficient revenue to cover costs and expenses incurred in
anticipation of these opportunities. Accordingly,
123
<PAGE> 135

Telco Systems may from time to time experience unanticipated intense competitive
pressure, possibly causing operating results to vary from those expected.

Telco Systems' future operating results are dependent on its ability to
develop, produce and market new and innovative products and services. As part of
this effort, Telco Systems has invested in new technology with the acquisition
of Jupiter Technology and the acquisition of Synaptyx. There can be no assurance
that either of these investments will result in successful products. Critical to
Telco Systems' growth strategy is the acceptance of the Access 60 product and
the EdgeLink family of products. There are numerous risks inherent in the
complex process of product development, including rapid technological change and
the requirement that Telco Systems bring to market in a timely fashion new
products and services which meet customers' changing needs. The introduction of
newer technologies could result in lower demand for Telco Systems' products and
cause inventory on hand to become obsolete. Telco Systems experiences intense
competition for skilled employees who are in great demand. If important
technical and management positions remain unfilled, completion of product
development and other programs could be delayed causing financial results to be
adversely affected.

Historically, Telco Systems has generated a disproportionate amount of its
operating revenues toward the end of each quarter, making precise prediction of
revenues and earnings particularly difficult and resulting in risk of variance
of actual results from those forecast at any time. In addition, Telco Systems'
operating results historically have varied from fiscal period to fiscal period.
Accordingly, Telco Systems' financial results in any particular fiscal period
are not necessarily indicative of results for future periods.

Supplementary Data. The following table presents unaudited quarterly
operating results for each of Telco Systems' last eight quarters. This
information has been prepared by Telco Systems on a basis consistent with Telco
Systems' audited consolidated financial statements and includes all adjustments,
consisting only of normal recurring accruals, that Telco Systems considers
necessary for a fair presentation in accordance with GAAP. Such quarterly
results are not necessarily indicative of future operating results. This
information should be read in conjunction with Telco Systems' consolidated
financial statements and notes thereto included elsewhere herein. See "Index to
Financial Statements."

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
1997 1997 1997 1997 1998 1998 1998 1998
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales......................................... $31,835 $27,295 $27,111 $31,302 $27,005 $26,007 $28,545 $ 31,673
Gross profit.................................. 12,473 11,520 8,293 10,572 9,990 10,464 11,119 10,463
Net income (loss)............................. *2,274 256 (4,017) 409 642 (4,683) 1,165 (375)
Net income (loss) per share**
Basic....................................... .21 .02 (.37) .04 .06 (.43) .11 (.03)
Diluted..................................... .21 .02 (.37) .04 .06 (.43) .11 (.03)
</TABLE>

- ---------------

* Fiscal 1997 net (loss) income includes a $1,070 gain on the sale of an
investment in the first quarter.

** The net income (loss) per share amounts prior to fiscal 1998 have been
restated as required to comply with Statement of Financial Accounting
Standards No. 128, Earnings Per Share. For further discussion of earnings per
share and the impact of Statement No. 128, see the notes to the consolidated
financial statements beginning on page F-130.

Quantitative and Qualitative Disclosures About Market Risk. Telco Systems
is exposed to market risk related to changes in interest rates on its borrowing
under its $20,000,000 credit facility with Fleet National Bank (the "Credit
Facility"); however, Telco Systems does not believe these risks to be material
because it currently has made no borrowing under the Credit Facility. Under the
Credit Facility, revolving line of credit bears interest at the prime interest
rate.

Telco Systems has no derivative financial instruments or derivative
commodity instruments or investments. Telco Systems invests its cash and cash
equivalents in high-quality and highly liquid investments consisting of
certificates of deposit, money market instruments and overnight investments in
high grade commercial paper. As of November 6, 1998, Telco Systems' cash and
cash equivalents and investments consisted primarily of taxable money market
instruments, bank certificates of deposit, commercial paper and overnight
repurchase agreements with maturities of less than 60 days. Telco Systems
believes that its overall market risk exposure with respect to the investment of
its cash and cash equivalents is not material because

124
<PAGE> 136

the overall contribution of interest income relative to net revenue of Telco
Systems was less than one percent for fiscal 1998 and Telco Systems does not
anticipate a higher contribution percentage during fiscal 1999.

Less than one percent of Telco Systems' transactions are conducted in
currencies other than United States Dollars and as such Telco Systems does not
currently have material exposure to foreign currency risk.

125
<PAGE> 137

PRINCIPAL STOCKHOLDERS OF TELCO SYSTEMS

Telco Systems' only issued and outstanding class of voting securities is
the Telco Systems Common Stock. At the close of business on November 6, 1998,
there were 11,942,598 shares of Telco Systems Common Stock issued and
outstanding.

The following table sets forth certain information as of November 6, 1998
regarding the beneficial ownership of Telco Systems Common Stock by (i) each
person known by Telco Systems to own beneficially more than 5% of Telco Systems
Common Stock, (ii) each director individually, (iii) each executive officer who
would be a "named executive officer" of Telco Systems under Rule 402 of
Regulation S-K and (iv) all executive officers and directors as a group.

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF STOCKHOLDER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------- ----------------------- ----------------
<S> <C> <C>
LeRoy C. Kopp........................................... 3,507,634(2) 29.4%
Kopp Investment Advisors
7701 France Avenue South
Suite 500, Edina, MN 55435
William B. Smith+++..................................... 206,249(3) 1.7
Steward S. Flaschen+.................................... 90,730(4) *
Dean C. Campbell+....................................... 70,230(5) *
Sheldon Horing+......................................... 15,775(6) *
Edward J. Fontenot+..................................... 2,083(7) *
William J. Stuart++..................................... 25,910(8) *
Richard J. Nardone++.................................... 14,799(9) *
David LeBeau++.......................................... 17,774(10) *
Philip D. Wilson++...................................... 14,419(11) *
All executive officers and directors as a group (9
persons).............................................. 457,969 3.8
</TABLE>

- ---------------

* Less than one percent
+ Director
++ Executive Officer
(1) The persons named in the table have sole voting power and investment power
with respect to all shares of Telco Systems Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
All share amounts shown in this table include shares acquirable upon
exercise of stock option exercisable within 60 days on the date of this
table. The percent of class has been determined in accordance with Rule
13d-3 promulgated under the Exchange Act. Information about greater than 5%
stockholders of Telco Systems is based on filings on Schedule 13D.
(2) Kopp Investment Advisors, Inc., ("KIA"), a registered investment advisor,
has filed a report on Schedule 13D as of September 30, 1998, stating that
KIA is the direct owner of 200,000 shares of Telco Systems Common Stock and
is the beneficial owner of an additional 3,040,634 shares. Kopp Holding
Company and Mr. Kopp have indirect beneficial ownership of the shares
beneficially owned by KIA. Mr. Kopp has direct beneficial ownership of the
stock held in the Kopp Investment Advisors, Inc., Profit Sharing Plan (the
"KIA Plan"), for which he serves as sole trustee; the stock held in the
Kopp Family Foundation ("KFF") for which he serves as director; the stock
held in the LeRoy C. Kopp Individual Retirement Account ("IRA"); and the
stock held directly by Mr. Kopp. The KIA Plan owns 7,000 shares of Telco
Systems Common Stock; the KFF owns 30,000 shares of Telco Systems Common
Stock; the IRA owns 130,000 shares of Telco Systems Common Stock; and Mr.
Kopp directly owns 100,000 shares of Telco Systems Common Stock. Mr. Kopp
may be deemed, in the aggregate, to beneficially own 3,507,634 shares of
Telco Systems Common Stock.

126
<PAGE> 138

(3) Includes 12,041 shares held directly by Dr. Smith and 194,208 acquirable
upon exercise of stock options exercisable within 60 days of November 6,
1998 (not including any options exercisable upon consummation of the
Merger).
(4) Includes 29,958 shares held indirectly by Dr. Flaschen in the Steward S.
Flaschen Revocable Investment Trust; 16,042 shares held by Dr. Flaschen in
the Joyce Davies Flaschen Revocable Investment Trust; 5,458 shares held
jointly by Stewart and Joyce Davies Flaschen and 39,272 shares acquirable
upon exercise of stock options exercisable within 60 days of November 6,
1998 (not including any options exercisable upon consummation of the
Merger).
(5) Represents 70,230 shares acquirable by Mr. Campbell upon exercise of stock
options exercisable within 60 days of November 6, 1998 (not including any
options exercisable upon consummation of the Merger).
(6) Represents 15,775 shares acquirable by Mr. Horing upon exercise of stock
options exercisable within 60 days of November 6, 1998 (not including any
options exercisable upon consummation of the Merger).
(7) Represents 2,083 shares acquirable by Mr. Fontenot upon exercise of stock
options exercisable within 60 days of November 6, 1998 (not including any
options exercisable upon consummation of the Merger).
(8) Includes 650 shares held directly by Mr. Stuart and 25,260 acquirable upon
exercise of stock options exercisable within 60 days of November 6, 1998
(not including any options exercisable upon consummation of the Merger.)
(9) Includes 1,838 shares held directly by Mr. Nardone and 12,961 acquirable
upon exercise of stock options exercisable within 60 days of November 6,
1998 (not including any options exercisable upon consummation of the
Merger).
(10) Includes 1,022 shares held directly by Mr. LeBeau and 16,752 acquirable
upon exercise of stock options exercisable within 60 days of November 6,
1998 (not including any options exercisable upon consummation of the
Merger).
(11) Represents 14,419 shares acquirable by Mr. Wilson upon exercise of stock
options exercisable within 60 days of November 6, 1998 (not including any
options exercisable upon consummation of the Merger).

127
<PAGE> 139

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Combined Financial Statements of World
Access give effect to the consummation of the Merger and to the several
transactions that World Access has completed or are currently contemplated. The
Unaudited Pro Forma Combined Statements of Operations give effect to: (1) the
ATI acquisition; (2) the acquisition of a majority interest in NACT (the "NACT
Stock Purchase"); (3) the acquisition of the remainder of NACT (the "NACT
Transaction"); (4) the Resurgens Transaction; and (5) the Merger as if each of
these acquisitions had occurred on January 1, 1997. The Unaudited Pro Forma
Combined Balance Sheet gives effect to: the NACT Transaction, the Resurgens
Transaction and the Merger as if they had been completed on June 30, 1998.

As Telco Systems' fiscal year end, August 30, differs from World Access'
fiscal year-end by more than 93 days, Telco Systems' results of operations for
the period from November 25, 1996 through November 30, 1997 were used in
preparing the Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1997. Telco Systems' results of operations for the six months
from March 2, 1998 through August 30, 1998 were used in preparing the Unaudited
Pro Forma Combined Statement of Operations for the six months ended June 30,
1998. As such, Telco Systems' results of operations for the period from December
1, 1997 through March 1, 1998 are not included in the Unaudited Pro Forma
Combined Statements of Operations presented herein. Telco Systems' revenue, cost
of sales, operating loss and net loss for such period were $26.0 million; $15.5
million; $4.6 million and $4.6 million, respectively. Telco Systems' unaudited
June 30, 1998 balance sheet was utilized in preparing the Unaudited Pro Forma
Combined Balance Sheet as of June 30, 1998.

The pro forma adjustments are based upon currently available information
and upon certain assumptions that the management of World Access believes are
reasonable. Each of the acquisition transactions above has been accounted for
using the purchase method of accounting. The adjustments recorded in the
Unaudited Pro Forma Combined Financial Statements represent the preliminary
determination of these adjustments based upon available information. There can
be no assurance that the actual adjustments will not differ significantly from
the pro forma adjustments reflected in the Unaudited Pro Forma Combined
Financial Statements.

In connection with the consummation of the pending Merger, World Access
expects to record charges representing the estimated portion of the purchase
price allocated to in-process research and development of $60.7 million. In
addition, in the six month period ended June 30, 1998, World Access recorded
charges representing the estimated portion of the purchase price allocated to
in-process research and development of $44.6 million and $5.4 million for the
NACT Stock Purchase and ATI acquisition, respectively, and World Access has
assumed, for purposes of these pro forma combined financial statements, that it
will record $21.9 million in additional charges representing the estimated
purchase price allocated to in-process research and development in connection
with the NACT Transaction. Since these charges are directly related to the
acquisitions and will not recur, the Unaudited Pro Forma Combined Statements of
Operations have been prepared excluding these one-time non-recurring charges.

The Unaudited Pro Forma Combined Financial Statements are not necessarily
indicative of the financial position or the future results of operations or
results that might have been achieved if the foregoing acquisition transactions
had been consummated as of the indicated dates. The Unaudited Pro Forma Combined
Financial Statements should be read in conjunction with the historical
consolidated financial statements of Old World Access, ATI, NACT and Telco
Systems, the historical combined financial statements of Resurgens and the
related notes thereto contained elsewhere herein. See "Index to Financial
Statements."

128
<PAGE> 140

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
OLD WORLD ACCESS
OLD NACT MINORITY WORLD ACCESS AND
WORLD INTEREST AND NACT RESURGENS RESURGENS
ACCESS ADJUSTMENTS COMBINED RESURGENS ADJUSTMENTS COMBINED
-------- ------------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 57,653 $ -- $ 57,653 $ 1,637 $ (7,000)(C) $ 52,290
Marketable securities................ 3,500 -- 3,500 -- -- 3,500
Accounts receivable.................. 41,819 -- 41,819 3,354 -- 45,173
Inventories.......................... 34,473 -- 34,473 -- -- 34,473
Other current assets................. 15,429 -- 15,429 4,476 -- 19,905
-------- -------- -------- -------- -------- --------
Total Current Assets........... 152,874 -- 152,874 9,467 (7,000) 155,341
Property and equipment................ 17,203 -- 17,203 52,126 9,000(C) 78,329
Goodwill.............................. 74,378 9,617(A) 83,995 -- 71,251(C) 155,246
Acquired technology................... 4,400(A) 4,400 -- -- 4,400
Other assets.......................... 24,063 -- 24,063 152 18,300(C) 42,515
-------- -------- -------- -------- -------- --------
Total Assets................... $268,518 $ 14,017 $282,535 $ 61,745 $ 91,551 $435,831
======== ======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt...................... $ 4,408 $ -- $ 4,408 $ 3,542 $ -- $ 7,950
Accounts payable..................... 23,087 -- 23,087 19,731 -- 42,818
Other accrued liabilities............ 12,913 -- 12,913 7,243 2,000(C) 22,156
-------- -------- -------- -------- -------- --------
Total Current Liabilities...... 40,408 -- 40,408 30,516 2,000 72,924
Long-term debt........................ 115,529 -- 115,529 -- -- 115,529
Noncurrent liabilities................ 1,564 1,700(A) 3,264 29,050 -- 32,314
Minority interests.................... 12,443 (12,443)(A) -- -- -- --
-------- -------- -------- -------- -------- --------
Total Liabilities.............. 169,944 (10,743) 159,201 59,566 2,000 220,767
Stockholders' Equity
Common stock......................... 219 25(A) 244 85 (85)(D) 280
36(C)
Capital in excess of par value....... 133,286 46,635(A) 179,921 61,467 (61,467)(D) 271,615
91,694(C)
Retained earnings.................... (34,931) (21,900)(B) (56,831) (59,373) 59,373(D) (56,831)
-------- -------- -------- -------- -------- --------
Total Stockholders' Equity..... 98,574 24,760 123,334 2,179 89,551 215,064
-------- -------- -------- -------- -------- --------
Total Liabilities and
Stockholders' Equity.......... $268,518 $ 14,017 $282,535 $ 61,745 $ 91,551 $435,831
======== ======== ======== ======== ======== ========

<CAPTION>
WORLD ACCESS,
RESURGENS AND
TELCO TELCO SYSTEMS TELCO SYSTEMS
SYSTEMS ADJUSTMENTS COMBINED
-------- ------------- ---------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents $11,601 $ -- $ 63,891
Marketable securities................ 2,200 -- 5,700
Accounts receivable.................. 16,974 -- 62,147
Inventories.......................... 23,209 (3,000)(E) 54,682
Other current assets................. 954 -- 20,859
-------- -------- ---------
Total Current Assets........... 54,938 (3,000) 207,279
Property and equipment................ 8,383 (3,798)(E) 82,914
Goodwill.............................. 7,400 (7,400)(E) 155,246
Acquired technology................... -- 46,317(E) 50,717
Other assets.......................... 217 19,217(E) 61,949
-------- -------- ---------
Total Assets................... $70,938 $ 51,336 $ 558,105
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt...................... $ -- $ -- $ 7,950
Accounts payable..................... 4,357 -- 47,175
Other accrued liabilities............ 12,635 6,650(E) 41,441
-------- -------- ---------
Total Current Liabilities...... 16,992 6,650 96,566
Long-term debt........................ -- -- 115,529
Noncurrent liabilities................ 991 20,449 53,754
Minority interests.................... -- -- --
-------- -------- ---------
Total Liabilities.............. 17,983 27,099 265,849
Stockholders' Equity
Common stock......................... 110 (110)(F) 345
65(E) --
Capital in excess of par value....... 79,017 (79,017)(F) 409,430
137,815(E) --
Retained earnings.................... (26,172) 26,172(F) (117,519)
(60,688)(G) --
-------- -------- ---------
Total Stockholders' Equity..... 52,955 24,237 292,256
-------- -------- ---------
Total Liabilities and
Stockholders' Equity.......... $70,938 $ 51,336 $ 558,105
======== ======== =========
</TABLE>

129
<PAGE> 141

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
NACT WORLD ACCESS
MINORITY AND
OLD WORLD INTEREST WORLD RESURGENS RESURGENS
ACCESS ADJUSTMENTS ACCESS RESURGENS ADJUSTMENTS COMBINED
--------- ----------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and
equivalents........ $ 57,653 $ -- $57,653 $ 1,637 $ (7,000)(C) $ 52,290
Marketable
securities......... 3,500 -- 3,500 -- -- 3,500
Accounts receivable... 41,819 -- 41,819 3,354 -- 45,173
Inventories........... 34,473 -- 34,473 -- -- 34,473
Other current
assets............. 15,429 -- 15,429 4,476 -- 19,905
-------- -------- -------- -------- -------- --------
Total Current
Assets........... 152,874 -- 152,874 9,467 (7,000) 155,341
Property and
equipment............. 17,203 -- 17,203 52,126 9,000(C) 78,329
Goodwill................ 74,378 9,617(A) 83,995 -- 71,251(C) 155,246
Acquired technology..... 4,400(A) 4,400 -- -- 4,400
Other assets............ 24,063 -- 24,063 152 18,300(C) 42,515
-------- -------- -------- -------- -------- --------
Total Assets....... $268,518 $ 14,017 $282,535 $ 61,745 $ 91,551 $435,831
======== ======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt....... $ 4,408 $ -- $ 4,408 $ 3,542 $ -- $ 7,950
Accounts payable...... 23,087 -- 23,087 19,731 -- 42,818
Other accrued
liabilities........ 12,913 -- 12,913 7,243 2,000(C) 22,156
-------- -------- -------- -------- -------- --------
Total Current
Liabilities...... 40,408 -- 40,408 30,516 2,000 72,924
Long-term debt.......... 115,529 -- 115,529 -- -- 115,529
Noncurrent
liabilities........... 1,564 1,700(A) 3,264 29,050 32,314
Minority interests...... 12,443 (12,443)(A) -- -- -- --
-------- -------- -------- -------- -------- --------
Total
Liabilities...... 169,944 (10,743) 159,201 59,566 2,000 220,767
Stockholders' Equity
Common stock.......... 219 25(A) 244 85 (85)(D) 280
36(C)
Capital in excess of
par value.......... 133,286 46,635(A) 179,921 61,467 (61,467)(D) 271,615
91,694(C)
Accumulated deficit... (34,931) (21,900)(B) (56,831) (59,373) 59,373(D) (56,831)
-------- -------- -------- -------- -------- --------
Total Stockholders'
Equity........... 98,574 24,760 123,334 2,179 89,551 215,064
-------- -------- -------- -------- -------- --------
Total Liabilities
and Stockholders'
Equity........... $268,518 $ 14,017 $282,535 $ 61,745 $ 91,551 $435,831
======== ======== ======== ======== ======== ========
</TABLE>

130
<PAGE> 142

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
NACT WORLD
OLD MINORITY ACCESS AND
WORLD INTEREST WORLD TELCO TELCO SYSTEMS TELCO SYSTEMS
ACCESS ADJUSTMENTS ACCESS SYSTEMS ADJUSTMENTS COMBINED
-------- ----------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents.... $ 57,653 $ -- $ 57,653 $ 11,601 $ -- $ 69,254
Marketable securities... 3,500 -- 3,500 2,200 -- 5,700
Accounts receivable..... 41,819 -- 41,819 16,974 -- 58,793
Inventories............. 34,473 -- 34,473 23,209 (3,000)(E) 54,682
Other current assets.... 15,429 -- 15,429 954 -- 16,383
-------- -------- -------- -------- -------- --------
Total Current
Assets......... 152,874 -- 152,874 54,938 (3,000) 204,812
Property and equipment.... 17,203 -- 17,203 8,383 (3,798)(E) 21,788
Goodwill.................. 74,378 9,617(A) 83,995 7,400 (7,400)(E) 83,995
Acquired technology....... 4,400(A) 4,400 -- 46,317(E) 50,717
Other assets.............. 24,063 -- 24,063 217 19,217(E) 43,497
-------- -------- -------- -------- -------- --------
Total Assets..... $268,518 $ 14,017 $282,535 $ 70,938 $ 51,336 $404,809
======== ======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt......... $ 4,408 $ -- $ 4,408 $ -- $ -- $ 4,408
Accounts payable........ 23,087 -- 23,087 4,357 -- 27,444
Other accrued
liabilities........... 12,913 -- 12,913 12,635 6,650(E) 32,198
-------- -------- -------- -------- -------- --------
Total Current
Liabilities.... 40,408 -- 40,408 16,992 6,650 64,050
Long-term debt............ 115,529 -- 115,529 -- -- 115,529
Noncurrent liabilities.... 1,564 1,700(A) 3,264 991 20,449(E) 24,704
Minority interests........ 12,443 (12,443)(A) -- -- -- --
-------- -------- -------- -------- -------- --------
Total
Liabilities.... 169,944 (10,743) 159,201 17,983 27,099 204,283
Stockholders' Equity
Common stock............ 219 25(A) 244 110 (110)(F) 309
65(E)
Capital in excess of par
value................. 133,286 46,635(A) 179,921 79,017 (79,017)(F) 317,736
137,815(E)
Accumulated deficit..... (34,931) (21,900)(B) (56,831) (26,172) 26,172(F) (117,519)
(60,688)(G)
-------- -------- -------- -------- -------- --------
Total
Stockholders'
Equity......... 98,574 24,760 123,334 52,955 24,237 200,526
-------- -------- -------- -------- -------- --------
Total Liabilities
and
Stockholders'
Equity......... $268,518 $ 14,017 $282,535 $ 70,938 $ 51,336 $404,809
======== ======== ======== ======== ======== ========
</TABLE>

131
<PAGE> 143

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OLD
WORLD
ACCESS,
OLD ATI AND
WORLD NACT NACT NACT
OLD ACCESS MAJORITY MAJORITY MINORITY
WORLD ATI AND ATI INTEREST INTEREST INTEREST
ACCESS ATI ADJUSTMENTS COMBINED NACT ADJUSTMENTS COMBINED ADJUSTMENTS
-------- ------ ----------- -------- ------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of products.......... $ 69,830 $ 826 $ -- $ 70,656 $ 1,175 $ -- $71,831 $ --
Service revenues........... 13,408 -- -- 13,408 1,160 -- 14,568 --
-------- ------ ------- -------- ------- -------- ------- -------
Total Sales............... 83,238 826 -- 84,064 2,335 -- 86,399 --
Cost of products sold...... 39,012 631 -- 39,643 755 190(D) 40,588 90(H)
Cost of services........... 12,189 -- -- 12,189 1,220 -- 13,409 --
-------- ------ ------- -------- ------- -------- ------- -------
Total Cost of Sales....... 51,201 631 -- 51,832 1,975 190 53,997 90
Gross Profit.............. 32,037 195 -- 32,232 360 (190) 32,402 (90)
Engineering and
development............... 2,582 241 -- 2,823 504 -- 3,327 --
Selling, general and
administrative............ 7,936 349 -- 8,285 1,369 -- 9,654 --
Amortization of goodwill... 1,882 -- 16(A) 1,898 39 360(E) 2,297 240(I)
In-process research and
development............... 50,000 -- (5,400)(B) 44,600 -- (44,600)(F) -- --
Special charges............ 3,240 -- -- 3,240 -- -- 3,240 --
-------- ------ ------- -------- ------- -------- ------- -------
Operating Income (Loss)... (33,603) (395) 5,384 (28,614) (1,552) 44,050 13,884 (330)
Interest and other
income.................... 1,971 -- -- 1,971 -- -- 1,971 --
Interest and other
expense................... (3,031) (18) -- (3,049) -- -- (3,049) --
-------- ------ ------- -------- ------- -------- ------- -------
Income (Loss) Before
Income Taxes and
Minority Interests...... (34,663) (413) 5,384 (29,692) (1,552) 44,050 12,806 (330)
Income taxes............... 6,135 -- (140)(C) 5,995 (620) -- 5,375 --
-------- ------ ------- -------- ------- -------- ------- -------
Income (Loss) Before
Minority Interests...... (40,798) (413) 5,524 (35,687) (932) 44,050 7,431 (330)
Minority interests in
earnings of subsidiary.... 1,533 -- -- 1,533 -- (305)(G) 1,228 (1,228)(J)
-------- ------ ------- -------- ------- -------- ------- -------
Net Income (Loss)......... $(42,331) $ (413) $ 5,524 $(37,220) $ (932) $ 44,355 $ 6,203 $ 898
======== ====== ======= ======== ======= ======== ======= =======
Net Income (Loss) Per
Common Share
Basic.....................
Diluted...................
Weighted Average Shares
Outstanding
Basic.....................
Diluted...................

WORLD
WORLD ACCESS,
ACCESS RESURGENS
AND TELCO AND TELCO
WORLD RESURGENS RESURGENS TELCO SYSTEMS SYSTEMS
ACCESS RESURGENS ADJUSTMENTS COMBINED SYSTEMS ADJUSTMENTS COMBINED
-------- --------- ----------- ------------ ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales of products.......... $ 71,831 $ -- $ -- $ 71,831 $60,218 $ -- $ 132,049
Service revenues........... 14,568 10,377 -- 24,945 -- -- 24,945
-------- -------- ------- -------- ------- ------- ---------
Total Sales............... 86,399 10,377 -- 96,776 60,218 -- 156,994
Cost of products sold...... 40,678 -- -- 40,678 38,636 (195)(P) 82,054
2,935(Q)
Cost of services........... 13,409 27,028 -- 40,437 -- -- 40,437
-------- -------- ------- -------- ------- ------- ---------
Total Cost of Sales....... 54,087 27,028 -- 81,115 38,636 2,740 122,491
Gross Profit.............. 32,312 (16,651) -- 15,661 21,582 (2,740) 34,503
Engineering and
development............... 3,327 -- -- 3,327 8,204 -- 11,531
Selling, general and
administrative............ 9,654 10,404 620(L) 20,678 12,270 385(R) 33,333
Amortization of goodwill... 2,537 -- 1,780(M) 4,317 444 (406)(S) 4,355
In-process research and
development............... -- -- -- -- -- -- --
Special charges............ 3,240 -- -- 3,240 -- -- 3,240
-------- -------- ------- -------- ------- ------- ---------
Operating Income (Loss)... 13,554 (27,055) (2,400) (15,901) 664 (2,719) (17,956)
Interest and other
income.................... 1,971 4 -- 1,975 376 -- 2,351
Interest and other
expense................... (3,049) (2,224) -- (5,273) -- -- (5,273)
-------- -------- ------- -------- ------- ------- ---------
Income (Loss) Before
Income Taxes and
Minority Interests...... 12,476 (29,275) (2,400) (19,199) 1,040 (2,719) (20,878)
Income taxes............... 5,375 -- (5,375)(N) -- 250 (250)(T) --
-------- -------- ------- -------- ------- ------- ---------
Income (Loss) Before
Minority Interests...... 7,101 (29,275) 2,975 (19,199) 790 (2,469) (20,878)
Minority interests in
earnings of subsidiary.... -- -- -- -- -- -- --
-------- -------- ------- -------- ------- ------- ---------
Net Income (Loss)......... $ 7,101 $(29,275) $ 2,975 $(19,199) $ 790 $(2,469) $ (20,878)
======== ======== ======= ======== ======= ======= =========
Net Income (Loss) Per
Common Share
Basic..................... $ (0.62)(W)
=========
Diluted................... $ (0.62)(W)
=========
Weighted Average Shares
Outstanding
Basic..................... 33,498(W)
=========
Diluted................... 33,498(W)
=========
</TABLE>

132
<PAGE> 144

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OLD WORLD ACCESS,
ATI AND NACT NACT WORLD
MAJORITY MINORITY ACCESS AND
INTEREST INTEREST WORLD RESURGENS RESURGENS
COMBINED ADJUSTMENTS ACCESS RESURGENS ADJUSTMENTS COMBINED
----------------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales of products................... $71,831 $ -- $71,831 $ -- $ -- $ 71,831
Service revenues.................... 14,568 -- 14,568 10,377 -- 24,945
------- ------- ------- -------- ------- --------
Total Sales....................... 86,399 -- 86,399 10,377 -- 96,776
Cost of products sold............... 40,588 90(H) 40,678 -- -- 40,678
Cost of services.................... 13,409 -- 13,409 27,028 -- 40,437
------- ------- ------- -------- ------- --------
Total Cost of Sales............... 53,997 90 54,087 27,028 -- 81,115
Gross Profit...................... 32,402 (90) 32,312 (16,651) -- 15,661
Engineering and development......... 3,327 -- 3,327 -- -- 3,327
Selling, general and
administrative.................... 9,654 -- 9,654 10,404 620(L) 20,678
Amortization of goodwill............ 2,297 240(I) 2,537 -- 1,780(M) 4,317
Special charges..................... 3,240 -- 3,240 -- -- 3,240
------- ------- ------- -------- ------- --------
Operating Income (Loss)........... 13,884 (330) 13,554 (27,055) (2,400) (15,901)
Interest and other income........... 1,971 -- 1,971 4 -- 1,975
Interest and other expense.......... (3,049) -- (3,049) (2,224) -- (5,273)
------- ------- ------- -------- ------- --------
Income (Loss) Before Income Taxes
and Minority Interests.......... 12,806 (330) 12,476 (29,275) (2,400) (19,199)
Income taxes........................ 5,375 -- 5,375 -- (5,375)(N) --
------- ------- ------- -------- ------- --------
Income (Loss) Before Minority
Interests....................... 7,431 (330) 7,101 (29,275) 2,975 (19,199)
Minority interests in earnings of
subsidiary........................ 1,228 (1,228)(J) -- -- -- --
------- ------- ------- -------- ------- --------
Net Income (Loss)................. $ 6,203 $ 898 $ 7,101 $(29,275) $ 2,975 $(19,199)
======= ======= ======= ======== ======= ========
Net Income (Loss) Per Common Share
Basic............................. $ (0.71)(O)
========
Diluted........................... $ (0.71)(O)
========
Weighted Average Shares Outstanding
Basic............................. 26,982(O)
========
Diluted........................... 26,982(O)
========
</TABLE>

133
<PAGE> 145

WORLD ACCESS, INC

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OLD
WORLD
ACCESS,
ATI AND
NACT NACT WORLD ACCESS
MAJORITY MINORITY AND
INTEREST INTEREST TELCO SYSTEMS TELCO SYSTEMS
COMBINED ADJUSTMENTS WORLD ACCESS TELCO SYSTEMS ADJUSTMENTS COMBINED
-------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales of products................. $71,831 $ -- $71,831 $60,218 $ -- $132,049
Service revenues.................. 14,568 -- 14,568 -- -- 14,568
------- ------ ------- ------- ------- --------
Total Sales..................... 86,399 -- 86,399 60,218 -- 146,617
Cost of products sold............. 40,588 90(H) 40,678 38,636 (195)(P) 82,054
2,935(Q)
Cost of services.................. 13,409 -- 13,409 -- -- 13,409
------- ------ ------- ------- ------- --------
Total Cost of Sales............. 53,997 90 54,087 38,636 2,740 95,463
Gross Profit.................... 32,402 (90) 32,312 21,582 (2,740) 51,154
Engineering and development....... 3,327 -- 3,327 8,204 -- 11,531
Selling, general and
administrative.................. 9,654 -- 9,654 12,270 385(R) 22,309
Amortization of goodwill.......... 2,297 240(I) 2,537 444 (406)(S) 2,575
Special charges................... 3,240 -- 3,240 -- -- 3,240
------- ------ ------- ------- ------- --------
Operating Income (Loss)......... 13,884 (330) 13,554 664 (2,719) 11,499
Interest and other income......... 1,971 -- 1,971 376 -- 2,347
Interest expense.................. (3,049) -- (3,049) -- -- (3,049)
------- ------ ------- ------- ------- --------
Income (Loss) Before Income
Taxes and Minority
Interests..................... 12,806 (330) 12,476 1,040 (2,719) 10,797
Income taxes...................... 5,375 -- 5,375 250 (545)(U) 5,080
------- ------ ------- ------- ------- --------
Income (Loss) Before Minority
Interests..................... 7,431 (330) 7,101 790 (2,174) 5,717
Minority interests in earnings of
subsidiary...................... 1,228 (1,228)(J) -- -- -- --
------- ------ ------- ------- ------- --------
Net Income (Loss)............... $ 6,203 $ 898 $ 7,101 $ 790 $(2,174) $ 5,717
======= ====== ======= ======= ======= ========
Net Income Per Common Share
Basic........................... $ 0.19(V)
========
Diluted......................... $ 0.18(V)
========
Weighted Average Shares
Outstanding
Basic........................... 29,748(V)
========
Diluted......................... 31,653(V)
========
</TABLE>

134
<PAGE> 146

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OLD
WORLD ACCESS,
ATI AND
NACT NACT
MAJORITY MINORITY
INTEREST INTEREST WORLD
COMBINED ADJUSTMENTS ACCESS
------------- ----------- -------
<S> <C> <C> <C>
Sales of products......................................... $71,831 $ -- $71,831
Service revenues.......................................... 14,568 -- 14,568
------- ------- -------
Total Sales............................................. 86,399 -- 86,399
Cost of products sold..................................... 40,588 90(H) 40,678
Cost of services.......................................... 13,409 -- 13,409
------- ------- -------
Total Cost of Sales..................................... 53,997 90 54,087
Gross Profit............................................ 32,402 (90) 32,312
Engineering and development............................... 3,327 -- 3,327
Selling, general and administrative....................... 9,654 -- 9,654
Amortization of goodwill.................................. 2,297 240(I) 2,537
Special charges........................................... 3,240 -- 3,240
------- ------- -------
Operating Income........................................ 13,884 (330) 13,554
Interest and other income................................. 1,971 -- 1,971
Interest expense.......................................... (3,049) -- (3,049)
------- ------- -------
Income Before Income Taxes and Minority Interests....... 12,806 (330) 12,476
Income taxes.............................................. 5,375 -- 5,375
------- ------- -------
Income Before Minority Interests........................ 7,431 (330) 7,101
Minority interests in earnings of subsidiary.............. 1,228 (1,228)(J) --
------- ------- -------
Net Income.............................................. $ 6,203 $ 898 $ 7,101
======= ======= =======
Net Income Per Common Share
Basic................................................... $ 0.31(K)
=======
Diluted................................................. $ 0.29(K)
=======
Weighted Average Shares Outstanding
Basic................................................... 23,232(K)
=======
Diluted................................................. 24,731(K)
=======
</TABLE>

135
<PAGE> 147

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OLD WORLD
ACCESS,
OLD ATI AND
WORLD NACT NACT NACT
OLD ACCESS NACT MAJORITY MAJORITY MINORITY
WORLD ATI AND ATI MAJORITY INTEREST INTEREST INTEREST
ACCESS ATI ADJUSTMENTS COMBINED INTEREST ADJUSTMENTS COMBINED ADJUSTMENTS
------- -------- ----------- -------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of products............. $71,392 $ 13,687 $ (150)(A) $ 84,929 $24,502 $ -- $109,431 $ --
Service revenues.............. 21,593 -- -- 21,593 5,493 -- 27,086 --
------- -------- ------- -------- ------- ------- -------- ------
Total Sales.................. 92,985 13,687 (150) 106,522 29,995 -- 136,517 --
Cost of products.............. 43,827 13,586 (70)(A) 57,343 7,569 370(D) 65,282 180(G)
Cost of services.............. 17,018 -- -- 17,018 5,756 -- 22,774 --
------- -------- ------- -------- ------- ------- -------- ------
Total Cost of Sales.......... 60,845 13,586 (70) 74,361 13,325 370 88,056 180
Gross Profit................. 32,140 101 (80) 32,161 16,670 (370) 48,461 (180)
Engineering and development... 1,862 4,283 -- 6,145 2,761 -- 8,906 --
Selling, general and
administrative............... 9,000 6,265 -- 15,265 6,913 -- 22,178 --
Amortization of goodwill...... 1,756 -- 200(B) 1,956 573 2,150(E) 4,679 480(H)
------- -------- ------- -------- ------- ------- -------- ------
Operating Income (Loss)...... 19,522 (10,447) (280) 8,795 6,423 (2,520) 12,698 (660)
Interest and other income..... 2,503 64 -- 2,567 734 -- 3,301 --
Interest and other expense.... (1,355) -- -- (1,355) (19) -- (1,374) --
------- -------- ------- -------- ------- ------- -------- ------
Income (Loss) Before Income
Taxes and Minority
Interests.................. 20,670 (10,383) (280) 10,007 7,138 (2,520) 14,625 (660)
Income taxes.................. 7,536 -- (3,800)(C) 3,736 2,757 -- 6,493 --
------- -------- ------- -------- ------- ------- -------- ------
Income (Loss) Before Minority
Interests.................. 13,134 (10,383) 3,520 6,271 4,381 (2,520) 8,132 (660)
Minority interests in earnings
of subsidiary................ -- -- -- -- -- 1,433(F) 1,433 (1,433)(I)
------- -------- ------- -------- ------- ------- -------- ------
Net Income (Loss)............ $13,134 $(10,383) $ 3,520 $ 6,271 $ 4,381 $(3,953) $ 6,699 $ 773
======= ======== ======= ======== ======= ======= ======== ======
Net Income (Loss) Per Common
Share
Basic........................
Diluted......................
Weighted Average Shares
Outstanding
Basic........................
Diluted......................

WORLD ACCESS
AND
RESURGENS RESURGENS TELCO SYSTEMS
WORLD ACCESS RESURGENS ADJUSTMENTS COMBINED TELCO SYSTEMS ADJUSTMENTS
------------ --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales of products............. $109,431 $ -- $ -- $ 109,431 $113,013 $
Service revenues.............. 27,086 165,489 -- 192,575 --
-------- --------- ------- --------- -------- --------
Total Sales.................. 136,517 165,489 -- 302,006 113,013 --
Cost of products.............. 65,462 -- -- 65,462 72,638 (390)(O)
5,870(P)
Cost of services.............. 22,774 246,494 1,230(K) 270,498
-------- --------- ------- --------- -------- --------
Total Cost of Sales.......... 88,236 246,494 1,230 335,960 72,638 5,480
Gross Profit................. 48,281 (81,005) (1,230) (33,954) 40,375 (5,480)
Engineering and development... 8,906 -- -- 8,906 14,927
Selling, general and
administrative............... 22,178 74,448 -- 96,626 28,181 770(Q)
Amortization of goodwill...... 5,159 -- 3,560(L) 8,719 669 (669)(R)
-------- --------- ------- --------- -------- --------
Operating Income (Loss)...... 12,038 (155,453) (4,790) (148,205) (3,402) (5,581)
Interest and other income..... 3,301 642 -- 3,943 692 --
Interest and other expense.... (1,374) (16,909) -- (18,283) --
-------- --------- ------- --------- -------- --------
Income (Loss) Before Income
Taxes and Minority
Interests.................. 13,965 (171,720) (4,790) (162,545) (2,710) (5,581)
Income taxes.................. 6,493 -- (6,493)(M) -- -- --
-------- --------- ------- --------- -------- --------
Income (Loss) Before Minority
Interests.................. 7,472 (171,720) 1,703 (162,545) (2,710) (5,581)
Minority interests in earnings
of subsidiary................ -- -- -- --
-------- --------- ------- --------- -------- --------
Net Income (Loss)............ $ 7,472 $(171,720) $ 1,703 $(162,545) $ (2,710) $ (5,581)
======== ========= ======= ========= ======== ========
Net Income (Loss) Per Common
Share
Basic........................
Diluted......................
Weighted Average Shares
Outstanding
Basic........................
Diluted......................

WORLD ACCESS,
RESURGENS AND
TELCO SYSTEMS
COMBINED
-------------
<S> <C>
Sales of products............. $ 222,444
Service revenues.............. 192,575
---------
Total Sales.................. 415,019
Cost of products.............. 143,580
Cost of services.............. 270,498
---------
Total Cost of Sales.......... 414,078
Gross Profit................. 941
Engineering and development... 23,833
Selling, general and
administrative............... 125,577
Amortization of goodwill...... 8,719
---------
Operating Income (Loss)...... (157,188)
Interest and other income..... 4,635
Interest and other expense.... (18,283)
---------
Income (Loss) Before Income
Taxes and Minority
Interests.................. (170,836)
Income taxes.................. --
---------
Income (Loss) Before Minority
Interests.................. (170,836)
Minority interests in earnings
of subsidiary................ --
---------
Net Income (Loss)............ $(170,836)
=========
Net Income (Loss) Per Common
Share
Basic........................ $ (5.31)(U)
=========
Diluted...................... $ (5.31)(U)
=========
Weighted Average Shares
Outstanding
Basic........................ 32,153(U)
=========
Diluted...................... 32,153(U)
=========
</TABLE>

136
<PAGE> 148

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OLD
WORLD
ACCESS,
ATI AND
NACT NACT WORLD ACCESS
MAJORITY MINORITY AND
INTEREST INTEREST RESURGENS RESURGENS
COMBINED ADJUSTMENTS WORLD ACCESS RESURGENS ADJUSTMENTS COMBINED
-------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales of products...................... $109,431 $ -- $109,431 $ -- $ -- $ 109,431
Service revenues....................... 27,086 -- 27,086 165,489 -- 192,575
-------- ------ -------- --------- ------- ---------
Total Sales.......................... 136,517 -- 136,517 165,489 -- 302,006
Cost of products sold.................. 65,282 180(G) 65,462 -- -- 65,462
Cost of services....................... 22,774 -- 22,774 246,494 1,230(K) 270,498
-------- ------ -------- --------- ------- ---------
Total Cost of Sales.................. 88,056 180 88,236 246,494 1,230 335,960
Gross Profit......................... 48,461 (180) 48,281 (81,005) (1,230) (33,954)
Engineering and development............ 8,906 -- 8,906 -- -- 8,906
Selling, general and administrative.... 22,178 -- 22,178 74,448 -- 96,626
Amortization of goodwill............... 4,679 480(H) 5,159 -- 3,560(L) 8,719
-------- ------ -------- --------- ------- ---------
Operating Income (Loss).............. 12,698 (660) 12,038 (155,453) (4,790) (148,205)
Interest and other income.............. 3,301 -- 3,301 642 -- 3,943
Interest and other expense............. (1,374) -- (1,374) (16,909) -- (18,283)
-------- ------ -------- --------- ------- ---------
Income (Loss) Before Income Taxes and
Minority Interests................. 14,625 (660) 13,965 (171,720) (4,790) (162,545)
Income taxes........................... 6,493 -- 6,493 -- (6,493)(M) --
-------- ------ -------- --------- ------- ---------
Income (Loss) Before Minority
Interests.......................... 8,132 (660) 7,472 (171,720) 1,703 (162,545)
Minority Interests in Earnings of
Subsidiary........................... 1,433 (1,433)(I) -- -- -- --
-------- ------ -------- --------- ------- ---------
Net Income (Loss).................... $ 6,699 $ 773 $ 7,472 $(171,720) $ 1,703 $(162,545)
======== ====== ======== ========= ======= =========
Net Income (Loss) Per Common Share
Basic................................ $ (6.34)(N)
=========
Diluted.............................. $ (6.34)(N)
=========
Weighted Average Shares Outstanding
Basic................................ 25,637(N)
=========
Diluted.............................. 25,637(N)
=========
</TABLE>

137
<PAGE> 149

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OLD WORLD
ACCESS, WORLD
ATI AND NACT NACT ACCESS AND
MAJORITY MINORITY TELCO
INTEREST INTEREST WORLD TELCO TELCO SYSTEMS SYSTEMS
COMBINED ADJUSTMENTS ACCESS SYSTEMS ADJUSTMENTS COMBINED
------------ ----------- -------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Sales of products................ $109,431 $ -- $109,431 $113,013 $ -- $222,444
Service revenues................. 27,086 -- 27,086 -- -- 27,086
-------- ------ -------- -------- ------- --------
Total Sales.................... 136,517 -- 136,517 113,013 -- 249,530
Cost of products sold............ 65,282 180(G) 65,462 72,638 (390)(O) 143,580
5,870(P)
Cost of services................. 22,774 -- 22,774 -- -- 22,774
-------- ------ -------- -------- ------- --------
Total Cost of Sales............ 88,056 180 88,236 72,638 5,480 166,354
Gross Profit................... 48,461 (180) 48,281 40,375 (5,480) 83,176
Engineering and development...... 8,906 -- 8,906 14,927 -- 23,833
Selling, general and
administrative................. 22,178 -- 22,178 28,181 770(Q) 51,129
Amortization of goodwill......... 4,679 480(H) 5,159 669 (669)(R) 5,159
-------- ------ -------- -------- ------- --------
Operating Income (Loss)........ 12,698 (660) 12,038 (3,402) (5,581) 3,055
Interest and other income........ 3,301 -- 3,301 692 -- 3,993
Interest and other expense....... (1,374) -- (1,374) -- -- (1,374)
-------- ------ -------- -------- ------- --------
Income (Loss) Before Income
Taxes and Minority
Interests.................... 14,625 (660) 13,965 (2,710) (5,581) 5,674
Income taxes..................... 6,493 -- 6,493 -- (2,373)(S) 4,120
-------- ------ -------- -------- ------- --------
Income (Loss) Before Minority
Interests.................... 8,132 (660) 7,472 (2,710) (3,208) 1,554
Minority interests in earnings of
subsidiary..................... 1,433 (1,433)(I) -- -- -- --
-------- ------ -------- -------- ------- --------
Net Income (Loss).............. $ 6,699 $ 773 $ 7,472 $ (2,710) $(3,208) $ 1,554
======== ====== ======== ======== ======= ========
Net Income (Loss) Per Common
Share
Basic.......................... $ 0.05(T)
========
Diluted........................ $ 0.05(T)
========
Weighted Average Shares
Outstanding
Basic.......................... 28,403(T)
========
Diluted........................ 29,868(T)
========
</TABLE>

138
<PAGE> 150

WORLD ACCESS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OLD
WORLD ACCESS,
ATI AND NACT NACT
MAJORITY MINORITY
INTEREST INTEREST
COMBINED ADJUSTMENTS WORLD ACCESS
------------- ----------- --------------
<S> <C> <C> <C>
Sales of products..................................... $109,431 $ -- $109,431
Service revenues...................................... 27,086 -- 27,086
-------- ------- --------
Total Sales......................................... 136,517 -- 136,517
Cost of products sold................................. 65,282 180(G) 65,462
Cost of services...................................... 22,774 -- 22,774
-------- ------- --------
Total Cost of Sales................................. 88,056 180 88,236
Gross Profit........................................ 48,461 (180) 48,281
Engineering and development........................... 8,906 -- 8,906
Selling, general and administrative................... 22,178 -- 22,178
Amortization of goodwill.............................. 4,679 480(H) 5,159
-------- ------- --------
Operating Income.................................... 12,698 (660) 12,038
Interest and other income............................. 3,301 -- 3,301
Interest and other expense............................ (1,374) -- (1,374)
-------- ------- --------
Income Before Income Taxes and Minority Interests... 14,625 (660) 13,965
Income taxes.......................................... 6,493 -- 6,493
-------- ------- --------
Income Before Minority Interests.................... 8,132 (660) 7,472
Minority interests in earnings of subsidiary.......... 1,433 (1,433)(I) --
-------- ------- --------
Net Income.......................................... $ 6,699 $ 773 $ 7,472
======== ======= ========
Net Income Per Common Share
Basic............................................... $ 0.34(J)
========
Diluted............................................. $ 0.32(J)
========
Weighted Average Shares Outstanding
Basic............................................... 21,887(J)
========
Diluted............................................. 23,353(J)
========
</TABLE>

139
<PAGE> 151

WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

GENERAL HISTORICAL INFORMATION:

ACQUISITIONS OF ATI AND NACT

The ATI acquisition consummated on January 29, 1998 and the NACT Stock
Purchase consummated on February 27, 1998 have been accounted for under the
purchase method of accounting. The historical consolidated financial statements
of World Access include the results of the operations of ATI and NACT from
February 1, 1998 and March 1, 1998, respectively. The purchase price of ATI and
the majority interest in NACT was allocated to the fair values of the net assets
acquired, to in-process research and development projects and to goodwill.
During the first quarter of 1998, $5.4 million and $44.6 million of purchased
in-process research and development technologies related to the ATI acquisition
and the NACT Stock Purchase, respectively, was expensed in accordance with the
applicable accounting rules. See Note 2 to Consolidated Financial Statements in
the World Access June 30 Form 10-Q for further descriptions of these
acquisitions.

AEROTEL LITIGATION

On August 24, 1996, Aerotel, Ltd. and Aerotel U.S.A., Inc. (collectively,
"Aerotel") commenced an action against NACT and a customer of NACT alleging that
telephone systems manufactured and sold by NACT incorporating prepaid debit card
features infringe upon Aerotel's patent which was issued in November 1987. See
Note 8 to Consolidated Financial Statements in the World Access June 30 Form
10-Q for further description of this litigation.

As part of the negotiations relating to the acquisition of NACT, Old World
Access and GST Telecommunications, Inc. agreed to share evenly any Aerotel
judgment against NACT, including NACT's legal fees. Subsequent to the NACT Stock
Purchase, World Access has been actively engaged in settlement negotiations. On
October 26, 1998, Old World Access, GST and Aerotel agreed to settle the Aerotel
litigation. Including legal fees, the World Access portion of the Aerotel
settlement was approximately $3.3 million. These settlement costs have been
accounted for as additional NACT purchase price as of June 30, 1998.

IN-PROCESS RESEARCH AND DEVELOPMENT

Overview. The nature of the efforts required to develop the purchased
in-process technology into commercially viable products principally relate to
the completion of all planning, designing, prototyping, verification, and test
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features, and technical
performance requirements.

The value of the purchased in-process technology was determined by
estimating the projected net cash flows related to such products, including
costs to complete the development of the technology and the future revenues to
be earned upon commercialization of the products. These cash flows were
discounted back to their net present value. The resulting projected net cash
flows from such projects were based on management's estimates of revenues and
operating profits related to such projects. These estimates were based on
several assumptions, including those summarized below for each respective
acquisition.

If these projects to develop commercial products based on the acquired
in-process technology are not successfully completed the sales and profitability
of World Access may be adversely affected in future periods. Additionally, the
value of other intangible assets may become impaired.

NACT. NACT provides advanced telecommunications switching platforms with
integrated applications software and network telemanagement capabilities. NACT
designs, develops, and manufacturers all hardware and software elements
necessary for a fully integrated, turnkey telecommunications switching solution.
The nature of the in-process research and development was such that
technological feasibility had not been attained. Failure to attain technological
feasibility, especially given the high degree of customization required for
complete integration into the NACT solution, would have rendered partially
designed hardware and software useless for other applications. Incomplete design
of hardware and software coding would create a non-connective, inoperable
product that would have no alternative use.

140
<PAGE> 152
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NACT's business plan called for a shift in market focus to larger
customers, both domestic and international; therefore, NACT had numerous
projects in development at the time of the acquisition. Additionally, the
pending completion of a major release of NACT's billing system required
significant development efforts to ensure continued integration with NACT's
product suite. The purchased in-process technology acquired in the NACT
acquisition was comprised of nine projects related to switching systems. These
projects were scheduled to be released between February 1998 and December 1999.
Most major projects had several ongoing sub-projects (e.g., a hardware design
project and a software design project). These projects include planned additions
of new products, based on undeveloped technologies, to NACT's suite of STX and
NTS products. The projects also include the creation of products for new product
suites. The research and development projects were at various stages of
development. None of the in-process projects considered in the write-off had
attained technological feasibility. The in-process projects do not build on
existing core technology; such existing technologies were valued as a separate
asset.

NACT had thirteen projects (the nine switching projects noted above and the
related sub projects) in development at the time of acquisition. These projects
were at multiple stages along NACT's development timeline. Some projects were
beginning testing in NACT labs; others were at earlier stages of planning and
designing. Eleven projects were scheduled for release between February and
December of 1998. The remaining two projects were scheduled for staggered
release over 1998 and 1999. Revenue projections for the in-process technologies
reflected the anticipated release dates of each project.

Revenue attributable to in-process technology was assumed to increase in
the first five years of the twelve-year projection at annual rates ranging from
52.7% to 7.2%, decreasing over the remaining years at annual rates ranging from
- -2.7% to -61.2% as other products are released in the marketplace. Projected
annual revenue attributable to in-process technology ranged from approximately a
low of $6.3 million to a high of $117.2 million within the term of the
projections. These projections were based on assumed penetration of the existing
customer base, synergies as a result of the NACT acquisition, and movement into
new markets. Projected revenues from in-process technology were assumed to peak
in 2002 and decline from 2003 through 2009 as other new products are expected to
enter the market.

In-process technology's contribution to the operating profit of NACT
(earnings before interest, taxes and depreciation and amortization) was
projected to grow within the projection period at annual rates ranging from a
high of 119.2% to a low of 11.0% during the first five years, decreasing during
the remaining years of the projection period similar to the revenue growth
projections described above. Projected in-process technology's annual
contribution to operating profit ranged from approximately $1.7 million to $34
million within the term of the projections.

The discount rate used to value the existing technology of NACT was 14.0%.
This discount rate was estimated relative to the overall business discount rate
of 15.0% based on (1) the completed status of the products utilizing existing
technology (i.e., the lack of development risk), and (2) the potential for
obsolescence of current products in the marketplace.

The discount rate used to value the in-process technology of NACT was
15.0%. This discount rate was estimated relative to the overall business
discount rate of 15.0% based on (1) the incomplete status of the products
expected to utilize the in-process technology (i.e., development risk), (2) the
expected market risk of the planned products relative to the existing products,
(3) the emphasis on targeting larger customers for the planned products, (4) the
expected demand for the products from current and prospective NACT customers,
(5) the anticipated increase in NACT's sales force, and (6) the nature of
remaining development tasks relative to previous development efforts.

Management estimates that the costs to develop the in-process technology
acquired in the NACT acquisition will be approximately $4.1 million in the
aggregate through the year 1999 ($3,249,000 in 1998 and $829,000 in 1999). The
expected sources of funding were scheduled research and development expenses
from the operating budget of NACT provided by the operating assets and
liabilities of NACT.

141
<PAGE> 153
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

ATI. ATI develops and manufactures a series of high-performance digital
microwave/millimeter radio equipment. Their products reach across all frequency
bands and data rates and offer numerous features. The nature of the in-process
research and development was such that technological feasibility had not been
attained. Failure to attain technological feasibility would have rendered
partially designed equipment useless for other applications. ATI's products are
designed for specific frequency bandwidths and, as such, are highly customized
to those bandwidths and the needs of customers wishing to operate in them.
Products only partially completed for certain bandwidths cannot be used in other
bandwidths.

Between each product line, various stages of development had been reached.
Additionally, within each product line, different units had reached various
stages of development. Of the products management considered in-process, none
had attained technological feasibility. The purchased-in-process technology
acquired in the ATI acquisition was comprised of three primary projects related
to high-performance, digital microwave/millimeter radio equipment. Each project
consists of multiple products. These projects were at multiple stages along
ATI's typical development timeline. Some projects were beginning testing in ATI
labs; others were at earlier stages of planning and designing. The majority of
the products were scheduled to be released during 1998 and 1999. Revenue
projections for the in-process technologies reflected the anticipated release
dates of each project.

Revenue attributable to in-process technology was estimated to increase
within the first three years of the seven-year projection at annual rates
ranging from a high of 240.7% to a low of 2.3%, decreasing within the remaining
years at annual rates ranging from -30.9% to -60.9% as other products are
released in the marketplace. Projected annual revenue attributable to in-process
technology ranged from approximately a low of $10.1 million to a high of $71.1
million within the term of the projections. These projections were based on
assumed penetration of the existing customer base, synergies as a result of the
ATI acquisition, and movement into new markets. Projected revenues from
in-process technology were assumed to peak in 2001 and decline from 2003 through
2004 as other new products are expected to enter the market.

In-process technology's contribution to the operating profit of ATI
(earnings before interest, taxes and depreciation and amortization) was
estimated to grow within the projection period at annual rates ranging from a
high of 665.9% to a low of 43.9% during the first four years, decreasing during
the remaining years of the projection period similar to the revenue growth
projections described above. Projected in-process technology's annual
contribution to operating profit ranged from approximately a low of -$900,000 to
a high of $9.1 million within the term of the projections.

The discount rate used to value the existing technology of ATI was 23.0%.
This discount rate was estimated relative to the overall business discount rate
of 25.0% based on (1) the completed status of the products utilizing existing
technology (i.e., the lack of development risk), and (2) the potential for
obsolescence of current products in the marketplace.

The discount rate used to value the in-process technology of ATI was 26.0%.
This discount rate was estimated relative to the overall business discount rate
of 25.0% based on (1) the incomplete status of the products expected to utilize
the in-process technology (i.e., development risk), (2) the expected market risk
of the planned products relative to the existing products, (3) the emphasis on
different markets than those currently pursued by ATI, and (4) the nature of
remaining development tasks relative to previous development efforts.

Management estimates that the costs to develop the in-process technology
acquired in the ATI acquisition will be approximately $24.3 million in the
aggregate through the year 2002 ($3.3 million, $7.2 million, $7.6 million, $5.1
million, and $1.1 million in 1998, 1999, 2000, 2001, and 2002, respectively).
The expected sources of funding were scheduled R&D expenses from the operating
budget of ATI provided by the operating assets and liabilities of ATI.

Telco Systems. Telco Systems develops and manufactures products focused on
providing integrated access for network services. Telco Systems' products can be
separated into three categories: (1) broadband

142
<PAGE> 154
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

transmission products, (2) network access products, and (3) bandwidth
optimization products. Telco Systems' products are deployed at the edge of the
service provider's networks to provide organizations with a flexible,
cost-effective means of transmitting voice, data, video and image traffic over
public or private networks.

At the time of acquisition, Telco Systems had eight primary projects in
development relating to next-generation telecommunication and data network
hardware. These projects were at various stages in the development process. Some
were about to enter the testing phase of the initial hardware prototype, while
others were still in the early concept and design specification stages. These
eight projects were scheduled for commercial release at various points in time
from December 1998 through late 1999/early 2000.

Telco Systems' in-process research and development projects are being
developed to run on new communications protocols and technologies not employed
in its current products. These include HDSL, SONET, Voice over IP and ATM
inverse multiplexing. Additionally, the products to be commercialized from Telco
Systems' in process research and development are expected to include interface
support not in Telco Systems' current product line, including E1, DS3 and OC3.

None of the in-process projects at Telco Systems considered in the
write-off are expected to achieve technological feasibility before the
consummation of World Access' acquisition of Telco Systems. Furthermore, if the
projects are not completed as planned, the in-process research and development
will have no alternative use. Failure of the in process technologies to achieve
technological feasibility may adversely affect the future profitability of World
Access.

Revenue attributable to Telco Systems' aggregate in-process technology was
assumed to increase over the first six years of the projection period at annual
rates ranging from a high of 195% to a low of zero growth, reflecting both the
displacement of Telco Systems' old products by these new products as well as the
expected growth in the overall market in which Telco Systems' products compete.
Thereafter, revenues are projected to decline over the remaining projection
period at annual rates ranging from -14% to -42%, as the acquired in process
technologies become obsolete and are replaced by newer technologies.

Management's projected annual revenues attributable to the aggregate
acquired in-process technologies, which assume that all such technologies
achieve technological feasibility, ranged from a low of approximately $28
million to a high of approximately $276 million. Projected revenues were
projected to peak in 2004 and decline thereafter through 2009 as other new
products enter the market.

The acquired in-process technology's contribution to the operating income
of Telco Systems (and subsequently World Access) was projected to grow over the
first five years of the projection period at annual rates ranging from a high of
142% to a low of 20% with one intermediate year of marginally declining
operating income. Thereafter, the contribution to operating income was projected
to decline through the projection period. The acquired in-process technology's
contribution to operating income ranged from a loss of approximately $5 million
to a high of approximately $86 million.

The discount rate used to value the existing technology was 20.0%. This
discount rate was selected because of the asset's intangible characteristics,
the risk associated with the economic life expectations of the technology, and
the risk associated with the financial assumptions with respect to the
projections used in the analysis.

The discount rate used to value the in-process technologies was 25.0%. This
discount rate was selected due to several incremental inherent risks. First the
actual useful economic life of such technologies may differ from the estimates
used in the analysis. Second, risks associated with the financial projections on
the specific products that comprise the acquired in-process research and
development. The third factor is the incomplete and unproven nature of the
technologies. Finally, future technological advances that are currently unknown
may negatively impact the economic and functional viability of the in-process
R&D.

Management expects that the cost to complete the development of the
acquired in-process technologies and to commercialize the resulting products
will aggregate approximately $16 million through 2001. Over the

143
<PAGE> 155
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

projection period, management expects to spend an additional aggregate $46
million on sustaining development efforts relating to the acquired in-process
technologies. These sustaining efforts include bug fixing, form-factor changes,
and identified upgrades.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET:

NACT MINORITY INTEREST ADJUSTMENTS

(A) The acquisition of the minority interest of NACT will be accounted for
under the purchase method of accounting. In addition, in accordance with
generally accepted accounting principles, the portion of the purchase price
allocable to the in-process research and development projects of NACT will be
expensed at the consummation of the NACT Transaction. The amount of the one-time
non-recurring charge is expected to approximate $21.9 million. Since this charge
is directly related to the acquisition and will not recur, the Unaudited Pro
Forma Statements of Operations have been prepared excluding this charge. World
Access has not determined the final allocation of the purchase price, and
accordingly, the amount ultimately determined may differ significantly from the
amounts shown below.

The unallocated excess of purchase price over the fair value of the net
assets acquired is determined as follows (in thousands):

Purchase price of approximately 32.7% minority interest in NACT:

<TABLE>
<S> <C>
Stock issued in exchange for NACT shares.................. $ 46,660
--------
Allocation:
Minority interest in subsidiaries......................... (12,443)
Adjust assets and liabilities.............................
In-process research and development costs(i)........... (21,900)
Acquired technology(ii)................................ (4,400)
Deferred tax liability(iii)............................ 1,700
--------
(37,043)
--------
Unallocated excess purchase price over net assets
acquired.................................................. $ 9,617
========
</TABLE>

(i) The in-process research and development write-off of $21.9 million is
based on the valuation performed in connection with the NACT Stock Purchase. The
valuation report assigned a value of $66.5 million to the in-process research
and development projects as of the date of the NACT Stock Purchase, of which
67.3% or $44.6 million was expensed at the consummation of the NACT Stock
Purchase. Management estimates that an additional $21.9 million of in-process
research and development projects will be written-off in conjunction with the
consummation of the NACT Transaction. World Access is in the process of
obtaining an updated valuation of the in-process research and development
projects as of the October 28, 1998 closing of the NACT Transaction for use in
determining the final purchase accounting for the NACT Transaction.

(ii) Represents the purchase price assigned to the acquired technology of
NACT based upon the valuation performed in connection with the NACT Stock
Purchase.

(iii) Establish a deferred tax liability related to the acquired
technology.

(B) Represents retained earnings adjustment for the one-time non-recurring
charge related to the write-off of in-process research and development expenses
acquired.

RESURGENS PRO FORMA ADJUSTMENTS

(C) The Resurgens Transaction will be accounted for under the purchase
method of accounting. World Access has not determined the final allocation of
the purchase price, and accordingly, the amount ultimately determined may differ
significantly from the amounts shown below.

144
<PAGE> 156
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The unallocated excess of purchase price over net assets acquired is
determined as follows (in thousands):

<TABLE>
<S> <C> <C>
Purchase price:
Cash paid for claims(i)................................... $ 3,000
Purchase of switching equipment by Old World Access for
use by Resurgens prior to closing of the merger........ 4,000
Restricted stock issued to creditors(ii).................. $76,000
Restricted stock issued to Renaissance Partners(ii)....... 15,730
-------
Total stock....................................... 91,730
Fees and expenses related to the Resurgens Transaction.... 2,000
--------
Total purchase price.............................. 100,730
--------
Allocation:
Historical stockholders' equity, net of creditor
liabilities forgiven(iii).............................. (2,179)
Adjust assets and liabilities:
Adjust licenses to estimated fair market value(iv)..... (3,000)
Adjust network switching equipment to estimated fair
market value(iv)..................................... (5,000)
Record switching equipment purchased by Old World
Access............................................... (4,000)
Establish deferred tax asset(v)........................ (15,300)
--------
(29,479)
--------
Unallocated excess purchase price over net assets
acquired.................................................. $ 71,251
========
</TABLE>

(i) Represents an estimate of $1.0 million to be paid to the creditors of
Resurgens under a cash settlement plan proposed by World Access and
approximately $2.0 million to be paid to governmental creditors.

(ii) The value assigned to the 3,750,000 restricted World Access shares to
be issued to the creditors and Renaissance Partners at the closing date will be
$25.17, the seven trading days average closing price of Old World Access common
stock, including the three days prior and the three days subsequent to May 12,
1998, the date economic terms of the Resurgens Transaction were announced, less
a 30% discount attributable to the restrictive nature of the shares. World
Access consulted with an independent financial advisor knowledgeable of the
transaction in determining the appropriate discount. Specific factors supporting
the discount are (1) the length of the restriction, (2) the number of shares
subject to restriction, and (3) the volatility of World Access common stock (the
closing price on the announcement date was $37.06 and the closing price on
November 3, 1998 was $22.56, a 39.1% reduction). Management of World Access
believes the discount rate to be used in valuing these restricted shares is
appropriate and reasonable.

In addition to the shares noted above, the creditors and Renaissance
Partners will also be issued 7,500,000 restricted World Access shares at the
closing (the "Escrowed Shares"). These shares will be immediately placed into
escrow and will be valued at par value only, or $75,000. As it becomes probable
that the conditions for release from escrow will be met, the fair market value
of the shares as measured at that time will be recorded as additional goodwill
and stockholders' equity, respectively.

145
<PAGE> 157
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Specifically, the Escrowed Shares will be released in the amounts and on
the dates specified below if the sum of the EBITDA for Resurgens for the
performance periods set forth below equals or exceeds the Target EBITDA for such
performance period as set forth below:

<TABLE>
<CAPTION>
ESCROWED SHARES
TO BE
PERFORMANCE PERIOD RELEASE DATE RELEASED TARGET EBITDA
------------------ ------------ --------------- -------------
<S> <C> <C> <C>
July 1, 1998 to and including
December 31, 1998 (the "First
Performance Period")............ February 15, 1999 1,875,000 $7,500,000
January 1, 1999 to and including
December 31, 1999 (the "Second
Performance Period")............ February 15, 2000 2,812,500 $29,000,000
January 1, 2000 to and including
December 31, 2000 (the "Third
Performance Period)............. February 15, 2001 2,812,500 $36,500,000
</TABLE>

Notwithstanding the foregoing, if the Exchange Closing Date is on or after
September 30, 1998, then the First Performance Period shall commence on the
first day of the calendar month in which the Exchange Closing occurs and shall
terminate on (and including) the last day of the sixth calendar month following
the month in which the Exchange Closing occurs, the release date shall be
forty-five (45) days after the end of such period and the Target EBITDA shall be
equal to the sum of (i) $2,100,000 for each calendar month of 1998 included in
the First Performance Period and (ii) $2,400,000 for each calendar month of 1999
included in the First Performance Period.

If, after the Exchange, the EBITDA of Resurgens is less than the Target
EBITDA required for the release of Escrowed Shares in either of the First or
Second Performance Periods (and with respect to the Second Performance Period is
no less than zero), then, notwithstanding anything described herein, the
Escrowed Shares shall be released if the actual cumulative EBITDA for Resurgens
for such Performance Period and any subsequent Performance Periods equals or
exceeds the cumulative Target EBITDA for such Performance Periods.

Notwithstanding anything to the contrary, (a) if during any calendar
quarter of the Second Performance Period, the closing price per share of the
World Access Common Stock as reported by Nasdaq equals or exceeds $65.00 for any
five consecutive trading days during such calendar quarter, then 25% of all of
the shares of Escrowed Shares shall be released on February 15, 2000, provided
that if no Escrowed Shares are eligible for release during any such calendar
quarter, then such Escrowed Shares shall become eligible for release in a
subsequent calendar quarter of the Second Performance Period if the closing
price per share of the World Access Common Stock as reported by Nasdaq equals or
exceeds $65.00 for a total number of consecutive trading days during such
subsequent calendar quarter equal to or exceeding the total number of trading
days which such closing price was required to equal or exceed for (i) such
subsequent calendar quarter and (ii) each of the previous calendar quarters
beginning with the calendar quarter for which such Escrowed Shares were not
eligible for release; (b) if the EBITDA of Resurgens for the Second Performance
Period equals or exceeds $52,775,000, then the Escrowed Shares related to the
Third Performance Period shall be released on February 15, 2000; and (c) all of
the Escrowed Shares shall be released upon a Change of Control (as defined in
the Exchange Agreement).

(iii) The combined historical accounts of Resurgens include pre-petition
creditor liabilities of $334.5 million, which are classified as "liabilities
subject to compromise," and borrowings under the WorldCom, Inc.
debtor-in-possession financing facility of $22.0 million as of June 30, 1998,
respectively. These liabilities will be satisfied in connection with the Plan of
Reorganization, which has been approved by the creditors committee and was
confirmed by the bankruptcy court on September 3, 1998. Upon the closing of the
Resurgens Transaction, the creditors will receive shares of RCG common stock in
exchange for the surrender

146
<PAGE> 158
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

of all of their claims against RCG. Immediately thereafter, the creditors'
shares of RCG will be cancelled and automatically converted into the right to
receive shares of World Access Common Stock, a portion of which will be received
directly and a portion of which will be deposited into escrow pending the
satisfaction of certain conditions. All such shares of World Access Common Stock
are subject to certain contractual restrictions.

The confirmation of the Plan of Reorganization is a condition precedent to
the closing of the Resurgens Transaction. Therefore, the combined historical
stockholders deficit of $354.4 million as of June 30, 1998 has been adjusted to
reflect a $352.6 million reduction for the liabilities subject to compromise and
the WorldCom, Inc. debtor-in-possession financing facility for purposes of the
unaudited pro forma combined balance sheet.

(iv) Estimates of fair market value of the licenses and the switching
equipment acquired have been made by management. These estimates are subject to
adjustment pending final valuations to be obtained from independent appraisers.

(v) At the time the Resurgens Transaction is consummated, Resurgens is
expected to have in excess of $125 million in net operating loss carryforwards
available to offset future federal taxable income. Based on its current
assessment of the forecasted operating results of Resurgens and other pertinent
factors, management expects at least 35% of these future tax benefits will be
realized. Accordingly, a deferred tax asset of $44 million, net of a 65%
valuation allowance of approximately $29 million, has been reflected in the Pro
Forma Combined Balance Sheet. The amount of the valuation allowance is subject
to future analysis and may be revised prior to the closing of the Resurgens
Transaction.

The pro forma loss of the combined entity is not indicative of the results
of operations that are expected to be achieved by the combined entity in the
future. The nature of Resurgens current operations are concentrated solely on
the international carriers' carrier business and an upgraded, efficient
operating network is now in place. Resurgens has a new, experienced management
team in place and has entered into several new contracts to increase its revenue
base, including a significant service contract with WorldCom Network Services,
Inc., a wholly owned subsidiary of WorldCom, Inc. Prior to the acquisition of
Resurgens, it is expected that Resurgens will be essentially debt free due to
its Chapter 11 bankruptcy proceedings. In addition, there are several closing
conditions that must be satisfied before the Resurgens Transaction is
consummated, including the achievement by Resurgens of monthly revenues of $25
million and related gross profit margin of greater than 5% for the calendar
month immediately preceding the closing date.

(D) Eliminate existing stockholders' equity.

TELCO SYSTEMS PRO FORMA ADJUSTMENTS

(E) The Merger will be accounted for under the purchase method of
accounting. In addition, in accordance with generally accepted accounting
principles, the portion of the purchase price allocable to the in-process
research and development projects of Telco Systems will be expensed at the
consummation of the acquisition. The amount of the one-time non-recurring charge
is expected to approximate $60.7 million. Since this charge is directly related
to the acquisition and will not recur, the Unaudited Pro Forma Statements of
Operations have been prepared excluding this charge. World Access has not
determined the final allocation of the purchase price, and accordingly, the
amount ultimately determined may differ significantly from the amounts shown
below.

147
<PAGE> 159
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The amounts allocated to tangible and intangible assets acquired less
liabilities assumed exceed the purchase price by approximately $24.0 million.
This excess value over cost has been allocated to reduce proportionably the
values assigned to long-term assets in determining their fair values. As a
result in the change in fair values of the long-term assets, the deferred tax
liability associated with these assets was also adjusted.

The table below is a summary of the preliminary amounts allocated to the
long-term assets, the allocation of the excess value over purchase price and the
resulting fair values of the assets acquired:

<TABLE>
<CAPTION>
FAIR VALUE ALLOCATION
PER EXCESS VALUE OF PURCHASE PRICE
PRELIMINARY OVER PURCHASE TO LONG-TERM
LONG-TERM ASSET CATEGORY VALUATION PRICE ASSETS
------------------------ ----------- ------------- -----------------
<S> <C> <C> <C>
Property and equipment.................................. $ 5,583 $ (998) $ 4,585
Acquired technology..................................... 56,400 (10,083) 46,317
Purchased in-process research and development........... 73,900 (13,212) 60,688
Other assets............................................ 23,400 (4,183) 19,217
Deferred tax liabilities................................ (24,900) 4,451 (20,449)
-------- -------- --------
$134,383 $(24,025) $110,358
======== ======== ========
</TABLE>

The purchase price and the allocation to the fair values of assets and
liabilities is determined as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Purchase price(i):
Stock issued in exchange for Telco Systems shares......... $133,380
Fair market value of World Access options issued in
exchange for Telco Systems options..................... 4,500
Fees and expenses related to the Merger................... 3,750
--------
Total purchase price.............................. $141,630
========
Allocation to the fair values of assets and liabilities:
Historical stockholders' equity........................... $ 52,955
Eliminate historical goodwill............................. (7,400)
Adjust assets and liabilities:
Write-down of inventories related to outsourcing,
recent procurement agreements, excess quantities
related to reduced demand of certain legacy products
and those that are non-strategic as a result of the
Merger to net realizable value........................ (3,000)
Write-down to fair market value of certain redundant
equipment resulting from the Merger................... (1,500)
Write-off of leaseholds associated with Telco's current
Norwood facility which is expected to be relocated.... (1,300)
Pro rata adjustment to property and equipment resulting
from the excess value over cost....................... (998)
Accrue involuntary employee termination benefits....... (1,500)
Accrue lease termination provision related to Telco's
current Norwood facility.............................. (1,400)
Trademarks............................................. 6,077
Establish deferred tax asset(ii)....................... 13,140
Acquired technology(iii)............................... 46,317
In-process research and development costs(iv).......... 60,688
Deferred tax liabilities(v)............................ (20,449)
--------
$141,630
========
</TABLE>

(i) The total purchase price of Telco Systems was determined by multiplying
the number of shares of Telco Systems Common Stock outstanding (approximately
11.1 million shares) by the Minimum Nominal Value ($12). The total purchase
price was computed based on the Minimum Nominal Value because the value of the
Merger Consideration to which the holder of one share of Telco Systems Common
Stock would

148
<PAGE> 160
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

otherwise be entitled (determined by multiplying the Exchange Ratio of .5862
(assuming that World Access does not elect to pay any portion of the Merger
Consideration in cash) by the average of the last reported sale prices of one
share of World Access Common Stock for the seven trading days surrounding the
October 13, 1998 announcement of the new economic terms of the Merger (or
$14.25)) would be less than the Minimum Nominal Value.

Pursuant to the Merger Agreement, World Access, at its option, may pay a
portion of the Merger Consideration (which would otherwise be paid solely in
shares of World Access Common Stock) in cash, subject to the requirement that a
minimum of 45% of the Merger Consideration be paid in the form of World Access
Common Stock. For purposes of these pro forma combined financial statements,
World Access has assumed that the Merger Consideration will consist solely of
approximately 6.5 million shares of World Access Common Stock having an
approximate value of $133.4 million. The value of the World Access Common Stock
comprising Merger Consideration was determined by multiplying (i) the number of
shares of World Access Common Stock assumed to be issued (based an exchange
ratio of .5862) by (ii) $20.47, which represents the World Access Market Price
below which World Access would be obligated to issue additional shares of World
Access Common Stock or pay additional cash amounts to the Telco Systems
stockholders to ensure that they receive Merger Consideration having the Minimum
Nominal Value.

If World Access elects to pay the minimum of 45% of the Merger
Consideration in the form of World Access Common Stock, then the Merger
Consideration would consist of approximately 2.9 million shares of World Access
Common Stock (having an approximate value of $60.0 million) and approximately
$73.4 million in cash. For purposes of each of the foregoing calculations, the
World Access Market Price was assumed to be $20.47.

The total purchase price of Telco Systems for purposes of these unaudited
pro forma combined financial statements does not give effect to Telco Systems'
acquisition of Synaptyx in October 1998 pursuant to which Telco systems issued
approximately 576,000 shares of Telco Systems Common Stock, placed in escrow an
additional approximately 204,000 shares of Telco Systems Common Stock, the
release of which is subject to achieving certain operating performance criteria,
and issued options to acquire approximately 368,000 shares of Common Stock. As a
consequence of this transaction, World Access will be required in the Merger (i)
to issue an additional approximately 457,000 shares of World Access Common Stock
and options to acquire approximately 216,000 shares of World Access Common Stock
(assuming that the Merger Consideration is comprised solely of shares of World
Access Common Stock) or (ii) to issue an additional approximately 206,000 shares
of World Access Common Stock and options to acquire approximately 216,000 shares
of World Access Common Stock and pay approximately $5.1 million in cash
(assuming that 55% of the Merger Consideration is comprised of cash). The
acquisition of Synaptyx does not meet any of the materiality thresholds that
would require it to be given pro forma effect in this Joint Proxy
Statement/Prospectus.

(ii) The net deferred tax asset of $13.1 million is comprised primarily of
gross temporary differences arising from the differences between book and tax
basis of certain assets and liabilities and for tax credits available to Telco
Systems and World Access. It is the opinion of management that these tax assets
are likely to be utilized by Telco Systems or World Access.

(iii) The value of the acquired technology of $46.3 million is based on a
preliminary valuation report prepared by an independent appraiser as adjusted
for the pro rata allocation of the excess value over cost. The value of Telco
Systems' current technology is calculated using the income approach.

(iv) The amount of in-process research and development costs of $60.7
million is based on (1) a preliminary valuation report prepared by an
independent appraiser, based on factors considered such as the number of
projects in process, the potential alternative future uses of those projects and
estimated future projected revenues from those projects as adjusted for the pro
rata allocation of the excess value over cost. World Access will obtain an
updated valuation of the in-process research and development as of the closing
of the Merger for use in determining the final purchase accounting for the
Merger.

149
<PAGE> 161
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(v) Establish deferred tax liabilities related to the identifiable
intangible assets.

(F) Eliminate existing stockholders' equity.

(G) Represents retained earnings adjustment for the one-time non-recurring
charge related to the write-off of in-process research and development expenses
acquired.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1998:

ATI PRO FORMA ADJUSTMENTS

(A) Amortization of unallocated excess purchase price over net assets
acquired over 15 years relating to the one month period ended January 31, 1998
not included in the Old World Access historical statement of earnings.

(B) Eliminate the one-time non-recurring in-process research and
development charge recorded in connection with the ATI merger.

NACT MAJORITY INTEREST PRO FORMA ADJUSTMENTS

(D) Amortization of the acquired technology relating to the majority
interest portion of NACT over 8 years.

(E) Amortization of unallocated excess purchase price over net assets
acquired over 20 years relating to the two month period ended February 28, 1998
not included in the Old World Access historical statement of earnings.

(F) Eliminate the one-time non-recurring in-process research and
development charge recorded in connection with the purchase of the majority
interest in NACT.

(G) Record the 32.7% minority interest in net income of NACT.

NACT MINORITY INTEREST PRO FORMA ADJUSTMENTS

(H) Amortization of the acquired technology relating to the minority
interest portion of NACT over 8 years.

(I) Amortization of unallocated excess purchase price over net assets
acquired related to the purchase of the remaining minority interest in NACT over
20 years.

(J) Reverse the minority interests in earnings of NACT.

(K) Represents basic and diluted earnings per share, including
approximately 2.8 million shares of World Access common stock issued in the NACT
Transaction calculated in accordance with SFAS 128.

RESURGENS PRO FORMA ADJUSTMENTS

(L) Record an adjustment to depreciation expense for the adjustment to fair
market value of switching equipment and the adjustment to amortization expense
for the adjustment to fair market values of the license agreements.

(M) Amortization of unallocated excess purchase price over net assets
acquired over 20 years.

(N) Adjust tax provision for the benefit of the loss incurred by Resurgens
and the pro forma adjustments.

(O) Represents basic and diluted earnings per share, including
approximately 3.8 million shares of World Access common stock issued to
Resurgens's creditors and Renaissance Partners calculated in accordance with
SFAS 128.

150
<PAGE> 162
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

TELCO SYSTEMS PRO FORMA ADJUSTMENTS

(P) Record an adjustment to depreciation expense related to the write-down
of certain redundant equipment and the adjustment to fair values resulting from
the excess values over purchase price.

(Q) Amortization of acquired technology of Telco Systems over 8 years.

(R) Amortization of trademarks of Telco Systems over 8 years.

(S) Represents the elimination of the portion of Telco Systems' historical
intangible asset amortization written down in connection with the merger.

(T) Adjust tax provision for the benefit of the loss incurred by the
combined entities.

(U) To record a reduction in tax expense related to the reduction of the
deferred tax liability established in conjunction with the allocation of
purchase price to acquired technology and trademarks.

(V) Represents basic and diluted earnings per share, including
approximately 6.5 million shares of World Access common stock issued in the
merger and common stock equivalents related to stock options issued in exchange
for Telco Systems options calculated in accordance with SFAS 128.

(W) Represents basic and diluted earnings per share, including
approximately 6.5 million shares assumed issued in the Merger, 3.8 million
shares assumed issued in the Resurgens Transaction and 2.8 million shares issued
in the NACT Transaction.

PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997:

ATI PRO FORMA ADJUSTMENTS

(A) Eliminate inter-company sales and related cost of sales.

(B) Amortization of unallocated excess purchase price over net assets
acquired over 15 years.

NACT MAJORITY INTEREST PRO FORMA ADJUSTMENTS

(D) Amortization of acquired technology relating to the majority interest
portion of NACT over 8 years.

(E) Amortization of unallocated excess purchase price over net assets
acquired over 20 years.

(F) Record the 32.7% minority interest in net income of NACT.

NACT MINORITY INTEREST PRO FORMA ADJUSTMENTS

(G) Amortization of acquired technology relating to the minority interest
portion of NACT over 8 years.

(H) Amortization of unallocated excess purchase price over net assets
acquired over 20 years.

(I) Reverse the minority interests in earnings of NACT.

(J) Represents basic and diluted earnings per share, including
approximately 2.8 million shares of World Access common stock issued in the NACT
Transaction calculated in accordance with SFAS 128.

RESURGENS PRO FORMA ADJUSTMENTS

(K) Record an adjustment to depreciation expense for the adjustment to fair
market value of switching equipment and the adjustment to amortization expense
for the adjustment to fair market value of the license agreements.

(L) Amortization of unallocated excess purchase price over net assets
acquired over 20 years.

(M) Adjust tax provision for the benefit of the loss incurred by Resurgens
and the pro forma adjustments.

151
<PAGE> 163
WORLD ACCESS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(N) Represents basic and diluted earnings per share, including
approximately 3.8 million shares of World Access common stock issued to
Resurgens's creditors and Renaissance Partners calculated in accordance with
SFAS 128.

TELCO SYSTEMS PRO FORMA ADJUSTMENTS

(O) Record an adjustment to depreciation expense related to the write-down
of certain redundant equipment and the adjustment to fair values resulting from
the excess value over purchase price.

(P) Amortization of acquired technology of Telco Systems over 8 years.

(Q) Amortization of trademarks of Telco Systems over 8 years.

(R) Represents the elimination of the portion of Telco Systems' historical
intangible asset amortization written down in connection with the merger.

(S) Adjust tax provision for the benefit of the Telco Systems' loss and pro
forma adjustments. This adjustment is not required when presented to give effect
to the Resurgens Transaction as the loss of Resurgens eliminates the provision
for income taxes in its entirety.

(T) Represents basic and diluted earnings per share, including
approximately 6.5 million shares of World Access common stock issued in the
merger and common stock equivalents related to stock options issued in exchange
for Telco Systems options calculated in accordance with SFAS 128.

(U) Represents basic and diluted earnings per share, including
approximately 6.5 million shares assumed issued in the Merger, 3.8 million
shares assumed issued in the Resurgens Transaction and 2.8 million shares issued
in the NACT Transaction.

152
<PAGE> 164

DESCRIPTION OF WORLD ACCESS CAPITAL STOCK

GENERAL

World Access is authorized to issue 40,000,000 shares of World Access
Common Stock, and 10,000,000 shares of preferred stock, par value $.01 per share
("World Access Preferred Stock"). If the World Access stockholders approve the
proposal to increase the number of authorized shares of World Access Common
Stock at the World Access Special Meeting, then the number of authorized shares
of World Access Common Stock will increase to 150,000,000 shares. As of November
2, 1998, there were issued and outstanding 25,675,253 shares of World Access
Common Stock and no shares of World Access Preferred Stock.

WORLD ACCESS COMMON STOCK

The holders of World Access Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by the stockholders. There is
no cumulative voting with respect to the election of directors; accordingly,
holders of a majority of the outstanding shares of World Access Common Stock can
elect all members of World Access' board of directors, and holders of the
remaining shares by themselves cannot elect any member of the board of
directors. Holders of World Access Common Stock have the exclusive right,
subject to the DGCL, to vote for election of directors and all other purposes.

The holders of World Access Common Stock are entitled to receive dividends
when, as and if declared by the board of directors out of funds legally
available therefor. In the event of the liquidation, dissolution or winding up
of World Access, the holders of World Access Common Stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the World Access Common Stock. Holders of shares of
World Access Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
World Access Common Stock. All of the outstanding shares of World Access Common
Stock are fully paid and nonassessable.

WORLD ACCESS PREFERRED STOCK

The World Access board of directors is authorized, without stockholder
approval, to issue from time to time up to 10,000,000 shares of World Access
Preferred Stock in one or more series and, with respect to each series, to
determine, subject to limitations prescribed by law, any dividend rights and
rates, any conversion or exchange rights, any rights, terms and prices of
redemption (including sinking fund provisions), any liquidation preferences, any
voting rights, and generally any other rights, preferences, privileges,
qualifications, limitations and restrictions not in conflict with the World
Access Certificate. To date, no series of World Access Preferred Stock has been
authorized or issued. World Access has no present plans to issue any shares of
World Access Preferred Stock.

The issuance of shares of World Access Preferred Stock by action of the
World Access board of directors could adversely affect the voting power,
dividend rights and other rights of holders of World Access Common Stock.
Issuance of shares of a series of World Access Preferred Stock also could,
depending on the terms of such series, either impede or facilitate the
completion of a merger, tender offer or other takeover attempt. Although the
World Access board of directors is required to make a determination as to the
best interests of World Access and its stockholders when issuing shares of World
Access Preferred Stock, the board of directors could act in a manner that would
discourage an acquisition attempt or other transaction that some or a majority
of the stockholders might believe to be in the best interests of World Access or
in which stockholders might receive a premium for their World Access Common
Stock over the then-prevailing market price. Although there are currently no
plans to issue shares of World Access Preferred Stock or rights to purchase such
shares, World Access believes that the availability of the World Access
Preferred Stock will provide it with increased flexibility in structuring future
financings and acquisitions and in meeting other corporate needs that might
arise. The authorized shares of World Access Preferred Stock are available for
issuance without further action by the World Access stockholders, unless such
action is required by applicable law or the rules of any stock exchange on which
the World Access Common Stock may then be listed.

153
<PAGE> 165

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the DGCL provides that an "interested stockholder" of a
Delaware corporation may not engage in any business combination, including
mergers or consolidations or acquisitions of additional shares of the
corporation, with the corporation for a three-year period following the date
that such stockholder becomes an interested stockholder unless (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an "interested stockholder," the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(iii) at or subsequent to such time, the business combination is approved by the
board of directors of the corporation and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
Except as otherwise specified in Section 203, an interested stockholder is
defined to include (x) any person that is the owner of 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the date
of determination, and (y) the affiliates and associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. World Access has not
elected to be exempt from the restrictions imposed under Section 203. The
provisions of Section 203 may encourage persons interested in acquiring World
Access to negotiate in advance with its board of directors, since the
stockholder approval requirement would be avoided if a majority of the directors
then in office approves either the business combination or the transaction which
results in any such person becoming an interested stockholder. Such provisions
also may have the effect of preventing changes in the management of World
Access. It is possible that such provisions could make it more difficult to
accomplish transactions which World Access stockholders may otherwise deem to be
in their best interests.

LIABILITY OF DIRECTORS

The World Access Certificate provides that a director of World Access will
not be personally liable to World Access or its stockholders for monetary
damages for breach of fiduciary duty as a director, except, if required by the
DGCL as amended from time to time, for liability (i) for any breach of the
director's duty of loyalty to World Access or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, which concerns unlawful
payments of dividends, stock purchases or redemptions, or (iv) for any
transactions from which the director derived an improper personal benefit.
Neither the amendment nor repeal of such provision will eliminate or reduce the
effect of such provision in respect of any matter occurring, or any cause of
action, suit or claim, that, but for such provision, would accrue or arise,
prior to such amendment or repeal.

TRANSFER AGENT

The transfer agent for the World Access Common Stock is Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.

154
<PAGE> 166

COMPARISON OF STOCKHOLDER RIGHTS

The rights of World Access stockholders are currently governed by the DGCL,
the World Access Certificate and the By-Laws of World Access (the "World Access
By-Laws"). The rights of Telco Systems stockholders are currently governed by
the DGCL, the Telco Systems Certificate and the by-laws of Telco Systems (the
"Telco Systems By-Laws"). In accordance with the Merger Agreement, at the
Effective Time, each issued and outstanding share of Telco Systems Common Stock
(together with the Associated Rights) (other than (i) shares owned by Telco
Systems, World Access or Old World Access, which will be cancelled, and (ii)
shares held by persons who have perfected their appraisal rights (if applicable)
under Section 262 of the DGCL) will be converted into the right to receive the
Merger Consideration, at least 45% of which will be in the form of shares of
World Access Common Stock. Accordingly, upon consummation of the Merger, the
rights of Telco Systems stockholders who become stockholders of World Access in
the Merger will be governed by the DGCL, the World Access Certificate and World
Access By-Laws. The following is a summary of the material differences between
the current rights of World Access stockholders and the current rights of Telco
Systems stockholders.

The following discussions are not intended to be complete and are qualified
by reference to the World Access Certificate, the World Access By-Laws, the
Telco Systems Certificate and the Telco Systems By-Laws. Copies of these
documents are incorporated by reference herein and will be sent to stockholders
of Telco Systems and World Access upon request. See "Incorporation of Certain
Documents by Reference."

AUTHORIZED CAPITAL

World Access. The authorized capital stock of World Access consists of
40,000,000 shares of World Access Common Stock, of which there were 25,675,253
shares issued and outstanding as of November 2, 1998, and 10,000,000 shares of
World Access Preferred Stock, of which none are issued and outstanding. At the
World Access Special Meeting, stockholders are being asked to approve an
increase in the number of shares of World Access Common Stock to 150,000,000.
Both common and preferred shares have par value of $0.01 per share.

Telco Systems. The authorized capital stock of Telco Systems consists of
25,000,000 shares of common stock, of which 24,000,000 are designated as Telco
Systems Common Stock and 1,000,000 are designated as Series A Junior Common
Stock, and 5,000,000 shares of preferred stock, of which 200,000 have been
designated as Series A Participating Cumulative Preferred Stock. Both common and
preferred shares have par value of $0.01 per share. There were 11,942,598 shares
of Telco Systems Common Stock issued and outstanding as of November 6, 1998. No
shares of Junior Common Stock or Preferred Stock of Telco Systems are issued and
outstanding.

BOARD OF DIRECTORS

World Access. Pursuant to the World Access Certificate, the number of
directors of World Access is to be fixed from time to time by resolution adopted
by the World Access board of directors by at least a majority of the total
number of authorized directors most recently fixed by the World Access board of
directors. In addition, pursuant to the World Access Certificate, the number of
directors may not consist of fewer than three members and not more than twelve
members. The current size of the World Access board of directors is fixed at
six. The World Access Certificate provides for three classes of directors, with
each class elected for a term of three years and consisting as nearly as
possible of one third of the total number of directors on the World Access board
of directors. Classification of directors has the effect of making it more
difficult for stockholders to change the composition of the World Access board
of directors. World Access directors are elected by an affirmative plurality of
the number of votes cast at the annual stockholders meeting by the holders of
shares entitled to vote in the election of directors. A quorum at any meeting of
the World Access board of directors consists of a majority of the total number
of directors, and a majority of the directors present at any meeting at which a
quorum is present is required and sufficient to approve an action of the World
Access board of directors.

Telco Systems. Pursuant to the Telco Systems Certificate and the Telco
Systems By-Laws, the number of Telco Systems directors is determined from time
to time by the affirmative vote of a majority of the entire

155
<PAGE> 167

Telco Systems board of directors or by the affirmative vote of a majority of
Telco Systems' voting stock. The current size of the Telco Systems board of
directors is fixed at five. The Telco Systems certificate provides for
cumulative voting for directors. Cumulative voting entitles a stockholder to
cast a number of votes equal to the number of directors to be elected multiplied
by the number of votes to which that stockholder's shares are entitled without
cumulative voting, and all such votes may be cast for a single candidate or may
be distributed among any or all of the candidates. The Telco Systems By-Laws
provide that Telco Systems directors are selected based upon the directors who
have received the greatest number votes. The Telco Systems board of directors is
not divided into classes. Telco Systems directors are elected for one-year terms
by stockholders at Telco Systems' annual meeting. A quorum at any meeting of the
Telco Systems board of directors consists of a majority of the total number of
Telco Systems directors, and a majority of the directors present at any meeting
at which a quorum is present is required and sufficient to approve an action of
the Telco Systems board of directors.

COMMITTEES OF THE BOARD OF DIRECTORS

World Access. The World Access By-Laws provide for the designation of
committees by resolution passed by a majority of the whole World Access board of
directors. Committees must consist of one or more of the directors, and may
exercise the powers and authority of the World Access board of directors in the
management and business affairs of the corporation. The World Access board of
directors currently has an Audit Committee and a Compensation Committee.

Telco Systems. Pursuant to the Telco Systems By-Laws, the Telco Systems
board of directors may designate an Executive Committee composed of three or
more directors appointed by the Telco Systems board of directors. To the full
extent permitted by law, the Executive Committee may be delegated by the Telco
Systems board of directors all powers of the Telco Systems board of directors
while the board is not in session. Other committees may be designated from time
to time by resolution passed by a majority of the whole Telco Systems board of
directors. To the full extent permitted by law, such committees may be delegated
by the Telco Systems board of directors all powers of the board. The Telco
Systems board of directors currently has an Audit Committee and a Compensation
Committee.

NEWLY CREATED DIRECTORSHIPS AND VACANCIES

World Access. Pursuant to the World Access Certificate, only a majority of
the World Access board of directors then in office, although less than a quorum,
may fill newly created or vacated board seats. The World Access Certificate also
provides that a sole remaining director may fill the vacant seats.

Telco Systems. The Telco Systems By-Laws contain provisions similar to the
World Access Certificate regarding the filling of directors vacancies.

REMOVAL OF DIRECTORS

World Access. The World Access Certificate provides that directors may be
removed only for cause and only by the affirmative vote of the holders of at
least a majority of the voting power of all outstanding shares of capital stock
then entitled to vote in an election of directors, voting as a single class.

Telco Systems. Neither the Telco Systems Certificate nor the Telco Systems
By-Laws includes a provision setting forth the procedure for the removal of
directors. Under the DGCL, any director or the entire board of directors of a
corporation may be removed, with or without cause, by the holders of a majority
of shares then entitled to vote at an election of directors.

OFFICERS

World Access. Pursuant to the World Access By-Laws, the World Access board
of directors may appoint a President, a Secretary, a Treasurer, and, if deemed
necessary, expedient or desirable by the World Access board of directors, a
Chairman of the board of directors, a Vice-Chairman of the board of directors,
an executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and other officers.
Except as may otherwise be provided in the resolution of the World Access board
of directors choosing an officer, no officer other than the Chairman or
Vice-Chairman of the

156
<PAGE> 168

board of directors, if any, need be a director. The World Access By-Laws allow
removal of officers by the World Access board of directors with or without
cause.

Telco Systems. Pursuant to the Telco Systems By-Laws, the Telco Systems
board of directors shall appoint a Chairman of the board of directors, a
President, a Secretary and a Chief Financial Officer. The Telco Systems board of
directors may appoint a Chief Executive Officer, one or more Vice-Presidents,
one or more Assistant Secretaries and Assistant Chief Financial Officers. The
Telco Systems By-Laws provide that, notwithstanding express provisions of a
contract authorized by the Telco Systems board of directors, officers may be
removed with or without cause.

SPECIAL MEETINGS OF STOCKHOLDERS

World Access. Pursuant to the World Access By-Laws, a special meeting of
the World Access stockholders may be called at any time by the directors or by
any officer instructed by the directors to call the meeting.

Telco Systems. Pursuant to the Telco Systems Certificate and Telco Systems
By-Laws, a special meeting of Telco Systems stockholders may be called only by
the Chairman of the board of directors, the President, the Telco Systems board
of directors or a committee of the Telco Systems board of directors which has
been duly designated by the Telco Systems board of directors and whose powers
and authority as provided in a resolution of the Telco Systems board of
directors or in the Telco Systems By-Laws include the power to call such
meetings or by a person or persons owning, directly or indirectly, shares
possessing not less than 20% of the votes eligible to be cast for the election
of directors at the time any such determination is being made.

QUORUM AT STOCKHOLDER MEETINGS

Pursuant to the World Access By-Laws and the Telco Systems By-Laws,
respectively, the holders of a majority of the shares of stock of the respective
corporation entitled to vote constitutes a quorum at all stockholder meetings.
In the absence of a quorum, the holders of a majority of the shares of stock
present in person or by proxy and entitled to vote may adjourn any meeting until
a quorum attends.

STOCKHOLDER ACTION BY WRITTEN CONSENT

The World Access By-Laws and the Telco Systems Certificate, respectively,
deny the right for stockholders to act by written consent.

ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS

Neither the Telco Systems Certificate, the Telco Systems By-Laws, the World
Access Certificate nor the World Access By-Laws includes a provision which
requires that advance notice be given to Telco Systems or World Access of
stockholder-proposed business to be conducted at annual meetings, except that
pursuant to the World Access Certificate, stockholders desiring to nominate
persons for election as directors at an annual meeting must notify the Secretary
of World Access in writing not less than 120 calendar days in advance of the
date which is one year later than the date of the World Access proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that if no annual meeting of stockholders
was held in the previous year or if the date of the forthcoming annual meeting
of stockholders has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement or if the
forthcoming meeting is not an annual meeting of stockholders, then to be timely
such stockholder's notice must be so received not later than the close of
business on the tenth day following the earlier of (a) the day on which notice
of the date of the forthcoming meeting was mailed or given to stockholders by or
on behalf of World Access or (b) the day on which public disclosure of the date
of the forthcoming meeting was made by or on behalf of World Access. Any such
stockholders' notices must contain the specific information set forth in the
World Access Certificate. The DGCL also does not explicitly require that
stockholder-proposed business be the subject of an advance notice to
stockholders.

AMENDMENT OF GOVERNING DOCUMENTS

World Access. World Access may amend, alter, change or repeal any
provision of the World Access Certificate as permitted by the DGCL. Under the
DGCL, an amendment to a corporation's certificate of

157
<PAGE> 169

incorporation requires the recommendation of a corporation's board of directors,
the approval of a majority of all shares entitled to vote thereon, voting
together as a single class, and the approval of a majority of the outstanding
stock of each class entitled to vote separately thereon unless a higher vote is
required in the corporation's certificate of incorporation (which is required by
the World Access Certificate with respect to amending the provision pertaining
to the composition and procedures regarding the World Access board of directors
(three-quarters affirmative vote of all voting stock, voting together as a
single class)). The World Access Certificate provides that the By-Laws may be
adopted, amended or repealed by the World Access board of directors. The World
Access By-Laws provide that they may be adopted, amended or repealed by the
World Access board of directors or stockholders.

Telco Systems. Pursuant to the Telco Systems Certificate, Telco Systems
reserves the right to amend or repeal any provision of the Telco Systems
Certificate as permitted under the DGCL, except as noted below. Under the DGCL,
an amendment to a corporation's certificate of incorporation requires the
recommendation of a corporation's board of directors, the approval of a majority
of all shares entitled to vote thereon, voting together as a single class, and
the approval of a majority of the outstanding stock of each class entitled to
vote thereon unless a higher vote is required in the corporation's certificate
of incorporation (which is required by the Telco Systems Certificate with
respect to amending the provisions pertaining to the denial of the right of
stockholder action by written consent (two-thirds affirmative vote of all voting
stock, voting together as a single class), certain business combinations
(two-thirds affirmative vote of all voting stock, voting together as a single
class) and amendment of the Telco Systems Certificate provision providing the
above-described exceptions (two-thirds affirmative vote of all voting stock,
voting together as a single class)). Pursuant to the Telco Systems By-Laws, the
Telco Systems board of directors has the power to adopt, amend and repeal the
Telco Systems By-Laws. Also, pursuant to the Telco Systems By-Laws, stockholders
may adopt, amend and repeal the Telco Systems By-Laws at an annual meeting,
without previous notice, or at any special meeting of stockholders, provided
that notice of such proposed amendment, repeal or adoption is given in the
notice of the special meeting, and the Telco Systems directors may exercise such
power of amendment or repeal at any meeting.

FAIR PRICE PROVISIONS

World Access. The World Access Certificate does not include any provision
governing the approval requirements of business combinations. Under the DGCL an
agreement of merger, or the sale, lease or exchange of all or substantially all
of a corporation's assets must be approved by the corporation's board and
adopted by the holders of a majority of the outstanding shares of stock entitled
to vote thereon.

Telco Systems. In addition to the approval requirements of business
combinations under the DGCL, the Telco Systems Certificate includes what
generally is referred to as a "fair price provision."

In general, this provision of the Telco Systems Certificate provides that a
Business Combination (which is defined to include mergers, consolidations,
certain recapitalizations and the sale, lease, exchange or transfer of all or
substantially all of the assets of Telco Systems, with, to or for the benefit of
an Interested Stockholder (as defined below)) requires approval by the
affirmative vote of at least two-thirds of the votes entitled to be cast by the
holders of all then outstanding shares of voting capital stock of Telco Systems
unless the Business Combination is approved by a majority of the Disinterested
Directors (as defined below) or unless certain minimum price criteria and
procedural requirements which are intended to assure an adequate and fair price
under the circumstances are satisfied. In general, an "Interested Stockholder,"
for purposes of this provision, includes any person who is, or has announced or
publicly disclosed a plan or intention to become, the beneficial owner of voting
capital stock entitled to 20% or more of the votes. A "Disinterested Director"
is any member of the Telco Systems board of directors who neither is or is
affiliated with an Interested Stockholder and who was not directly or indirectly
a nominee of an Interested Stockholder or affiliate thereof and who either (a)
was a director of Telco Systems prior to the time any Interested Stockholder
became an Interested Stockholder or (b) is a successor of a Disinterested
Director and was nominated to succeed a Disinterested Director by a majority of
the Disinterested Directors at the time of his nomination.

158
<PAGE> 170

RIGHTS AGREEMENT

Telco Systems. On February 19, 1997, the Telco Systems board of directors
adopted the Rights Agreement. The Telco System Rights (referred to elsewhere in
this Joint Proxy Statement/Prospectus as the "Associated Rights") provided for
thereunder represent the right to purchase one one-hundredth of a share of Telco
Systems Series A Participating Cumulative Preferred Stock, par value $0.01 per
share. One Telco Systems Right is issued for each outstanding share of Telco
Systems Common Stock. The Telco Systems Rights have certain anti-takeover
effects. The Telco Systems Rights will cause substantial dilution to a person or
group that attempts to acquire control of Telco Systems in a manner which causes
the Telco Systems Rights to become exercisable unless the offer is conditional
on the Telco Systems Rights being redeemed. Telco Systems has executed an
amendment to the Rights Agreement exempting the Merger from the potential
dilution effects of the Rights Agreement and providing that, upon consummation
of the Merger, each issued and outstanding share of Telco Systems Common Stock
(together with Associated Rights) will be converted into the right to receive
the number of shares of World Access Common Stock equal to the Exchange Ratio.

World Access. World Access has not adopted a stockholder rights or similar
plan.

159
<PAGE> 171

ADDITIONAL MATTERS SUBMITTED TO A VOTE OF WORLD ACCESS STOCKHOLDERS

ADDITIONAL PROPOSAL NO. 1 -- PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
OF WORLD ACCESS TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF WORLD ACCESS
COMMON STOCK TO 150,000,000

The board of directors of World Access has adopted a resolution unanimously
approving and recommending to World Access stockholders for their approval an
amendment to the World Access Certificate to provide therein for an increase to
150,000,000 shares of World Access Common Stock.

The authorized capital stock of World Access currently consists of (i)
40,000,000 shares of World Access Common Stock, $.01 par value per share, of
which 25,675,253 were issued and outstanding as of November 2, 1998 and
approximately 2,106,812 were reserved for issuance under the World Access 1991
Stock Option Plan, the Outside Directors' Warrant Plan and the Directors'
Warrant Incentive Plan, and (ii) 10,000,000 shares of World Access Preferred
Stock with terms and designations to be determined by the board of directors of
World Access, none of which was issued and outstanding or authorized for
issuance as of the date hereof. Accordingly, as of November 2, 1998, World
Access had available for issuance 12,217,935 shares of World Access Common Stock
and 10,000,000 shares of World Access Preferred Stock.

The board of directors believes the authorization of the increase in the
number of shares of World Access Common Stock is desirable to enhance the
company's flexibility in connection with possible future actions, such as public
or private offerings of shares for cash, dividends payable in stock of World
Access, stock splits, corporate mergers and acquisitions, and implementation and
continuation of employee benefit plans. Having such authorized shares for
issuance in the future would allow shares of World Access Common Stock to be
issued without the expense and delay of a special meeting of stockholders. The
additional shares of World Access Common Stock may be voting or non-voting as
determined in the board of director's sole discretion with no further
authorization by security holders required for the creation and issuance
thereof, subject to the requirements of Nasdaq that stockholder approval be
obtained for certain issuances of additional shares of World Access Common Stock
in excess of 20% of the number of shares then outstanding.

The World Access board of directors is required to make any determination
to issue shares of World Access Common Stock or Preferred Stock based on its
judgment as to the best interests of the stockholders and World Access. Although
the board of directors has no present intention of doing so, it could issue
shares of World Access Common Stock or World Access Preferred Stock that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of World Access by means of a merger, tender offer,
proxy contest or other means. Such shares could be used to create voting or
other impediments or to discourage persons seeking to gain control of World
Access and could also be privately placed with purchasers favorable to the board
of directors in opposing such action. In addition, the board of directors could
authorize holders of a series of World Access Common Stock or World Access
Preferred Stock to vote either separately as a class, or with the holders of
currently outstanding World Access Common Stock, on any merger, sale or exchange
of assets by World Access or any other extraordinary corporate transaction. The
mere existence of the additional authorized shares could have the effect of
discouraging unsolicited takeover attempts. The issuance of new shares also
could have a dilutive effect on the voting power of existing holders of World
Access Common Stock and on earnings per share and could be used to dilute the
stock ownership of a person or entity seeking to obtain control of World Access
should the board of directors consider the action of such entity or person not
to be in the best interest of the stockholders and World Access.

While World Access may from time to time consider issuing shares of World
Access Common Stock in connection with the acquisition of related businesses or
assets, World Access currently has no plans, agreements or understandings for
issuing any shares of World Access Common Stock not currently authorized in
connection with any such acquisition other than in connection with the Merger,
and the Resurgens Transaction, nor does World Access currently have any plans,
agreements or understandings for otherwise issuing any shares of World Access
Common Stock other than pursuant to the World Access stock option plans and
director warrant plans and pursuant to the Incentive Equity Plan, as proposed
for adoption and approval in Additional Proposal No. 2 hereof. In addition,
World Access currently has no plans, agreements or understandings for issuing
any shares of a new series of World Access Common Stock or any shares of World
Access Preferred Stock. However, if this proposal is approved by the
stockholders, no assurances can be given

160
<PAGE> 172

that World Access will not consider effecting an equity offering of World Access
Common Stock or World Access Preferred Stock or otherwise issuing such stock in
the future for purposes of raising additional working capital, acquiring related
businesses or assets or otherwise. Therefore, the terms of any new series of
World Access Common Stock or any World Access Preferred Stock subject to this
proposal cannot be stated or estimated at this time.

Approval of this Additional Proposal No. 1 requires the affirmative vote of
the holders of a majority of the outstanding shares of World Access Common Stock
entitled to vote at the World Access Special Meeting. If approved by the
stockholders, the amendment to the World Access Certificate will become
effective upon filing with the Secretary of the State of Delaware a Certificate
of Amendment to the World Access Certificate of Incorporation, a copy of which
is attached as Appendix F to the Joint Proxy Statement/Prospectus, which filing
is expected to take place shortly after the World Access Special Meeting.

THE BOARD OF DIRECTORS OF WORLD ACCESS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF WORLD ACCESS VOTE "FOR" THE AMENDMENT TO THE WORLD ACCESS
CERTIFICATE TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF WORLD ACCESS COMMON
STOCK TO 150,000,000.

ADDITIONAL PROPOSAL NO. 2 -- PROPOSAL TO ADOPT THE WORLD ACCESS, INC. 1998
INCENTIVE EQUITY PLAN

The board of directors of World Access adopted on December 9, 1997, and
submits for stockholder approval, the World Access, Inc. 1998 Incentive Equity
Plan (the "Incentive Equity Plan"). A copy of the Incentive Equity Plan is
attached as Appendix G to this Joint Proxy Statement/Prospectus. The summary of
the Incentive Equity Plan which appears below is qualified by reference to the
full text of the Incentive Equity Plan.

World Access has adopted the Incentive Equity Plan to attract, motivate and
retain the best available personnel for service as officers and key employees of
World Access, to provide equity ownership opportunities to these individuals and
to align the long-term interests of these people with those of stockholders.

Set forth below is a description of the principal features of the Incentive
Equity Plan and the benefits that World Access has either granted under the
Incentive Equity Plan, subject to stockholder approval, or currently anticipates
granting.

GENERAL INCENTIVE EQUITY PLAN PROVISIONS

The Incentive Equity Plan provides for the award of benefits (collectively,
"Benefits") of various types, including stock options ("Options"), restricted
shares of World Access Common Stock ("Restricted Stock"), performance shares
("Performance Shares"), and other stock-based awards. The number of shares of
World Access Common Stock which may be issued in connection with Benefits will
not exceed 5,000,000 shares. An individual's shares may be awarded in the form
of Options, Restricted Stock, Performance Shares and other stock based awards or
in any combination thereof. On December 9, 1997, the closing price of World
Access Common Stock was $23.50.

The Incentive Equity Plan is administered by the Compensation Committee of
the World Access board of directors (the "Committee") which consists of two or
more members of the board of directors who are "non-employee directors", as
defined in Rule 16b-3 ("Rule 16b-3") under the Exchange Act and "outside
directors", as defined in Section 162(m) of the Code. The Compensation Committee
is currently comprised of one director and there is one vacancy on such
committee. The Committee may amend the Incentive Equity Plan at any time.
However, the Committee may not amend the Incentive Equity Plan without
stockholder approval if such amendment would (i) cause options which are
intended to qualify as incentive stock options to fail to qualify as such, (ii)
cause the Incentive Equity Plan to fail to meet the requirements of Rule 16b-3,
or (iii) violate applicable law or rules to which World Access is subject. No
Benefit may be granted under the Incentive Equity Plan on or after the tenth
anniversary date of the date the Incentive Equity Plan is approved by World
Access stockholders, but Benefits granted prior to such tenth anniversary may
extend beyond that date.

Under the Incentive Equity Plan, the Committee may grant Benefits at such
times, in such amounts, and to such recipients as the Committee may determine.
Benefits may be awarded, however, only to directors, officers, employees,
independent contractors and agents of World Access and its affiliates, provided
that
161
<PAGE> 173

incentive stock options ("ISOs") may only be granted to employees. The amendment
or termination of the Incentive Equity Plan will not adversely affect any
Benefit granted prior to such amendment or termination. However, any Benefit may
be modified or canceled by the Committee if and to the extent permitted by the
Incentive Equity Plan or applicable agreement or with the consent of the
participant to whom such Benefit was granted.

Options may be either ISOs or non-qualified stock options ("NQSOs"). For
ISOs, the option price will be no less than the fair market value of the shares
of World Access Common Stock at the time the Option is granted. The other terms
of Options will be determined by the Committee, and, in the case of Options
intended to qualify as ISOs, will meet all requirements of Section 422 of the
Code.

Restricted Stock is subject to forfeiture until certain conditions have
been fulfilled and/or a period of time has elapsed. Grants of Restricted Stock
shall be made at such cost as the Committee shall determine and may be issued
for no monetary consideration, subject to applicable state law. Such shares are
non-transferable until all restrictions have been satisfied. At the discretion
of the Committee, the grantee may or may not be entitled to voting and dividend
rights with respect to the Restricted Stock from the date of grant.

Performance Shares are the right to receive World Access Common Stock equal
to the fair market value of the World Access Common Stock at a future date.
Generally, such right will be based upon the attainment of one or more targeted
performance goals.

The Committee may also grant other awards which may be valued in whole or
in part by reference to, or otherwise based on, World Access Common Stock.

If an Option expires or is terminated, surrendered, or canceled without
having been fully exercised, if Restricted Stock or Performance Shares are
forfeited, or if any other conditions result in any World Access Common Stock
not being issued, the unused shares of World Access Common Stock covered by any
such Benefit shall again be available for grant under the Incentive Equity Plan
to any participant who is not subject to Section 16 of the Exchange Act. If
there is any change in World Access Common Stock by reason of any stock split,
stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares, or any other
similar transaction, the number of shares of World Access Common Stock available
for grant under the Incentive Equity Plan or subject to, or granted pursuant to,
a Benefit and the price thereof, as applicable, will be appropriately adjusted
by the Committee.

Except as may be provided in an applicable agreement, the terms of any
Benefits, including the pricing terms thereof, may be modified and any Benefit
may be converted, modified, forfeited, or canceled, or the restrictions or
conditions applicable to such Benefit waived or accelerated, prospectively or
retroactively, in whole or in part, by the Committee, but (unless the
participant has acted in a manner contrary to the best interests of World Access
or an affiliate of World Access) no such action may impair the rights of a
participant without his or her consent. The occurrence of a Change of Control,
as defined in Section 2.1(f) of the Incentive Equity Plan, will not limit the
Committee's authority to take any such action.

Awards may be granted by the Committee in tandem. However, no Benefit may
be granted in tandem with an ISO. Upon the exercise of an Option or in the case
of any other Benefit that requires a payment to World Access, payment may be
made either (i) in cash, or (ii) with the consent of the Committee, (a) by the
surrender of all or part of a Benefit (including the Benefit being exercised),
(b) by the tender to World Access of World Access Common Stock owned by the
participant having a fair market value equal to the amount due to World Access,
(c) in other property, or (d) by any combination of the foregoing. At the time
any Benefit granted under the Incentive Equity Plan is distributed or exercised,
World Access may withhold, in cash or in shares of World Access Common Stock,
any amount necessary to satisfy withholding requirements applicable to such
distribution.

Unless otherwise determined by the Committee or specified in an applicable
agreement, Benefits will not be transferable other than by beneficiary
designation, will, pursuant to the laws of descent and distribution, or pursuant
to a qualified domestic relations order, and will be exercisable during the
participant's lifetime only by such participant; except that no ISO may be
transferred or assigned pursuant to a qualified domestic relations order or
exercised, during a participant's lifetime, by the participant's guardian or
legal representative.

162
<PAGE> 174

BENEFITS GRANTED UNDER THE INCENTIVE EQUITY PLAN

All employees of World Access are eligible to participate in the Incentive
Equity Plan. The Committee has not yet determined how many employees are likely
to ultimately participate in the Incentive Equity Plan. The Committee has
awarded, however, NQSOs for an aggregate of 1,591,700 shares of World Access
Common Stock to certain senior executive officers of World Access, other key
employees of World Access and substantially all employees of NACT.

The following table shows NQSOs that have been granted subject to
stockholder approval of the Incentive Equity Plan:

<TABLE>
<CAPTION>
DOLLAR
NAME VALUE (1) NUMBER OF SHARES
- ---- ---------- -------------------------
<S> <C> <C>
Steven A. Odom, Chairman of the Board and Chief Executive
Officer................................................. -- 400,000
Hensley E. West, President and Chief Operating Officer.... -- 300,000
Mark A. Gergel, Executive Vice President and Chief
Financial Officer....................................... -- 200,000
A. Lindsay Wallace, President of NACT Telecommunications,
Inc..................................................... -- 70,000
Executive Officers as a Group............................. -- 970,000
Non-Executive Directors as a Group........................ -- 0
Non-Executive Officer Employee Group...................... 621,700
</TABLE>

- ---------------

(1) All options have been granted at the fair market value of World Access
Common Stock on the date of grant.

In December 1997, World Access made an initial grant of 900,000 NQSO's
under the Incentive Equity Plan to its Chairman and Chief Executive Officer,
President and Chief Operating Officer, and Executive Vice President and Chief
Financial Officer. These options vest 25% on each of the first four
anniversaries from the date of grant and are exercisable at $19.00 per share,
the market price at the date of grant.

In February 1998, World Access granted 568,700 NQSO's to certain key
employees, including the new President of its ATI Division (acquired in January
1998) and substantially all employees of NACT (majority interest acquired in
February 1998). These options vest 25% on each of the first four anniversaries
from the date of grant and are exercisable at $23.50 per share, the market price
at the date of grant.

In June 1998, World Access granted 123,000 NQSO's to certain key employees.
These options vest 25% on each of the first four anniversaries from the date of
grant and are exercisable at $25.50 per share, the market price at the date of
grant.

All of the options granted under the Incentive Equity Plan to date
accelerate upon a change of control of World Access. The consummation of the
Merger and the Resurgens Transaction will not constitute a change of control for
purposes of these options.

Upon approval by the stockholders, the date of approval will become the
measurement date for purposes of computing compensation expense for the NQSO's
referred to above, if any. If the stock price as of the measurement date exceeds
the exercise prices, then the total compensation impact will be the difference
between stock price at the measurement date and the exercise prices. World
Access will record that expense ratably over the vesting period. Based on a
price of $22.25 per share, the market value of World Access Common Stock as of
November 2, 1998, World Access would record compensation expense for the
1,591,700 NQSO's of $731,250 for each of the years 1998 through 2001.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of certain federal income tax consequences of
the Incentive Equity Plan. Any time a distribution is made under the Incentive
Equity Plan, whether in cash or in shares of stock, World Access may withhold
from such payment any amount necessary to satisfy federal and state income tax
withholding requirements with respect to the distribution. Such withholding may
be in cash or in shares of stock.

163
<PAGE> 175

Deductibility of Benefits. All Company deductions for Plan Benefits are
limited by Section 162(m) of the Code, which generally limits the World Access
deduction for non-performance based compensation to $1 million per year for the
World Access Chief Executive Officer and its other four most highly compensated
officers.

Incentive Stock Options. An optionee does not recognize income on the
grant of an ISO. If an optionee exercises an ISO in accordance with the terms of
the Option and does not dispose of the shares acquired within two years from the
date of the grant of the Option nor within one year from the date of exercise,
the optionee will not realize any income by reason of the exercise (except for
purposes of computing any potential alternative minimum tax ("AMT") liability as
discussed below), and World Access will be allowed no deduction by reason of the
grant or exercise. The optionee's basis in the shares acquired upon exercise
will be the amount paid upon exercise. (See the discussion below for the tax
consequences of the payment of the exercise price of an Option with stock
already owned by the optionee.) Provided the optionee holds the shares acquired
upon exercise as a capital asset at the time of sale or other disposition of the
shares, his gain or loss, if any, recognized on the sale or other disposition
will be capital gain or loss. The amount of his gain or loss will be the
difference between the amount realized on the disposition of the shares and his
basis in the shares.

If an optionee disposes of the shares within two years from the date of
grant of the Option or within one year from the date of exercise ("Early
Disposition"), the optionee will recognize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (i) the
amount realized on the Early Disposition, and (ii) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. World
Access would be entitled to a deduction in an amount equal to such recognized
income. If an optionee disposes of the shares subsequent to one year from the
date of exercise, the excess, if any, of the amount realized on the disposition
of such shares over the fair market value of the shares on the date of exercise
will be long-term or short-term capital gain, depending upon the holding period
of the shares. If an optionee disposes of such shares for less than the
optionee's basis in the shares, the difference between the amount realized and
the optionee's basis will be a long-term or short-term capital loss, depending
upon the holding period of the shares.

The excess of the fair market value of the shares at the time the ISO is
exercised over the exercise price for the shares is in the optionee's income for
AMT purposes in the taxable year of exercise. The AMT involves an additional tax
calculation applying lower rates than the regular tax calculation but adjusting
regular taxable income for certain preference items and exemption amounts.

Non-Qualified Stock Options. An optionee generally does not recognize
income at the time of the grant of a NQSO; rather, the optionee recognizes
ordinary income upon the exercise of a NQSO in an amount equal to the difference
between the fair market value of the stock on the date of exercise and the
exercise price paid for the stock. As a result of the optionee's exercise of an
NQSO, World Access will be entitled to deduct as compensation an amount equal to
the amount included in the optionee's gross income. The World Access deduction
will be taken in the taxable year in which the NQSO is exercised.

Use of Shares to Exercise Option. If an optionee exercises an Option by
surrendering stock already owned by such optionee ("Old Shares"), the following
rules apply:

(i) To the extent the number of shares acquired ("New Shares") exceeds
the number of Old Shares exchanged, the optionee will recognize ordinary
income on the receipt of such additional shares (unless the Option is an
ISO) in an amount equal to the fair market value of such additional shares
less any cash paid for them, and World Access will be entitled to a
deduction in an amount equal to such income. The basis of such additional
shares will be equal to the fair market value of such shares (or, in the
case of an ISO, the cash, if any, paid for the additional shares) on the
date of exercise and the holding period for such additional shares will
commence on the date the Option is exercised.

(ii) Except as provided below, to the extent the number of New Shares
acquired does not exceed the number of Old Shares exchanged, no gain or
loss will be recognized on such exchange, the basis of the New Shares
received will be equal to the basis of the Old Shares surrendered, and the
holding period of the New Shares received will include the holding period
of the Old Shares surrendered. However, under proposed regulations
promulgated by the Internal Revenue Service, if the optionee exercises an

164
<PAGE> 176

ISO by surrendering Old Shares, the holding period for the New Shares will
begin on the date the New Shares are transferred to the optionee for
purposes of determining whether there is an Early Disposition of the New
Shares and, if the optionee makes an Early Disposition of the New Shares,
such optionee will be deemed to have disposed of the New Shares with the
lowest basis first. If the optionee exercises an ISO by surrendering Old
Shares which were acquired through the exercise of an ISO or an option
granted under an employee stock purchase plan, and if the surrender occurs
prior to the expiration of the holding period applicable to the type of
option under which the Old Shares were acquired, the surrender will be
deemed to be an Early Disposition of the Old Shares. The federal income tax
consequences of an Early Disposition are discussed above.

(iii) If the Old Shares surrendered were acquired by the optionee by
exercise of an ISO, then, except as provided in (ii) above, the exchange
will not constitute an Early Disposition of the Old Shares.

(iv) Based upon prior rulings of the Internal Revenue Service in
analogous areas, it is believed that if an optionee exercises an ISO and
surrendered Old Shares and if such optionee disposes of the New Shares
received upon exercise within two years from the date of the grant of the
Option or within one year from the date of exercise, the following tax
consequences would result:

(a) To the extent the number of New Shares received upon exercise
does not exceed the number of Old Shares surrendered, the disposition of
the New Shares will not constitute an Early Disposition (unless the
disposition is a surrender of the New Shares in the exercise of an ISO).

(b) The disposition of the New Shares will constitute an Early
Disposition to the extent the number of New Shares received upon
exercise and disposed of exceeds the number of Old Shares surrendered.

Restricted Stock and Performance Shares. Grantees of Restricted Stock and
Performance Shares do not recognize income at the time of the grant of such
stock. However, when shares of Restricted Stock are no longer subject to a
substantial risk of forfeiture or when Performance Shares are paid, grantees
recognize ordinary income in an amount equal to the fair market value of the
stock less, in the case of Restricted Stock, the amount paid, if any, for the
stock. Alternatively, the grantee of Restricted Stock may elect (pursuant to a
"Section 83(b) election" under the Code) to recognize income upon the grant of
the stock and not at the time the restrictions lapse. World Access is entitled
to deduct an amount equal to the fair market value of the stock at the time the
grantee recognizes income related to the grant.

Dividends and Dividend Equivalents. Dividends on Restricted Stock and
dividend equivalent payments are taxable as ordinary income when paid. World
Access is entitled to deduct the amount of dividends on Restricted Stock prior
to vesting (unless the optionee makes the Section 83(b) election referred to
above) and dividend equivalent payments when such amounts are taxable to the
recipient.

Change of Control. If there is an acceleration of the vesting or payment
of Benefits and/or an acceleration of the exercisability of Options upon a
Change of Control, all or a portion of the accelerated benefits may constitute
"Excess Parachute Payments", under Section 280G of the Code. An employee
receiving an Excess Parachute Payment incurs an excise tax of 20% of the amount
of the payment in excess of the employee's average annual compensation over the
five calendar years preceding the year of the Change of Control, and World
Access is not entitled to a deduction for such excess amount.

The foregoing summary of federal income tax consequences of the Incentive
Equity Plan is based on World Access' understanding of present federal tax law
and regulations and does not address any state tax ramifications. The summary
does not purport to be complete or applicable to every specific situation.

THE BOARD OF DIRECTORS OF WORLD ACCESS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF WORLD ACCESS VOTE "FOR" THE ADOPTION OF THE WORLD ACCESS, INC.
1998 INCENTIVE EQUITY PLAN.

ADDITIONAL PROPOSAL NO. 3 -- PROPOSAL TO RATIFY AND APPROVE INDEMNIFICATION
AGREEMENTS WITH THE DIRECTORS AND CERTAIN OFFICERS OF WORLD ACCESS

165
<PAGE> 177

GENERAL

Pursuant to authority granted by its board of directors, World Access has
entered into separate Indemnification Agreements (the "Indemnification
Agreements"), each in the form attached hereto as Appendix H, with its directors
and non-director officers at the level of Vice President and above. The board of
directors believes that the Indemnification Agreements are in the best interests
of World Access and its stockholders. In the view of the board of directors: (i)
it is important for World Access to continue to retain and attract responsible
and well-qualified individuals to serve as its directors and officers; (ii)
World Access' ability to do so is threatened by the increasing reluctance of
qualified directors and officers to assume such positions due to the increased
risk of personal liability caused by a growing risk of litigation directed
against corporate directors and officers generally and by the increasingly
adverse market for directors' and officers' liability insurance, where the
available coverage is more limited than in the past and the cost of such
insurance has increased substantially; and (iii) the Indemnification Agreements
will enhance World Access' ability to retain and attract such well-qualified
directors and officers.

Although stockholder approval of the Indemnification Agreements is not
required by law or by their terms, the board of directors considers it
appropriate to submit the Indemnification Agreements to the stockholders of
World Access for their ratification and approval because the members of the
board of directors are parties to, and, therefore, the beneficiaries of the
rights contained in, the Indemnification Agreements. World Access believes that
stockholder approval will remove as a basis for challenging the enforceability
of such agreements the fact that directors may be deemed to be interested
parties under Section 144 of the DGCL. Although World Access cannot determine in
advance its position with respect to any challenge to the enforceability of the
Indemnification Agreements by a stockholder, World Access may assert stockholder
approval of the Indemnification Agreements as a defense. In addition, a
stockholder of World Access may be estopped from making a claim that the
Indemnification Agreements are invalid, if the stockholder votes in favor of
ratification and approval of the Indemnification Agreements. The Indemnification
Agreements are not conditioned on stockholder approval, and if Proposal No. 3 is
not adopted, the Indemnification Agreements will, nonetheless, remain in effect.

In the case of persons who from time to time in the future become members
of the board of directors or senior officers of World Access, the board of
directors anticipates that indemnification agreements substantially in the form
of Appendix H hereto will be entered into with such new directors and officers,
subject to being authorized by the board of directors. The board of directors at
present does not expect to seek stockholder approval or ratification for any
such future agreements. A stockholder of World Access may be estopped from
making a claim that such future agreements entered into by World Access with
directors and officers of World Access are invalid, if the stockholder votes in
favor of ratification and approval of the Indemnification Agreements.

The Indemnification Agreements became effective upon their execution and
delivery and will provide, in accordance with their terms, indemnification
protection to the directors and officers of World Access who are parties
thereto, with respect to actions, suits and proceedings threatened or commenced
before, as well as after, such date. The board of directors knows of no
threatened, pending or completed action, suit or proceeding to which the
Indemnification Agreements would apply.

World Access has no present plans to provide indemnification protection to
its directors and officers beyond that provided by the Indemnification
Agreements.

EXISTING INDEMNIFICATION AND INSURANCE PROTECTION APART FROM
INDEMNIFICATION AGREEMENTS

Apart from the Indemnification Agreements, World Access currently affords
protection, by means of indemnification and insurance, to its directors and
officers. World Access is incorporated under the DGCL. Section 145 of the DGCL
provides a detailed statutory framework covering indemnification of directors
and officers against liabilities and expenses arising out of legal proceedings
brought against them by reason of their status or service as directors and
officers. Article XI of the World Access Certificate provides that World Access
shall indemnify its directors and officers to the fullest extent permitted by
the DGCL.

Article XI of the World Access Certificate (which is based upon the
statutory indemnification scheme contained in Section 145 of the DGCL) provides,
in effect, that a director or officer of World Access (i) shall

166
<PAGE> 178

be indemnified by World Access for all expenses of such litigation when he is
successful on the merits, (ii) shall be indemnified by World Access for the
expenses, judgments, fines and amounts paid in settlement of such litigation
(other than a derivative suit), even if he is not successful on the merits, if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of World Access (and, in the case of a criminal
proceeding, had no reason to believe his conduct was unlawful), and (iii) shall
be indemnified by World Access for expenses of a derivative suit (a suit by a
stockholder by or in the right of World Access alleging a breach by a director
or officer of a duty owed to World Access) even if he is not successful on the
merits, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of World Access, provided that no such
indemnification may be made in accordance with this clause (iii) if he is
adjudged liable to World Access, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he is entitled to
indemnification. The indemnification described in clauses (ii) and (iii) above
may be made only upon a determination by a majority of a quorum of disinterested
directors, independent legal counsel or the stockholders that indemnification is
proper because the applicable standard of conduct has been met. It is possible
that indemnification pursuant to clause (ii) above would be authorized where a
director or officer of World Access has been adjudged to have been negligent or
grossly negligent, if the standard specified in clause (ii) has been satisfied.
The board of directors of World Access may also authorize the advancement of
litigation expenses to a director or officer upon receipt of an undertaking by
such director or officer to repay such expenses if it is ultimately determined
that he is not entitled to be indemnified by World Access.

As permitted by the DGCL, World Access has purchased a directors' and
officers' liability insurance policy which covers certain liabilities of
directors and officers of World Access which arise out of claims based on acts
or omissions in their capacity as such and for which they are not indemnified by
World Access.

LIMITATIONS OF EXISTING INDEMNIFICATION AND INSURANCE PROTECTION APART FROM
INDEMNIFICATION AGREEMENTS

There are, in the judgment of the board of directors, certain limitations
inherent in the protection currently afforded to World Access' directors and
officers apart from the Indemnification Agreements. For one thing, the World
Access Certificate, including the indemnification provisions contained therein,
is subject to amendment upon obtaining the required vote of stockholders. One of
the principal purposes of the Indemnification Agreements is to provide the
directors and officers entering into the same with a continuing basis of
indemnification protection that cannot be made the subject of unilateral
amendment or revocation. As a contracting party, each indemnified director or
officer must grant his written consent to any amendment to his Indemnification
Agreement.

In addition, the board of directors believes that the indemnification
provided by the World Access Certificate, which is based on the statutory
indemnification scheme, has other limitations: (i) Section 145 of the DGCL does
not provide for indemnification of a director or officer for amounts paid in
settlement of a derivative action; and (ii) the Company is under no obligation
to advance litigation expenses to a director or officer. The Indemnification
Agreements address each of these limitations. In view of the nature of a
derivative suit (a suit by a stockholder by or in the right of a corporation
alleging a breach by a director or officer of a duty owed to the corporation),
the requirement under the Indemnification Agreements of indemnification for
amounts paid in settlement of derivative actions could result in World Access
reimbursing the directors or officers who are the defendants in such a case for
amounts recovered by World Access from such defendants pursuant to a settlement
of the case.

As previously mentioned, World Access maintains a directors' and officers'
liability insurance policy, and the board of directors considers this policy to
be an important part of the protection afforded by World Access to its directors
and officers. If and to the extent that a director or officer of World Access is
entitled to indemnification under his Indemnification Agreement for an amount
not covered by World Access' directors' and officers' liability insurance, then
World Access will act as a self-insurer of such amount.

World Access to provide indemnification coverage for actions of a director or
officer beyond what World Access is already obligated to provide by Article XI
of the World Access Certificate of Incorporation, except that the
Indemnification Agreements obligate World Access to provide indemnification for
amounts paid in settlement of a derivative action. Currently, if a director or
officer of World Access is entitled to indemnification under Article XI of the
World Access Certificate for an amount not covered by World Access' directors'
and officers' liability insurance, World Access acts as a self-insurer of such
amount. World Access has no present plans to cancel its directors' and officers'
liability insurance.

In view of the foregoing limitations of the indemnification and insurance
protection currently afforded to World Access directors and officers apart from
the Indemnification Agreements, and for the reasons mentioned above, the board
of directors believes that it is in the best interests of World Access and its
stockholders to supplement such protection with the Indemnification Agreements.

INDEMNIFICATION AGREEMENTS

The Indemnification Agreements are based on the indemnification scheme set
forth in Section 145 of the DGCL which is incorporated into Article XI of the
World Access Certificate as discussed above (see "-- Limitations of Existing
Indemnification and Insurance Protection Apart From Indemnification
Agreements"), with certain changes and additions. The following is a summary of
such principal changes and additions provided by the Indemnification Agreements,
a form of which is attached hereto as Appendix H and incorporated herein by
reference. The description of the Indemnification Agreements is qualified in its
entirety by reference to the complete text of the form thereof. The principal
changes and additions are as set forth below.

First, the Indemnification Agreements establish the presumption that the
director or officer has met the applicable standard of conduct required for
indemnification. Indemnification will be made unless the board of directors or
independent counsel determines that the applicable standard of conduct has not
been met. Following a "Change in Control" of World Access (as defined in the
Indemnification Agreements), if the person seeking indemnification so requests,
this determination must be made by independent counsel selected in the manner
provided in the Indemnification Agreements. The Indemnification Agreements
provide a detailed procedure relating to the selection of independent counsel
following a Change in Control of World Access in which the board of directors
following a Change in Control of World Access participates. Furthermore, the
Indemnification Agreements provide that the independent counsel shall not have
provided legal services to World Access, the person seeking indemnification
during the preceding five years or any other party to the proceeding giving rise
to the claim for indemnification. The board of directors, therefore, does not
believe that this provision will discourage a potential acquiror from attempting
to accomplish a Change in Control of World Access.

Second, the Indemnification Agreements provide that litigation expenses
shall be advanced to a director or officer at his request provided that he
undertakes to repay the amount advanced if it is ultimately determined that he
is not entitled to indemnification for such expenses.

Third, the Indemnification Agreements explicitly provide for
indemnification of amounts paid in settlement of a derivative suit.

Fourth, in the event of a determination by the disinterested members of the
board of directors or independent counsel that a director or officer did not
meet the standard of conduct required for indemnification, the Indemnification
Agreements allow such director or officer to contest this determination by
petitioning a court or commencing any arbitration proceeding to be conducted by
a single arbitrator pursuant to the rules of the American Arbitration
Association to make an independent determination of whether such director or
officer is entitled to indemnification under his Indemnification Agreement.

Finally, the Indemnification Agreements provide that the expenses incurred
by a director or officer in enforcing his rights under the Indemnification
Agreements shall be reimbursed by World Access.

The Commission takes the position that indemnification of directors or
officers against violations of the Securities Act is against public policy and
unenforceable, and any time World Access registers securities with the
Commission it must execute an undertaking to submit to a court any such
indemnification claim arising

168
<PAGE> 180

with respect to the registered securities for a determination whether the clause
is enforceable and to be bound by the court's decision. Accordingly, any claim
made by a director or officer of World Access for indemnification under an
Indemnification Agreement with respect to a claim subject to World Access'
undertaking to the Commission will have to be submitted to a court before final
payment thereunder would be made to the director or officer.

VOTE REQUIRED FOR RATIFICATION AND APPROVAL OF THE INDEMNITY AGREEMENTS

Ratification and approval of the Indemnification Agreements requires the
affirmative vote of the holders of a majority of the shares of World Access
Common Stock present in person or represented by proxy at the Special Meeting.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The board of directors unanimously recommended that Proposal No. 3 be
submitted to the stockholders of World Access for approval. As noted herein,
however, the approval of Proposal No. 3 may benefit the directors and certain
officers of World Access. Accordingly, to the extent such persons might be
deemed to so benefit from the ratification and approval of the Indemnification
Agreements, the World Access board of directors might be viewed as having a
conflict of interest in recommending Proposal No. 3 to the stockholders for
approval.

169
<PAGE> 181

OTHER MATTERS

As of the date of this Joint Proxy Statement/Prospectus, the boards of
directors of World Access and Telco Systems know of no matters which will be
presented for consideration at the World Access Special Meeting or the Telco
Systems Special Meeting, respectively, other than as described in this Joint
Proxy Statement/Prospectus. If any other matter properly comes before the World
Access Special Meeting or the Telco Systems Special Meeting or any adjournment
or postponement thereof and is voted upon, it is the intention of the persons
named in the accompanying proxies to vote such proxies in accordance with the
judgment of the respective boards of directors of World Access and Telco
Systems.

EXPERTS

The consolidated financial statements of World Access, Inc., included in
this Joint Proxy Statement/Prospectus for the year ended December 31, 1997, have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

The consolidated financial statements of Telco Systems, Inc. at August 30,
1998 and August 31, 1997, and for each of the three years in the period ended
August 30, 1998, appearing in this Joint Proxy Statement/ Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

The financial statements and schedule of NACT Telecommunications, Inc. as
of September 30, 1997 and 1996 and for each of the years in the three-year
period ended September 30, 1997, have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Advanced TechCom, Inc. as of and
for the year ended December 31, 1997, included in this Joint Proxy
Statement/Prospectus, have been so included in reliance upon the report of
Tedder, Grimsley & Company, P.A., independent certified public accountants,
given the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Advanced TechCom, Inc. as of
December 31, 1996 and 1995 and for the years then ended, included in this Joint
Proxy Statement/Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to certain
subsequent events, including entering into an agreement to subcontract certain
of ATI's manufacturing, raising of additional equity and the receipt of a
commitment for additional financing) appearing herein, and have been so included
in reliance upon the report of Deloitte & Touche LLP given upon their authority
as experts in accounting and auditing.

The combined financial statements of Cherry Communications Incorporated
(d/b/a Resurgens Communications Group) and Cherry Communications U.K. Limited at
December 31, 1997 and for the year then ended, included in this Joint Proxy
Statement/Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph describing conditions that raise substantial doubt about the company's
ability to continue as a going concern as described in note 2 to the combined
financial statements), and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.

The combined financial statements of Cherry Communications Incorporated
(d/b/a Resurgens Communications Group) and Cherry Communications U.K. Limited at
December 31, 1996 and 1995 and for the years then ended, included in this Joint
Proxy Statement/Prospectus, have been audited by Grant Thornton LLP, independent
auditors, as set forth in their report thereon, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

170
<PAGE> 182

LEGAL MATTERS

The validity of the World Access Common Stock to be issued in connection
with the Merger will be passed upon for World Access by Rogers & Hardin LLP,
Atlanta, Georgia. Certain legal matters with respect to the federal income tax
consequences of the Merger will be passed upon for World Access by Rogers &
Hardin LLP and for Telco Systems by Skadden, Arps, Slate, Meagher & Flom LLP.

STOCKHOLDER PROPOSALS

The date by which stockholder proposals must have been received by Telco
Systems for inclusion in the proxy statement and form of proxy for its February
1999 annual meeting of stockholders, if the Merger has not been consummated
prior to the date such meeting is to be held, was August 31, 1998. In order for
a stockholder proposal submitted outside of Rule 14a-8 to be considered "timely"
within the meaning of Rule 14a-4(c), such proposal must be received by Telco
Systems on or prior to November 14, 1998.

Proposals of stockholders submitted pursuant to Rule 14a-8 of the
Commission for inclusion in the proxy statement for the 1999 annual meeting of
stockholders of World Access must be received by World Access at its principal
executive offices at 2240 Resurgens Plaza, 945 E. Paces Ferry Road, Atlanta,
Georgia 30326 a reasonable time before World Access begins to print and mail the
proxy materials for its 1999 annual meeting. In order for a stockholder proposal
submitted outside of Rule 14a-8 to be considered "timely" within the meaning of
Rule 14a-4(c), such proposal also must be received by World Access a reasonable
time before World Access begins to print and mail the proxy materials for its
1999 annual meeting.

Under the World Access Certificate, stockholders desiring to nominate
persons for election as directors at an annual meeting must notify the Secretary
of World Access in writing not less than 120 calendar days in advance of the
date which is one year later than the date of the World Access proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that if no annual meeting of stockholders
was held in the previous year or if the date of the forthcoming annual meeting
of stockholders has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement or if the
forthcoming meeting is not an annual meeting of stockholders, then to be timely
such stockholder's notice must be so received not later than the close of
business on the tenth day following the earlier of (a) the day on which notice
of the date of the forthcoming meeting was mailed or given to stockholders by or
on behalf of World Access or (b) the day on which public disclosure of the date
of the forthcoming meeting was made by or on behalf of World Access. Any such
stockholders' notices must contain the specific information set forth in the
World Access Certificate. Stockholders will be furnished a copy of the World
Access Certificate without charge upon written request to the Secretary of World
Access.

171
<PAGE> 183

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
WORLD ACCESS, INC.
Consolidated unaudited financial statements of World
Access, Inc. and Subsidiaries for the six months ended
June 30, 1998 and 1997
Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997..................... F-4
Consolidated Statements of Operations for the three
months ended June 30, 1998 and 1997 and for the six
months ended June 30, 1998 and 1997 (unaudited)....... F-5
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended June 30, 1998
(unaudited)........................................... F-6
Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 (unaudited)....... F-7
Notes to Consolidated Financial Statements............. F-8
Consolidated financial statements of World Access, Inc.
and Subsidiaries for the years ended December 31, 1997,
1996 and 1995
Report of Independent Certified Public Accountants..... F-14
Consolidated Balance Sheets as of December 31, 1997 and
1996.................................................. F-15
Consolidated Statements of Operations for the years
ended December 31, 1997, 1996 and 1995................ F-16
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1997, 1996 and
1995.................................................. F-17
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995................ F-18
Notes to Consolidated Financial Statements............. F-19
Schedule II............................................ F-37
ADVANCED TECHCOM, INC.
Consolidated financial statements of Advanced TechCom,
Inc. and Subsidiaries for the year ended December 31,
1997
Independent Auditor's Report........................... F-38
Consolidated Balance Sheet as of December 31, 1997..... F-39
Consolidated Statement of Operations for the year ended
December 31, 1997..................................... F-40
Consolidated Statement of Stockholders' Equity for the
year ended December 31, 1997.......................... F-41
Consolidated Statement of Cash Flows for the year ended
December 31, 1997..................................... F-42
Notes to Consolidated Financial Statements............. F-43
Consolidated financial statements of Advanced TechCom,
Inc. and Subsidiary for the years ended December 31,
1996 and 1995
Independent Auditor's Report........................... F-51
Consolidated Balance Sheets as of December 31, 1996 and
1995.................................................. F-52
Consolidated Statements of Operations for the years
ended December 31, 1996 and 1995...................... F-53
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996 and 1995................ F-54
Consolidated Statements of Cash Flows for the years
ended December 31, 1996 and 1995...................... F-55
Notes to Consolidated Financial Statements............. F-56
NACT TELECOMMUNICATIONS, INC.
Unaudited financial statements of NACT Telecommunications,
Inc. for the three months ended December 31, 1997 and
1996 and the six months ended June 30, 1998 and 1997
Balance Sheets as of June 30, 1998 and December 31,
1997 (unaudited)...................................... F-65
Statements of Income for the three months ended
December 31, 1997 and
1996 and the six months ended June 30, 1998 and 1997
(unaudited)........................................... F-66
</TABLE>

F-1
<PAGE> 184

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Statements of Cash Flows for the three months ended
December 31, 1997 and
1996 and the Six Months Ended June 30, 1998 and 1997
(unaudited)........................................... F-67
Statement of Stockholders' Equity for the nine months
ended June 30, 1998................................... F-68
Notes to Financial Statements.......................... F-69
Financial statements of NACT Telecommunications, Inc. for
the years ended September 30, 1997, 1996 and 1995
Independent Auditors' Report........................... F-71
Balance Sheets as of September 30, 1997 and 1996....... F-72
Statements of Income for the years ended September 30,
1997, 1996 and 1995................................... F-73
Statements of Stockholders' Equity for the years ended
September 30, 1997, 1996 and 1995..................... F-74
Statements of Cash Flows for the years ended September
30, 1997, 1996 and 1995............................... F-75
Notes to Financial Statements.......................... F-77
Schedule II............................................ F-88
CHERRY COMMUNICATIONS INCORPORATED
Combined unaudited financial statements of RCG and Cherry
U.K. for the six months ended June 30, 1998 and 1997
Combined Balance Sheets as of June 30, 1998 and
December 31, 1997..................................... F-89
Combined Statements of Operations for the three months
ended June 30, 1998 and 1997 and for the six months
ended June 30, 1998 and 1997.......................... F-90
Combined Statements of Cash Flows for the six months
ended June 30, 1998 and 1997.......................... F-91
Combined Statement of Net Stockholders' Deficiency as
of June 30, 1998 and December 31, 1997................ F-92
Notes to Combined Unaudited Financial Statements....... F-93
Combined financial statements of RCG and Cherry U.K. for
the year ended December 31, 1997
Report of independent auditors......................... F-94
Audited combined financial statements
Combined Balance Sheet as of December 31, 1997......... F-95
Combined Statement of Operations for the year ended
December 31, 1997..................................... F-96
Combined Statement of Net Stockholders' Deficiency for
the year ended December 31, 1997...................... F-97
Combined Statement of Cash Flows for the year ended
December 31, 1997..................................... F-98
Notes to Combined Financial Statements................. F-99
Combined balance sheet of RCG and Cherry U.K. for the year
ended December 31, 1996 and the related combined
statements of operations, stockholders' equity
(deficit) and cash flows for the two years in the
period ended December 31, 1996
Report of independent certified public accountants..... F-109
Audited financial statements
Combined Balance Sheet as of December 31, 1996......... F-110
Combined Statements of Operations for the years ended
December 31, 1996 and 1995............................ F-111
Combined Statements of Stockholder's Equity (Deficit)
for the two years ended December 31, 1996............. F-112
Combined Statements of Cash Flows for the years ended
December 31, 1996 and 1995............................ F-113
Notes to Combined Financial Statements................. F-114
</TABLE>

F-2
<PAGE> 185

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
TELCO SYSTEMS, INC.
Report of Independent Auditors......................... F-121
Consolidated Statements of Operations for each of the
three years in the period ended August 30, 1998....... F-122
Consolidated Balance Sheets as of August 30, 1998 and
August 31, 1997....................................... F-123
Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended August 30,
1998.................................................. F-124
Consolidated Statements of Cash Flows for each of the
three years in the period ended August 30, 1998....... F-125
Notes to Consolidated Financial Statements............. F-126
Schedule II............................................ F-135
</TABLE>

F-3
<PAGE> 186

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents...................................... $ 57,653,355 $118,065,045
Marketable securities..................................... 3,500,000 --
Accounts receivable....................................... 41,819,028 20,263,971
Inventories............................................... 34,472,593 22,426,918
Other current assets...................................... 15,428,681 10,923,723
------------ ------------
Total Current Assets.............................. 152,873,657 171,679,657
Property and equipment...................................... 17,202,608 5,704,585
Goodwill.................................................... 74,378,279 31,660,201
Other assets................................................ 24,063,136 16,238,298
------------ ------------
Total Assets...................................... $268,517,680 $225,282,741
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................... $ 4,408,477 $ 81,739
Accounts payable.......................................... 23,086,925 9,339,588
Other accrued liabilities................................. 12,913,105 8,508,698
------------ ------------
Total Current Liabilities......................... 40,408,507 17,930,025
Long-term debt.............................................. 115,528,565 115,263,984
Noncurrent liabilities...................................... 1,564,078 333,802
Minority interests.......................................... 12,442,337 --
------------ ------------
Total Liabilities................................. 169,943,487 133,527,811
------------ ------------
Stockholders' Equity
Common stock.............................................. 218,871 193,062
Capital in excess of par value............................ 133,286,631 84,162,478
Retained earnings (deficit)............................... (34,931,309) 7,399,390
------------ ------------
Total Stockholders' Equity........................ 98,574,193 91,754,930
------------ ------------
Total Liabilities and Stockholders' Equity........ $268,517,680 $225,282,741
============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 187

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Sales of products.......................... $41,600,854 $19,444,256 $ 69,829,810 $34,914,306
Service revenues........................... 5,906,224 4,571,822 13,408,313 9,353,196
----------- ----------- ------------ -----------
Total sales......................... 47,507,078 24,016,078 83,238,123 44,267,502
Cost of products sold...................... 22,239,271 11,525,183 39,011,720 21,494,810
Cost of services........................... 4,761,514 4,005,782 12,189,198 8,089,263
----------- ----------- ------------ -----------
Total cost of sales................. 27,000,785 15,530,965 51,200,918 29,584,073
----------- ----------- ------------ -----------
Gross profit........................ 20,506,293 8,485,113 32,037,205 14,683,429
Engineering and development................ 1,793,743 428,595 2,581,927 745,005
Selling, general and administrative........ 4,680,414 2,434,951 7,936,268 4,352,514
Amortization of goodwill................... 1,018,374 380,404 1,882,371 664,535
In-process research and development........ -- -- 50,000,000 --
Special charges............................ -- -- 3,240,000 --
----------- ----------- ------------ -----------
Operating income (loss)............. 13,013,762 5,241,163 (33,603,361) 8,921,375
Interest and other income.................. 701,454 225,091 1,970,738 592,277
Interest expense........................... (1,515,576) (24,044) (3,030,489) (52,974)
----------- ----------- ------------ -----------
Income (loss) before income taxes
and minority interests........... 12,199,640 5,442,210 (34,663,112) 9,460,678
Income taxes............................... 4,880,249 2,014,000 6,135,249 3,420,000
----------- ----------- ------------ -----------
Income (loss) before minority
interests........................ 7,319,391 3,428,210 (40,798,361) 6,040,678
Minority interests in earnings of
subsidiary............................... 848,687 -- 1,532,338 --
----------- ----------- ------------ -----------
Net income (loss)................... $ 6,470,704 $ 3,428,210 $(42,330,699) $ 6,040,678
=========== =========== ============ ===========
Net income (loss) per common share:
Basic.................................... $ .31 $ .21 $ (2.13) $ .37
=========== =========== ============ ===========
Diluted.................................. $ .30 $ .19 $ (2.13) $ .34
=========== =========== ============ ===========
Weighted average shares outstanding:
Basic.................................... 20,576,451 16,556,478 19,894,508 16,478,013
=========== =========== ============ ===========
Diluted.................................. 21,821,649 18,515,809 19,894,508 17,918,264
=========== =========== ============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 188

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
CAPITAL IN RETAINED
COMMON EXCESS OF EARNINGS
STOCK PAR VALUE (DEFICIT) TOTAL
-------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1998.................. $193,062 $ 84,162,478 $ 7,399,390 $91,754,930
Net loss.................................... (42,330,699) (42,330,699)
Issuance of 1,429,907 shares for NACT
acquisition............................... 14,299 26,867,953 26,882,252
Issuance of stock options for NACT
acquisition............................... 8,359,737 8,359,737
Issuance of 633,982 shares for ATI
acquisition............................... 6,340 6,508,200 6,514,540
Issuance of 513,728 shares for stock
options and warrants...................... 5,138 3,074,391 3,079,529
Tax benefit from exercises of stock
options and warrants...................... 4,222,100 4,222,100
Issuance of 3,222 shares for matching
contribution to 401K plan................. 32 91,772 91,804
-------- ------------ ------------ -----------
Balance at June 30, 1998.................... $218,871 $133,286,631 $(34,931,309) $98,574,193
======== ============ ============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 189

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $(42,330,699) $ 6,040,678
Adjustments to reconcile net income (loss) to net cash from
(used by) operating activities:
Depreciation and amortization............................. 3,193,828 1,105,303
Income tax benefit from stock warrants and options........ 4,222,100 1,200,000
Special charges........................................... 55,034,046 --
Minority interests in earnings of subsidiary.............. 1,532,338 --
Provision for inventory reserves.......................... 143,500 243,001
Provision for bad debts................................... 316,360 68,755
Stock contributed to employee benefit plan................ 91,804 43,187
Changes in operating assets and liabilities, net of
effects from businesses acquired:
Accounts receivable.................................... (13,087,624) (5,474,956)
Inventories............................................ (9,294,251) (6,170,980)
Accounts payable....................................... 9,100,656 1,859,535
Other assets and liabilities........................... (5,970,061) (357,746)
------------ -----------
Net cash from (used by) operating activities...... 2,951,997 (1,443,223)
------------ -----------
Cash flows from investing activities:
Acquisitions of businesses.................................. (62,084,127) (4,099,852)
Software development costs.................................. (1,830,950) --
Loan repayments by affiliate................................ -- 582,500
Expenditures for property and equipment..................... (5,858,706) (1,115,745)
------------ -----------
Net cash used by investing activities............. (69,773,783) (4,633,097)
------------ -----------
Cash flows from financing activities:
Short-term debt borrowings.................................. 4,297,109 3,509,087
Proceeds from exercise of stock warrants and options........ 3,079,529 1,390,730
Long-term debt repayments................................... (966,542) --
Issuance of long-term debt for capital lease................ -- 291,500
------------ -----------
Net cash from financing activities................ 6,410,096 5,191,317
------------ -----------
Decrease in cash and equivalents............................ (60,411,690) (885,003)
Cash and equivalents at beginning of period................. 118,065,045 22,480,082
------------ -----------
Cash and equivalents at end of period............. $ 57,653,355 $21,595,079
============ ===========
Supplemental schedule of noncash financing and investing
activities:
Issuance of common stock for businesses acquired............ $ 33,396,792 $ 8,676,650
Issuance of stock options for businesses acquired........... 8,359,737
Conversion of note receivable to investment in ATI.......... 4,484,534
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-7
<PAGE> 190

WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiary companies, all of which are
wholly-owned except NACT Telecommunications, Inc. ("NACT") of which the Company
owns 67.3%. Minority interests represent the minority stockholders proportionate
share of NACT's equity. These financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of the interim periods covered have been included.
For further information, refer to the audited consolidated financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.

The results of operations for the three and six months ended June 30, 1998
are not necessarily indicative of the results expected for the full year.
Certain reclassifications have been made to the prior period's financial
information to conform with the presentations used in 1998.

NOTE 2. ACQUISITIONS

ATI ACQUISITION

In connection with the ATI Merger, the stockholders of ATI received
approximately $300,000 in cash and 424,932 restricted shares of the Company's
common stock valued at approximately $6.5 million. The Company's policy is to
value restricted stock issued in acquisitions at the average market price of its
common stock for the three trading days prior and the three trading days
subsequent to the date economic terms of the acquisition are announced less a
discount to reflect the lack of marketability caused by trading restrictions,
size of the share issuances and other relevant factors. A discount factor of 30%
was used to value the 424,932 restricted shares, which was based on previous
sales of restricted Company common stock and independent studies regarding
discount attributable to lack of marketability. Management believes the discount
rate used to value these restricted shares was appropriate and reasonable.

In addition to the shares noted above, the stockholders of ATI were issued
209,050 restricted shares of the Company's common stock. These shares were
immediately placed into escrow and will be released to the stockholders of ATI
contingent upon the realization of predefined levels of pre-tax income from
ATI's operations during calendar years 1998 and 1999. Upon issuance, the 209,050
escrowed shares were valued by the Company at par value only, or $2,091. As it
becomes probable that the conditions for release from escrow will be met, the
fair market value of the shares as measured at that time will be recorded as
additional goodwill and stockholders' equity, respectively.

The acquisition of ATI has been accounted for using the purchase method of
accounting. Accordingly, the results of ATI's operations have been included in
the accompanying consolidated financial statements from February 1, 1998. The
purchase price was allocated to net assets acquired and to approximately $5.4

F-8
<PAGE> 191
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

million of purchased in-process research and development ("R&D"). The excess of
purchase price over the fair value of net assets acquired and purchased
in-process R&D, currently estimated at approximately $2.7 million, has been
recorded as goodwill and is being amortized over a 15 year period.

Purchased in-process R&D, which consisted of the value of ATI products in
the development stage that were not considered to have reached technological
feasibility as of the date of the ATI Merger, was expensed in the first quarter
of 1998 in accordance with applicable accounting rules. See Management's
Discussion and Analysis.

NACT ACQUISITION

In the fourth quarter of 1997, the Company began a three phase acquisition
of NACT, a Provo, Utah based single-source provider of advanced
telecommunications switching platforms with integrated telephony software
applications and network telemanagement capabilities. During November and
December 1997, the Company purchased 355,000 shares of NACT common stock in the
open market for approximately $5.0 million.

On December 31, 1997, the Company entered into a stock purchase agreement
with GST Telecommunications, Inc. ("GST") and GST USA, Inc. ("GST USA") to
acquire 5,113,712 shares of NACT common stock owned by GST USA, representing
approximately 63% of the outstanding shares of NACT (the "NACT Acquisition"). On
February 27, 1998, the NACT Acquisition was completed with GST USA receiving
$59.7 million in cash and 1,429,907 restricted shares of the Company's common
stock valued at approximately $26.9 million. These shares were valued at $18.80
per share, a 20% discount to the closing market price of Company common stock on
February 26, 1998. Management believes this valuation was appropriate and
reasonable based on the fact GST USA sold all 1,429,907 restricted shares at
$18.80 per share to an independent third party in a private transaction
completed on February 27, 1998.

In addition, the Company issued 740,543 non-qualified options to purchase
Company common stock at $11.15 per share and 106,586 non-qualified options to
purchase Company common stock at $16.25 per share in exchange for substantially
all the options held by NACT employees, which became immediately vested in
connection with the NACT Acquisition. These options had an initial fair value of
approximately $8.4 million.

On February 24, 1998, the Company entered into a merger agreement with NACT
pursuant to which the Company agreed to acquire all of the shares of NACT common
stock not already owned by the Company or GST USA. Pursuant to the terms of the
merger agreement, each share of NACT common stock will be converted into shares
of Company common stock having a value of $17.50 per share based on the average
of the daily closing price of Company common stock on the Nasdaq National Market
for a pre-defined period prior to the closing (the "Closing Price"), provided
that if the Closing Price is more than $25.52, then each share of NACT common
stock will be converted into 0.6857 shares of Company common stock. If the
Closing Price is less than $20.88, then the Company may elect to terminate the
agreement. The merger is subject to, among other things, the approval of the
NACT stockholders and the satisfaction of certain other customary conditions.
This merger is expected to be consummated in September 1998.

The acquisition of the 67.3% majority interest in NACT has been accounted
for using the purchase method of accounting. Accordingly, the results of NACT's
operations have been included in the accompanying consolidated financial
statements from March 1, 1998. The purchase price of the majority interest in
NACT was allocated to 67.3% of the net assets acquired and purchased in-process
R&D. The excess of purchase price over 67.3% of the fair value of net assets
acquired and purchased in-process R&D, currently estimated at approximately
$42.8 million, has been recorded as goodwill and is being amortized over a 20
year period.

During the first quarter of 1998, $44.6 million of purchased in-process
R&D, which consists of 67.3% of the value of NACT products in the development
stage that are not considered to have reached technological

F-9
<PAGE> 192
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

feasibility as of the date of the NACT Acquisition, was expensed in accordance
with applicable accounting rules. See Management's Discussion and Analysis.

PRO FORMA RESULTS OF OPERATIONS

On a pro forma, unaudited basis, as if the acquisitions of ATI and NACT had
occurred as of January 1, 1997, total sales, operating income, net income and
diluted net income per common share for the six months ended June 30, 1998 and
1997 would have been approximately $86.4 million and $66.9 million; $14.1
million and $7.6 million; $6.4 million and $4.1 million; and $0.30 and $0.21,
respectively. The pro forma results of operations for the six months ended June
30, 1998 would not have been materially different had the acquisitions of AIT
and NACT occurred on January 1, 1998.

These unaudited pro forma results have been prepared for comparative
purposes only and are not necessarily indicative of the results of operations
which would actually have occurred had the acquisitions been in effect on the
date indicated. The portion of the ATI and NACT purchase prices allocated to
purchased in-process R&D expensed in accordance with applicable accounting rules
will not recur, therefore the pro forma results have been prepared excluding
these charges.

NOTE 3. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
Switching systems, frames and related circuit boards....... $20,960,342 $13,445,770
Transport and access products.............................. 1,343,217 779,674
Electronic components...................................... 6,364,945 4,879,213
Pay telephone parts........................................ 1,666,120 1,332,835
Work in progress........................................... 3,747,254 1,744,368
Other finished goods....................................... 390,715 245,058
----------- -----------
$34,472,593 $22,426,918
=========== ===========
</TABLE>

NOTE 4. GOODWILL

Goodwill from acquisitions, representing the excess of purchase price paid
over the value of net assets acquired and purchased in-process R&D, was as
follows:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
NACT....................................................... $42,752,140 $ --
CIS........................................................ 12,485,239 12,485,239
AIT........................................................ 10,657,917 11,557,917
Galaxy..................................................... 5,089,265 5,089,265
ATI........................................................ 2,748,309 --
Other...................................................... 5,034,062 5,034,062
----------- -----------
78,766,932 34,166,483
Accumulated amortization................................... (4,388,653) (2,506,282)
----------- -----------
$74,378,279 $31,660,201
=========== ===========
</TABLE>

Goodwill is being amortized on a straight-line basis over a 15 to 20 year
period. In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Company regularly reviews the projected future cash flows
from operations of each of the acquired businesses to assess the recoverability
of goodwill. In the

F-10
<PAGE> 193
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

event that the Company deems permanent impairment of goodwill has resulted,
charges are recorded against current operations for the impairment. No
significant impairment charges have been recorded to date. See Management's
Discussion and Analysis.

NOTE 5. DEBT

The Company has a $10.0 million revolving line of credit with a large
European bank. As of June 30, 1998, the Company had borrowings of $4.3 million
outstanding under this facility. These borrowing were repaid to the bank in July
1998.

The bank agreement, which expires in March 2001, contains standard lending
covenants including financial ratios, restrictions on dividends and limitations
on additional debt and the disposition of Company assets. Interest is paid at
the rate of prime plus 1 and 1/4% or Libor plus 2 and 1/2%, at the option of the
Company.

NOTE 6. SPECIAL CHARGES

Special charges in the first quarter of 1998 included $6.6 million for
costs related to the consolidation of several operations and the Company's exit
from the contract manufacturing business. The Company's AIT and circuit board
repair operations have been consolidated into a new facility in Orlando,
Florida; the Company's manufacturing operations have moved from Orlando to a new
facility in Alpharetta, Georgia; and the Company's Scottsdale, Arizona
operations have been integrated into ATI's facility in Wilmington,
Massachusetts.

The special charges included $3,360,000 to cost of sales for obsolete
contract manufacturing inventories and inventories deemed obsolete or redundant
as a result of the consolidation activities. The additional charges consisted
of:

<TABLE>
<S> <C>
Severance and termination benefits.......................... $ 550,000
Idle facility costs......................................... 1,340,000
Idle equipment costs........................................ 1,350,000
----------
$3,240,000
==========
</TABLE>

The consolidated program began in the first quarter of 1998 and was
completed as of June 30, 1998. No costs were included in the special charges
that are expected to derive future economic benefit to the Company. As of June
30, 1998, approximately $600,000 of accrued special charges is included in Other
current liabilities on the Company's balance sheet, which consisted primarily of
facility lease termination losses expected to be incurred. See Management's
Discussion and Analysis.

NOTE 7. EARNINGS PER SHARE

Effective in 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings per Share". The computation of basic earnings per
share is based on the weighted average number of common shares outstanding
during the period. The computation of diluted earnings per share is based on the
weighted average number of common shares outstanding plus, when their effect is
dilutive, potential common stock consisting of shares subject to stock options,
stock warrants and convertible notes. Potential common stock shares of 1,245,198
were included in computing diluted earnings per share for the three month period
ended June 30, 1998, and potential common stock shares of 1,959,331 and
1,440,251 were included in computing diluted earnings per share for the three
and six month periods ended June 30, 1997, respectively. A total of 1,203,786
shares of common stock held in escrow from certain acquisitions and a license
agreement were excluded from the earnings per share calculations for the three
months ended June 30, 1998 because the conditions for release of shares from
escrow had not been satisfied.

Common stock issued and outstanding at June 30, 1998 and 1997 was
21,887,074 and 18,159,797 shares, respectively.

F-11
<PAGE> 194
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. LEGAL PROCEEDINGS

On August 24, 1996, Aerotel, Ltd. and Aerotel U.S.A. Inc. (collectively,
"Aerotel") commenced an action against NACT and a customer of NACT in the United
States District Court, Southern District of New York, alleging that telephone
systems manufactured and sold by NACT incorporating prepaid debit card features
infringe upon Aerotel's patent which was issued in November 1987 (the "Aerotel
Patent"). Aerotel sought injunctive relief, damages in an unspecified amount and
damages of up to three times damages found for willful infringement of the
Aerotel Patent. NACT filed an answer and Counterclaim in which it denied
infringement of the Aerotel Patent and sought judgement that the Aerotel patent
is invalid and unenforceable and that Aerotel has misused its patent in
violation of antitrust laws. NACT has denied that it has committed defamation,
unfair competition and tortuous interference with prospective business
relations. In August 1997, Aerotel amended its complaint to include as
defendants GST, GST USA, and two former executive officers of NACT. The amended
pleadings seek in excess of $18.7 million in damages and allege that GST and GST
USA have infringed the Aerotel patent, aided and abetted infringement by others,
including NACT, and participated in, and aided and abetted alleged tortuous
conduct by NACT. GST, GST USA and the two former executive officers of NACT have
served answers denying all material allegations.

Under the terms of the Company's stock purchase agreement with GST, the
Company and GST have agreed to share evenly the costs of any judgement against
NACT as a result of the Aerotel litigation, including NACT's legal fees.
Subsequent to the NACT Acquisition, the Company has been actively engaged in
settlement negotiations. On July 9, 1998, the Company, GST and Aerotel entered
into a Memorandum of Understanding to settle the Aerotel litigation. As of the
date of this Report, the parties are negotiating the terms and conditions of a
final settlement agreement.

The Company currently estimates that its portion of the total settlement
costs, including legal fees, will be approximately $3.3 million. Any payment
made to Aerotel is expected to be paid through the issuance of Company common
stock. The settlement costs expected to be incurred by the Company as a result
of the Aerotel litigation have been accounted for as additional NACT purchase
price as of June 30, 1998.

Management expects a final Aerotel settlement agreement to be executed in
the near future. If a settlement does not occur, management believes that NACT
has valid defenses to the Aerotel claim. An unfavorable decision in this action,
however, could have a material adverse effect on the Company's financial
position.

NOTE 9. PENDING ACQUISITIONS

RESURGENS ACQUISITION

On February 12, 1998, the Company executed a letter of intent to acquire
Cherry Communications Incorporated, d/b/a Resurgens Communications Group
("RCG"), and Cherry Communications U.K. Limited ("Cherry U.K.", and together
with RCG, "Resurgens"). On May 12, 1998, the Company signed definitive
agreements to acquire Resurgens. The agreement to acquire RCG is subject to the
approval of the Bankruptcy Court. The transactions, which will be accounted for
under the purchase method of accounting, are currently expected to close in
September or October 1998.

Pursuant to the terms of the agreements, the creditors of RCG and the
shareholders of Cherry U.K. will receive approximately 3.7 million restricted
shares of Company common stock in the aggregate, with an estimated fair value of
approximately $90 million. In addition, the RCG creditors and Cherry U.K.
shareholders have the right to receive additional consideration of up to 7.5
million restricted shares of Company common stock over the next two and one-half
years, contingent upon the achievement of certain EBITDA levels by Resurgens
during this timeframe. The transaction is subject to, among other things,
Resurgens exceeding pre-defined levels of monthly revenues and gross margin, the
receipt of the requisite corporate and regulatory approvals, the confirmation of
RCG's Plan of Reorganization and the approval of Company stockholders.

F-12
<PAGE> 195
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RCG, currently operating under the protection of Chapter 11 of the United
States Bankruptcy Code, and Cherry U.K. are facilities-based providers of
international network access, commonly referred to in the industry as carriers'
carrier. In October 1997, John D. ("Jack") Phillips, a director of the Company,
entered into a series of agreements whereby, among other things, he became the
new Chairman and Chief Executive Officer of Resurgens. RCG filed for bankruptcy
protection shortly thereafter. WorldCom, Inc. ("WorldCom"), a major customer and
vendor of Resurgens, has subsequently provided Resurgens approximately $26
million of direct financial support through a debtor in possession facility and
additional financial support, primarily through trade credits.

TELCO ACQUISITION

On June 4, 1998, the Company entered into a definitive Agreement to merge
with Telco Systems, Inc. ("Telco") (the "Merger").

As a result of the Merger, each outstanding share of Telco common stock
shall be converted into the right to receive that number of shares of Company
common stock equal to the quotient of $17.00 divided by the average daily
closing price of Company common stock as reported on Nasdaq on each of the
twenty consecutive trading days ending on the second business day prior to the
date of the Merger (the "Average Closing Price"), provided that if the Average
Closing Price is more than $36.00 per share, then each share of Telco common
stock will be converted into .4722 shares of Company common stock and if the
Average Closing Price is less than $29.00 per share, then each share of Telco
common stock will be converted into .5862 shares of Company common stock. Based
on the Company's current stock price as of the date of this Report, the shares
issued in connection with the Merger will be valued at approximately $200
million.

The Merger is intended to constitute a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended, and will be accounted for as a
purchase. The purchase price will be allocated to the net assets acquired and to
approximately $65 million of purchased in-process R&D. Purchased in-process R&D,
which consists of the value of Telco's products in the development stage that
are not considered to have reached technological feasibility, will be expensed
upon completion of the Merger.

The consummation of the Merger is subject to (i) clearance under the
Hart-Scott-Rodino Improvements Act of 1976, as amended, (ii) the approval by the
respective stockholders of the Company and Telco, (iii) the approval by the
stockholders of the Company of an increase in the authorized shares of common
stock of such corporation, and (iv) the satisfaction or waiver of customary
conditions. The Merger is expected to be consummated in September or October
1998.

NOTE 10. COMPREHENSIVE INCOME

The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income", effective January 1, 1998. For
the six months ended June 30, 1998 and 1997, respectively, comprehensive and net
income were the same for the Company.

F-13
<PAGE> 196

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of World Access, Inc.,

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of World Access, Inc. and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP

Atlanta, Georgia
March 5, 1998

F-14
<PAGE> 197

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents...................................... $118,065,045 $22,480,082
Accounts receivable....................................... 20,263,971 9,651,884
Inventories............................................... 22,426,918 10,657,412
Other current assets...................................... 10,923,723 3,533,615
------------ -----------
Total Current Assets.............................. 171,679,657 46,322,993
Property and equipment...................................... 5,704,585 2,657,661
Investment in affiliate..................................... 5,002,000 --
Goodwill.................................................... 31,660,201 9,526,140
Other assets................................................ 11,236,298 2,229,172
------------ -----------
Total Assets...................................... $225,282,741 $60,735,966
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................... $ 81,739 $ --
Accounts payable.......................................... 9,339,588 3,756,722
Accrued payroll and benefits.............................. 2,589,461 1,605,840
Purchase price payable.................................... 3,700,000 --
Other accrued liabilities................................. 2,219,237 2,999,187
------------ -----------
Total Current Liabilities......................... 17,930,025 8,361,749
Other liabilities........................................... 333,802 --
Long-term debt.............................................. 115,263,984 --
------------ -----------
Total Liabilities................................. 133,527,811 8,361,749
------------ -----------
Stockholders' Equity
Common stock, $.01 par value, 40,000,000 shares
authorized, 19,306,235 and 16,328,513 issued and
outstanding at December 31, 1997 and 1996,
respectively........................................... 193,062 163,285
Capital in excess of par value............................ 84,162,478 58,517,279
Note receivable from affiliate............................ -- (571,634)
Retained earnings (deficit)............................... 7,399,390 (5,734,713)
------------ -----------
Total Stockholders' Equity........................ 91,754,930 52,374,217
------------ -----------
Total Liabilities and Stockholders' Equity........ $225,282,741 $60,735,966
============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-15
<PAGE> 198

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Sales of products....................................... $71,391,688 $34,411,079 $17,383,904
Service revenues........................................ 21,592,794 16,589,123 12,754,585
----------- ----------- -----------
Total Sales................................... 92,984,482 51,000,202 30,138,489
Cost of products sold................................... 43,827,123 21,485,696 12,657,218
Cost of services........................................ 17,017,674 14,519,917 11,118,411
----------- ----------- -----------
Total Cost of Sales........................... 60,844,797 36,005,613 23,775,629
----------- ----------- -----------
Gross Profit.................................. 32,139,685 14,994,589 6,362,860
Engineering and development............................. 1,861,734 891,959 577,299
Selling, general and administrative..................... 8,999,931 6,210,324 3,124,559
Amortization of goodwill................................ 1,755,798 533,919 157,394
Special charges......................................... -- -- 980,000
----------- ----------- -----------
Operating Income.............................. 19,522,222 7,358,387 1,523,608
Interest and other income............................... 2,503,318 484,211 142,632
Interest expense........................................ (1,355,437) (318,987) (493,797)
----------- ----------- -----------
Income Before Income Taxes.................... 20,670,103 7,523,611 1,172,443
Income taxes............................................ 7,536,000 745,069 --
----------- ----------- -----------
Net Income.................................... $13,134,103 $ 6,778,542 $ 1,172,443
=========== =========== ===========
Net Income Per Common Share:
Basic................................................. $ .76 $ .52 $ .15
=========== =========== ===========
Diluted............................................... $ .70 $ .46 $ .12
=========== =========== ===========
Weighted Average Shares Outstanding:
Basic................................................. 17,242,405 13,044,432 7,858,954
=========== =========== ===========
Diluted............................................... 18,707,781 14,529,994 9,083,260
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-16
<PAGE> 199

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CAPITAL IN NOTE RETAINED
COMMON EXCESS OF RECEIVABLE EARNINGS
STOCK PAR VALUE FROM AFFILIATE (DEFICIT) TOTAL
-------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995............ $ 69,182 $14,776,433 $ -- $(13,685,698) $ 1,159,917
Net income............................ 1,172,443 1,172,443
Issuance of 2,583,988 shares for stock
warrants and options................ 25,840 6,703,561 6,729,401
Issuance of 1,181,770 shares in
private placement, net of
expenses............................ 11,818 2,857,607 2,869,425
Issuance of 1,351,603 shares for AIT
acquisition......................... 13,516 2,259,902 2,273,418
Issuance of 517,050 shares for Westec
acquisition......................... 5,171 1,023,279 1,028,450
Note receivable from affiliate, net... (919,836) (919,836)
Issuance of 5,596 shares for matching
contribution to 401K plan........... 56 20,761 20,817
-------- ----------- --------- ------------ -----------
Balance at December 31, 1995.......... 125,583 27,641,543 (919,836) (12,513,255) 14,334,035
Net income............................ 6,778,542 6,778,542
Issuance of 3,487,500 shares in
secondary public offering, net of
expenses............................ 34,875 25,296,375 25,331,250
Issuance of 655,364 shares for Sunrise
acquisition......................... 6,553 2,990,383 2,996,936
Release of 318,654 shares from escrow
for AIT acquisition................. 2,042,373 2,042,373
Repayment of loan by affiliate, net... 348,202 348,202
Issuance of 50,000 shares for
technology license.................. 500 137,020 137,520
Issuance of 246,906 shares for stock
options and warrants................ 2,469 377,629 380,098
Retirement of 672,419 escrowed shares
from 1991 initial public offering... (6,724) 6,724 --
Issuance of 2,883 shares for matching
contribution to 401K plan........... 29 25,232 25,261
-------- ----------- --------- ------------ -----------
Balance at December 31, 1996.......... 163,285 58,517,279 (571,634) (5,734,713) 52,374,217
Net income............................ 13,134,103 13,134,103
Issuance of 1,285,884 shares for CIS
acquisition......................... 12,859 5,601,560 5,614,419
Issuance of 408,205 shares for Galaxy
acquisition......................... 4,082 4,768,893 4,772,975
Release of 159,327 shares from escrow
for AIT acquisition................. 892,231 892,231
Issuance of 121,182 shares for AIT
acquisition......................... 1,212 2,168,788 2,170,000
Release of 50,000 shares from escrow
for Westec acquisition.............. 835,625 835,625
Repayment of loan by affiliate........ 571,634 571,634
Issuance of 1,155,360 shares for stock
options and warrants................ 11,553 4,594,299 4,605,852
Tax benefit from exercises of stock
options and warrants................ 6,675,000 6,675,000
Issuance of 7,091 shares for matching
contribution to 401K plan........... 71 108,803 108,874
-------- ----------- --------- ------------ -----------
Balance at December 31, 1997.......... $193,062 $84,162,478 $ -- $ 7,399,390 $91,754,930
======== =========== ========= ============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-17
<PAGE> 200

WORLD ACCESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 13,134,103 $ 6,778,542 $ 1,172,443
Adjustments to reconcile net income to net cash from
(used by) operating activities:
Depreciation and amortization........................ 3,096,356 1,420,052 894,484
Income tax benefit from stock warrants and options... 6,675,000 -- --
Provision for inventory reserves..................... 772,867 197,409 162,345
Provision for bad debts.............................. 171,574 167,612 7,568
Stock contributed to 401K plan....................... 108,874 34,861 19,317
Special charges...................................... -- -- 823,714
Changes in operating assets and liabilities, net of
effects from businesses acquired:
Accounts receivable............................... (8,796,812) (258,167) (6,809,851)
Inventories....................................... (12,147,373) (5,988,385) (1,627,479)
Accounts payable.................................. 4,313,371 (46,669) 177,090
Other assets and liabilities...................... (9,290,063) (310,306) (1,264,163)
------------ ----------- -----------
Net Cash From (Used By) Operating
Activities................................. (1,962,103) 1,994,949 (6,444,532)
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of businesses............................. (5,945,724) (436,791) (649,769)
Investment in affiliate................................ (5,002,000) -- --
Repayments by (loans to) affiliates.................... (3,319,534) 348,202 (1,502,336)
Expenditures for property and equipment................ (3,590,978) (1,176,018) (279,571)
Technology licenses.................................... (21,298) (528,050) --
------------ ----------- -----------
Net Cash Used By Investing Activities........ (17,879,534) (1,792,657) (2,431,676)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt............................. 111,909,015 -- --
Net proceeds from secondary public offering............ -- 25,331,250 --
Net proceeds from private equity offerings............. -- -- 2,835,000
Proceeds from exercise of stock warrants and options... 4,605,852 4,251,487 2,961,207
Short-term debt borrowings (repayments)................ (588,715) (5,510,220) 4,338,556
Long-term debt repayments.............................. -- (3,625,000) (125,000)
Debt issuance costs.................................... (499,552) (56,546) --
------------ ----------- -----------
Net Cash From Financing Activities........... 115,426,600 20,390,971 10,009,763
------------ ----------- -----------
Increase in Cash and Equivalents............. 95,584,963 20,593,263 1,133,555
Cash and Equivalents at Beginning of
Period..................................... 22,480,082 1,886,819 753,264
------------ ----------- -----------
Cash and Equivalents at End of Period........ $118,065,045 $22,480,082 $ 1,886,819
============ =========== ===========
Supplemental Schedule of Noncash Financing and
Investing Activities:
Issuance of common stock for businesses acquired....... $ 14,285,250 $ 5,039,309 $ 3,301,868
Issuance of common stock for stockholder notes......... 3,828,194
Reduction in note receivable from affiliate to
recognize contingent purchase price earned........... 582,500 582,500
Conversion of accounts receivable to investment in
technology license................................... 241,919
Issuance of common stock for technology license........ 137,520
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-18
<PAGE> 201

WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A: GENERAL

NATURE OF BUSINESS

World Access, Inc. and its wholly-owned subsidiaries (the "Company")
operate in one business segment as a provider of systems, products and services
to the global telecommunications marketplace. The Company develops, manufactures
and markets wireline and wireless switching, transport and access products
primarily for the United States, Caribbean Basin and Latin American
telecommunications markets. The Company's products allow telecommunications
service providers to build and upgrade their central office and outside plant
networks in order to provide a wide array of voice, data and video services to
their business and residential customers. The Company offers digital switches,
cellular base stations, fixed wireless local loop systems, intelligent
multiplexers, microwave and millimeterwave radio systems and other
telecommunications network equipment. The products offered by the Company
include those manufactured by the Company as well as those manufactured by other
telecommunications equipment companies. To support and complement its product
sales, the Company also provides its customers with a broad range of design,
engineering, manufacturing, testing, installation, repair and other value-added
services.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries from their effective dates of acquisition (see
"Note B"). All material intercompany accounts and transactions are eliminated in
consolidation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of the respective
balance sheet dates. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date and current estimates of fair value may differ significantly from the
amounts presented herein.

The fair values of cash equivalents, accounts receivable, accounts payable
and accrued expenses approximate the carrying values due to their short-term
nature. The fair values of long-term debt are estimated based on current market
rates and instruments with the same risk and maturities and approximate the
carrying value.

REVENUE RECOGNITION

In general, revenues are recognized when the Company's products are shipped
or services are rendered. Occasionally, the Company will enter into long-term
contracts which require percentage of completion accounting treatment.

During 1997, the Company recognized approximately $5.3 million of revenues
under the percentage of completion method. Of this amount, approximately $2.5
million represents costs and estimated earnings in excess of billings and is
included in Other current assets on the Company's December 31, 1997 balance
sheet.

F-19
<PAGE> 202
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SIGNIFICANT CUSTOMERS

A portion of the Company's total sales have been derived from significant
customers. During 1997, no customer individually accounted for 10.0% of the
Company's total sales. During 1996, one customer accounted for 10.9% of total
sales. During 1995, two customers individually accounted for 22.7% and 15.1% of
total sales.

CASH AND EQUIVALENTS

Cash equivalents include demand deposits with banks and all highly liquid
investments with original maturities of three months or less.

ACCOUNTS RECEIVABLE

Accounts receivable are presented net of an allowance for doubtful accounts
of $237,000, $265,000, and $208,000 at December 31, 1997, 1996, and 1995,
respectively.

INVESTMENT IN AFFILIATE

During November and December 1997, the Company purchased 355,000 shares of
NACT Telecommunications, Inc. ("NACT") common stock in the open market for
approximately $5.0 million.

On December 31, 1997, the Company entered into a stock purchase agreement
with GST Telecommunications, Inc. ("GST") and GST USA, Inc. ("GST USA"), a
wholly owned subsidiary of GST, to acquire 5,113,712 shares of NACT common stock
owned by GST USA. On February 27, 1998, the Company completed this purchase
increasing its ownership of NACT to approximately 67.3%. On February 24, 1998,
the Company executed a definitive merger agreement with NACT to acquire the
remaining 32.7% of NACT common shares (see "Note N").

EARNINGS PER SHARE

Effective in 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings per Share". The computation of basic earnings per
share is based on the weighted average number of common shares outstanding
during the period. The computation of diluted earnings per share is based on the
weighted average number of common shares outstanding plus, when their effect is
dilutive, potential common stock consisting of shares subject to stock options,
stock warrants and convertible notes. Potential common stock shares of
1,465,376, 1,485,562 and 1,224,306 as of December 31, 1997, 1996 and 1995,
respectively, have been included in computing diluted earnings per share. A
total of 994,736, 401,267 and 895,744 shares of common stock for the years ended
December 31, 1997, 1996 and 1995, respectively, held in escrow from certain
acquisitions (see "Note B"), the Company's initial public offering (see "Note
H") and the TCSI license agreement (see "Note E"), were excluded from the
earnings per share calculations because the conditions for release of shares
from escrow had not been satisfied.

RECLASSIFICATIONS

Certain items in the prior year consolidated financial statements have been
reclassified to conform to the current presentation.

NOTE B: ACQUISITIONS

AIT ACQUISITION

On May 17, 1995, the Company entered into an agreement to acquire AIT, Inc.
("AIT"), a Lakeland, Florida based provider of new and used Northern Telecom
switching systems and related circuit boards to the telecommunications industry.
On July 11, 1995, the transaction was completed in its final form whereby AIT
was merged with and into Restor-AIT, Inc., a wholly-owned subsidiary of the
Company (the "AIT Merger"). In connection with the AIT Merger, the sole
stockholder of AIT received 685,970 restricted shares of the Company's common
stock. These shares had an initial fair value of approximately $1.7 million.

F-20
<PAGE> 203
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In July 1995, the Company loaned the sole stockholder of AIT $1.3 million
in cash in connection with a $2,330,000 interest bearing promissory note
executed as an integral part of the merger agreement between the two companies.
An additional $1,030,000 was to be loaned to the stockholder as specific
accounts receivable, notes receivable and inventories on AIT's May 17, 1995
balance sheet were collected and/or realized by the Company. As of December 31,
1996, the Company had loaned an aggregate of $2,319,134 to the stockholder. The
principal balance of the note as of December 31, 1996 was $571,634, which was
fully collateralized by shares of the Company's common stock pledged by the sole
stockholder. As a result of this pledge agreement, the note receivable from the
stockholder was accounted for as a reduction of stockholders' equity. As of
December 31, 1997, the amounts due from the stockholder were paid in full.

In addition to the 685,970 shares noted above, the sole stockholder of AIT
was issued 637,308 restricted shares of the Company's common stock. These shares
were immediately placed into escrow, and along with $2,330,000 in potential cash
payments, were to be released to the sole stockholder over a two year period
ending August 15, 1997 contingent upon the realization of predefined levels of
gross profit from AIT's operations during this same period. To the extent cash
consideration was paid, the sole stockholder was immediately required to repay
the equivalent amount of borrowings outstanding under the promissory note
described above.

Upon issuance, the 637,308 escrowed shares were valued by the Company at
par value only, or $6,373. As it became probable that the conditions for release
from escrow would be met, the fair market value of the shares as measured at
that time, along with any contingent cash payment earned, were recorded as
additional goodwill and stockholders' equity, respectively.

As of December 31, 1997, the Company had released all 637,308 shares from
escrow and paid additional cash consideration of $2,330,000 based on AIT's gross
profit performance. Based on AIT's pre-tax income performance, an additional
$3.1 million in purchase price was paid to the sole stockholder in August 1997
in the form of 121,182 restricted shares of the Company's common stock. The net
effect of the above has been to increase goodwill and stockholder's equity by
approximately $8.0 million as of December 31, 1997.

As part of a final purchase price settlement agreement entered into in
August 1997, the sole stockholder of AIT pledged 280,509 shares of the Company's
common stock to the Company to effectively guarantee the collectibility of
certain AIT accounts receivable. During the fourth quarter of 1997 and the first
quarter of 1998, these accounts receivable were paid in full through cash
proceeds from the sale of these pledged shares.

The acquisition of AIT has been accounted for using the purchase method of
accounting. Accordingly, the results of AIT's operations have been included in
the accompanying consolidated financial statements from May 17, 1995, the
effective date of acquisition. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as of the
date of acquisition. The excess of purchase price over the fair value of net
assets acquired, approximately $11.6 million, has been recorded as goodwill and
is being amortized over a 15 year period.

WESTEC ACQUISITION

On October 2, 1995, the Company entered into an agreement to acquire Westec
Communications, Inc. ("Westec"), a Scottsdale, Arizona based provider of
wireless systems and repair services to the cable television and
telecommunications industries. On October 31, 1995, the transaction was
completed in its final form whereby Westec was merged with and into
Restor-Westec, Inc., a wholly-owned subsidiary of the Company (the "Westec
Merger"). Restor-Westec, Inc. subsequently changed its name to Westec
Communications, Inc. In connection with the Westec Merger, the sole stockholder
of Westec received $550,000 and 272,050 restricted shares of the Company's
common stock. These shares had an initial fair value of approximately $900,000.

As part of the Westec Merger agreement, the sole stockholder of Westec may
also receive $1.0 million in additional purchase price (the "Westec Additional
Consideration") contingent upon the realization of

F-21
<PAGE> 204
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

predefined levels of pre-tax income from Westec's operations during five
calendar years beginning in 1996. This additional consideration may be paid, at
the option of the Company, in the form of cash or restricted shares of the
Company's common stock valued at the then current market prices. If earned, the
Westec Additional Consideration will be capitalized as additional goodwill and
stockholders' equity, respectively.

In connection with the Westec Merger, the Company entered into a
Compensation Agreement with Sherman Capital Group L.L.C. ("Sherman"), a merchant
banking firm that had a pre-existing letter of intent to acquire Westec.
Pursuant to the Compensation Agreement, Sherman received $100,000 and 45,000
restricted shares of the Company's common stock. These shares had an initial
fair value of approximately $150,000. The compensation paid to Sherman has been
accounted for as part of the purchase price of Westec. In addition, 200,000
restricted shares of the Company's common stock were placed in escrow and may be
released to Sherman in installments over a four year period on February 15 of
each year beginning on February 15, 1997, contingent upon the realization of
predefined levels of pre-tax income from Westec's operations. Upon issuance, the
200,000 escrowed shares were valued by the Company at par value only, or $2,000.
As it becomes probable that the conditions for release from escrow will be met,
the fair market value of the shares as measured at that time will be recorded as
additional goodwill and stockholders' equity.

The first measurement period for purposes of releasing escrowed shares and
paying Westec Additional Consideration was January 1, 1996 to December 31, 1996.
Westec's pre-tax income for the first measurement period failed to meet the
performance criterion required to earn any additional consideration. In
reviewing Westec's pre-tax performance for the second performance period,
January 1, 1997 to December 31, 1997, the Company determined that the earn-out
performance criterion was met. Accordingly, 50,000 escrowed shares were
accounted for as if released to Sherman and $200,000 of Westec Additional
Consideration was accounted for as if paid to the sole stockholder of Westec as
of December 31, 1997. The net effect of this accounting was to increase goodwill
and stockholders equity by approximately $1.0 million and $800,000,
respectively. The escrowed shares were released and Westec Additional
Consideration was paid on February 15, 1998.

The acquisition of Westec has been accounted for using the purchase method
of accounting. Accordingly, the results of Westec's operations have been
included in the accompanying consolidated financial statements from October 2,
1995, the effective date of acquisition. The purchase price was allocated to the
assets acquired and liabilities assumed based on their estimated fair values as
of the date of acquisition. The excess of purchase price over the fair value of
net assets acquired, currently estimated at approximately $2.4 million, has been
recorded as goodwill and is being amortized over a 15 year period.

SUNRISE ACQUISITION

In February 1996, the Company entered into an agreement to acquire Comtech
Sunrise, Inc. ("Sunrise"), a Livermore, California based manufacturer of
multiplexers, digital loop carriers and other intelligent transport and access
products. On June 18, 1996, after a mandatory registration process was completed
in the State of California, the transaction was completed in its final form
whereby Sunrise was merged with and into Restor-Comtech, Inc., a wholly-owned
subsidiary of the Company (the "Sunrise Merger"). Restor-Comtech, Inc.
subsequently changed its name to Sunrise Sierra, Inc. In connection with the
Sunrise Merger, the stockholders of Sunrise received approximately $100,000 in
cash and 385,481 shares of the Company's common stock. These shares had an
initial fair value of approximately $2.3 million.

In addition to the 385,481 shares noted above, the stockholders of Sunrise
were issued 211,765 restricted shares of the Company's common stock. These
shares were immediately placed into escrow, and along with $1.8 million in
additional purchase price (the "Sunrise Additional Consideration"), will be
released to the stockholders of Sunrise contingent upon the realization of
predefined levels of pre-tax income from Sunrise's operations during three
one-year periods beginning January 1, 1996. The Sunrise Additional Consideration
may be paid, at the option of the Company, in the form of cash or restricted
shares of the Company's common stock valued at the then current market prices.

F-22
<PAGE> 205
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Upon issuance, the 211,765 escrowed shares were valued by the Company at
par value only, or $2,118. As it becomes probable that the conditions for
release from escrow will be met, the fair market value of the shares as measured
at that time, along with any Sunrise Additional Consideration earned, will be
recorded as additional goodwill and stockholders' equity, respectively.

The first measurement period for purposes of releasing escrowed shares and
paying Sunrise Additional Consideration was January 1, 1996 to December 31,
1996. In reviewing Sunrise's pre-tax income performance, the Company determined
that the earn-out performance criterion was met. Accordingly, 58,823 escrowed
shares were accounted for as if released and $500,000 of Sunrise Additional
Consideration was accounted for as if paid (in the form of 58,118 restricted
shares of Company common stock) as of December 31, 1996. The net effect of this
accounting was to increase goodwill and stockholders' equity by approximately
$700,000. The escrowed shares were released and additional shares were issued on
February 15, 1997. The second measurement period was January 1, 1997 to December
31, 1997. Sunrise's pre-tax income failed to meet the performance criterion
required to earn any additional consideration for that period.

The acquisition of Sunrise has been accounted for using the purchase method
of accounting. Accordingly, the results of Sunrise's operations have been
included in the accompanying consolidated financial statements from January 1,
1996, the effective date of acquisition as defined in the definitive agreement
and plan of merger. The purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values as of the date of
acquisition. The excess of purchase price over the fair value of net assets
acquired, currently estimated at approximately $2.3 million, has been recorded
as goodwill and is being amortized over a 15 year period.

CIS ACQUISITION

On March 11, 1997, the Company entered into an agreement to acquire
Cellular Infrastructure Supply, Inc. ("CIS"), a Burr Ridge, Illinois based
provider of new and/or upgraded equipment and related design, installation and
technical support services to cellular, PCS and other wireless service
providers. On March 27, 1997, the transaction was completed in its final form
whereby CIS was merged with and into CIS Acquisition Corp., a wholly-owned
subsidiary of the Company (the "CIS Merger"). CIS Acquisition Corp. subsequently
changed its name to Cellular Infrastructure Supply, Inc. In connection with the
CIS Merger, the three stockholders of CIS received $3.5 million in cash and
440,874 restricted shares of the Company's common stock. These shares had an
initial fair value of approximately $2.6 million.

In addition to the 440,874 shares noted above, the stockholders of CIS were
issued 845,010 restricted shares of the Company's common stock. These shares
were immediately placed into escrow, and along with $6.5 million in additional
purchase price (the "CIS Additional Consideration"), will be released and paid
to the stockholders of CIS contingent upon the realization of predefined levels
of pre-tax income from CIS's operations during three one-year periods beginning
January 1, 1997.

Upon issuance, the 845,010 escrowed shares were valued by the Company at
par value only, or $8,450. Once conditions for release from escrow have been
met, the fair market value of the shares as measured at that time, along with
any CIS Additional Consideration earned, will be recorded as additional goodwill
and stockholders' equity, respectively.

The first measurement period for purposes of releasing escrowed shares and
paying CIS Additional Consideration was January 1, 1997 to December 31, 1997. In
reviewing CIS's pre-tax income performance as of April 30, 1997, the Company
determined that it was highly probable that the conditions for release and
payment for the first period would be met. Accordingly, 317,427 escrowed shares
were accounted for as if released and $3.5 million of CIS Additional
Consideration was accounted for as if paid as of April 30, 1997. The net effect
of this accounting was to increase goodwill and stockholders' equity by
approximately $6.5 million and $3.0 million, respectively, as of April 30, 1997.
These escrowed shares were released and CIS Additional Consideration was paid to
the former stockholders of CIS on February 15, 1998. The $3.5 million

F-23
<PAGE> 206
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of CIS Additional Consideration earned is included in Purchase price payable on
the Company's December 31, 1997 balance sheet.

The acquisition of CIS has been accounted for using the purchase method of
accounting. Accordingly, the results of CIS's operations have been included in
the accompanying consolidated financial statements from January 1, 1997, the
effective date of acquisition as defined in the definitive agreement and plan of
merger. The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as of the date of acquisition. The
excess of purchase price over the fair value of net assets acquired, currently
estimated at approximately $12.5 million, has been recorded as goodwill and is
being amortized over a 15 year period.

GALAXY ACQUISITION

On July 29, 1997, the Company entered into a letter of intent to acquire
Galaxy Personal Communications Services, Inc. ("Galaxy"), a Norcross, Georgia
based provider of system design, implementation, optimization and other
value-added radio engineering and consulting services to PCS, cellular and other
wireless telecommunications service providers. On August 26, 1997, the
transaction was completed in its final form whereby Galaxy was merged with and
into Galaxy Acquisition Corp., a wholly-owned subsidiary of the Company (the
"Galaxy Merger"). Galaxy Acquisition Corp. subsequently changed its name to
Galaxy Personal Communications Services, Inc. In connection with the Galaxy
Merger, the former stockholders of Galaxy received approximately $1.2 million in
cash and 262,203 restricted shares of the Company's common stock. These shares
had an initial fair value of approximately $4.2 million.

In addition to the 262,203 shares noted above, the former Galaxy
stockholders were issued 131,101 restricted shares of the Company's common
stock. These shares were immediately placed into escrow, and along with $3.5
million in additional consideration (the "Galaxy Additional Consideration"),
will be released and paid to the former stockholders of Galaxy contingent upon
the realization of predefined levels of pre-tax income from Galaxy's operations
during four measurement periods between July 1, 1997 and December 31, 2000. The
Galaxy Additional Consideration may be paid, at the option of the Company, in
the form of cash or restricted shares of the Company's common stock valued at
the then current market prices.

Upon issuance, the 131,101 escrowed shares were valued by the Company at
par value only, or $1,311. Once conditions for release from escrow have been
met, the fair market value of the shares as measured at that time, along with
any Galaxy Additional Consideration earned, will be recorded as additional
goodwill and stockholders' equity, respectively.

The first measurement period for purposes of releasing escrowed shares and
paying Galaxy Additional Consideration was July 1, 1997 to December 31, 1997. In
reviewing Galaxy's pre-tax income performance, the Company determined that the
earn-out performance criterion was met. Accordingly, 15,215 escrowed shares were
accounted for as if released and $400,000 of Galaxy Additional Consideration (in
the form of 14,901 restricted shares of Company common stock) were accounted for
as if paid as of December 31, 1997. The net effect of this accounting was to
increase goodwill and stockholders' equity by approximately $500,000 as of
December 31, 1997. These escrowed shares were released and additional shares
were issued to the former stockholders of Galaxy on February 15, 1998.

The acquisition of Galaxy has been accounted for using the purchase method
of accounting. Accordingly, the results of Galaxy's operations have been
included in the accompanying consolidated financial statements from July 1,
1997, the effective date of acquisition as defined in the definitive agreement
and plan of merger. The purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values as of the date of
acquisition. The excess of purchase price over the fair value of net assets
acquired, currently estimated at approximately $5.1 million, has been recorded
as goodwill and is being amortized over a 15 year period.

F-24
<PAGE> 207
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PRO FORMA RESULTS OF OPERATIONS

On a pro forma, unaudited basis, as if the acquisitions of AIT, Westec and
Sunrise had occurred as of January 1, 1995, total sales, operating income, net
income and diluted net income per common share for the year ended December 31,
1995 would have been approximately $38,100,000, $2,200,000, $1,800,000 and
$0.17, respectively.

On a pro forma, unaudited basis, as if the acquisition of CIS had occurred
as of January 1, 1996, total sales, operating income, net income and net income
per diluted common share for the year ended December 31, 1996 would have been
approximately $63,810,000, $10,680,000, $8,520,000, and $0.57, respectively. The
results of operations for Galaxy during 1996 and the first six months of 1997
were not material and therefore are not included in the pro forma disclosure.

NOTE C: INVENTORIES

Inventories are stated at the lower of cost or market as determined
primarily on a first-in, first-out basis. To address potentially obsolete and
slow moving inventories and related market valuation adjustments, the Company
charged to operations for the years ended December 31, 1997, 1996 and 1995
approximately $773,000, $197,000 and $162,000, respectively.

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Switching systems, frames and related circuit boards........ $13,445,770 $ 6,902,886
Electronic components....................................... 4,879,213 2,539,497
Pay telephone parts......................................... 1,332,835 494,315
Work in progress............................................ 1,744,368 437,926
Other finished goods........................................ 1,024,732 282,788
----------- -----------
$22,426,918 $10,657,412
=========== ===========
</TABLE>

The switching systems, frames and related circuit board inventory at
December 31, 1997 includes approximately $3.8 million of consigned inventory
held at Resurgens Communications Group (see "Note M").

F-25
<PAGE> 208
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE D: PROPERTY AND EQUIPMENT

Property and equipment is stated at cost, less accumulated depreciation as
computed using the straight-line method. Leasehold improvements are depreciated
over their remaining estimated lease term. Estimated lives for other depreciable
assets range from three to eight years. Depreciation expense for the years ended
December 31, 1997, 1996 and 1995 was $1,040,000, $829,000 and $690,000,
respectively.

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Leasehold improvements...................................... $ 915,258 $ 686,683
Manufacturing assembly and test equipment................... 9,865,060 6,463,996
Office furniture and equipment.............................. 1,739,870 1,328,730
Vehicles.................................................... 129,498 84,975
----------- -----------
12,649,686 8,564,384
Accumulated depreciation.................................... (6,945,101) (5,906,723)
----------- -----------
$ 5,704,585 $ 2,657,661
=========== ===========
</TABLE>

The Company leases various facilities and equipment under operating leases.
As of December 31, 1997, future minimum payments under noncancelable operating
leases with initial or remaining terms of more than one year are approximately:
1998 -- $750,000, 1999 -- $545,000, 2000 -- $322,000; 2001 -- $300,000; and
2002 -- $58,000.

Total rental expense under operating leases for the years ended December
31, 1997, 1996 and 1995 was approximately $1,732,000, $1,327,000 and $670,000,
respectively, exclusive of property taxes, insurance and other occupancy costs
generally payable by the Company.

NOTE E: TECHNOLOGY LICENSES

In March 1996, the Company entered into a memorandum of understanding with
International Communication Technologies, Inc. ("ICT") and Eagle Telephonics,
Inc. ("Eagle") to manufacture, market and sell a new modular, digital central
office switch developed by Eagle. In July 1996, a long-term technology licensing
agreement was executed by all three parties. As consideration for this license,
the Company paid Eagle $250,000 in cash and provided it $450,000 of
manufacturing services. The license fees paid Eagle will be amortized to expense
in connection with the first 300,000 lines of phone service provided for within
the switches sold by the Company, i.e. approximately $2.50 per line. In addition
to the up-front consideration, the Company agreed to pay ICT certain royalties
based on future sales of the switch by the Company. During 1997, the Company
expensed license fees and royalties of approximately $200,000 in connection with
lines sold during the year. In connection with this license and the up-front
consideration paid, the Company received 1.2 million restricted shares of Eagle
common stock. The fair value of these shares was not material as of December 31,
1997.

In December 1996, the Company executed a technology licensing agreement
with TCSI Corporation ("TCSI") that grants the Company the perpetual rights to
incorporate TCSI's spread spectrum Code Division Multiple Access ("CDMA") based
wireless technology into the Company's products sold throughout the world. Under
the terms of the agreement, the Company also has the rights to use the
technology covered by seven TCSI patents, all of which address digital data
signals and wireless communication systems. As total consideration for this
license, TCSI was paid $50,000 in cash and 25,000 shares of restricted Company
common stock. These shares had an initial fair value of approximately $150,000.
In addition to the 25,000 shares noted above, TCSI was issued 25,000 shares of
restricted common stock. These shares were immediately placed into escrow and
will be released to TCSI upon the earlier of the first commercial use of

F-26
<PAGE> 209
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the technology by the Company or the expiration of the two year period from the
date the license was executed. As of December 31, 1997, no escrowed shares had
been released to TCSI.

NOTE F: GOODWILL

Goodwill from acquisitions, representing the excess of purchase price paid
over the value of net assets acquired, is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
CIS......................................................... $12,485,239 $ --
AIT......................................................... 11,557,917 6,403,187
Galaxy...................................................... 5,089,265 --
Westec...................................................... 2,364,660 1,329,035
Sunrise..................................................... 2,284,500 2,159,500
Other....................................................... 384,902 384,902
----------- -----------
34,166,483 10,276,624
Accumulated amortization.................................... (2,506,282) (750,484)
----------- -----------
$31,660,201 $ 9,526,140
=========== ===========
</TABLE>

Goodwill is being amortized on a straight-line basis over a 15 year period.
The Company reviews the net carrying value of goodwill on a regular basis, and
if deemed necessary, charges are recorded against current operations for any
impairment in the value of these assets. No significant impairment charges have
been recorded to date. Goodwill is removed from the books when fully amortized.

NOTE G: DEBT

SUMMARY

The Company had no debt outstanding as of December 31, 1996. Debt as of
December 31, 1997 consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Convertible subordinated notes.............................. $115,000,000
Capital lease obligations and other debt.................... 345,723
------------
Total debt........................................ 115,345,723
Amount due within one year.................................. (81,739)
------------
Long -- term debt................................. $115,263,984
============
</TABLE>

Interest paid for the years ended December 31, 1997, 1996 and 1995 was
$57,000, $352,000 and $507,000, respectively.

CONVERTIBLE SUBORDINATED NOTES

On October 1, 1997, the Company sold $100.0 million in aggregate principal
amount of convertible subordinated notes (the "Notes") under Rule 144A of the
Securities Act of 1933. The Notes bear interest at the rate of 4.5% per annum,
are convertible into Company common stock at an initial price of $37.03 per
share and mature on October 1, 2002. Interest on the Notes is payable on April 1
and October 1 of each year, commencing on April 1, 1998. The Notes are general
unsecured obligations of the Company and are subordinate in right of payment to
all existing and senior indebtedness. The Company received $97.0 million from
the sale of the Notes, after the application of the initial purchasers' discount
fees of $3.0 million.

F-27
<PAGE> 210
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition to the Notes sold on October 1, 1997, the Company granted the
initial purchasers an option to purchase up to an additional $15.0 million in
Notes to cover over-allotments. On October 28, 1997, the initial purchasers
exercised the over-allotment option in full and the Company received an
additional $14,550,000, after the application of the initial purchasers'
discount fees of $450,000.

The discount fees and legal, accounting, printing and other expenses (the
"Debt issuance costs") related to the Notes offering amounted to approximately
$4.0 million, and are being amortized to expense over the five year term of the
Notes. During 1997, the Company recognized approximately $200,000 of debt
issuance cost amortization related to the Notes. Debt issuance costs of
approximately $3.8 million are included in Other assets on the Company's
December 31, 1997 balance sheet.

BANK DEBT

In December 1996, the Company's agreement with a large European bank was
amended to increase its revolving line of credit to $10 million. Borrowings
under the line are secured by a first lien on substantially all the assets of
the Company. The bank agreement, which expires in March 2001, contains standard
lending covenants including financial ratios, restrictions on dividends and
limitations on additional debt and the disposition of Company assets. Interest
is paid at the rate of prime plus 1 1/4% or LIBOR plus 2 1/2%, at the option of
the Company.

Prior to 1996, the Company's principal source of debt financing since May
1992 has been with this European bank. In connection with operating losses
experienced by the Company, restructuring programs implemented by the Company
and violations of financial covenants established by the bank, the bank
agreement was amended several times during 1992 through 1994 to defer principal
payments and restructure financial covenants. In consideration for the original
credit facility and the significant concessions provided during this period, the
bank received warrants to purchase 360,000 shares of the Company's common stock
at its then current market price of $1.25 per share.

In July 1995, the Company received a new $2 million revolving line of
credit from the bank. In consideration for the line of credit and a reduced
interest rate, the Company paid the bank a $30,000 origination fee and issued
the bank warrants to purchase 100,000 shares of the Company's common stock at
its then current market price of $3.82 per share on or prior to October 31,
1999. In October 1995, the bank paid the Company $832,000 to exercise all
460,000 warrants (see "Note I").

In October 1996, in connection with a secondary public equity offering
completed by the Company, the Company paid the bank $3.9 million to pay off the
outstanding principal balance on its term loan.

NOTE H: STOCKHOLDERS' EQUITY

During September and October 1996, 3,487,500 shares of Company common stock
were sold in a secondary public offering at a price of $8.00 per share. The
Company received $26,156,250 from this offering, net of underwriting discounts.
The Company incurred additional expenses of approximately $825,000 in connection
with this offering.

During June and July 1995, 1,168,000 restricted shares of the Company's
common stock were sold in a private placement for a gross consideration of
$2,920,000, or its then current market price of $2.50 per share. Participants in
the offering also received warrants to purchase a total of 1,168,000 of
additional shares of restricted common stock at $3.50 per share on or prior to
June 30, 2000. Approximately $275,000 of the offering was purchased by the
directors and management of the Company. In October 1995, stockholders paid the
Company approximately $4.1 million to exercise all warrants issued as a result
of the private offering (see "Note I").

In connection with the Company's initial public offering in August 1991,
all of the existing holders of the Company's common stock placed in escrow an
aggregate of 672,419 shares of the Company's common stock. As of August 12,
1996, the termination date of the escrow agreement, the conditions for release
of the shares

F-28
<PAGE> 211
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

had not been met. Accordingly, the 672,419 escrowed shares of Company common
stock were returned to the Company and became authorized but unissued shares.

NOTE I: STOCK WARRANTS AND OPTIONS

STOCK WARRANTS

In connection with various financial transactions completed by the Company
during 1992 to 1995, equity investors (see "Note H"), debtors (see "Note G") and
certain consultants were issued warrants to purchase shares of the Company's
common stock in the future. All of these warrants had exercise prices that were
set at or above the then current market price of the Company's common stock at
the respective dates of grant.

In October 1995, the Company raised approximately $6.5 million of new
capital through the exercise of previously issued warrants and non-qualified
options to purchase 2,433,853 shares of the Company's common stock. Of the $6.5
million raised, approximately $1.6 million was invested by the directors,
management and the principal lender of the Company. In exercising their warrants
or options, investors had the option of paying cash or executing an 8% interest
bearing note payable to the Company. Approximately $2.4 million of the total
proceeds was paid in cash and $4.1 million through notes. The notes were paid in
full by March 29, 1996.

As of December 31, 1997, there were no warrants outstanding to purchase
Company common stock except for the Director warrant plans discussed below.

DIRECTOR WARRANT PLANS

In December 1994, in an effort to attract and retain experienced executives
to serve as outside directors for the Company, the Company's Board of Directors
adopted an Outside Directors' Warrant Plan (the "Plan").

In December 1994, three new outside directors of the Company were awarded a
total of 450,000 warrants. Each director received 150,000 warrants and each
warrant entitles the director to purchase one share of the Company's common
stock on or prior to December 15, 1999 per the following terms:

<TABLE>
<CAPTION>
EXERCISE
WARRANTS PRICE VESTING
- -------- -------- -------
<S> <C> <C>
50,000................................................... $1.50 December 15, 1995
50,000................................................... 2.25 December 15, 1995
50,000................................................... 4.00 December 15, 1996
</TABLE>

Concurrent with the above initial grant, a fourth outside director of the
Company was awarded 126,000 warrants. The terms of this grant were exactly as
those described above except the number of warrants at the $1.50 exercise price
was set at 26,000 instead of 50,000.

During 1997, outside directors paid the Company approximately $900,000 to
exercise 358,660 warrants. As of December 31, 1997, 217,340 warrants are
exercisable by the Company's outside directors under the Plan.

In December 1994, the Company's Board of Directors awarded Steven A. Odom,
who joined the Board in October 1994 and became Chairman in November 1994, an
initial grant of 450,000 warrants under the Plan. Each warrant entitles Mr. Odom
to purchase one share of the Company's common stock on or prior to December 15,
1999 per the following terms:

<TABLE>
<CAPTION>
EXERCISE
WARRANTS PRICE VESTING
- -------- -------- -------
<S> <C> <C>
150,000.................................................. $1.50 December 15, 1995
150,000.................................................. 2.25 December 15, 1995
150,000.................................................. 4.00 December 15, 1996
</TABLE>

F-29
<PAGE> 212
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In August 1997, Mr. Odom paid the Company $225,000 to exercise 150,000
warrants at $1.50. As of December 31, 1997, 300,000 warrants are exercisable by
Mr. Odom under the Plan.

In December 1994, the Board also adopted the Directors Warrant Incentive
Plan, pursuant to which the Board, beginning in 1997, may grant to each director
on an annual basis warrants to purchase up to 50,000 shares of Company common
stock at an exercise price per share equal to no less than 110% of the fair
market value of the common stock at the date of grant. Warrants may only be
issued under this plan if the Company's common stock has appreciated by a
compounded annual average rate of in excess of 35% for the four years preceding
the year of grant. In March 1997, the four outside directors of the Company were
each granted warrants to purchase 50,000 shares of Company common stock at $9.21
per share. These warrants became fully vested on December 31, 1997.

The vesting of all warrants awarded pursuant to the plans above will be
subject to the director to whom such warrants have been granted attending at
least 75% of the meetings of the Board of Directors for the year in which such
warrants are scheduled to vest. Notwithstanding this limitation, the warrants to
be awarded pursuant to the plans will become immediately exercisable (i) if the
Company is to be consolidated with or acquired by another entity in a merger,
(ii) upon the sale of substantially all of the Company's assets or the sale of
at least 90% of the outstanding common stock of the Company to a third party,
(iii) upon the merger or consolidation of the Company with or into any other
corporation or the merger or consolidation of any corporation with or into the
Company (in which consolidation or merger the shareholders of the Company
receive distributions of cash or securities as a result thereof), or (iv) upon
the liquidation or dissolution of the Company.

STOCK OPTION PLANS

In 1991, the Company's stockholders adopted the 1991 Stock Option Plan (the
"1991 Plan"). The 1991 Plan, as amended, provided for the granting of up to
3,500,000 options. As of December 31, 1997, no options were available for future
grant under the 1991 Plan.

In December 1997, the Company's Board of Directors authorized the adoption
of the 1998 Incentive Compensation Plan (the "1998 Plan"). The 1998 Plan, which
is subject to shareholder approval, provides for the granting of up to 5,000,000
options. As of December 31, 1997, there were 4,025,000 options available for
future grant under the 1998 Plan.

These plans allow the Board of Directors to grant non-qualified and
incentive stock options to purchase the Company's common stock at an exercise
price not less than fair market value as of the grant date. Options issued under
these plans typically vest over a four year period. Options awarded under the
1991 Plan and the 1998 Plan are subject to the same vesting acceleration
provisions described above under the Director warrant plans.

F-30
<PAGE> 213
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the activity relating to both plans:

<TABLE>
<CAPTION>
NUMBER AVERAGE
OF OPTIONS PRICE
---------- -------
<S> <C> <C>
Balance at January 1, 1995.................................. 765,857 $1.70
Options granted............................................. 1,246,327 5.62
Options exercised........................................... (167,400) 1.86
Options lapsed or canceled.................................. (162,955) 1.93
---------
Balance at December 31, 1995................................ 1,681,829 4.57
Options granted............................................. 883,269 8.03
Options exercised........................................... (170,030) 1.47
Options lapsed or canceled.................................. (67,940) 5.38
---------
Balance at December 31, 1996................................ 2,327,128 6.08
Options granted............................................. 1,955,500 16.95
Options exercised........................................... (647,700) 5.77
Options lapsed or canceled.................................. (80,440) 7.23
---------
Balance at December 31, 1997................................ 3,554,488 12.14
=========
Exercisable at December 31, 1997............................ 1,101,800 7.64
=========
</TABLE>

The options outstanding at December 31, 1997 have been segregated into four
price ranges for additional disclosure as follows:

<TABLE>
<CAPTION>
WEIGHTED-OPTIONS WEIGHTED-AVERAGE WEIGHTED-AVERAGE
RANGE OF OUTSTANDING REMAINING EXERCISE
EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE PRICES
- ---------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
$ 1.25-2.25............................. 78,863 1.9 $ 1.88
3.78-3.97............................. 414,500 2.7 3.79
7.00-9.75............................. 1,624,125 3.7 8.01
19.00-25.25............................ 1,437,000 5.0 19.78
</TABLE>

In December 1995, the Company offered a voluntary salary reduction program
for 1996 that resulted in the grant of 424,627 non-qualified stock options at
the then current market price of $7.00 per share. Salaried employees voluntarily
agreed to reduce their salaries by $849,254, i.e. $2 in exchange for each stock
option granted. The options vested based upon the attainment of specific
financial and operational objectives during the year. As of December 31, 1996,
these options had become fully vested.

In December 1996, the Company offered a similar voluntary salary reduction
program for 1997 that resulted in the grant of 413,019 non-qualified options at
the then current market price of $8.00 per share. Salaried employees voluntarily
agreed to reduce their salaries by $826,038, i.e. $2 in exchange of each stock
option granted. The options vested based upon the Company achieving key
operational objectives during the year including 25% internal sales growth,
improved inventory turnover and specific enhancements to the Company's quality
and information systems designed to facilitate growth. As of December 31, 1997,
these options had become fully vested.

An additional element of the 1996 and 1997 voluntary salary reduction
programs provided for the potential repayment of salaries if certain pre-tax
income amounts are realized by the Company. Full repayment was earned and
recorded to expense in 1996 and a 30% partial repayment was earned and recorded
to expense in 1997.

In August 1995, the Company granted its new President and Chief Operating
Officer 400,000 options at $3.78 per share, the market price of the Company's
common stock on the date his offer of employment was accepted. These options
vest 25% on each of the first four anniversaries from the initial date of
employment.

F-31
<PAGE> 214
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1995, the Company granted its Chairman and Chief Executive
Officer and its Vice President and Chief Financial Officer 200,000 and 50,000
options, respectively, at the then market price of $7.00 per share. The 200,000
options vested 50% on the first two anniversaries from the date of grant. The
50,000 options vested 25% immediately and the remaining 25% on each of the next
three anniversaries from the date of grant.

In December 1997, the Company made an initial grant of 975,000 options
under the 1998 Plan to its Chairman and Chief Executive Officer (400,000
options), President and Chief Operating Officer (300,000 options), Executive
Vice President and Chief Financial Officer (200,000 options) and Executive Vice
President of Business Development (25,000 options). These options, which are
subject to stockholder approval, vest 25% on each of the first four
anniversaries from the date of grant and are exercisable at $19.00 per share,
the market price at the date of grant. The date the stockholders approve the
1998 Plan will become the measurement date for purposes of computing
compensation expense, if any. If the stock price as of the measurement date
exceeds $19.00, then the total compensation impact will be the difference
between stock price at the measurement date and $19.00. The Company will record
that expense ratably over a period of four years.

PRO FORMA RESULTS OF OPERATIONS

The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its employee
stock options. Therefore, no compensation cost has been recognized related to
stock options. If the company had elected to account for its stock options under
the fair value method of SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and net income per common share would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Net Income
As reported..................................... $13,134,103 $6,778,542 $1,172,443
Pro forma....................................... 11,380,000 6,100,000 980,000
Basic EPS
As reported..................................... 0.76 0.52 0.15
Pro forma....................................... 0.66 0.47 0.12
Diluted EPS
As reported..................................... 0.70 0.46 0.12
Pro forma....................................... 0.61 0.42 0.11
</TABLE>

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Since the Company's employee stock options have characteristics
significantly different from those of traded options and changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of the Company's employee stock options.

F-32
<PAGE> 215
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of each option has been estimated on the date of grant using
a Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997, 1996 and 1995, respectively:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Dividend Yield.............................................. n/a n/a n/a
Expected volatility......................................... 44 50 50
Risk-free interest rate..................................... 5.5 5.1 6.0
Expected life of stock options (in years)................... 4.5 3.0 4.0
</TABLE>

NOTE J: RETIREMENT SAVINGS PLAN

The Company has a retirement savings 401(k) plan that covers substantially
all employees. The plan provides for the employees to voluntarily contribute a
portion of their compensation on a tax deferred basis and allows for the Company
to make discretionary matching contributions as determined by the Board of
Directors. For the years ended December 31, 1997, 1996 and 1995, the Company
contributed approximately $109,000, $42,000 and $19,000, respectively, in the
form of Company common stock to the Plan. In 1997, Company contributions were
based on a 50% match to employee contributions, up to the first six percent
contributed.

NOTE K: INCOME TAXES

The Company uses the asset and liability approach for financial accounting
and reporting for income taxes. Certain expenses are reported for financial
accounting purposes in different periods than for income tax purposes. These
temporary differences arise primarily from depreciation, bad debt reserves,
inventory valuation and various reserves.

The provision for income taxes for the years ended December 31, 1997 and
1996 was computed in accordance with SFAS No. 109, "Accounting for Income Taxes"
and consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Current income taxes
Federal................................................... $5,362,500 $1,009,003
State..................................................... 613,000 189,188
---------- ----------
5,975,500 1,198,191
---------- ----------
Deferred income taxes
Federal................................................... 1,400,500 (405,425)
State..................................................... 160,000 (47,697)
---------- ----------
1,560,500 (453,122)
---------- ----------
Total income taxes................................ $7,536,000 $ 745,069
========== ==========
</TABLE>

As of December 31, 1997, the Company has capital loss carryforwards of
approximately $1.2 million expiring in 1998.

As a result of the exercises of non-qualified stock options and warrants by
the Company's directors and employees during 1997, the Company has realized a
federal income tax benefit of approximately $6.7 million. This tax benefit has
been accounted for as a decrease in current income taxes payable and an increase
in capital in excess of par value.

F-33
<PAGE> 216
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes. The sources
and tax effects of the differences are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996
----------------- ------------------
<S> <C> <C> <C> <C>
Federal tax at statutory rate................... $7,210,000 35.0% $2,558,028 34.0%
Effect of:
State tax, net of federal benefit............. 825,000 4.0 373,041 5.0
Nondeductible purchase adjustments............ 575,000 2.8 190,000 2.5
Reduction in valuation allowance, utilization
of net operating loss carryforwards and
reduction of reserves...................... (1,074,000) (5.3) (2,376,000) (31.6)
---------- ---- ---------- -----
Income tax expense............................ $7,536,000 36.5% $ 745,069 9.9%
========== ==== ========== =====
</TABLE>

Significant components of the Company's deferred income tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets
Accrued liabilities....................................... $ 978,594 $ 793,809
Net operating loss carryforwards.......................... -- 1,519,658
Capital loss carryforwards................................ 493,071 480,428
Other..................................................... 455,001 314,646
---------- ----------
1,926,666 3,108,541
Deferred tax liabilities
Depreciation/amortization................................. (496,147) (406,481)
Other..................................................... (182,367) --
Valuation allowance......................................... (493,071) (480,428)
---------- ----------
Net deferred tax assets..................................... $ 755,081 $2,221,632
========== ==========
</TABLE>

The valuation allowance relates to capital losses whose use is limited to
capital gains the Company would record. These losses will expire during 1998,
and currently there are no foreseeable events which would allow for the
utilization of the losses.

NOTE L: SPECIAL CHARGES

In the second quarter of 1995, the Company recorded a one-time special
charge of $980,000 for the following items:

<TABLE>
<CAPTION>
<S> <C>
Write-down of test equipment and related tooling............ $675,000
Consolidation of repair operations.......................... 95,000
Retirement benefits and relocation costs.................... 150,000
Other....................................................... 60,000
--------
$980,000
========
</TABLE>

As a result of the significant decline in analog circuit board repair
revenues experienced by the Company in recent years, the shift in strategic
focus to new digital repair services and programs offered by the Company in
1995, the acquisition of AIT and other market considerations, the Company
elected to consolidate certain operations and significantly write-down the net
book value of certain assets related to repair operations. These assets
primarily represent test equipment, tooling, dies and diagnostic programs for
the repair of analog telecommunications equipment. All of these assets were
capitalized in 1988 to 1990 in connection with acquisitions made by the Company.

F-34
<PAGE> 217
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE M: RELATED PARTY TRANSACTIONS

In October 1997, John D. Phillips, a director of the Company, entered into
a series of agreements whereby, among other things, he became the new Chairman
and Chief Executive Officer of Cherry Communications Incorporated (d/b/a
Resurgens Communications Group) ("Resurgens"), a facilities-based provider of
international network access commonly referred to as a carriers' carrier.
Resurgens was shortly thereafter placed into bankruptcy under Chapter 11 of the
United States Bankruptcy Code. WorldCom, Inc. ("WorldCom"), a major customer and
vendor of Resurgens, has subsequently agreed to provide Resurgens up to $28
million in financing in the form of a debtor in possession facility and other
credits.

During the fourth quarter of 1997, the Company shipped switching equipment
to Resurgens. The cost of this equipment was approximately $3.8 million. On
February 12, 1998, the Company executed a letter of intent to acquire Resurgens.
The equipment shipped to Resurgens is included in the Company's inventory at
December 31, 1997 (see "Note C").

The Resurgens acquisition is subject to, among other things, the
satisfactory completion by the Company of its due diligence investigation of
Resurgens, the preparation and execution of a definitive merger agreement, the
receipt of the requisite corporate and regulatory approvals and the confirmation
of Resurgens' Plan of Reorganization.

NOTE N: SUBSEQUENT EVENTS

ATI ACQUISITION

On December 24, 1997, the Company entered into an agreement to acquire
Advanced TechCom, Inc. ("ATI"), a Wilmington, Massachusetts based designer and
manufacturer of digital microwave and millimeterwave radio systems for short and
long haul voice, data and/or video applications. On January 29, 1998, the
transaction was completed in its final form whereby ATI was merged with and into
CIS, a wholly-owned subsidiary of the Company (the "ATI Merger"). In connection
with the ATI Merger, the stockholders of ATI received approximately $300,000 in
cash and 418,054 restricted shares of the Company's common stock. These shares
had an initial fair value of approximately $8.0 million.

In addition to the 418,054 shares noted above, the stockholders of ATI were
issued 209,050 restricted shares of the Company's common stock. These shares
were immediately placed into escrow and will be released to the stockholders of
ATI contingent upon the realization of predefined levels of pre-tax net income
from ATI's operations during calendar years 1998 and 1999.

In December 1997, the Company loaned ATI approximately $4.5 million. The
note receivable from ATI is included in Other assets on the Company's balance
sheet at December 31, 1997.

NACT ACQUISITION

In the fourth quarter of 1997, the Company began a three phase acquisition
of NACT. NACT, based in Provo Utah, is a leading single-source provider of
advanced telecommunications switching platforms with integrated telephony
software applications and network telemanagement capabilities.

During November and December 1997, the Company purchased 355,000 shares of
NACT common stock in the open market for approximately $5.0 million (see "Note
A").

On December 31, 1997, the Company entered into a stock purchase agreement
with GST and GST USA to acquire 5,113,712 shares of NACT common stock owned by
GST USA, representing approximately 63% of the outstanding shares of NACT (the
"Acquisition"). On February 27, 1998, the Acquisition was completed with GST USA
receiving $59.7 million in cash and 1,429,907 restricted shares of the Company's
common stock. These shares had an initial fair value of approximately $23.0
million.

On February 24, 1998 the Company entered into a merger agreement with NACT
pursuant to which the Company agreed to acquire all of the shares of NACT common
stock not already owned by the Company or

F-35
<PAGE> 218
WORLD ACCESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GST USA. Pursuant to the terms of the merger agreement, each share of NACT
common stock will be converted into shares of Company common stock having a
value of $17.50 per share based on the average of the daily closing price of
Company common stock on the Nasdaq National Market for a pre-defined period
prior to the closing (the "Closing Price"), provided that if the Closing Price
is more than $25.52, then each share of NACT common stock will be converted into
0.6857 shares of Company common stock. If the Closing Price is less than $20.88,
then the Company may elect to terminate the agreement. The merger is subject to,
among other things, the approval of the NACT stockholders and the satisfaction
of certain other customary conditions.

On August 24, 1996, Aerotel, Ltd. and Aerotel U.S.A. Inc. (collectively,
"Aerotel") commenced an action against NACT and a customer of NACT in the United
States District Court, Southern District of New York, alleging that telephone
systems manufactured and sold by NACT incorporating prepaid debit card features
infringe upon Aerotel's patent which was issued in November 1987 (the "Aerotel
Patent"). Aerotel sought injunctive relief, damages in an unspecified amount,
damages of up to three times damages found for willful infringement of the
Aerotel Patent and an order requiring NACT to publish a written apology to
Aerotel. NACT filed an answer and Counterclaim in which it denied infringement
of the Aerotel Patent and sought judgement that the Aerotel patent is invalid
and unenforceable and that Aerotel has misused its patent in violation of
antitrust laws. NACT has denied that it has committed defamation, unfair
competition and tortious interference with prospective business relations. In
August 1997, Aerotel amended its complaint to include as defendants GST, GST
USA, and two former executive officers of NACT. The amended pleadings seek in
excess of $18.7 million in damages and allege that GST and GST USA have
infringed the Aerotel patent, aided and abetted infringement by others,
including NACT, and participated in, and aided and abetted alleged tortious
conduct by NACT. GST, GST USA and the two former executive officers of NACT have
served answers denying all material allegations and intend to defend vigorously.

Under the terms of the Company's stock purchase agreement with GST, the
Company and GST have agreed to share evenly the costs of any judgement against
NACT as a result of the Aerotel litigation, including NACT's legal fees. The
Company believes that NACT has valid defenses to the Aerotel claims. An
unfavorable decision in this action could have a material adverse effect on the
Company's financial position.

RESURGENS PENDING ACQUISITION

On February 12, 1998, the Company executed a letter of intent to acquire
Resurgens (see "Note M").

PRO FORMA RESULTS OF OPERATIONS

On a pro forma, unaudited basis, as if the acquisitions of ATI and NACT had
occurred as of January 1, 1996, total sales, operating income, net income (loss)
and diluted net income (loss) per common share for the years ended December 31,
1997 and 1996 would have been approximately $136,520,000 and $80,360,000;
$13,608,000 and $13,000; $6,919,000 and $(629,000); and $0.37 and $(0.04),
respectively.

F-36
<PAGE> 219

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997:
Deducted from asset account
Allowance for doubtful
accounts....................... $265,000 $171,574 $35,000(B) $(234,574)(A) $237,000
Year Ended December 31, 1996:
Deducted from asset account
Allowance for doubtful
accounts....................... $207,960 $167,612 $30,000(B) $(140,572)(A) $265,000
Year Ended December 31, 1995:
Deducted from asset account
Allowance for doubtful
accounts....................... $230,911 $ 7,568 $25,000(B) $ (55,519)(A) $207,960
</TABLE>

- ---------------

(A) Write-off of uncollectible amounts.
(B) Reserves established from businesses acquired.

F-37
<PAGE> 220

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders Advanced TechCom, Inc.
Wilmington, Massachusetts

We have audited the accompanying consolidated balance sheet of Advanced
TechCom, Inc. and Subsidiaries (the "Company") as of December 31, 1997, and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
TechCom, Inc. and Subsidiaries as of December 31, 1997 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ Tedder, Grimsley & Company, P.A.

March 27, 1998

F-38
<PAGE> 221

ADVANCED TECHCOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
CURRENT ASSETS
Cash............................................................................................... $ 473,433
Accounts receivable................................................................................ 1,349,833
Inventory.......................................................................................... 4,553,766
Prepaid expenses and other......................................................................... 73,683
-------------
TOTAL CURRENT ASSETS..................................................................... 6,450,715
PROPERTY AND EQUIPMENT -- net...................................................................... 1,081,714
-------------
TOTAL ASSETS............................................................................. $ 7,532,429
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.................................................................. $ 5,675,021
Accounts payable................................................................................... 1,700,536
Accrued liabilities................................................................................ 1,899,597
Warranty reserve................................................................................... 586,339
Customer deposits.................................................................................. 305,173
-------------
TOTAL CURRENT LIABILITIES................................................................ 10,166,666
LONG-TERM DEBT -- net of current portion........................................................... 73,413
-------------
TOTAL LIABILITIES........................................................................ 10,240,079
STOCKHOLDERS' EQUITY
Preferred stock.................................................................................... 1,121,051
Common stock....................................................................................... 38,747
Additional paid-in capital......................................................................... 13,246,315
Accumulated deficit................................................................................ (17,113,763)
-------------
TOTAL STOCKHOLDER'S EQUITY............................................................... (2,707,650)
-------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY......................................................... $ 7,532,429
=============
</TABLE>

See accompanying notes to consolidated financial statements.

F-39
<PAGE> 222

ADVANCED TECHCOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
NET SALES................................................... $ 13,686,728
Cost of goods sold.......................................... 10,404,156
Write-off of obsolete inventory............................. 2,188,000
Capitalization of material overhead......................... 431,700
Accrual of liability under firm purchase commitments........ 561,500
------------
TOTAL COST OF GOODS SOLD.......................... 13,585,356
------------
GROSS PROFIT...................................... 101,372
OPERATING EXPENSES
Research and development.................................... 4,282,513
Sales and marketing......................................... 3,524,061
General and administrative.................................. 2,228,273
Customer service............................................ 513,778
------------
TOTAL OPERATING EXPENSES.......................... 10,548,625
------------
LOSS FROM OPERATIONS.............................. (10,447,253)
OTHER INCOME................................................ 64,004
------------
NET LOSS BEFORE INCOME TAXES...................... (10,383,249)
PROVISION FOR INCOME TAXES.................................. --
------------
NET LOSS.......................................... $(10,383,249)
============
</TABLE>

See accompanying notes to consolidated financial statements.

F-40
<PAGE> 223

ADVANCED TECHCOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
$.10 PAR $.10 PAR STOCK
----------------- ----------------------- ADDITIONAL ACCUMULATED SUBSCRIPTION DEFERRED
SHARES AMOUNT SHARES AMOUNT PIC DEFICIT RECEIVABLE COMPENSATION
------- ------- ---------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of
year................. 343,989 $34,399 10,097,103 $1,009,710 $10,107,727 $(6,730,514) $(273,000) $(24,000)
Issuance of stock...... 750 75 913,413 91,341 2,951,766 -- -- --
Exercise of stock
options.............. 42,730 4,273 -- -- 6,822 -- -- --
Stock issued for
services............. -- -- 200,000 20,000 180,000 -- -- 24,000
Forgiveness of debt.... -- -- -- -- -- -- 273,000 --
Net loss............... -- -- -- -- -- (10,383,249) -- --
------- ------- ---------- ---------- ----------- ------------ --------- --------
Balance, end of year... 387,469 $38,747 11,210,516 $1,121,051 $13,246,315 $(17,113,763) $ -- $ --
======= ======= ========== ========== =========== ============ ========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-41
<PAGE> 224

ADVANCED TECHCOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(10,383,249)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 699,382
Forgiveness of stock subscription receivable.............. 273,000
Deferred compensation..................................... 24,000
Issuance of stock for services............................ 200,000
Other..................................................... 115,401
(Increase) decrease in:
Accounts receivable.................................... 2,238,264
Inventory.............................................. 1,289,950
Prepaid expenses and other............................. 73,922
Increase (decrease) in:
Accounts payable....................................... (930,234)
Accrued liabilities.................................... 1,023,095
Warranty reserve....................................... 183,488
Customer deposits...................................... 84,266
------------
NET CASH USED BY OPERATING ACTIVITIES............. (5,108,715)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment.......................... (774,972)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit............................. 975,000
Proceeds from issuance of debt.............................. 2,364,948
Principal payments on debt.................................. (343,548)
Proceeds from sale of stock................................. 3,043,182
Proceeds from exercise of stock options..................... 11,095
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 6,050,677
------------
NET INCREASE IN CASH.............................. 166,990
CASH, BEGINNING OF YEAR..................................... 306,443
------------
CASH, END OF YEAR................................. $ 473,433
============
</TABLE>

F-42
<PAGE> 225

ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Advanced TechCom, Inc. and Subsidiaries (the "Company") designs, develops
and manufactures a series of high-performance digital microwave/millimeter wave
radio equipment, operating in frequencies of 1.5 GHZ to 38 GHZ utilized in the
telecommunications industry.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned foreign sales corporation, Advanced TechCom
(Barbados), Inc. They also include the accounts of Advanced TechCom de Mexico,
S.A. de C.V. which is owned equally by Advanced TechCom, Inc. and Advanced
TechCom (Barbados), Inc.

REVENUE RECOGNITION

The Company recognizes revenue from the sales of products when the products
are shipped. Sales to overseas customers generally require letters of credit
before the products are shipped.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

An allowance for doubtful accounts is provided when accounts are considered
uncollectible.

INVENTORY

Inventory is stated at the lower of cost (first-in, first-out method) or
market.

PROPERTY AND EQUIPMENT

Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives of assets are as follows:

<TABLE>
<S> <C>
Machinery, equipment and other........... 3-7 years
Furniture and fixtures................... 3-7 years
Leasehold improvements................... Shorter of lease term or useful life
</TABLE>

FINANCIAL INSTRUMENTS

The carrying values of cash, accounts receivable, accounts payable and
borrowings under the Company's various debt instruments approximate fair value
due to the short-term nature of these instruments.

INCOME TAXES

The Company is taxed as a C Corporation. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Deferred
income taxes are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed when incurred.

WARRANTY RESERVE

The Company sells the majority of its products with a two-year repair or
replacement warranty. The accompanying consolidated financial statements include
an accrual of $586,339 for estimated warranty claims based on the Company's
actual claims and anticipated future claims.
F-43
<PAGE> 226
ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EMPLOYEE STOCK-BASED COMPENSATION

The Company used the intrinsic value-based method of Accounting Principles
Board Opinion ("APB") No. 25 as allowed under Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to
account for all of its employee stock-based compensation plans.

CUSTOMERS AND CONCENTRATION OF CREDIT RISK

The Company's products are sold both directly to customers and through
distributors. The Company's customers consist of domestic and international
wireless and cellular companies, telephone companies, utilities and government
and educational institutions.

Approximately 93% of the Company's net sales are derived from international
customers. A major international systems integrator, who resells worldwide,
accounted for approximately 18% of the Company's 1997 net sales and
approximately 12% of the accounts receivable balance at December 31, 1997. A
second customer accounted for approximately 16% of the Company's 1997 net sales
and approximately 10% of the accounts receivable balance at December 31, 1997.

USE OF ESTIMATES

The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
of certain assets and liabilities at the balance sheet date. Actual results may
differ from such estimates.

NOTE B -- FUNDING OF OPERATIONS

As shown in the consolidated financial statements for the year ended
December 31, 1997, the Company incurred a net loss of $10,383,249 and had
negative cash flow from operations of $5,108,715. The Company's 1997 loss and
working capital needs were principally funded by proceeds from a private
placement equity offering, issuance of short-term debt and borrowings under a
line of credit.

On December 24, 1997, the Company entered into an agreement and plan of
merger with World Access, Inc. and its wholly owned Subsidiary, Cellular
Infrastructure Supply, Inc. (which is a more fully described below). This merger
was completed in January, 1998. Subsequent to the merger, management made
significant revisions to its plan of operations including personnel cut backs
and expenditure reductions.

NOTE C -- ACCOUNTS RECEIVABLE

At December 31, 1997, the Company evaluated its accounts receivable and
determined that $413,092 of accounts receivable may be uncollectible. Such
amount has been established as an allowance for doubtful accounts at December
31, 1997.

Accounts receivable is comprised of the following at December 31, 1997:

<TABLE>
<S> <C>
Accounts receivable......................................... $1,762,925
Less allowance for doubtful accounts........................ 413,092
----------
$1,349,833
==========
</TABLE>

NOTE D -- INVENTORY

Inventory consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Raw materials............................................... $3,065,469
Work in process............................................. 1,220,720
Finished goods.............................................. 267,577
----------
Total............................................. $4,553,766
==========
</TABLE>

F-44
<PAGE> 227
ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E -- PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Leasehold improvements...................................... $ 60,459
Machinery, equipment and other.............................. 1,990,896
Office furniture and equipment.............................. 881,801
----------
2,933,156
Less accumulated depreciation............................. 1,851,442
----------
Property and equipment -- net............................. $1,081,714
==========
</TABLE>

At December 31, 1997, the capitalized cost of property and equipment under
capital leases was approximately $451,979 and related accumulated depreciation
was approximately $78,807.

NOTE F -- LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1997:

<TABLE>
<S> <C>
Revolving line of credit -- World Access, Inc............... $4,450,613
Note payable to stockholder, due on demand, interest rate
12%....................................................... 195,000
Note payable to stockholder, due on demand, interest rate
12%....................................................... 200,000
Note payable to a community development finance corporation,
interest payable monthly at a rate of 10%, collateralized
by a second lien on substantially all
of the Company's assets and personally guaranteed by the
principal stockholder of the Company...................... 124,999
Note payable to a community development organization,
interest payable monthly at a rate of 10%, collateralized
by a second lien on substantially all of the Company's
assets and personally guaranteed by the principal
stockholder of the Company................................ 124,999
Note payable to a business development corporation, payable
in installments through August 2000 with interest computed
at prime plus 2.5% (approximately 9% at December 31,
1997), collateralized by a second lien on substantially
all of the Company's assets and personally guaranteed by
the principal stockholder of the Company.................. 274,982
Premium finance agreement payable in monthly installments of
$1,353 including interest at 10.75%....................... 10,217
</TABLE>

Capital lease obligations:

<TABLE>
<CAPTION>
NON-CANCELABLE LEASE OBLIGATIONS, PAYABLE IN MONTHLY INSTALLMENTS,
COLLATERALIZED BY CERTAIN EQUIPMENT
- -------------------------------------------------------------------
MONTHLY INTEREST
PAYMENT RATE MATURITY DATE
- ------------- -------------- -----------------
<C> <C> <S> <C>
3,1$72..... 12.24% March, 1999 $ 57,142
2,428..... 12.24% May, 1999 47,630
13,416.... 12.38% April, 1999 262,852
---------
5,748,434
Less current portion.................... 5,675,021
---------
$ 73,413
=========
</TABLE>

F-45
<PAGE> 228
ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maturities on long-term debt as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998....................................................... $ 5,675,021
1999....................................................... 73,413
-------------
$ 5,748,434
=============
</TABLE>

The Company had a revolving bank line of credit up to a maximum of
$2,500,000 which was due on demand and had interest at the bank's prime rate
plus 1/2%. The line was collateralized by substantially all of the Company's
assets. This line of credit required, among other things, minimum levels of
consolidated tangible net worth, maintenance of certain financial ratios and a
minimum base of inventory and accounts receivable. The Company was out of
compliance with such covenants.

In December 1997, World Access, Inc., assumed the bank's position under
such agreement via assignment by the bank.

World Access, Inc. subsequently increased the line of credit to $5,000,000
and waived compliance with certain covenants.

World Access, Inc. also repaid certain notes payable by the Company to the
bank in the amount of $117,344 which was applied against the line of credit
extended to the Company.

Subsequent to December 31, 1997, all of the notes payable except the line
of credit, the premium finance agreement and the capital lease obligations were
refinanced by the Company by requesting funds from World Access, Inc. for such
purpose. World Access, Inc. formally merged the Company into its wholly owned
subsidiary in 1998. As such debts were in substance, refinanced in 1998, they
are included in current liabilities.

NOTE G -- INCOME TAXES

Deferred income taxes are provided for temporary differences in the
recognition of certain income and expense items for financial reporting and
income tax purposes. Such temporary differences relate primarily to depreciation
methods, inventory allowances, the recognition of certain liabilities for
financial statement purposes that can not be recognized for tax purposes until
later periods and the difference in the recognition of the tax effects of
operating losses for financial reporting and income tax purposes.

As of December 31, 1997, the Company had a net deferred tax asset of
approximately $7,437,000 which consisted of the following:

<TABLE>
<S> <C>
State research and development credits...................... $ 654,223
Federal research and development credits.................... 361,202
State investment tax credits................................ 21,837
Inventory................................................... 34,114
Warranty.................................................... 222,220
Accruals.................................................... 450,824
Depreciation................................................ 189,500
Operating loss carry forwards............................... 5,503,080
-----------
7,437,000
Valuation allowance......................................... (7,437,000)
-----------
Net deferred taxes.......................................... $ --
===========
</TABLE>

A valuation allowance for the full amount has been recognized to fully
offset this asset as the Company will not be able to utilize the future benefit.

As of December 31, 1997, the Company had net operating losses of
approximately $14,520,000.

F-46
<PAGE> 229
ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE H -- STOCKHOLDER'S EQUITY

STOCK --

The Company has authorized the issuance of the following stock as of
December 31, 1997:

<TABLE>
<S> <C> <C>
Common stock................................................ $.10 par value 25,000,000 shares
Preferred stock-designated*................................. $.10 par value 15,000,000 shares
Preferred stock-undesignated................................ $.10 par value 5,000,000 shares
</TABLE>

- ---------------

* Series A preferred stock

Each share of Series A preferred stock shall automatically be converted
into common stock at the then effective applicable conversion rate upon the
closing of a public offering with gross proceeds of not less than $15 million or
upon the affirmative vote of the majority of the preferred stockholders.

NOTE I -- OPTIONS

During 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan"). The 1995 Plan initially permitted the grant of options to purchase up to
1,200,000 shares of the Company's common stock at a price at least equal to the
fair market value of the stock, determined by the Board, on the date of grant
for incentive stock options and at prices determined by the Board in its sole
discretion for nonqualified options. On September 6, 1996, the Board and
stockholders approved an increase in the shares available for grants to
1,650,000.

During the fourth quarter of 1996, the Company repriced all options to
reflect the then fair market value of the Company's common stock. The repricing
provided each option holder the right to exchange their existing stock options
for new incentive stock options (the "new options") to purchase an identical
number of shares of common stock at an exercise price of $.26 per share. The new
options vest according to the original vesting schedule but with a six-month
delay, or in 16 equal quarterly installments beginning three months before the
original vesting date. The options are exercisable for 10 years from the
original date of grant.

At December 31, 1997, there were 824,250 options available for grant under
the 1995 Plan.

Stock Exchanged for Services -- During 1997, the Company issued 200,000
shares of preferred stock in exchange for services by a Director of the Company.
The value of the services provided amounting to $200,000 for 1997 has been
charged to operations.

A summary of all stock option activity for the year ended December 31, 1997
is as follows:

<TABLE>
<CAPTION>
EXERCISE PRICE
SHARES PER SHARE
-------- --------------
<S> <C> <C>
Outstanding at December 31, 1996....................... 821,861 $.26
Options granted........................................ 215,200
Options terminated..................................... (42,730) .26
Options exercised...................................... (168,581) .26
-------- ----
Outstanding at December 31, 1997....................... 825,750 $.26
======== ====
Options exercisable at December 31, 1997............... 463,430 $.26
======== ====
</TABLE>

The weighted average grant date fair value for options granted in 1997 was
approximately $.31.

F-47
<PAGE> 230
ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth information regarding stock options
outstanding at December 31, 1997 under the Stock Option Plans as described
above:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE WEIGHTED WEIGHTED EXERCISE
NUMBER OF OF AVERAGE AVERAGE NUMBER PRICE FOR
OPTIONS EXERCISE EXERCISE REMAINING CURRENTLY CURRENTLY
OUTSTANDING PRICE PRICE LIFE EXERCISABLE EXERCISABLE
- ----------- -------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
825,750 $0.26 $0.26 7.6 years 463,430 $0.26
</TABLE>

PRO FORMA DISCLOSURES

As described in Note 1, the Company applies the intrinsic value method of
APB No. 25 and related Interpretations in accounting for its stock option plan.
Accordingly, no compensation cost has been recognized for its stock option plan.
Had compensation cost been determined based on the fair value at the grant dates
for awards under the plan consistent with the method of SFAS No. 123, the
Company's net loss for the year ended December 31, 1997 would have been
approximately $10,449,961.

For purposes of pro forma disclosures, the fair value of the options
granted under the Company's stock options plans during 1997 was estimated on the
date of grant using the Black-Scholes option pricing mode. Key assumptions used
to apply this pricing model are as follows:

<TABLE>
<S> <C>
Risk-free interest rate.................................... 6.50%
Expected life of option grants............................. 5 years
</TABLE>

The pro-forma disclosures, as required by SFAS No. 123, only include the
effects of options granted in 1997.

NOTE J -- EMPLOYEE BENEFIT PLAN

In 1994, the Company established a 401(k) retirement plan for substantially
all employees. Employees eligible to participate in the plan must be age 21. The
Company does not contribute to the plan.

NOTE K -- LEASES

The Company leases its present facilities in Wilmington, Massachusetts,
under a five-year lease expiring in November 2000. Future minimum lease payments
under noncancelable operating leases with initial or remaining terms of one year
or more consist of the following at December 31, 1997.

<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
- ----------- ------
<S> <C>
1998........................................................ $ 351,996
1999........................................................ 368,000
2000........................................................ 384,000
----------
Total............................................. $1,103,996
==========
</TABLE>

The Company is also responsible for real estate taxes and other operating
expenses associated with the property lease. Rent expense under all operating
leases for the year ended December 31, 1997 was approximately $631,000.

NOTE L -- CONTINGENCIES

The Company has been named as a defendant in a suit filed by a successor to
a former vendor. The vendor claims it is owed $1,000,000 from the Company and
has asserted breach of contract and other claims. The Company has counter
claimed for breach of contract and other causes of action. The Company's
recorded liability at December 31, 1997 was approximately $480,564. The ultimate
outcome of this claim cannot be

F-48
<PAGE> 231
ADVANCED TECHCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

predicted, however, management estimates that the Company's possible loss that
may be incurred will not exceed the amounts recorded.

NOTE M -- SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES

<TABLE>
<S> <C>
Cash flow information --
Cash paid for interest.................................... $ 292,679
Cash paid for taxes....................................... --
Non-cash investing and financing activities --
Debt refinanced by:
World Access, Inc. line of credit...................... $2,315,516
Capital lease obligations.............................. 283,933
Other --
Interest expensed......................................... $ 394,653
</TABLE>

NOTE N -- LETTER OF CREDIT

The Company is contingently liable under a letter of credit arrangement
with a bank for $140,000 which is being used as security for the operating lease
on its facilities. The letter of credit is secured by a $140,000 certificate of
deposit (included in cash in the accompanying consolidated balance sheet).

NOTE O -- CONCENTRATION OF CREDIT RISK

The Company maintains certain of its main operating accounts in a single
financial institution. At times throughout the year, the Company may maintain
balances in such accounts in excess of the FDIC insured limits. The excess at
December 31, 1997 was $270,855.

NOTE P -- FORGIVENESS OF STOCK SUBSCRIPTION RECEIVABLE

The Company's Board of Directors authorized the forgiveness of the stock
subscription receivable from the Company's principal stockholder in 1997.

NOTE Q -- PURCHASE COMMITMENTS

The Company has entered into numerous agreements for the purchase of
inventory. In connection with such agreements, the Company has recorded
estimated losses of $561,500 in the accompanying consolidated financial
statements for the future purchase of inventory that they no longer expect to
use and other reasons.

NOTE R -- SUBSEQUENT EVENTS

In December 1997 the Company entered into an Agreement and Plan of Merger
(the "Plan") with World Access, Inc. and its wholly owned Subsidiary, Cellular
Infrastructure Supply, Inc. Under the Plan, the Company's stockholders would
receive shares of World Access, Inc. stock in return for their shares of the
Company's stock. Outstanding stock options were also to be acquired by World
Access, Inc. The final Plan was executed in January 1998.

F-49
<PAGE> 232

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of Advanced TechCom, Inc.
Wilmington, Massachusetts

We have audited the accompanying consolidated balance sheets of Advanced
TechCom, Inc. and Subsidiary (the "Company") as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Advanced TechCom, Inc. and
Subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, subsequent
to year end the Company entered into an agreement to subcontract certain of its
manufacturing, raised additional equity, and received a commitment for
additional financing.

/s/ Deloitte & Touche LLP

February 26, 1997
(October 15, 1997 as to Notes 2 and 13,
and the last paragraph of Note 5)

F-50
<PAGE> 233

ADVANCED TECHCOM, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 306,443 $ 271,458
Accounts Receivable....................................... 3,588,097 2,777,070
Inventory................................................. 5,843,716 7,203,140
Prepaid expenses and other................................ 147,605 141,886
Deferred income taxes..................................... -- 104,456
----------- -----------
Total current assets.............................. 9,885,861 10,498,010
PROPERTY AND EQUIPMENT -- Net..................... 1,006,124 1,020,113
----------- -----------
TOTAL ASSETS...................................... $10,891,985 $11,518,123
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable............................................. $ 1,690,000 $ 4,023,000
Current portion of long-term debt......................... 356,598 316,290
Accounts Payable.......................................... 2,630,770 1,681,619
Accrued Salaries and commissions.......................... 545,252 662,387
Accrued Expenses.......................................... 734,101 517,393
Customer deposits......................................... 389,439 685,885
----------- -----------
Total current liabilities......................... 6,346,160 7,886,574
----------- -----------
LONG TERM DEBT -- Net of current portion.......... 421,503 650,509
----------- -----------
STOCKHOLDERS EQUITY:
Preferred stock, $.10 per share par value -- 20,000,000
shares authorized; issued and outstanding -- 10,097,103
shares in 1996......................................... 1,009,710 --
Common stock, $.10 per share par value -- 25,000,000
shares authorized; issued and outstanding -- 343,989
and 8,032,248 shares in 1996 and 1995, respectively.... 34,399 803,223
Additional paid-in capital................................ 10,107,727 3,167,580
Accumulated deficit....................................... (6,730,514) (572,763)
----------- -----------
Less:
Stock subscription value.................................. (273,000) (357,000)
Deferred compensation..................................... (24,000) (60,000)
----------- -----------
Total stockholders' equity........................ 4,124,322 2,981,040
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $10,891,985 $11,518,123
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-51
<PAGE> 234

ADVANCED TECHCOM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
NET SALES................................................... $15,713,507 $18,297,699
COST OF GOODS SOLD.......................................... 11,993,587 10,698,605
----------- -----------
GROSS PROFIT................................................ 3,719,920 7,599,094
----------- -----------
OPERATING EXPENSES:
Research and development.................................. 4,785,393 3,350,540
Selling, general and administrative....................... 4,606,697 3,866,043
----------- -----------
Total operating expenses.......................... 9,392,090 7,216,583
----------- -----------
(LOSS) INCOME FROM OPERATIONS............................... (5,672,170) 382,511
OTHER INCOME (EXPENSE)
Interest, net............................................. (339,527) (324,175)
Other..................................................... (98,598) (12,946)
----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES........................... (6,110,295) 45,390
PROVISION FOR INCOME TAXES.................................. 47,456 --
----------- -----------
NET (LOSS) INCOME................................. $(6,157,751) $ 45,390
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-52
<PAGE> 235

ADVANCED TECHCOM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
NO PAR $.10 PAR VALUE $.10 PAR VALUE
COMMON STOCK COMMON STOCK PREFERRED STOCK ADDITIONAL
----------------------- ---------------------- ------------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ---------- ---------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995.... 6,706,479 $2,045,803 -- $ -- -- $ -- $ --
Exercise of stock
options.................. 525,000 350,000 -- -- -- -- --
Issuance of stock.......... 3,750 -- -- -- -- -- --
Exchange of no par common
stock for $.10 par value
common stock............. (7,235,229) (2,395,803) 7,235,229 723,522 -- -- 1,672,281
Sale of common stock....... -- -- 750,000 75,000 -- -- 1,425,000
Stock issued for
services................. -- -- 47,019 4,701 -- -- 70,299
Accrued interest on stock
subscription............. -- -- -- -- -- -- --
Dividends paid............. -- -- -- -- -- -- --
Net income........... -- -- -- -- -- -- --
---------- ---------- ---------- --------- ----------- ---------- -----------
BALANCE, DECEMBER 31,
1995....................... 8,032,248 803,223 -- -- 3,167,580
Exercise of stock
options.................. -- -- 262,500 26,250 -- -- 148,750
Sale of common stock....... -- -- 953,430 95,344 -- -- 3,082,756
Stock issued for
services................. -- -- 73,014 7,302 -- -- 87,631
Exchange of $.10 par value
common stock for $.10 par
value Series A preferred
stock.................... -- -- (8,977,203) (897,720) 8,977,203 897,720 --
Sale of Series A preferred
stock.................... -- -- -- -- 1,119,900 111,990 3,621,010
Receipt of stock
subscription............. -- -- -- -- -- -- --
Accrued interest on stock
subscription............. -- -- -- -- -- -- --
Forgiveness of interest on
stock subscription
loan..................... -- -- -- -- -- -- --
Net loss................... -- -- -- -- -- -- --
---------- ---------- ---------- --------- ----------- ---------- -----------
BALANCE, DECEMBER 31,
1996....................... -- $ -- 343,989 $ 34,399 10,097,103 $1,009,710 $10,107,727
========== ========== ========== ========= =========== ========== ===========

STOCK
ACCUMULATED SUBSCRIPTION DEFERRED
DEFICIT RECEIVABLE COMP. TOTAL
------------ ------------ -------- ----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995.... $ (404,542) $ -- $ -- $1,641,261
Exercise of stock
options.................. -- (350,000) -- --
Issuance of stock.......... -- -- -- --
Exchange of no par common
stock for $.10 par value
common stock............. -- -- -- --
Sale of common stock....... -- -- -- 1,500,000
Stock issued for
services................. -- -- (60,000) 15,000
Accrued interest on stock
subscription............. -- (7,000) -- (7,000)
Dividends paid............. (213,611) -- -- (213,611)
Net income........... 45,390 -- -- 45,390
----------- --------- -------- ----------
BALANCE, DECEMBER 31,
1995....................... (572,763) (357,000) (60,000) 2,981,040
Exercise of stock
options.................. -- -- -- 175,000
Sale of common stock....... -- -- -- 3,178,100
Stock issued for
services................. -- -- 36,000 130,933
Exchange of $.10 par value
common stock for $.10 par
value Series A preferred
stock.................... -- -- -- --
Sale of Series A preferred
stock.................... -- -- -- 3,733,000
Receipt of stock
subscription............. -- 77,000 -- 77,000
Accrued interest on stock
subscription............. -- (24,582) -- (24,582)
Forgiveness of interest on
stock subscription
loan..................... -- 31,582 -- 31,582
Net loss................... (6,157,751) -- -- (6,157,751)
----------- --------- -------- ----------
BALANCE, DECEMBER 31,
1996....................... $(6,730,514) $(273,000) $(24,000) $4,124,322
=========== ========= ======== ==========
</TABLE>

See notes to consolidated financial statements.

F-53
<PAGE> 236

ADVANCED TECHCOM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income........................................... $(6,157,751) $ 45,390
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
Depreciation and amortization............................. 600,413 424,334
Deferred income taxes..................................... 104,456 (104,456)
Other..................................................... 137,933 20,946
Change in assets and liabilities:
Accounts receivable....................................... (811,027) 498,280
Inventory................................................. 1,359,424 (3,975,477)
Prepaid expenses and other................................ (5,719) (94,815)
Accounts payable.......................................... 949,151 50,059
Accrued expenses.......................................... 99,573 578,183
Customer deposits......................................... (296,446) 209,289
----------- -----------
Net cash used in operating activities............. (4,019,993) (2,348,267)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES --
Purchases of property and equipment......................... (418,379) (920,358)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under line of credit.............. (2,528,000) 1,809,000
Proceeds from notes payable................................. 195,000 750,000
Principal payments on long-term notes payable............... (281,659) (269,036)
Principal payments on capital leases........................ (75,084) (38,039)
Proceeds from exercise of stock option plans................ 175,000 --
Proceeds from sale of stock................................. 6,911,100 1,500,000
Proceeds from payment of stock subscription receivable...... 77,000 --
Dividends paid.............................................. -- (213,611)
----------- -----------
Net cash provided by financing activities......... 4,473,357 3,538,314
NET INCREASE IN CASH........................................ 34,985 269,689
CASH, BEGINNING OF YEAR..................................... 271,458 1,769
----------- -----------
CASH, END OF YEAR........................................... $ 306,443 $ 271,458
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 336,906 $ 324,316
=========== ===========
Cash paid (refunded) for income taxes..................... $ (90,116) $ 174,456
=========== ===========
SUPPLEMENTAL NONCASH FINANCING AND INVESTING ACTIVITY:
Capital lease obligations................................. $ 168,045 $ --
=========== ===========
Stock issued for notes receivable......................... $ -- $ 350,000
=========== ===========
Increase in notes receivable for accrued interest......... $ 24,582 $ 7,000
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-54
<PAGE> 237

ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business. Advanced TechCom, Inc. and Subsidiary (the "Company") designs,
develops and manufactures a series of high-performance digital
microwave/millimeter wave radio equipment, operating in frequencies of 1.5 GHZ
to 38 GHZ utilized in the telecommunications industry.

Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned foreign
sales corporation, Advanced TechCom (Barbados), Inc. All material intercompany
transactions and balances have been eliminated.

Stock Split. In November 1996, the Board of Directors declared a
three-for-one split of the Company's common and preferred stock effected in the
form of stock dividends. Shares will be distributed to all stockholders of
record. All share and per share data have been adjusted to reflect the split.

Revenue Recognition. The Company recognizes revenue from the sales of
products when the products are shipped. Sales to overseas customers generally
require letters of credit before the products are shipped.

Allowance for Doubtful Accounts. An allowance for doubtful accounts is
provided when accounts are considered uncollectible. No such allowances were
considered necessary at December 31, 1996 and 1995.

Inventory. Inventory is stated at the lower of cost (first-in, first-out
method) or market.

Property and Equipment. Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives of the assets. Estimated
useful lives of assets are as follows:

<TABLE>
<S> <C>
Machinery and equipment and other....................... 3-5 years
Furniture and fixtures.................................. 3-7 years
Leasehold improvements.................................. Shorter of lease term
or useful life
</TABLE>

Financial Instruments. The carrying values of cash, accounts receivable,
accounts payable, borrowings under the Company's credit line and debt
approximate fair value due to the short-term nature of these instruments.

Income Taxes. The Company is taxed as a C Corporation. Deferred tax assets
and liabilities are recognized for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Deferred income taxes are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

Research and Development. Research and development costs are expensed when
incurred.

Warranty Reserve. The Company sells the majority of its products with a
two-year repair or replacement warranty. The accompanying consolidated financial
statements for 1996 and 1995 include an accrual of approximately $403,000 and
$150,000, respectively, for estimated warranty claims based on the Company's
experience of actual claims and anticipated future claims.

Employee Stock. Based Compensation -- The Company uses the intrinsic
value-based method of Accounting Principles Board Opinion ("APB") No. 25. as
allowed under Statement of Financial Accounting Standards ("SFAS") No. 123
"Accounting for Stock-Based Compensation," to account for all of its employee
stock-based compensation plans.

Customers and Concentration of Credit Risk. The Company's products are
sold both directly to customers and through distributors. The Company's
customers consist of domestic and international wireless and cellular companies,
telephone companies, utilities and government and educational institutions.
Approximately 93% of the Company's net sales are derived from international
customers. A major international systems integrator, who resells worldwide,
accounted for approximately 20% of the Company's 1996 net sales

F-55
<PAGE> 238
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and approximately 54% of the accounts receivable balance at December 31, 1996. A
second customer accounted for approximately 14% of the accounts receivable
balance at December 31, 1996.

Use of Estimates. The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosure of certain assets and liabilities at the balance sheet date.
Actual results may differ from such estimates.

Reclassifications. Certain amounts in the 1995 financial statements have
been reclassified to conform with the 1996 presentation.

Adoption of New Accounting Pronouncements. Effective January 1, 1996, the
Company adopted, prospectively, SFAS No. 121, "Accounting for Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of." SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever
circumstances indicate that the carrying value of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have a significant effect on
the Company's consolidated financial position or results of operations for the
year ended December 31, 1996.

Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation." As permitted by SFAS No. 123 the Company has
continued to account for its stock-based transactions to employees in accordance
with APB No. 25, "Accounting for Stock Issued to Employees." As required by SFAS
No. 123 for stock option grants to nonemployees, the Company follows the
provisions of SFAS No. 123, calculates compensation expense using a fair value
based method and amortizes compensation expense over the vesting period. During
the year ended December 31, 1996, the Company did not grant any options to
purchase shares of common stock to nonemployees.

2. FUNDING OF OPERATIONS

As shown in the consolidated financial statements, for the year ended
December 31, 1996, the Company incurred a net loss of $6,157,751 and had
negative cash flow from operations of $4,019,993. The Company's 1996 loss and
working capital needs were principally funded by proceeds from various private
placement equity offerings completed throughout the year.

Since December 31, 1996, the Company has continued to incur losses.
However, it has negotiated a line of credit for borrowings of up to $2.5 million
and raised approximately $3.0 million through the issuance of preferred stock.
Moreover, the Company has entered into a joint venture agreement to subcontract
the manufacturing of certain of its products and, upon the successful
refinancing of the Company's existing bank line of credit or financing with a
new bank, the agreement will also provide up to $2.0 million of additional
financing. On October 15, 1997, the Company received a commitment letter for
bank financing of $750,000. The Company is also now selling its compact product
line in the 38 GHZ and 23 GHZ frequencies, thus improving its existing product
line offerings and plans to raise additional equity financing in 1997.
Management believes these factors will provide sufficient working capital for
the remainder of 1997 and into 1998.

3. INVENTORY

Inventory consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials......................................... $4,685,490 $5,841,531
Work in process..................................... 845,613 1,170,597
Finished goods...................................... 312,613 191,012
---------- ----------
Total....................................... $5,843,716 $7,203,140
========== ==========
</TABLE>

F-56
<PAGE> 239
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Machinery and equipment and other..................... $1,322,067 $ 927,700
Office furniture and equipment........................ 836,117 644,060
---------- ----------
2,158,184 1,571,760
Less Accumulated Depreciation......................... (1,152,060) (551,647)
---------- ----------
Property and equipment, net........................... $1,006,124 $1,020,113
========== ==========
</TABLE>

At December 31, 1996, the capitalized cost of property and equipment under
capital leases was $251,416 and related accumulated depreciation was $104,831.

Property and equipment under capital leases and related accumulated
depreciation for the year ended December 31, 1995 was not material.

5. NOTES PAYABLE

Notes payable consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revolving bank line of credit............................... $1,245,000 $3,773,000
Note payable-stockholder, due on demand, interest payable
monthly at 12%............................................ 195,000 --
Note payable-to a community development finance corporation
with interest payable monthly at a rate of 10%,
collateralized by a second lien on substantially all of
the Company's assets, and personally guaranteed by the
principal stockholder of the Company...................... 125,000 125,000
Note payable-to a community development organization with
interest payable monthly at a rate of 10%, collateralized
by a second lien on substantially all of the Company's
assets, and personally guaranteed by the principal
stockholder of the Company................................ 125,000 125,000
---------- ----------
$1,690,000 $4,023,000
========== ==========
</TABLE>

The Company had a revolving bank line-of-credit agreement which expired in
May 1996. Since the expiration of the agreement, borrowings under the line were
based on eligible accounts receivable and inventory up to a maximum of
$1,245,000. At December 31, 1996, the Company had outstanding bank letters of
credit totaling $172,657, of which $32,657 reduces borrowing availability under
the line of credit. The line is payable on demand and bears interest at the
bank's prime rate plus 1/2% (8.75% at December 31, 1996). The line is
collateralized by substantially all of the Company's assets and is personally
guaranteed by the principal stockholder of the Company. The agreement contains
certain covenants which, among other things, require minimum levels of
consolidated tangible net worth, the maintenance of certain financial ratios,
and a minimum collateral base of inventory and accounts receivable. At December
31, 1996, the Company was not in compliance with certain provisions of the loan
agreement related to the minimum debt coverage ratio requirement.

On March 13, 1997, the Company's bank line-of-credit agreement was amended.
The amended agreement provides for available borrowings under the line based on
eligible accounts receivable up to a maximum of $2,500,000, reduced by
outstanding letters of credit issued by the Company. The line is payable on
demand and bears interest at the bank's prime lending rate plus 1/2%. The line
is collateralized by substantially all of the Company's assets and is personally
guaranteed by the principal stockholder of the Company. The agreement contains
certain covenants which, among other things, require minimum levels of

F-57
<PAGE> 240
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

consolidated tangible net worth, the maintenance of certain financial ratios,
and a minimum collateral base of inventory and accounts receivable. As of
October 15, 1997, approximately $2,200,000 was outstanding under the line and
the Company was in default on certain covenant requirements. The Company is
currently discussing refinancing of the line (see Note 2).

6. LONG-TERM DEBT

Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Note payable-bank-payable in monthly installments through
January 1998 with interest at prime plus 1/2% (8.75% at
December 31, 1996) the note is collateralized by a second
lien on substantially all Company assets.................. $106,528 $204,855
Note payable-finance company-payable in monthly installments
through July 1997 with interest computed at rates ranging
from 10.24%-10.37%; collateralized by certain equipment... 143,795 50,834
Note payable-bank-payable in installments through October
1998 with interest computed at prime plus 1/2% (8.75% at
December 31, 1996); collateralized by a second lien on
substantially all Company assets.......................... 152,778 236,111
Note payable-to a business development
corporation -- payable in installments through August 2000
with interest computed at prime plus 2 1/4% (10.5% at
December 31, 1996); collateralized by a second lien on
substantially all Company assets and personally guaranteed
by the principal stockholder.............................. 375,000 474,999
-------- --------
778,101 966,799
Less current portion........................................ (356,598) (316,290)
-------- --------
Long-term debt.............................................. $421,503 $650,509
======== ========
</TABLE>

Maturities on long-term debt as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1997........................................................ $356,598
1998........................................................ 227,082
1999........................................................ 119,421
2000........................................................ 75,000
--------
$778,101
========
</TABLE>

F-58
<PAGE> 241
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

The components of the Company's provision for income taxes as are as
follows:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Currently payable taxes before application of credits and
benefit of Foreign Sales Corporation
Federal................................................... $ -- $151,460
State..................................................... 18,746 65,320
State Manufacturing investment and research and
development credits.................................... (18,746) (65,320)
Federal research and development credits.................. -- (42,004)
Benefit of Foreign Sales Corporation...................... -- (5,000)
Federal benefit of net operating loss carryback........... (57,000) --
-------- --------
Net currently payable (refundable) tax.................... (57,000) 104,456
Deferred tax expense...................................... 104,456 (104,456)
-------- --------
Total............................................. $ 47,456 $ --
======== ========
</TABLE>

A reconciliation between reported income tax expense and the amount
computed by applying the statutory federal income tax rate of 34% to income
before income taxes is as follows:

<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Taxes at statutory federal rates............................ $(2,066,762) $ 15,433
1996 taxable loss for which no tax asset was recorded....... 2,066,762 --
State taxes, net of federal tax benefit..................... (299,858) --
Federal and state tax credit carryforwards.................. (368,090) (129,081)
Federal tax credit utilized................................. -- (42,004)
Valuation allowance for deferred tax assets................. 596,236 --
Change in valuation allowance............................... 104,456 175,447
Other....................................................... 14,712 (19,795)
----------- ---------
Net tax expense............................................. $ 47,456 $ --
=========== =========
</TABLE>

The Company's deferred taxes at December 31 were as follows:

<TABLE>
<CAPTION>
1996 1995
----------- --------
<S> <C> <C>
State research and development credits...................... $ 387,981 $203,127
Federal research and development credits.................... 202,104 40,705
State investment tax credits................................ 21,837 --
Inventory................................................... 247,661 70,285
Warranty.................................................... 162,229 60,405
Accruals.................................................... 156,303 133,024
Other....................................................... -- 1,991
Depreciation................................................ 45,595 --
Tax benefit from exercise of stock options.................. 120,810 --
Operating loss carryforwards................................ 1,925,881 --
----------- --------
3,270,401 509,537
Valuation Allowance......................................... (3,270,401) (405,081)
----------- --------
Net deferred taxes................................ $ -- $104,456
=========== ========
</TABLE>

Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes in
different periods and future tax benefits of federal and state tax credits. At
December 31, 1995, deferred tax assets totaling $509,537, with a related
valuation

F-59
<PAGE> 242
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

allowance of $405,081, or net deferred tax assets of $104,456, were recorded
based upon management's assessment at that time that taxable income would more
likely than not be sufficient to utilize fully the net deferred tax asset. At
December 31, 1996, based on operating results and management's reassessment of
future taxable income, the Company established a valuation allowance to reduce
the carrying value of net deferred tax assets to zero.

At December 31, 1996, the Company had available unused federal research and
development credits of approximately $202,000 which expire in the years 2010 and
2011, state research and development credits of approximately $388,000, of which
approximately $7,300 are unlimited and the remainder expire at various dates
beginning in 2006 through 2011 and an investment tax credit of $21,837. Net
operating loss carryforwards totaled approximately $5,080,000 at December 31,
1996.

8. STOCKHOLDERS' EQUITY

On November 7, 1996, the Company amended the Company's Certificate of
Incorporation to increase the authorized preferred stock to 20,000,000 shares
with par value of $.10 per share; 15,000,000 shares designated as Series A
convertible preferred stock ("Series A preferred stock") and 5,000,000 shares as
undesignated preferred stock (see "Stock Split" in Note 1).

The preferred stock has voting rights similar to common stock and equal to
the number of whole shares of common into which the preferred is convertible.
The preferred stock also has preference on liquidation over common stock and on
the payment of dividends. The Series A preferred stock shall be convertible,
without the payment of any additional consideration by the holder, at any time
at the option of the holder, at a conversion rate, subject to adjustment, of one
share of common for each share of preferred. Each share of Series A preferred
stock shall automatically be converted into common stock at the then effective
applicable conversion rate upon the closing of a public offering with gross
proceeds of not less than $15 million or upon the affirmative vote of the
majority of the preferred stockholders.

Concurrent with the increase in the number of authorized shares of
preferred stock, common stockholders were granted the option of converting their
shares into Series A preferred stock on a one-for-one basis.

In addition, additional shares of Series A convertible preferred stock
totaling 965,430 were issued for no additional consideration to those persons
who purchased common stock in April and May 1996 at a price of $20 per share in
order that their purchase price, after taking into account the stock split, be
adjusted to $3 1/3 per share.

9. STOCK PLANS

Performance Share Plan. The Company had a performance share plan which was
intended as an incentive to certain key employees and directors who contribute
to the success of the Company's business. Under the terms of the plan,
performance shares were granted to individuals at the discretion of the
Company's Board of Directors (the "Board"), subject to various vesting
schedules. Performance shares exercised during 1995 totaled 6,980. Shares
forfeited under the plan totaled 17,809 for 1995.

In August 1995, the Board voted to terminate the performance share plan and
authorized the Company's president, in consultation with the Compensation
Committee, to offer stock options in exchange for performance shares held by the
holders thereof.

Stock Options. During 1995, the Company adopted the 1995 Stock Option Plan
(the "1995 Plan"). The 1995 Plan initially permitted the grant of options to
purchase up to 1,200,000 shares of the Company's common stock at a price at
least equal to the fair market value of the stock, determined by the Board, on
the date of grant for incentive stock options and at prices determined by the
Board in its sole discretion for nonqualified options. On September 6, 1996, the
Board and stockholders approved an increase in the shares available for grants
to 1,650,000.

F-60
<PAGE> 243
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1996, there were 828,137 options available for grant under
the 1995 Plan. Prior to the adoption of the 1995 Plan, the Company issued stock
options to certain individuals which were exercisable on varying dates at prices
ranging from $.67 to $2.57 per share.

Stock Exchanged for Services. During 1995, the Company issued 47,019
shares of common stock in exchange for current and future services. Of the
47,019 shares issued, 36,000 were issued to a director for services to be
provided through 1997. The right to the 36,000 shares is subject to a two-year
vesting schedule through 1997. The value of the services provided amounting to
$15,000 and $36,000 for 1996 and 1995, respectively, has been charged to
operations. During 1996, an additional 73,014 shares of common stock were issued
in exchange for current services. The value of the shares totaling $94,933 was
expensed in 1996.

A summary of all stock option activity for the years ended December 31,
1996 and 1995 is as follows:

<TABLE>
<CAPTION>
EXERCISE PRICE
SHARES PER SHARE
-------- --------------
<S> <C> <C>
Outstanding at January 1, 1995.............................. 943,500 $0.67-$2.57
Options granted in exchange for performance shares.......... 175,476 $ 2.00
Options granted............................................. 454,458 $ .33-$2.20
Options terminated.......................................... (159,000) $2.00-$2.57
Options exercised........................................... (525,000) $ 0.67
-------- -----------
Outstanding at December 31, 1995............................ 889,434 $0.33-$2.20
-------- -----------
Options granted............................................. 298,803 $0.26-$2.20
Options terminated.......................................... (103,876) $0.33-$2.20
Options exercised........................................... (262,500) $ 0.67
Options cancelled upon exchange............................. (865,161) $0.67-$2.57
Options issued upon exchange................................ 865,161 $ 0.26
-------- -----------
Outstanding at December 31, 1996............................ 821,861 $ 0.26
======== ===========
Options exercisable at December 31, 1995.................... 650,568 $0.33-$2.20
======== ===========
Options exercisable at December 31, 1996.................... 448,377 $ 0.26
======== ===========
</TABLE>

The weighted average grant date fair value for options granted in 1996 and
1995 was $.31 and $.67, respectively.

During 1995, the Company's principal stockholder exercised options to
purchase 525,000 shares of common stock by issuing a note to the Company in the
amount of $350,000 (the "Note"). The Note is due on August 24, 2000 and bears
interest, payable annually, at 8% per annum commencing August 24, 1996. Accrued
interest on the Note as of December 31, 1996 totaling $31,582 has been forgiven.

F-61
<PAGE> 244
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth information regarding stock options
outstanding at December 31, 1996 under the Stock Option Plans as described
above:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED WEIGHTED EXERCISE
NUMBER OF RANGE OF AVERAGE AVERAGE NUMBER PRICE FOR
OPTIONS EXERCISE EXERCISE REMAINING CURRENTLY CURRENTLY
OUTSTANDING PRICE PRICE LIFE EXERCISABLE EXERCISABLE
----------- -------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
821,861............................... $0.26 $0.26 7.6 years 448,377 $0.26
</TABLE>

Pro Forma Disclosures. As described in Note 1, the Company applies the
intrinsic value method of APB No. 25 and related Interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 123, the Company's net loss for the years
ended December 31, 1996 and 1995 would have been $6,260,157 and $25,215,
respectively.

For purposes of the pro forma disclosures, the fair value of the options
granted under the Company's stock option plans during 1996 and 1995 was
estimated on the date of grant using the Black-Scholes option pricing model. Key
assumptions used to apply this pricing model are as follows:

<TABLE>
<CAPTION>
1996 1995
------- ---------
<S> <C> <C>
Risk-free interest rate..................................... 6.50% 6.50%
Expected life of option grants.............................. 5 years 4.9 years
</TABLE>

The pro forma disclosures, as required by SFAS No. 123, only include the
effects of options granted in 1996 and 1995.

10. EMPLOYEE BENEFIT PLAN

In 1994, the Company established a 401(k) retirement plan for substantially
all employees. Employees eligible to participate in the plan must be age 21. The
Company does not contribute to the plan.

11. LEASES

<TABLE>
<CAPTION>
YEAR ENDING AMOUNT
- ----------- ----------
<S> <C>
1997...................................................... $ 320,000
1998...................................................... 351,996
1999...................................................... 368,000
2000...................................................... 384,000
----------
Total............................................. $1,423,996
==========
</TABLE>

The Company is also responsible for real estate taxes and other operating
expenses associated with the property lease. Rent expense under all operating
leases for the years ended December 31, 1996 and 1995 was approximately $586,000
and $246,000, respectively.

12. RELATED-PARTY TRANSACTIONS

The Company purchases computers and other networking equipment from a
computer distributor whose principal shareholder is a director of the Company.
Purchases of equipment totaled $77,758 and $186,163 for 1996 and 1995,
respectively. As of December 31, 1996, there are no amounts payable to the
distributor.

F-62
<PAGE> 245
ADVANCED TECHCOM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Interest expense on the note payable to stockholder (see Note 5) was $8,112
for the year ended December 31, 1996.

13. SUBSEQUENT EVENT

Subsequent to year end, the Company was named as a defendant in a suit
filed by a successor to a former vendor. The vendor claims it is owed $1,000,000
from the Company and has asserted breach of contract and other claims. The
Company's recorded liability at December 31, 1996 was approximately $450,000.
The Company and the vendor have agreed to stay the litigation while they engage
in settlement negotiations. The ultimate outcome of this claim cannot be
predicted, however, management estimates that the Company's possible loss that
may be incurred will not exceed the amounts recorded.

14. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
AUDITORS' REPORT

As discussed in notes 2 and 5, as of October 15, 1997 the Company had
approximately $2,200,000 outstanding and was in default on certain covenant
requirements under its bank line of credit. Moreover, the Company was discussing
the refinancing of this line in connection with a joint venture agreement
entered into to subcontract the manufacturing of certain of its products and had
received a commitment letter for bank financing of $750,000. The commitment
letter expired on December 15, 1997 and on December 29, 1997 the Company signed
a definitive agreement to be acquired by World Access, Inc. In connection with
the acquisition the Company also entered into an agreement to terminate the
joint venture agreement referred to above. In December 1997, World Access paid
the Company's outstanding bank debt and began funding its operations. The
acquisition of the Company, by World Access, was consummated on January 29,
1998.

F-63
<PAGE> 246

NACT TELECOMMUNICATIONS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 11,264 $ 5,252
Marketable securities..................................... 3,500 7,246
Accounts receivable, less allowance for doubtful accounts
of $411 in June and $631 in December................... 10,541 9,496
Notes receivable, less allowance for doubtful accounts of
$461 in June and $295 in December...................... 3,609 4,055
Intercompany receivable................................... 1,057 --
Inventories............................................... 2,586 2,814
Prepaid expenses and other assets......................... 436 216
Deferred tax asset -- current............................. 699 817
-------- --------
Total current assets.............................. 33,692 29,896
Fixed Assets:
Property, plant, and equipment............................ 7,291 6,577
Less: Accumulated depreciation............................ (1,037) (698)
-------- --------
Net fixed assets.................................. 6,254 5,879
Notes receivable -- long term............................... 1,627 785
Inventory -- long term...................................... 225 225
Intangibles................................................. 5,372 5,598
Other Assets................................................ 144 164
-------- --------
Total Assets...................................... $ 47,314 $ 42,547
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 3,252 $ 1,889
Accrued expenses.......................................... 1,143 1,206
Current corporate tax lability............................ 2,670 1,073
Deferred Revenue.......................................... 662 790
Inter company payable..................................... -- 1,743
-------- --------
Total current liabilities......................... 7,727 6,701
Long Term Liabilities:
Deferred compensation liability........................... 132 158
Deferred tax liability.................................... 1,175 1,252
-------- --------
Total long-term liabilities....................... 1,307 1,410
Stockholders' Equity:
Common stock, $.01 par value.............................. 81 81
Additional paid-in-capital................................ 28,318 28,271
Retained earnings......................................... 9,879 6,055
Unrealized appreciation on marketable securities.......... 2 29
-------- --------
Total stockholders' equity........................ 38,280 34,436
-------- --------
Total liabilities and stockholders' equity........ $ 47,314 $ 42,547
======== ========
</TABLE>

See accompanying notes to financial statements.

F-64
<PAGE> 247

NACT TELECOMMUNICATIONS, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ----------------------
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1997 1996 1998 1997
------------ ------------ --------- ---------
(IN THOUSANDS, EXCEPT PER (IN THOUSANDS, EXCEPT
SHARE DATA) PER SHARE DATA)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Product sales................................... $7,300 $4,780 $17,006 $10,812
Network carrier sales........................... 1,387 1,610 2,424 2,685
------ ------ ------- -------
Total revenues.......................... 8,687 6,390 19,430 13,497
Cost of goods sold:
Products........................................ 2,158 1,730 5,141 3,229
Network carrier usage........................... 1,387 1,558 2,167 2,547
Authorization of acquired intangibles........... 170 91 340 181
------ ------ ------- -------
Total cost of goods sold................ 3,715 3,379 7,648 5,957
------ ------ ------- -------
Gross profit............................ 4,972 3,011 11,782 7,540
Operating expenses:
Research and development........................ 799 423 1,495 1,356
Sales and marketing............................. 767 357 1,750 1,391
General and administrative...................... 1,362 836 2,289 1,628
Amortization of acquired intangibles............ 143 143 286 286
------ ------ ------- -------
Total operating expenses................ 3,071 1,759 5,810 4,661
------ ------ ------- -------
Income from operations.................. 1,901 1,252 5,972 2,879
Other income, net................................. 223 25 401 274
------ ------ ------- -------
Income before income taxes.............. 2,124 1,277 6,373 3,153
Income taxes...................................... 850 569 2,549 1,261
------ ------ ------- -------
Net income.............................. $1,274 $ 708 $ 3,824 1,892
====== ====== ======= =======
</TABLE>

<TABLE>
Weighted average common and common equivalent
shares outstanding:
<S> <C> <C> <C> <C>
Basic........................................... 8,122 6,114 8,130 6,923
Diluted......................................... 8,443 6,114 8,265 6,923
Earnings per share:
Basic........................................... $ 0.16 $ 0.12 $ 0.47 $ 0.27
Diluted......................................... $ 0.15 $ 0.12 $ 0.46 $ 0.27
</TABLE>

See accompanying notes to financial statements.

F-65
<PAGE> 248

NACT TELECOMMUNICATIONS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- -----------------
1997 1996 1998 1997
-------- -------- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 1,274 $ 708 $ 3,824 $ 1,892
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization........................ 498 322 1,045 508
Provision for loss on accounts and notes
receivable......................................... 382 218 348 194
Provision for loss on inventory...................... 228 -- 228 --
Capital contribution by parent company............... -- 497 -- --
Deferred taxes....................................... 91 (10) 41 10
Decrease (increase) in operating assets:
Trade accounts and notes receivable................ (3,658) (2,717) (2,076) (4,380)
Inventories........................................ (262) (205) (1) 216
Prepaid expenses and other assets.................. (19) (167) (200) 52
Increase (decrease) in operating liabilities:
Accounts payable................................... 456 (1,088) 1,364 (133)
Accrued expenses................................... 243 54 (63) 675
Income taxes payable............................... (280) 71 1,596 881
Intercompany payable............................... 296 2,110 (2,800) (1,136)
Deferred revenue and deferred compensation......... 324 4 (154) (367)
------- ------- ------- -------
Net cash provided by (used in) operating
activities.................................... (427) (203) 3,152 (1,788)
------- ------- ------- -------
Cash flows from investing activities:
Purchase of land, property, plant and equipment......... (240) (63) (426) (4,428)
Proceeds from sale of marketable securities............. 1,121 250 6,219 --
Purchase of marketable securities....................... (5,103) -- (2,500) (2,240)
Capitalization of software development costs............ (187) (125) (480) (629)
------- ------- ------- -------
Net cash provided by (used in)
investing activities.......................... (4,409) 62 2,813 (7,297)
Cash flows from financing activities:
Proceeds from issuance of common stock.................. 141 -- 47 18,624
Principle payments of capital lease obligations......... -- (1) -- (11)
------- ------- ------- -------
Net cash provided by (used in)
financing activities.......................... 141 (1) 47 18,613
------- ------- ------- -------
Net (decrease) increase in cash........................... (4,695) (142) 6,012 9,528
Cash at beginning of period............................... 9,947 694 5,252 552
------- ------- ------- -------
Cash at end of period..................................... $ 5,252 $ 552 $11,264 $10,080
======= ======= ======= =======
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest........................................ $ 0 $ 2 $ 0 $ 21
Income taxes.................................... 1,038 0 911 97
</TABLE>

See accompanying notes to financial statements.

F-66
<PAGE> 249

NACT TELECOMMUNICATIONS, INC.

STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS) ON
COMMON STOCK ADDITIONAL MARKETABLE
--------------- PAID-IN RETAINED INVESTMENT
SHARES AMOUNT CAPITAL EARNINGS SECURITIES TOTAL
------ ------ ---------- -------- -------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1997........... 8,114 81 28,130 4,781 12 33,004
Issuance of common stock for cash, net of
expenses............................... 20 188 144
Net unrealized gain on marketable
investment securities.................. (10) (10)
Net income............................... 5,098 2,503
----- -- ------ ----- --- ------
Balances at June 30, 1998................ 8,134 81 28,318 9,879 2 38,280
===== == ====== ===== === ======
</TABLE>

F-67
<PAGE> 250

NACT TELECOMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The interim financial statements included herein have been prepared by NACT
Telecommunications, Inc. ("NACT" or the "Company") without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission (the "SEC").
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 SEC rules and regulations. These
condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's September 30, 1997
audited financial statements filed as part of the Company's Annual Report on
Form 10K with the SEC in December 1997. In the opinion of management, the
condensed financial statements included herein reflect all adjustments necessary
to present fairly the financial position of the Company as of June 30, 1998 and
December 31, 1997, and the results of its operations and cash flows for the
three month and six month periods ended June 30, 1998 and 1997. The results of
operations for the interim periods are not necessarily indicative of the results
of operations for the full year.

2. EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No., 128, Earnings per Share (SFAS
128). SFAS 128 became effective for financial statements with interim and annual
periods ending after December 15, 1997. Accordingly, the Company adopted SFAS
128 for the quarter ended December 31, 1997. SFAS 128 establishes a different
method of computing earnings per common share than was previously required under
the provisions of Accounting Principles Board Opinion No. 15. SFAS 128 requires
the presentation of basic and diluted earnings per common share. Basic earnings
per common share is the amount of earnings for the period available to each
share of common stock outstanding during the reporting period. Diluted earnings
per common share is the amount of earnings for the period available to each
share of common stock outstanding during the reporting period and to each share
that would have been outstanding assuming the issuance of common shares for all
dilutive potential common shares outstanding during the period. The earnings per
common share as previously reported has been restated for all periods presented
to adopt the provisions of SFAS 128.

3. STOCK PLAN

In connection with entering into a stock purchase agreement with the
Company (the "NACT Stock Purchase Agreement"), on January 2, 1998 relating to
the purchase by World Access, Inc. ("WAI") of approximately 63% of Company's
outstanding common stock ("NACT Stock Purchase"), WAI entered into option
exchange agreements (the "Option Exchange Agreements") with the holders of
options to purchase an aggregate of 1,034,032 shares of NACT Common Stock (the
"Exchanged Options") representing approximately 99% of all the then-outstanding
options to acquire NACT Common Stock. Pursuant to the Option Exchange
Agreements, upon consummation of the NACT Stock Purchase, each Exchanged Option
was assumed by WAI and now constitutes an option to acquire, on the same terms
and conditions as were applicable under such Exchanged Option, a number of
shares of WAI Common Stock equal to (i) the product of the number of shares of
NACT Common Stock subject to such Exchanged Option (ii) multiplied by 0.8390
with an exercise price per share equal to (i) the aggregate exercise price for
such shares of NACT Common Stock deemed to be purchasable pursuant to such
option; provided, however that none of Exchanged Options will be incentive stock
options under Section 422 of the Code and all such options are now exercisable.
As a result of the consummation of the NACT Stock Purchase Agreement on February
27, 1998, these options will become exercisable for shares of WAI Common Stock
on a one-for-one basis.

F-68
<PAGE> 251
NACT TELECOMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. INVENTORIES

Inventories are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Raw materials............................................... $1,578 $1,577
Work-in-process............................................. 576 587
Finished goods.............................................. 432 189
Refurbished inventory held for sale......................... 0 461
------ ------
$2,586 $2,814
====== ======
Inventory -- long term...................................... $ 225 $ 225
====== ======
</TABLE>

5. PROPERTY AND EQUIPMENT

Property and equipment are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Furniture and equipment..................................... $ 314 $ 311
Computer equipment.......................................... 1,014 900
Switch and testing equipment................................ 1,748 1,165
Land........................................................ 563 563
Building.................................................... 3,652 3,638
------ ------
7,291 6,577
Less accumulated depreciation and amortization.............. 1,037 698
====== ======
$6,254 $5,879
====== ======
</TABLE>

6. COMPREHENSIVE INCOME

The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income", effective January 1, 1998. SFAS
130 establishes for reporting and display of comprehensive income and its
components in financial statements. The components of the Company's
comprehensive income are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
------ ------
<S> <C> <C>
Net income.................................................. $3,824 $1,892
Change in unrealized gain on marketable securities.......... (27) 0
------ ------
Comprehensive income........................................ $3,797 $1,892
====== ======
</TABLE>

F-69
<PAGE> 252

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
NACT Telecommunications, Inc.:

We have audited the accompanying balance sheets of NACT Telecommunications,
Inc. as listed in the accompanying index. In connection with our audits of the
financial statements, we also have audited the financial statement schedule as
listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NACT Telecommunications,
Inc. as of September 30, 1997 and 1996, and the results of its operations and
its cash flows for each of the years in the three-year period ended September
30, 1997, in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Salt Lake City, Utah
December 4, 1997

F-70
<PAGE> 253

NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (notes 11 and 12)............... $ 9,946,621 $ 694,359
Marketable investment securities (note 3)................. 3,247,296 250,000
Trade accounts receivable, less allowance for doubtful
accounts of $380,819 in 1997 and $100,000 in 1996...... 6,840,958 3,171,180
Notes receivable, less allowance for doubtful notes of
$250,000 in 1997 and $310,000 in 1996 (note 4)......... 3,252,170 561,396
Inventories (note 2)...................................... 2,780,467 2,406,399
Prepaid expenses and other................................ 197,659 16,338
Deferred tax assets (note 8).............................. 587,199 418,449
----------- -----------
Total current assets.............................. 26,852,370 7,518,121
----------- -----------
Property and equipment, net (note 5)........................ 5,783,157 717,804
Notes receivable, less current installments (note 4)........ 966,868 1,179,750
Inventories -- long term (note 2)........................... 225,000 --
Intangibles, net (notes 4 and 6)............................ 5,775,673 5,075,366
Other assets................................................ 152,043 193,709
----------- -----------
$39,755,111 $14,684,750
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,432,922 $ 2,251,800
Accrued expenses.......................................... 963,034 266,451
Income taxes payable (note 8)............................. 1,353,371 199,557
Deferred revenue.......................................... 466,859 350,439
Current installments of obligation under capital lease.... -- 21,848
Payable to GST USA........................................ 1,446,891 183,176
----------- -----------
Total current liabilities......................... 5,663,077 3,273,271
Obligation under capital lease, less current installments... -- 58,221
Deferred compensation (note 13)............................. 157,819 157,819
Deferred tax liabilities (note 8)........................... 929,984 985,508
----------- -----------
Total long-term liabilities....................... 1,087,803 1,201,548
----------- -----------
Commitments and contingencies (notes 9, 12 and 13)
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 10,000,000
shares; none issued and outstanding in 1997 and 1996... -- --
Common stock, $.01 par value in 1997 and no par value in
1996. Authorized 25,000,000 and 10,000,000 shares in
1997 and 1996, respectively; issued and outstanding
8,113,712 shares in 1997 and 6,113,712 shares 1996..... 81,137 9,244,847
Additional paid-in-capital................................ 28,130,161 --
Retained earnings......................................... 4,780,760 965,255
Net unrealized gain (loss) on marketable investment
securities (note 3).................................... 12,173 (171)
----------- -----------
Total stockholders' equity........................ 33,004,231 10,209,931
----------- -----------
$39,755,111 $14,684,750
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-71
<PAGE> 254

NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Product sales......................................... $21,981,854 $ 9,929,702 $ 7,604,071
Network carrier sales................................. 5,716,406 3,783,445 2,781,761
Wins (note 1(b))...................................... -- 2,571,731 1,097,950
----------- ----------- -----------
Total revenues................................ 27,698,260 16,284,878 11,483,782
----------- ----------- -----------
Cost of goods sold (note 6):
Products.............................................. 7,140,914 3,941,529 2,645,646
Network carrier usage (note 13)....................... 5,485,671 3,381,716 2,731,295
Wins (note 1(b))...................................... -- 2,571,731 786,699
Amortization of acquired intangibles.................. 362,424 362,428 442,734
----------- ----------- -----------
Total cost of goods sold...................... 12,989,009 10,257,404 6,606,374
----------- ----------- -----------
Gross profit.................................. 14,709,251 6,027,474 4,877,408
Operating expenses (note 6):
Research and development.............................. 2,385,243 1,352,138 1,183,422
Selling and marketing................................. 2,504,420 953,486 924,542
General and administrative............................ 3,472,069 3,024,361 2,152,898
Amortization of acquired intangibles.................. 573,060 573,058 519,780
----------- ----------- -----------
Total operating expenses...................... 8,934,792 5,903,043 4,780,642
----------- ----------- -----------
Income from operations........................ 5,774,459 124,431 96,766
----------- ----------- -----------
Other income (expense):
Interest income....................................... 543,410 127,043 155,949
Interest expense...................................... (30,456) (14,202) (1,514)
Miscellaneous income.................................. 4,439 34,670 34,635
----------- ----------- -----------
Total other income............................ 517,393 147,511 189,070
----------- ----------- -----------
Income before income taxes.............................. 6,291,852 271,942 285,836
Income taxes (note 8)................................... 2,476,347 78,184 205,517
----------- ----------- -----------
Net income.............................................. $ 3,815,505 $ 193,758 $ 80,319
=========== =========== ===========
Earnings per common and common equivalent share:
Primary............................................... $ 0.52 $ 0.03 $ 0.01
Fully diluted......................................... $ 0.50 $ 0.03 $ 0.01
</TABLE>

See accompanying notes to financial statements.

F-72
<PAGE> 255

NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS) ON
COMMON STOCK ADDITIONAL MARKETABLE
---------------------- PAID-IN RETAINED INVESTMENT
SHARES AMOUNT CAPITAL EARNINGS SECURITIES TOTAL
--------- ---------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1994... 6,113,712 $6,277,572 $ -- $ 691,178 $ -- $ 6,968,750
Capital contribution by parent
company (note 1(l))............ -- 414,981 -- -- -- 414,981
Addition to capital arising from
push down accounting........... -- 2,162,384 -- -- -- 2,162,384
Net unrealized gain on marketable
investment securities.......... -- -- -- -- 3,605 3,605
Net income....................... -- -- -- 80,319 -- 80,319
--------- ---------- ----------- ---------- ------- -----------
Balances at September 30, 1995... 6,113,712 8,854,937 -- 771,497 3,605 9,630,039
Capital contribution by parent
company (note 1(l))............ -- 389,910 -- -- -- 389,910
Net unrealized loss on marketable
investment securities.......... -- -- -- -- (3,776) (3,776)
Net income....................... -- -- -- 193,758 -- 193,758
--------- ---------- ----------- ---------- ------- -----------
Balances at September 30, 1996... 6,113,712 9,244,847 -- 965,255 (171) 10,209,931
Capital contribution by parent
company (note 1(l))............ -- -- 899,799 -- -- 899,799
Issuance of common stock for
cash, net of expenses of
$1,933,348..................... 2,000,000 20,000 18,046,652 -- -- 18,066,652
Net unrealized gain on marketable
investment securities.......... -- -- -- -- 12,344 12,344
Reclass of common stock to
additional paid-in capital
resulting from establishing a
par value on common stock...... -- (9,183,710) 9,183,710 -- -- --
Net income....................... -- -- -- 3,815,505 -- 3,815,505
--------- ---------- ----------- ---------- ------- -----------
Balances at September 30, 1997... 8,113,712 $ 81,137 $28,130,161 $4,780,760 $12,173 $33,004,231
========= ========== =========== ========== ======= ===========
</TABLE>

See accompanying notes to financial statements.

F-73
<PAGE> 256

NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 3,815,505 $ 193,758 $ 80,319
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 1,431,226 1,165,885 1,212,039
Provision for loss on accounts, notes receivable,
and recourse obligation.......................... 1,385,734 942,785 229,342
Loss (gain) on sale of marketable investment
securities and equipment......................... 45,699 (4,399) (34,635)
Capital contribution by parent company............. 899,799 389,910 414,981
Provision for loss on inventories.................. 111,000 -- --
Deferred taxes..................................... (224,274) (374,127) (271,762)
Decrease (increase) in operating assets:
Trade accounts and notes receivable.............. (8,374,533) (1,980,342) (2,266,741)
Inventories...................................... (920,068) (2,019,310) 19,873
Prepaid expenses................................. (181,321) 89,441 (94,484)
Other assets..................................... 41,666 58,360 (227,882)
Increase (decrease) in operating liabilities:
Accounts payable................................. (818,878) 888,670 1,210,516
Accrued expenses................................. 496,583 45,287 148,411
Income taxes payable............................. 1,153,814 60,578 (208,468)
Deferred revenue and deferred compensation....... 116,420 193,475 180,844
Payable to GST USA............................... 1,263,715 243,176 --
----------- ----------- -----------
Net cash provided by (used in) operating
activities.................................. 242,087 (106,853) 392,353
----------- ----------- -----------
Cash flows from investing activities:
Purchase of land, plant, and equipment................ (5,169,888) (304,614) (326,796)
Proceeds from sale of equipment....................... -- -- 34,635
Proceeds from sale of available-for-sale securities... 250,000 596,836 --
Purchase of available-for-sale securities............. (3,234,952) -- --
Capitalization of software development costs.......... (821,568) (419,154) (162,025)
Cash included in transfer of Wins to parent (note
1)................................................. -- (173,718) --
----------- ----------- -----------
Net cash used in investing activities......... (8,976,408) (300,650) (454,186)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock................ 18,066,652 -- --
Principal payments on capital lease obligations....... (80,069) (19,868) (2,271)
----------- ----------- -----------
Net cash provided by (used in) financing
activities.................................. 17,986,583 (19,868) (2,271)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.... 9,252,262 (427,371) (64,104)
Cash and cash equivalents at beginning of year.......... 694,359 1,121,730 1,185,834
----------- ----------- -----------
Cash and cash equivalents at end of year................ $ 9,946,621 $ 694,359 $ 1,121,730
=========== =========== ===========
</TABLE>

F-74
<PAGE> 257
STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Reclass of common stock to additional paid-in capital
resulting from establishing a par value on common
stock................................................. $ 9,183,170 $ -- $ --
Disposition of fully depreciated asset.................. -- 132,270 --
Repossession of equipment in settlement of accounts and
notes receivable...................................... 76,922 45,000 128,936
Property purchased under capitalized leases............. -- -- 102,208
Transfer of inventory to property, plant, and
equipment............................................. 210,000 -- --
Intangibles capitalized as a result of push down........ -- -- 2,162,384
Disposition of equipment................................ -- 47,366 --
Sale of equipment to Wins on note receivable............ -- 60,000 --
Transfer of notes receivable to other assets (note 4)... 964,207 -- --
Change in net unrealized gain (loss) on marketable
investment securities................................. 12,344 (171) --
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest.................. $ 30,457 $ 17,707 $ 1,145
Cash paid during the year for income taxes.............. 638,287 -- 263,735
SUPPLEMENTAL DISCLOSURE OF THE ASSETS AND LIABILITIES
TRANSFERRED TO GST (NOTE 1(B))
Cash.................................................... $ -- $ (173,718) $ --
Trade accounts receivable............................... -- (68,705) --
Prepaid expenses........................................ -- (751) --
Property and equipment, net............................. -- (46,020) --
Other assets............................................ -- (14,036) --
Accounts payable........................................ -- 150,898 --
Accrued expenses........................................ -- 152,332 --
</TABLE>

See accompanying notes to financial statements.

F-75
<PAGE> 258

NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996, AND 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Description of Business

NACT Telecommunications, Inc. (the "Company") designs, develops and
manufactures advanced telecommunications switching platforms with integrated
applications software and network telemanagement capabilities. The Company's
customers include long distance carriers, prepaid debit (calling) card and
prepaid cellular network operators, international call back/reorigination
providers and other specialty telecommunications service providers.

From September 1993 through September 30, 1995, GST USA, Inc. ("GST USA")
acquired all of the issued and outstanding common stock of the Company. This
acquisition was accomplished through a series of purchases of newly issued
shares and the shares of principal stockholders of the Company. As a result of
these transactions, the Company became a wholly owned subsidiary of GST USA. GST
USA accounted for the acquisition using the purchase method of accounting. The
excess of the purchase price over the fair value of the assets acquired totaled
$6,912,322 and was assigned by GST USA as product support contracts, software
development costs, and goodwill. These amounts are included in the accompanying
balance sheet as intangible assets.

In February 1997, the Company closed an initial public offering (IPO) of
3,000,000 shares of common stock with 2,000,000 sold by the Company and
1,000,000 sold by GST USA. Upon completion of the offering, GST USA ownership
was reduced to approximately 63 percent of the outstanding common stock of the
Company and, as such, GST USA continues to control the Company. In connection
with the IPO, the Company established a par value of $.01 for common stock,
increased the number of common shares authorized to 25,000,000, and authorized
10,000,000, $.01 par value preferred shares.

On September 30, 1997, GST USA announced that it had retained Hambrecht and
Quist LLC to explore alternatives for monetizing its 63 percent interest in the
Company, including a potential sale of some or all of the Company's capital
stock to one or more strategic investors.

(b) Wasatch International Network Services

The 1995 financial statements include the accounts of the Company and its
wholly-owned subsidiary Wasatch International Network Services, Inc. ("Wins"),
which commenced operations in fiscal 1995 and had total assets, revenues, and
net loss of $316,455, $1,097,950 and $2,361, respectively, as of and for the
year ended September 30, 1995. All significant intercompany transactions and
balances were eliminated in consolidation. On October 1, 1995, the Company
transferred ownership and operations of Wins to GST USA in the form of a
dividend at historical cost. From October 1, 1995 through September 30, 1996,
the Company provided carrier services to GST USA for the Wins operation for
which it received $2,571,731. GST USA began providing its own carrier services
for Wins on October 1, 1996.

The Company considers all highly liquid financial instruments purchased
with an original maturity to the Company of three months or less to be cash
equivalents. Cash equivalents consist of money market accounts of $8,472,637 at
September 30, 1997 and $125,785 at September 30, 1996.

(d) Inventories

Raw materials are valued at the lower of cost (first-in, first-out) or
market. Work-in-process and finished goods are stated on the basis of
accumulated manufacturing costs, but not in excess of market (net realizable
value). Refurbished inventory is stated at the estimated selling price less
refurbishing costs, selling costs and a normal profit margin. Management
periodically reviews the selling price of the refurbished inventory and records
adjustments to the carrying value, if any, in the period in which they occur.

F-76
<PAGE> 259
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Long-term inventory consists of component parts held in order to provide
support on existing customer equipment beyond one year.

(e) Notes Receivable

Notes receivable are recorded at the principal amount outstanding, net of
an allowance for doubtful notes. The allowance is an amount that management
believes will be adequate to absorb possible losses based on evaluations of
collectibility and prior loss experience. The evaluation takes into
consideration such factors specific problem loans, past payment history, and
current and anticipated economic conditions that may affect the customers'
ability to pay.

While management uses available information to recognize losses on notes,
changing economic conditions and the economic prospects of the borrowers might
necessitate future additions to the allowance.

(f) Impaired Notes

Management, considers a note to be impaired when it is probable that the
Company will be unable to collect all amounts due according to the contractual
terms of the note agreement. When a note is considered to be impaired, the
amount of the impairment is measured based on the present value of expected
future cash flows discounted at the note's effective interest rate. Impairment
losses are included in the allowance for doubtful accounts through a charge to
bad debt expense. Cash receipts on impaired notes receivable are applied to
reduce the principal amount of such notes until the principal has been recovered
and are recognized as interest income thereafter.

(g) Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method for financial reporting purposes. Depreciation is based
upon the estimated useful lives of individual classes of assets. The estimated
useful lives of the individual classes of assets are as follows:

<TABLE>
<S> <C>
Building.................................................... 35 years
Furniture and equipment..................................... 7-10 years
Computer equipment.......................................... 3-7 years
Switch and testing equipment................................ 3-7 years
</TABLE>

(h) Intangibles

Intangibles include goodwill, software development costs, customer lists,
and product support contracts and are being amortized on a straight-line basis
over the estimated useful lives of the respective assets.

(i) Software Development Costs

Software development costs are capitalized upon the establishment of
technological feasibility of the product. Capitalization is discontinued when
the product is available for general release to customers. The Company
capitalized software development costs of $821,568, $419,154, and $162,025 in
1997, 1996, and 1995, respectively.

(j) Stock-Based Compensation

Effective October 1, 1996, the Company adopted the footnote disclosure
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS 123). SFAS 123 encourages entities to adopt
the fair value based method of accounting for stock options or similar equity
instruments. However, it also allows an entity to continue measuring
compensation cost for stock-based compensation using the intrinsic-value method
of accounting prescribed by Accounting Principles Board

F-77
<PAGE> 260
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). The Company
has elected to continue to apply the provisions of APB 25 and provide pro forma
footnote disclosures required by SFAS 123.

(k) Revenue Recognition and Deferred Revenue

Revenue from product sales is recognized when the product is shipped and
the Company has no significant performance obligations. Revenue from network
carrier sales is recognized as the related service is provided. Deferred revenue
consists of warranty payments billed or received in advance and deposits related
to future product sales. Warranty payments are amortized over the period of the
warranty agreement which is typically one year.

(l) Income Taxes

Through February 26, 1997, the Company was a member of a controlled group
which elected for federal income tax purposes to file a consolidated tax return
with GST USA. In accordance with the tax sharing arrangement with GST USA, the
Company recorded the estimated income tax expense as if the Company filed a tax
return on a separate company basis using the asset and liability method. GST USA
agreed to make a capital contribution to the Company in an amount that
approximates the Company's current federal income tax expense through February
26, 1997 in lieu of an intercompany payment for such taxes. Pursuant to the tax
sharing arrangement between the Company and GST USA, the adjustment recorded to
reconcile the intercompany and equity accounts with regard to differences
between the estimated tax determined at year-end and the final tax amount are
recognized in income tax expense in the period determined.

The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and deferred
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and deferred liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.

After the IPO on February 26, 1997, GST USA's ownership was reduced to 63
percent. As a result, the entities no longer meet the affiliated group test
defined in Internal Revenue Code Section 1504(a) and the Company will file
stand-alone returns for periods subsequent to February 26, 1997.

(m) Marketable Investment Securities

The Company classifies all of its marketable investment securities as
available-for-sale which are recorded at fair market value. Unrealized holding
gains and losses are excluded from earnings and are reported, net of tax, as a
separate component of stockholders' equity until realized. A decline in the
market value of any available-for-sale security below cost that is deemed other
than temporary is charged to earnings resulting in the establishment of a new
cost basis for the security. Dividend income is recognized when earned. Realized
gains and losses are included in earnings and are derived using the
specific-identification method for securities sold.

(n) Earnings Per Common and Common Equivalent Share

Earnings per common and common equivalent share are computed based on the
weighted-average number of common shares and as appropriate, dilutive common
stock equivalents outstanding during the period. Stock options are considered to
be common stock equivalents. The number of shares used to compute primary
earnings per common and common equivalent share were 7,350,623, 6,113,712, and
6,113,712, shares in 1997, 1996, and 1995, respectively. The number of shares
used to compute fully-diluted earnings per share reflect additional dilution
related to stock options and warrants using the market price at the end of the
period

F-78
<PAGE> 261
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

when higher than the average price for the period. The number of shares used to
compute fully-diluted earnings per share were 7,602,156, 6,113,712, and
6,113,712, shares in 1997, 1996, and 1995, respectively.

(o) Fair Value Disclosure

At September 30, 1997 and 1996, the book value of the Company's financial
instruments approximates fair value.

(p) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.

(2) INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials............................................... $1,065,113 $ 377,734
Work-in-process............................................. 498,525 346,273
Finished goods.............................................. 302,829 317,392
Refurbished inventory held for sale......................... 914,000 1,365,000
---------- ----------
$2,780,467 $2,406,399
========== ==========
Inventory -- long-term...................................... $ 225,000 $ --
========== ==========
</TABLE>

(3) MARKETABLE INVESTMENT SECURITIES

The amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and fair value for available-for-sale securities by major
security type and class of security at September 30, 1997 and 1996, are as
follows:

<TABLE>
<CAPTION>
GROSS UNREALIZED GROSS UNREALIZED FAIR
AMORTIZED COST HOLDING GAINS HOLDING LOSSES VALUE
-------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
At September 30, 1997:
U.S. government securities --
Maturing in one year or
less........................ $2,237,009 $10,287 $ -- $2,247,296
Certificate of
deposit -- Maturing in one
year or less................ 998,114 1,886 -- 1,000,000
---------- ------- ---- ----------
$3,235,123 $12,173 $ -- $3,247,296
========== ======= ==== ==========
At September 30, 1996:
U.S. government securities --
Maturing in one year or
less........................ $ 250,171 $ -- $171 $ 250,000
---------- ------- ---- ----------
$ 250,171 $ -- $171 $ 250,000
========== ======= ==== ==========
</TABLE>

(4) NOTES RECEIVABLE

Notes receivable at September 30, 1997 and 1996 include amounts due from
product sales of approximately $4,065,638 and $1,047,500, respectively. Interest
rates on the notes range from 9 percent to 14 percent with lives ranging from
six months to five years.

F-79
<PAGE> 262
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company's recorded investment in notes receivable for which an
impairment has been recognized was $137,032 and $928,210, and the related
allowance for doubtful accounts was $137,032 and $310,000 at September 30, 1997
and 1996, respectively. The average recorded investment in impaired notes
receivable during 1997 and 1996, was $532,261 and $548,331, respectively. There
was no interest income recognized on impaired notes receivable during 1997 and
1996.

The Company has sold carrier services to Overseas Telecom ("Overseas")
since 1994. Overseas is located in Brazil and provides international call
back/reorigination services to companies and individuals primarily in Brazil and
Eastern Europe. During the year ended September 30, 1996, Overseas became
delinquent on certain of its payments. In fiscal 1997, the Company entered into
a note receivable agreement with Overseas which provided for the repayment of
the noncurrent outstanding amount (approximately $0.93 million) bearing interest
at 12 percent. The note was secured primarily by Overseas' customer lists. In
the fourth quarter of fiscal 1997, the Company exercised its call privileges
under the note and took possession of the underlying collateral -- the customer
lists. There were two separate and distinct customer lists, one from Brazil and
one from Eastern Europe. The customer list related to the Brazilian operations
was sold to Intertoll Communications Network Corp. ("ICN"), an existing customer
of the Company with operations in Argentina and Brazil for $1,000,000 payable in
100 monthly payments of $10,000. The related payments have been discounted at 20
percent with the unpaid amount of approximately $485,000 classified as notes
receivable in the accompanying balance sheet as of September 30, 1997.

The customer list related to the Eastern European operations was recorded
on the Company's books at the lower of fair value or cost. Fair value was
estimated by an independent third party appraiser using generally accepted
valuation standards. Accordingly, a customer list of approximately $964,000 has
been recorded as an intangible asset and will be amortized over a three-year
period.

(5) PROPERTY AND EQUIPMENT

Property and equipment are as follows:

<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Land........................................................ $ 563,309 $ --
Building.................................................... 3,626,891 --
Furniture and equipment..................................... 279,908 212,525
Computer equipment.......................................... 784,521 440,827
Switch and testing equipment................................ 1,082,217 492,052
---------- ---------
6,336,846 1,145,404
Less accumulated depreciation and amortization.............. 553,689 427,600
---------- ---------
$5,783,157 $ 717,804
========== =========
</TABLE>

F-80
<PAGE> 263
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) INTANGIBLES

Intangible assets are summarized as follows:

<TABLE>
<CAPTION>
AMORTIZATION
1997 1996 PERIOD
---------- ---------- ------------
<S> <C> <C> <C>
Goodwill........................................... $2,863,766 $2,863,766 20 years
Software development costs......................... 3,305,127 2,483,559 3-5 years
Product support contracts.......................... 2,146,176 2,146,176 5 years
Customer list...................................... 964,207 -- 3 years
---------- ----------
9,279,276 7,493,501
Less amortization.................................. 3,503,603 2,418,135
---------- ----------
$5,775,673 $5,075,366
========== ==========
</TABLE>

On an ongoing basis, management reviews the valuation and amortization of
intangible assets to determine possible impairment by comparing the carrying
value of the asset to its undiscounted estimated future cash flows.

Amortization expense relating to these assets was $1,085,468, $978,813, and
$962,514 for 1997, 1996, and 1995, respectively. Of these amounts, $512,409,
$405,755, and $442,734, for 1997, 1996, and 1995, respectively, was recorded as
a component of cost of goods sold.

(7) STOCK OPTIONS

In November 1996, the Company adopted the 1996 Stock Option Plan ("1996
Plan") which was approved by the board of directors and GST USA. The Company has
reserved 1,250,000 shares for issuance under the 1996 Plan, of which options to
purchase 935,250 shares of common stock at an exercise price of $9.35 per share
were granted. All options granted during the year expire on November 25, 2001.
The Company may grant incentive stock options and nonqualified stock options to
employees, officers, directors, independent contractors, and consultants. The
exercise price of options must be greater than or equal to the estimated fair
market value of the stock at the date of grant. The board of directors or the
compensation committee thereof determines which eligible individuals are granted
options, terms of the options, exercise price, number of shares subject to the
option, vesting and exercisability. The 1996 Plan expires on November 25, 2006.

A summary of activity follows:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1997
----------------------
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ----------
<S> <C> <C>
Options outstanding at beginning of year.................... --
Plus options granted........................................ 935,250 $9.35
Less options exercised...................................... --
--------
Options outstanding at end of year.......................... 935,250 9.35
========
Options exercisable at end of year.......................... 289,688 9.35
Weighted-average fair value of options granted during the
year...................................................... $3.03
</TABLE>

F-81
<PAGE> 264
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about fixed stock options
outstanding at September 30, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ---------------------------
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE SEPTEMBER 30, CONTRACTUAL EXERCISE SEPTEMBER 30, EXERCISE
PRICES 1997 LIFE PRICE 1997 PRICE
-------- -------------- ----------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
$9.35 935,250 4.15 $9.35 289,688 $9.35
</TABLE>

The Company accounts for these plans under APB 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with SFAS 123, the Company's net earnings and
earnings per share would have been changed to the following pro forma amount:

<TABLE>
<CAPTION>
1997
----------
<S> <C> <C>
Net income.................................................. As reported $3,815,505
Pro Forma 2,784,147
Primary earnings per share.................................. As reported $ 0.52
Pro Forma 0.38
Fully-diluted earnings per share............................ As reported $ 0.50
Pro Forma 0.37
</TABLE>

Pro forma net earnings reflects only options granted in fiscal 1997.
Therefore, the effect that calculating compensation cost for stock-based
compensation under SFAS 123 has on the pro forma net earnings as shown above may
not be representative of the effects on reported net earnings for future years.

The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in fiscal 1997: risk-free interest rate of 6.0
percent; expected dividend yield of 0 percent; expected life of 3.4 years; and
expected volatility of 82 percent.

(8) INCOME TAXES

Income tax expense consists of:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- --------- ----------
<S> <C> <C> <C>
Year ended September 30, 1997:
U.S. federal..................................... $2,336,145 $(194,210) $2,141,935
State............................................ 364,476 (30,064) 334,412
---------- --------- ----------
$2,700,621 $(224,274) $2,476,347
========== ========= ==========
Year ended September 30, 1996:
U.S. federal..................................... $ 389,910 $(322,207) $ 67,703
State............................................ 60,358 (49,877) 10,481
---------- --------- ----------
$ 450,268 $(372,084) $ 78,184
========== ========= ==========
Year ended September 30, 1995:
U.S. federal..................................... $ 414,981 $(237,014) $ 177,967
State............................................ 64,239 (36,689) 27,550
---------- --------- ----------
$ 479,220 $(273,703) $ 205,517
========== ========= ==========
</TABLE>

F-82
<PAGE> 265
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to pretax income from continuing
operations as a result of the following:

<TABLE>
<CAPTION>
1997 1996 1995
---------- ------- --------
<S> <C> <C> <C>
Computed "expected" tax expense........................ $2,139,230 $92,460 $ 97,184
Increase (reduction) in income taxes resulting from:
Amortization of goodwill............................. 48,899 48,899 48,899
State and local income taxes, net of federal income
tax benefit....................................... 222,862 2,297 18,183
Meals and entertainment.............................. 5,796 3,631 4,060
Adjustment of tax provision to actual(1)............. -- (70,040) 36,214
Other, net........................................... 59,560 937 977
---------- ------- --------
$2,476,347 $78,184 $205,517
========== ======= ========
</TABLE>

- ---------------

(1) Represents management's adjustment to the Company's income tax liability
based on a current assessment of its related obligations.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at September
30, 1997 and 1996, are presented below:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net current deferred tax assets:
Accounts and notes receivable principally due to allowance
for doubtful accounts.................................. $ 309,895 $ 152,930
Unearned product warranty................................. 125,422 47,074
Accrued vacation payable.................................. 55,386 37,327
Unearned sales deposits................................... -- 83,640
Inventory principally due to uniform capitalization and
reserves............................................... 96,496 97,478
--------- ---------
Total gross deferred tax assets................... 587,199 418,449
--------- ---------
Net long-term deferred tax liabilities:
Deferred compensation..................................... 58,866 58,866
Plant and equipment, principally due to differences in
depreciation and capitalized interest.................. (77,155) (87,588)
Capitalized software...................................... (450,716) (200,619)
Push down intangibles..................................... (460,979) (756,269)
Unrealized (gain) loss on investments..................... -- 102
--------- ---------
Total gross deferred tax liabilities.............. (929,984) (985,508)
--------- ---------
Net deferred tax liability........................ $(342,785) $(567,059)
========= =========
</TABLE>

Management believes that existing taxable temporary differences will more
likely than not reverse within the applicable carryforward periods to allow
future realization of existing deferred tax assets.

F-83
<PAGE> 266
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(9) LEASES

The Company has operating leases for office furnishings, various office
equipment and two sales offices. Future minimum lease payments as of September
30, 1997 are as follows:

<TABLE>
<S> <C>
Year ending September 30:
1998................................................... $194,378
1999................................................... 180,240
2000................................................... 180,240
2001................................................... 180,240
2002................................................... 160,454
--------
Total minimum lease payments...................... $895,552
========
</TABLE>

These leases generally require the Company to pay all executory costs such
as maintenance and insurance. Rental expenses for all operating leases for 1997,
1996, and 1995, were $123,462, $100,299, and $116,944, respectively.

(10) PROFIT SHARING PLANS

The Company sponsors a defined contribution 401(k) plan (the "Plan") for
employees who have completed one year of service and attained the age of 21.
Participants may defer up to 15 percent of eligible compensation. The Company,
at its discretion, may match 50 percent of participant contributions up to 7.5
percent of participant compensation. Employer contributions made to the Plan
were $88,361, $59,881, and $51,863, for the years ended September 30, 1997,
1996, and 1995, respectively.

Through September 30, 1996, the Company established a discretionary profit
sharing program for full time employees who had completed one full year of
employment. Under the plan, 10 percent of the increase in profits based on the
Company's previous highest retained earnings balance were allocated among
employees determined on length of employment and salary level at the discretion
of the board of directors. Contributions to the program were $132,450 and
$171,483 for the years ended September 30, 1996 and 1995, respectively. The
program was terminated on September 30, 1996.

(11) MAJOR CUSTOMERS, CONCENTRATION OF CREDIT RISK AND NETWORK CARRIER SALES

Sales to individual customers exceeding 10 percent of total revenues or
total trade accounts and notes receivable as of and for the years ended
September 30, 1997, 1996, and 1995, were as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
REVENUES
---------------------
CUSTOMER 1997 1996 1995
- -------- ----- ----- -----
<S> <C> <C> <C>
J.D. Services, Inc.......................................... 8% -- --
Caribbean Telephone and Telegraph, Inc...................... -- -- 16%
Intertoll Communications Network Corp....................... 9 12% 8
Overseas Telecom............................................ 5 13 7
</TABLE>

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NOTES AND
ACCOUNTS RECEIVABLE
---------------------
CUSTOMER 1997 1996 1995
- -------- ----- ----- -----
<S> <C> <C> <C>
J.D. Services, Inc.......................................... 15% -- --
Caribbean Telephone and Telegraph, Inc...................... -- -- 7%
Intertoll Communications Network Corp....................... 4 6% 7
Overseas Telecom............................................ 3 22 7
</TABLE>

F-84
<PAGE> 267
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company's customers consist of business entities geographically
dispersed primarily throughout the United States. However, the Company also
sells products and/or services to customers in the United Kingdom, Bosnia,
Serbia, Bulgaria, Saudi Arabia, and Brazil. The Company maintains a security
interest in the telecommunications systems it sells until the related account
balances are paid in full.

The Company had deposits with financial institutions in excess of the
federally insured amount of $100,000 in the amount of $9,691,380 and $467,737
for the years ended September 30, 1997 and 1996, respectively.

Network carrier sales originating from countries outside the United States
aggregated approximately $3,180,000 and $2,105,000 for the years ended September
30, 1997 and 1996, respectively. These sales are payable in U.S. dollars.

(12) COMMITMENTS AND CONTINGENCIES

The Company acted as a guarantor for financing transactions executed under
repurchase agreements with a financial institution for $3,482,182 and $1,035,032
at September 30, 1997 and 1996, respectively. This results from the financial
institution providing lease financing to the Company's customers to enable them
to purchase product from the Company. At September 30, 1997, the Company had
established a reserve of $200,000 for its estimated obligation under the
recourse provisions and maintains a security interest in the equipment financed
under the repurchase agreement. No such reserve was recorded as of September 30,
1996. In addition to other covenants, the repurchase agreement requires the
Company to maintain an unrestricted cash account of $6,000,000. The Company has
also established a $750,000 revolving line of credit with this same financial
institution. No balances were outstanding under this line of credit at September
30, 1997.

On October 1, 1996, the Company entered into employment agreements with
various employees which specify the individual's salary, benefits, and
restrictions. All agreements expire on September 30, 2001.

On August 24, 1995, Aerotel, Ltd. and Aerotel U.S.A., Inc., (collectively,
"Aerotel") filed a patent infringement suit against the Company alleging that
telephone systems manufactured and sold by the Company incorporating prepaid
calling features infringe upon a patent which was issued to Aerotel in November
1987. The complaint further alleges defamation and unfair competition by the
Company and seeks various damages. Aerotel seeks injunctive relief, damages of
$18.7 million for willful infringement of its patent and an order requiring the
Company to publish a written apology to Aerotel. The Company has filed an Answer
and Counterclaim denying patent infringement, defamation or unfair competition
and seeking judgment that the Aerotel patent is invalid and that Aerotel has
misused its patent in violation of antitrust laws. Based on information
currently available, an estimate of potential loss cannot be made. However,
management is of the opinion that there will be no material impact of the
Company's financial position, results of operations or liquidity as a result of
this suit. Accordingly, no provision for loss has been provided in the
accompanying financial statements. An unfavorable decision could have a material
adverse effect on the business, financial condition, and results of operations
of the Company.

In addition to the above, the Company has various legal claims and other
contingent matters, incurred in the normal course of business. Although the
final outcome of such matters cannot be predicted, the Company believes the
ultimate disposition of these matters will not have a material adverse effect on
the Company's financial condition, liquidity, or results of operations.

As of September 30, 1997, the Company had capital expenditure purchase
commitments outstanding of approximately $900,000.

(13) RELATED PARTY TRANSACTIONS

In June 1997, and under contract with the Company, GST Realco, Inc. ("GST
Realco"), a subsidiary of GST USA, completed construction of a 40,000 square
foot office building in Provo, Utah. The Company

F-85
<PAGE> 268
NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

purchased the land and a portion of the building construction from GST Realco
for $563,309 and $1,293,072, respectively, and currently occupies the property
as its corporate and manufacturing facility.

During the year ended September 30, 1996, GST USA borrowed $250,000 from
the Company on short-term notes bearing interest at 11 percent. The note was
repaid by September 30, 1996. The Company recorded interest income of $2,602
relating to this note during the year ended September 30, 1996. There were no
borrowings during fiscal 1997.

Also, during the years ended September 30, 1997 and 1996, respectively, the
Company sold $32,788 and $356,000 of application platform switching products and
$0 and $2,571,731 of wholesale carrier usage to GST USA or subsidiaries and
purchased $4,466,907 and $361,000 of wholesale carrier usage from GST USA.

From April 1996 through May 1997 a member of the Company's board was
compensated by GST USA for services rendered to GST USA and its subsidiaries.

The Company has entered into a Deferred Compensation Trust Agreement (the
Trust) with the chairman of the Company whereby the Company funded the trust in
the amount of $144,000. The principal and related interest thereon are payable
to the chairman based on a defined payment schedule. The Company, at its sole
discretion, may at any time make additional contributions to the Trust. The
Trust is subject to claims of the Company's creditors in the event of the
Company's insolvency.

(14) ACCOUNTING STANDARDS ISSUED NOT YET ADOPTED

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). SFAS
128 establishes a different method of computing earnings per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS 128, the Company will be required to present both basic
earnings per share and diluted earnings per share. Basic and diluted earnings
per share are expected to be comparable to the currently presented earnings per
share. SFAS 128 is effective for the consolidated financial statements for
interim and annual periods ending after December 15, 1997. Accordingly, the
Company plans to adopt SFAS 128 in the first quarter of its 1998 fiscal year and
at that time all historical earnings per share data presented will be restated
to conform with the provisions of SFAS 128.

In 1997, the FASB also issued Statement No. 130, Reporting Comprehensive
Income, and Statement No. 131, Disclosures About Segments of an Enterprise and
Related Information. These statements which are effective for periods beginning
after December 15, 1997, expand or modify disclosures and accordingly, will have
no impact on the Company's reported financial position, results of operations or
cash flows.

F-86
<PAGE> 269

SCHEDULE II

NACT TELECOMMUNICATIONS, INC.
(A MAJORITY OWNED SUBSIDIARY OF GST USA)

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS WRITE OFFS
BEGINNING OF CHARGED TO AGAINST BALANCE AT
ALLOWANCE FOR DOUBTFUL ACCOUNTS YEAR BAD DEBTS ALLOWANCE END OF YEAR
- ------------------------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended September 30, 1997....................... $100,000 $872,427 $591,608 $380,819
======== ======== ======== ========
Year ended September 30, 1996....................... $116,410 $672,785 $689,195 $100,000
======== ======== ======== ========
Year ended September 30, 1995....................... $ -- $189,342 $ 72,932 $116,410
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS WRITE OFFS
BEGINNING OF CHARGED TO AGAINST BALANCE AT
ALLOWANCE FOR DOUBTFUL NOTES YEAR BAD DEBTS ALLOWANCE END OF YEAR
- ---------------------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended September 30, 1997....................... $310,000 $313,307 $373,307 $250,000
======== ======== ======== ========
Year ended September 30, 1996....................... $ 40,000 $270,000 $ -- $310,000
======== ======== ======== ========
Year ended September 30, 1995....................... $ -- $ 40,000 $ -- $ 40,000
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS CHARGES
BEGINNING OF AND AGAINST BALANCE AT
RECOURSE OBLIGATION RESERVE YEAR ADJUSTMENTS ALLOWANCE END OF YEAR
- --------------------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended September 30, 1997....................... $ -- $200,000 $ -- $200,000
======== ======== ======== ========
</TABLE>

F-87
<PAGE> 270

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,637 $ 4,347
Accounts receivable, net.................................. 3,354 1,757
Prepaid expenses.......................................... 3,831 1,838
Other..................................................... 645 648
-------- --------
Total current assets.............................. 9,467 8,590
Property and equipment, net................................. 52,126 54,958
Deposits and other assets, net.............................. 152 295
-------- --------
Total assets...................................... $ 61,745 $ 63,843
======== ========
Current liabilities not subject to compromise:
Accounts payable.......................................... $ 19,731 $ 8,761
Accrued expenses.......................................... 7,243 1,719
Debtor in possession facility............................. 22,000 7,250
Current portion of capitalized lease obligations.......... 3,542 3,630
-------- --------
Total current liabilities......................... 52,516 21,360
Liabilities subject to compromise........................... 334,542 336,751
Long-term obligations not subject to compromise
Capitalized lease obligations, less current portion....... 29,050 30,820
-------- --------
Total liabilities................................. 416,108 388,931
Net stockholders' deficiency:
Common stock - Resurgens.................................. 1 1
Common stock - Cherry U.K................................. 84 84
Additional paid-in capital................................ 61,467 61,467
Accumulated deficit....................................... (415,915) (386,640)
-------- --------
Net stockholders' deficiency...................... (354,363) (325,088)
-------- --------
Total liabilities and net stockholders'
deficiency...................................... $ 61,745 $ 63,843
======== ========
</TABLE>

F-88
<PAGE> 271

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues....................................... $ 10,009 $ 60,207 $ 10,377 $131,774
Cost of services............................... 17,943 77,382 27,028 164,140
-------- -------- -------- --------
Gross margin................................... (7,934) (17,175) (16,651) (32,366)
Operating expenses:
Selling, general and administrative
expenses.................................. 4,756 9,959 7,306 16,981
Depreciation and amortization................ 1,488 1,354 3,096 2,019
Provision for doubtful accounts.............. -- 8,355 2 17,561
-------- -------- -------- --------
Total operating expenses............. 6,244 19,668 10,404 36,561
Operating loss................................. (14,178) (36,843) (27,055) (68,927)
Other income, (expense):
Interest expense............................. (1,437) (1,964) (2,631) (3,772)
Other........................................ 4 727 (1) 256
-------- -------- -------- --------
Total other income, (expense) net.... (1,433) (1,237) (2,632) (3,516)
Loss before reorganization costs............... (15,611) (38,080) (29,687) (72,443)
Reorganization items........................... 778 N/A (412) N/A
-------- -------- -------- --------
Net loss............................. $(14,833) $(38,080) $(29,275) $(72,443)
======== ======== ======== ========
</TABLE>

F-89
<PAGE> 272

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1997
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Operating activities
Net loss.................................................. $(29,275) $(72,443)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Provision for doubtful accounts........................ 0 17,562
Depreciation and amortization.......................... 3,096 2,019
Changes in operating assets and liabilities:
Accounts receivable.................................. (1,597) 3,918
Prepaid expenses and other........................... (1,990) (5,103)
Accounts payable..................................... 10,970 47,168
Accrued expenses and other liabilities............... 5,524 10,400
-------- --------
Net cash used in operating activities before
reorganization items............................. (13,272) 3,521
Decrease in liabilities subject to compromise............. (2,209) --
-------- --------
Net cash used in operating activities..................... (15,481) 3,521
Investing activities
Fixed asset acquisitions.................................. (264) (9,526)
Deposits and other assets................................. 143 1,356
-------- --------
Net cash used in investing activities (121) (8,170)
Financing activities
Proceeds from debtor-in-possession financing 14,750 --
Proceeds from long-term debt -- 1,309
Payments on capitalized lease obligations (1,858) (1,496)
-------- --------
Net cash provided by (used in) financing
activities....................................... 12,892 (187)
Net decrease in cash and cash equivalents................... (2,710) (4,836)
Cash and cash equivalents, beginning of year................ 4,347 4,836
-------- --------
Cash and cash equivalents, end of year...................... $ 1,637 $ 0
======== ========
</TABLE>

F-90
<PAGE> 273

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENT OF NET STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
CHERRY CHERRY U.K.
COMMUNICATIONS INC. LIMITED
COMMON STOCK COMMON STOCK ADDITIONAL TOTAL
-------------------- --------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIENCY
------- ------- ------ ------ ---------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1997... 1,249 $1 50,000 $84 $61,467 $(386,640) $(325,088)
Net loss (unaudited)........ -- -- -- -- -- (29,275) (29,275)
----- -- ------ --- ------- --------- ---------
Balance June 30, 1998
(unaudited)............... 1,249 $1 50,000 $84 $61,467 $(415,915) $(354,363)
===== == ====== === ======= ========= =========
</TABLE>

F-91
<PAGE> 274

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1998

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited combined financial statements include the
accounts of Cherry Communications Incorporated (d/b/a Resurgens Communications
Group) ("RCG") and Cherry Communications U.K. Limited ("Cherry U.K."). Cherry
U.K.'s financial statements are prepared on a March 31 fiscal year-end. For
combination purposes, March 31, 1998 financial statements of Cherry U.K., which
were previously included in the combined entity as of December 31, 1997, have
been combined with the March 31, 1998 financial statements of RCG. Therefore,
the statement of net stockholders' deficiency and statement of cash flows
reflect an adjustment for Cherry U.K. which was previously included in fiscal
year 1997. For combination purposes, the six months ended June 30, 1997 of
Cherry U.K. have been combined with the six months ended June 30, 1997 for RCG.

These financial statements do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the results
of the interim periods covered have been included. For further information,
refer to the audited combined financial statements and footnotes included
elsewhere in this Proxy.

The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results expected for the full year. Certain
reclassifications have been made to the prior period's financial information to
conform with the presentations used in 1998.

F-92
<PAGE> 275

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Cherry Communications Incorporated,
d/b/a Resurgens Communications Group
and Cherry Communications U.K. Limited

We have audited the accompanying combined balance sheet of Cherry
Communications Incorporated (d/b/a Resurgens Communications Group), and Cherry
Communications U.K. Limited (collectively referred to as the "Companies") as of
December 31, 1997, and the related statements of operations, net stockholders'
deficiency, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position at December 31, 1997,
of the Companies and the combined results of their operations and their cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

The accompanying combined financial statements have been prepared assuming
that the Companies will continue as a going concern. As more fully described in
Note 2 to the financial statements, the Companies have not complied with the
repayment schedule for several of its loan agreements and is party to
significant litigation, the outcome of which cannot be predicted. In addition,
the Companies have incurred recurring operating losses, have a working capital
deficiency and have lost virtually all of their customer base. Cherry
Communications Incorporated (d/b/a Resurgens Communications Group) filed
voluntary bankruptcy under Chapter 11 of the United States Bankruptcy Code on
October 24, 1997, and is currently operating its business as a
debtor-in-possession under the supervision of the Bankruptcy Court. These
conditions raise substantial doubt about the Companies' ability to continue as a
going concern. Although Cherry Communications Incorporated (d/b/a Resurgens
Communications Group) is currently operating as a Debtor-In-Possession under the
jurisdiction of the Bankruptcy Court, the continuation of the business as a
going concern is contingent upon, among other things, the ability to formulate a
plan of reorganization which will gain approval of the creditors and
confirmation by the Bankruptcy Court, success of future operations, and the
ability to recover the carrying amount of assets and/or the amount and
classification of liabilities. The 1997 financial statements do not include any
adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amount and classification of liabilities that
may result from the outcome of the bankruptcy proceedings and related
uncertainties.

/s/ ERNST & YOUNG LLP

June 5, 1998

Atlanta, Georgia

F-93
<PAGE> 276

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED BALANCE SHEET
DECEMBER 31, 1997

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,347
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$1,062................................................ 1,757
Other.................................................. 648
---------
2,405
Prepaid expenses....................................... 1,838
---------
Total current assets.............................. 8,590
Property and equipment:
Telecommunications equipment.............................. 50,456
Furniture, fixtures and equipment......................... 10,266
Leasehold improvements.................................... 2,593
---------
63,315
Less accumulated depreciation and amortization............ (8,357)
---------
Net property and equipment................................ 54,958
Deposits and other assets, net.............................. 295
---------
Total assets...................................... $ 63,843
=========
</TABLE>

LIABILITIES AND NET STOCKHOLDERS' DEFICIENCY

<TABLE>
<S> <C>
Current liabilities not subject to compromise:
Accounts payable.......................................... $ 8,761
Accrued expenses.......................................... 1,719
Debtor-in-possession (DIP) loan........................... 7,250
Current portion of capitalized lease obligations.......... 3,630
---------
Total current liabilities......................... 21,360
Liabilities subject to compromise (Note 3).................. 336,751
Long-term obligations not subject to compromise:
Capitalized lease obligations, less current portion....... 30,820
---------
Total liabilities................................. 388,931
Net stockholders' deficiency:
Common stock, Resurgens, no par value, authorized 10,000
shares, issued 1,249 at December 31, 1997.............. 1
Common stock, Cherry U.K., no par value, authorized and
issued 50,000 shares at December 31, 1997.............. 84
Additional paid-in capital................................ 61,467
Accumulated deficit....................................... (386,640)
---------
Net stockholders' deficiency...................... (325,088)
---------
Total liabilities and net stockholders'
deficiency........................................ $ 63,843
=========
</TABLE>

See accompanying notes

F-94
<PAGE> 277

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
1997
--------------
(IN THOUSANDS)
<S> <C>
Revenues.................................................... $ 165,489
Cost of services............................................ 246,494
---------
Gross margin................................................ (81,005)
Operating expenses:
Selling, general and administrative expenses.............. 34,891
Depreciation and amortization............................. 5,814
Provision for doubtful accounts........................... 33,743
---------
Total operating expenses.......................... 74,448
Operating loss.............................................. (155,453)
Other income (expense):
Interest and finance charges.............................. (11,939)
Loss on disposition of property........................... (2,977)
Litigation settlements -- non bankruptcy.................. (1,328)
Other income.............................................. 642
---------
Total other expense, net.......................... (15,602)
Loss before reorganization costs............................ (171,055)
Reorganization items (Note 4)............................... (665)
---------
Net loss.................................................... $(171,720)
=========
</TABLE>

See accompanying notes

F-95
<PAGE> 278

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENT OF NET STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
CHERRY
CHERRY COMMUNICATIONS
COMMUNICATIONS INC. U.K. LIMITED
COMMON STOCK COMMON STOCK ADDITIONAL NET
-------------------- --------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIENCY
------ ------ ------ ------ ---------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996..................... 1,000 $1 50,000 $84 $61,467 $(214,920) $(153,368)
Additional shares issued
related to WorldCom
settlement (Note 3)... 249 -- -- -- -- -- --
Net loss................. -- -- -- -- -- (171,720) (171,720)
----- -- ------ --- ------- --------- ---------
Balance, December 31,
1997..................... 1,249 $1 50,000 $84 $61,467 $(386,640) $(325,088)
===== == ====== === ======= ========= =========
</TABLE>

See accompanying notes

F-96
<PAGE> 279

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(171,720)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Provision for doubtful accounts........................... 33,743
Depreciation and amortization............................. 5,814
Loss on disposition of property and equipment............. 2,977
Write-off of unrealizable deposits and other assets....... 1,450
Changes in operating assets and liabilities:
Accounts receivables................................... 6,520
Prepaid expenses and other............................. (669)
Accounts payable....................................... (181,332)
Accrued expenses and other liabilities................. (8,559)
---------
Net cash used in operating activities before
reorganization items.............................. (311,776)
Increase in liabilities subject to compromise............... 314,228
---------
Net cash provided by operating activities......... 2,452
INVESTING ACTIVITIES
Purchases of property and equipment......................... (9,545)
Deposits and other assets................................... 851
---------
Net cash used in investing activities............. (8,694)
FINANCING ACTIVITIES
Proceeds from DIP loan...................................... 7,250
Payments on capitalized lease obligations................... (1,496)
---------
Net cash provided by financing activities................... 5,754
---------
Net decrease in cash and cash equivalents................... (488)
Cash and cash equivalents, beginning of year................ 4,835
---------
Cash and cash equivalents, end of year...................... $ 4,347
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest and finance charges paid........................... $ 830
=========
Supplemental schedule of noncash investing and financing
activities:
Capitalized lease obligations incurred for property and
equipment............................................. $ 13,756
=========
Deposits applied to capital lease obligations.......... $ 1,165
=========
</TABLE>

See accompanying notes

F-97
<PAGE> 280

CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
DECEMBER 31, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Cherry Communications Incorporated (d/b/a Resurgens Communications Group)
("Resurgens") is a facilities-based international long-distance carrier
operating five long distance switch centers throughout the United States and
overseas, and has arrangements with domestic and foreign long distance carriers
for processing international calls. Resurgens primarily provides long distance
network services to U.S. based long distance carriers. Although there are a
number of domestic and foreign long distance carriers, a change in carriers
could disrupt Resurgens' ability to service its customers, which would result in
a possible loss of operating revenues. In August 1997 Resurgens began
experiencing a substantial decline in revenues, and in October 1997 Resurgens
began restructuring its network to improve quality and eliminate those costs not
necessary to implement Management's decision to focus its business efforts as a
carrier's carrier. Resurgens' bankruptcy filing (as described in Note 2) which
resulted in a substantial loss of customers and a corresponding write-off in
accounts receivable was an initial step in implementing the new business
strategy.

The combined financial statements presented herein also include financial
statements of Cherry Communications U.K. Limited ("Cherry U.K.") which is held
under common ownership. This subsidiary has licensing and operating agreements
for international telephone access in association with Resurgens. Cherry U.K.
records an administrative revenue fee derived solely from Resurgens, based on an
agreed upon percentage of operating expense, which is eliminated in these
combined financial statements.

In October 1996, WorldCom Network Services ("WorldCom") threatened to stop
providing private line services and switch services to Resurgens as a result of
Resurgens' failure to pay WorldCom. In response, Resurgens commenced a lawsuit
against WorldCom asserting various claims including substantial billing
disputes. Effective July 24, 1997 the Companies settled their litigation and
claims against WorldCom. The settlement resulted, among other things, in the
execution by Resurgens of two promissory notes in the aggregate principal amount
of $165,000 (terms of which are further described in Note 3), the issuance of
shares of Resurgens to WorldCom (representing 19.9% of outstanding shares) and
the executions of a pledge and security agreement for 51% of the outstanding
shares of Resurgens and 51% of the outstanding shares of Cherry U.K. This pledge
and security agreement gave WorldCom the ability to effectively control 71% and
51% of the voting common shares of Resurgens and Cherry U.K., respectively.

After this settlement was reached WorldCom, Resurgens, Cherry U.K., James
R. Elliott (owner of 80.1% of Resurgens and sole owner of Cherry U.K.), and John
D. Phillips entered into a series of agreements, effective October 1, 1997,
whereby John D. Phillips received an option to purchase ("call right") James R.
Elliott's common stock of the combined Companies (1,000 shares of Resurgens and
50,000 shares of Cherry U.K.) for $1,000 and James R. Elliott received the right
to require ("put right") John D. Phillips to purchase the common stock of the
companies for $1,000. John D. Phillips was also granted a revocable voting proxy
for all of the shares owned and controlled by WorldCom, thereby giving him
effective control of Resurgens and Cherry U.K. In conjunction with John D.
Phillips obtaining effective control of the Companies, Resurgens filed a
voluntary petition for relief under the provisions of Chapter 11 of the Federal
Bankruptcy Code. In addition, WorldCom agreed to provide debtor-in-possession
financing (see Note 5). Effective May 8, 1998, John D. Phillips closed on his
option and acquired all of the outstanding shares of common stock of Cherry U.K.
for $1,000. James R. Elliott's exercise of his put right related to the 1,000
shares of Resurgens stock has been enjoined by the Bankruptcy Court and the Plan
of Reorganization currently provides that Resurgens stockholders will receive no
consideration under the Plan.

F-98
<PAGE> 281
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PRINCIPLES OF COMBINATION

The combined financial statements include the accounts of Resurgens and
Cherry U.K. (which is commonly controlled) (collectively, the "Companies").
Cherry U.K. was purchased by the major shareholder of Resurgens in November
1995. Cherry U.K.'s financial statements are prepared on a March 31 fiscal year
end. For combination purposes, March 31, 1998 financial statements of Cherry
U.K. have been combined with the December 31, 1997 financial statements of
Resurgens. Significant intercompany accounts and transactions have been
eliminated in combination.

CASH AND CASH EQUIVALENTS

The Companies consider all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization
are generally computed using the straight-line method over the estimated useful
lives of the related assets as indicated below:

<TABLE>
<S> <C>
Telecommunications equipment.............................. 5-10 years
Furniture, fixtures and equipment......................... 4-5 years
Leasehold improvements.................................... Life of lease
</TABLE>

In the event facts and circumstances indicate the cost of any long-lived
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the assets would be compared to the carrying amount of the
assets to determine if a write down to fair value may be required.

REVENUE RECOGNITION

Revenues are derived primarily from the provision of long-distance
telecommunications services and are recognized when the services are provided.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997 the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS 130
requires that an enterprise classify items of other comprehensive income by
their nature in a financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the statement of financial position.
SFAS 130 is effective for fiscal years beginning after December 15, 1997.

The Companies intend to adopt the provisions of SFAS 130 in 1998 and do not
expect its application to have a material impact on the financial position or
results of operations of the Companies.

FINANCIAL INSTRUMENTS

Concentration of Credit Risk

Financial instruments that potentially subject the Companies to significant
concentrations of credit risk consist principally of cash and cash equivalents,
trade accounts receivable, accounts payable and long term debt.

F-99
<PAGE> 282
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Companies maintain cash and cash equivalents and certain other
financial instruments with various financial institutions. The Companies' policy
is designed to limit exposure at any one institution by performing periodic
evaluations of the relative credit standing of those financial institutions.

Fair Value of Financial Instruments

The fair value of the Companies' financial instruments classified as
current assets or liabilities, including cash and cash equivalents, accounts
receivable, and accounts payable approximate carrying value, principally because
of the short maturity of these items.

The carrying amounts of the long-term debt payable approximate fair value
due to the interest rates on these agreements approximating the Companies'
incremental borrowing rates, and the fair values of capitalized lease
obligations approximate carrying value based on their effective interest rates
compared to current market rates.

SIGNIFICANT CUSTOMERS

The Companies' revenues are derived from a variety of customers including
one customer, which accounted for 19% of the Companies' revenues during 1997.

ADVERTISING COSTS

Pursuant to American Institute of Certified Public Accountants (AICPA)
Statement of Position No. 93-7, "Reporting on Advertising Cost," the Companies
expensed advertising costs of $2,226 as incurred in 1997.

COST OF SERVICES AND PRODUCTS

Cost of services include payments primarily to local exchange carriers
("LECs") and interexchange carriers, primarily for access and transport charges.

INCOME TAXES

Due to Resurgens' conversion from a subchapter S Corporation to a C
Corporation as of August 1, 1997, Resurgens began accounting for income taxes
under the liability method. Under this method, deferred income taxes are
recorded to reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting and the
amounts for income tax purposes.

For the period prior to August 1, 1997, all taxable losses were allocated
to the owners of Resurgens. Accordingly no income taxes are reflected for
Resurgens in the accompanying financial statements for the period prior to the
conversion. Cherry U.K. accounted for income taxes under the liability method
for fiscal 1997.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates and such
differences could be material.

F-100
<PAGE> 283
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
FOREIGN OPERATIONS

Summarized financial information for Cherry U.K. in US dollars, prior to
intercompany elimination, is:

<TABLE>
<CAPTION>
1997
-------
<S> <C>
BALANCE SHEET
Current assets............................................ $ 792
Property and equipment.................................... 6,932
-------
Total assets...................................... 7,724
Current liabilities, including amount due to Resurgens of
$4,496.................................................... 6,337
Long-term debt.............................................. 3,996
-------
Total liabilities................................. 10,333
-------
Net deficiency.................................... $(2,609)
=======
STATEMENT OF OPERATIONS
Revenues.................................................. $ 2,848
Expenses.................................................. 3,665
=======
Net loss.......................................... $ (817)
=======
</TABLE>

FOREIGN CURRENCY TRANSLATION

Translation adjustments arising from combining Cherry U.K. are reflected
within the statements of operations as the US dollar is the functional currency
of Cherry U.K.

2. PETITION FOR RELIEF UNDER CHAPTER 11 BANKRUPTCY

On October 24, 1997, Resurgens filed a voluntary petition for relief under
the provisions of Chapter 11 of the Federal Bankruptcy Code ("Chapter 11") in
the United States Bankruptcy Court for the Northern District of Illinois (the
"Court"). Cherry U.K. was not included in this bankruptcy filing. Under Chapter
11, certain claims against Resurgens in existence prior to the filing for relief
under the federal bankruptcy laws are stayed while Resurgens continues business
operations as a Debtor-in-Possession subject to the supervision of the Court.
Management filed a plan of reorganization on June 15, 1998 which contemplates
emergence in the third quarter of 1998. There can be no assurance at this time
that a plan of reorganization will be approved or confirmed by the Bankruptcy
Court, or that such plan will be consummated.

After an exclusivity period, creditors of Resurgens have the right to
propose alternative plans of reorganization. Any plan of reorganization, among
other things, is likely to result in material dilution of the equity of existing
stockholders as a result of a possible issuance of equity to creditors or new
investors.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. However, as a
result of the Chapter 11 filing and circumstances relating to this event,
including Resurgens' leveraged financial structure and losses from operations,
such realization of assets and liquidation of liabilities is subject to
significant uncertainty. While under protection of Chapter 11, Resurgens may
sell or otherwise dispose of assets and liquidate or settle liabilities, for
amounts other than those reflected in the financial statements. Further, a plan
of reorganization could materially change the amounts reported in the financial
statements. Accordingly such financial statements do not give effect to all
adjustments of the carrying value of assets or liabilities that might be
necessary as a consequence of a plan of reorganization or the inability of the
Companies to continue as a going concern.

F-101
<PAGE> 284
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

2. PETITION FOR RELIEF UNDER CHAPTER 11 BANKRUPTCY -- (CONTINUED)
The ability to continue as a going concern is dependent upon, among other
things, confirmation of a plan of reorganization, future profitable operations,
and the ability to generate sufficient cash from operations and financing
arrangements to meet obligations.

3. LIABILITIES SUBJECT TO COMPROMISE

The principal categories of claims classified as liabilities subject to
compromise under the reorganization proceedings are identified below. These
amounts may be subject to future adjustment depending on the Court's action,
further developments with respect to disputed claims, determination as to the
value of any collateral securing claims, and other events. Additional claims may
arise resulting from rejection of additional executory contracts or unexpired
leases by Resurgens.

<TABLE>
<CAPTION>
1997
--------
<S> <C>
Accounts payable............................................ $136,095
Long-term debt.............................................. 168,545
Governmental entities....................................... 7,314
Former employees............................................ 2,485
Professional fees........................................... 2,098
Accrued interest............................................ 2,939
Other liabilities........................................... 17,275
--------
$336,751
========
</TABLE>

As a result of the bankruptcy filing, no principal or interest payments
will be made on any pre-petition debt without Court approval or until a
reorganization plan defining the repayment terms has been approved. Contractual
interest expense not recorded on certain pre-petition debt totaled $2,100 for
the period from October 24, 1997 through December 31, 1997.

LONG-TERM DEBT, SUBJECT TO COMPROMISE

<TABLE>
<CAPTION>
1997
--------
<S> <C>
WorldCom installment note due December 30, 1997, interest to
accrue at 18% for default of payment...................... $ 50,000
WorldCom installment note due July 23, 2000, bearing
interest at 10%. Interest only payments are due quarterly
beginning March 31, 1998 and payments of principal and
interest beginning October 23, 1998....................... 115,000
Illinois Capital Group installment note due September 1997,
bearing interest at 10% with monthly principal and
interest payments of $60. Penalty of $250 added to
principal for nonpayment of principal balance on due
date...................................................... 367
Esplanade at Locust Point installment note due June 1999,
with monthly payments of $100, including interest imputed
at 12.5%. Includes interest penalty of $894 added to
principal in 1998 due to nonpayments on account........... 3,008
Eastern Telecom installment note due on or before November
1, 1998 bearing interest at 8%............................ 170
--------
Total long-term debt, subject to compromise....... $168,545
========
</TABLE>

Under the two WorldCom installment notes, which are secured by
substantially all of the Companies' assets and stock of the Corporations, any
defaults allow WorldCom to charge interest at 18% annually on all outstanding
balances, and to request the entire indebtedness to become due. The Companies
have defaulted on the $50,000 note payable due December 30, 1997, and subsequent
to year end, defaulted on the March 31,

F-102
<PAGE> 285
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. LIABILITIES SUBJECT TO COMPROMISE -- (CONTINUED)
1998 interest payment due on the $115,000 note. Remedies of default are not
waived under this agreement by any failure or delay by any party in exercising
any remedy of default.

On April 2, 1996 Resurgens settled a litigation case with Illinois Capital
Group related to delinquent payments for leased switching equipment. In
connection with this settlement, a promissory note was executed for
approximately $1,300. The note required monthly payments beginning April 15,
1996 with a penalty amount of $250 if Resurgens did not make payments when due.
Resurgens ceased payment on this note in mid 1997 and therefore this penalty
amount has been added to the principal balance.

Resurgens entered into a settlement agreement with Esplanade at Locust
Point Limited Partnership ("Esplanade") on January 29, 1996 which released
Resurgens from litigation claims involving leased office space. In connection
with this settlement, a promissory note was issued in the amount of $4,000, with
monthly payments of $100 to begin in March 1996, with no interest. Resurgens
failed to remit the required monthly payments during 1997. The agreement stated
that an additional $1,000 would be assessed and due if the companies failed to
meet the required payment schedule. Esplanade filed a claim against Resurgens
for the outstanding balance of the loan plus the additional penalty amount.
Prior to December 31, 1997, a judgment was reached in this case and an
additional amount of $894 was granted to Esplanade. This amount is subject to an
interest rate of 12.5% and is included in the principal balance amount at
December 31, 1997.

The Eastern Telecom installment note was signed on August 1, 1997, based
upon judicial court settlement, for $190. The amount relates to non-performance
of a purchase agreement for switching equipment by Resurgens.

As part of the Chapter 11 reorganization process, Resurgens has attempted
to notify all known or potential creditors of the Chapter 11 filing for the
purpose of identifying all pre-petition claims against Resurgens. Generally,
creditors whose claims arose prior to the Petition Date had until February 6,
1998 ("Bar Date") to file claims or be barred from asserting claims in the
future. Claims arising from rejection of executory contracts by Resurgens, and
claims related to certain other items were permitted to be filed within other
dates as set by the Court.

Differences between amounts shown by Resurgens and claims filed by
creditors are being investigated and will either be resolved or adjudicated. The
ultimate amount of and settlement terms for such liabilities are subject to the
confirmed plan of reorganization and are not presently determinable. The total
amount of proofs of claims filed in Court approximate $434,000, while the amount
accrued by Resurgens at December 31, 1997 is $336,751. This difference of
approximately $95,000 pertains to claims that management believes to be
duplicate claims, amounts relating to outstanding litigation (See Note 11) and
other disputed claims for which management is unable to predict the ultimate
outcome of and therefore, no provision has been recorded in the financial
statements for this difference.

4. REORGANIZATION ITEMS

Reorganization items recorded in 1997 consisted of:

<TABLE>
<S> <C>
Rejected lease expense...................................... $ 956
Professional fees........................................... 233
Professional fees abated.................................... (524)
-----
$ 665
=====
</TABLE>

Professional fees incurred consisted of consulting and legal fees for
bankruptcy activity and restructuring efforts on behalf of Resurgens and the
creditor's committee.

F-103
<PAGE> 286
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBTOR-IN-POSSESSION (DIP) FINANCING

In November 1997, the Court authorized Resurgens to enter into a financing
agreement with WorldCom in order to facilitate continued operations as a
debtor-in-possession. The terms of this financing agreement originally provided
for maximum advances thereunder to $19,000 and required repayment on April 30,
1998 at 12% interest.

On April 16, 1998 the financing agreement was amended to provide for an
increased maximum amount of $25,000 and an extended term through July 31, 1998.
As of June 5, 1998, the Company had borrowed an additional $13,700.

6. CAPITALIZED LEASE OBLIGATIONS

The Companies lease telecommunications and other equipment through
capitalized lease arrangements.

Future minimum lease payments on these capitalized lease obligations at
December 31, 1997 are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 6,930
1999........................................................ 10,499
2000........................................................ 10,382
2001........................................................ 9,966
2002........................................................ 5,493
--------
Net minimum lease payments........................ 43,270
Less amount representing interest........................... (8,820)
--------
Present value of minimum lease payments..................... 34,450
Less current portion of capitalized lease obligations....... (3,630)
--------
Long-term portion of capitalized lease obligations, not
subject to compromise..................................... $ 30,820
========
</TABLE>

The net carrying value of assets under capital leases was $35,900 at
December 31, 1997, and is included in property and equipment. Amortization of
these assets is included in depreciation expense.

7. EMPLOYEE 401(K) PLAN

Effective January 1, 1997, Resurgens established a defined contribution
savings plan, intended to qualify under IRS Code Section 401(k), available to
all employees who complete six months of service and are at least age 21.
Employees may contribute up to 15% of their salary per year, subject to
statutory limitations, and Resurgens matches 100% of employee contributions up
to 5% of each employee's salary. Resurgens' matching contributions vest 20% per
year. Resurgens' expense under the plan during 1997 amounted to approximately
$98.

8. INCOME TAXES

For the period from inception through July 31, 1997, Resurgens elected to
have its income taxed directly to its individual shareholders under the
provisions of Subchapter S of the Internal Revenue Code ("the Code").
Accordingly, no deferred income taxes were established for Resurgens. Effective
August 1, 1997, the S-Corporation election was terminated due to a change in
ownership and Resurgens is now subject to federal and state income taxes. Upon
conversion to C corporation status, Resurgens recorded a net deferred tax asset
which was fully offset by the establishment of a valuation reserve. Accordingly,
no charge or benefit was made to the income tax provision to reflect the impact
of this change in tax status.

F-104
<PAGE> 287
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES -- (CONTINUED)
Effective August 1, 1997, the accompanying financial statements reflect
provisions for income taxes computed in accordance with the requirements of
Statement of Financial Accounting Standards ("SFAS") No. 109. With respect to
Cherry U.K., the accompanying financial statements reflect provisions for income
taxes calculated under the provisions of SFAS No. 109 since acquisition. For the
period prior to the change in tax status, the provision has been presented on a
pro forma basis as if Resurgens had been liable for federal and state income
taxes since January 1, 1997.

The Companies have generated significant net operating losses ("NOLs") both
in the United States and in the United Kingdom. These NOLs may be available to
offset future taxable income, subject to the limitations discussed below.
Resurgens has generated NOL carryforwards totaling $128,000 in the United States
after the date of the conversion from S-Corporation to C-Corporation status.
Cherry U.K. has NOLs available at December 31, 1997 approximating $1,500 in the
United Kingdom. The United States federal NOL generated in 1997 expires in the
year 2012, while the United Kingdom NOLs do not expire.

The significant components of the Companies' deferred tax assets and
liabilities are:

<TABLE>
<CAPTION>
AUGUST 1, DECEMBER 31,
1997 1997
--------- ------------
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts........................... $ 2,846 $ 4,889
Net operating loss carry-forward.................. -- 48,871
Accruals.......................................... 341 319
Depreciation and amortization..................... 452 458
Contested liabilities............................. 31,064 6,825
Other............................................. 17 29
Valuation allowance............................... (29,347) (56,061)
------- -------
5,373 5,330
------- -------
Deferred tax liabilities:
Depreciation and amortization..................... 474 441
Installment sale.................................. 4,899 4,889
------- -------
5,373 5,330
------- -------
Net deferred assets....................... $ -- $ --
======= =======
</TABLE>

The pro forma reconciliation of income tax benefit attributable to
operations computed at the US federal statutory rates to income tax expense is:

<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Tax benefit at US statutory rate............................ $(58,079)
State income tax benefit.................................... (6,833)
Permanent differences....................................... 1,025
Change in valuation allowance............................... 63,887
--------
$ --
========
</TABLE>

F-105
<PAGE> 288
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Companies' offices, along with various equipment and property access
rights, are leased under operating leases expiring in 1998 through 2006. Certain
leases contain escalation clauses based upon increases in the consumer price
index.

Future minimum lease payments on noncancellable operating leases at
December 31 are as follows:

<TABLE>
<CAPTION>
1997
------
<S> <C>
1998........................................................ $1,347
1999........................................................ 1,007
2000........................................................ 765
2001........................................................ 516
2002........................................................ 255
Thereafter.................................................. 568
------
Total future minimum lease payments............... $4,458
======
</TABLE>

Rent expense for the year ended December 31, 1997 was approximately $3,538.

10. RELATED PARTY TRANSACTIONS

Effective April 1, 1997, Resurgens entered into a ten-year lease agreement
for an office building with shareholder related trusts. Until occupancy on or
about January 1, 1998, Resurgens is required to pay 50% of the monthly lease
amount or approximately $11 per month. For the year ended December 31, 1997, the
Companies recorded rent expense of $200 associated with this lease. In December
1997, Resurgens recorded a liability of $444 for rejecting the lease in
accordance with Chapter 11 provisions.

During fiscal 1997, Resurgens utilized WorldCom, a shareholder, for
transport services aggregating $27,834, which have been expensed by the
Companies in cost of service. The amount owed to WorldCom at December 31, 1997
is $188,992, of which $178,863 is recorded as liabilities subject to compromise.

Effective April 1998, Resurgens entered into a Carrier Service Agreement
with WorldCom pursuant to which WorldCom is obligated to purchase international
long distance services up to $25,000 a month provided the services are of
acceptable quality and the rates are at least equal to rates from other third
parties. The contract is for a one year initial term but automatically renews
each month, subject to a one year termination notice.

11. LITIGATION

The Companies are subject to numerous lawsuits, investigations and claims
(a number of which involve amounts that are material to these financial
statements) arising out of the conduct of its business, including those relating
to commercial transactions and regulatory matters. Such items generally relate
to claims made previous to Resurgens filing bankruptcy; therefore, the ultimate
liability of Resurgens is generally included in the liabilities subject to
compromise (see Note 3).

Resurgens is party to an action with AT&T in which AT&T filed suit against
Resurgens. Resurgens purchased long distance and international service from AT&T
from January 1996 through February 1997, and disputed the accuracy of certain
charges which prompted AT&T to terminate all services. AT&T seeks in excess of
$16,000 for alleged unpaid services. Resurgens has filed a counterclaim against
AT&T, alleging offset claims for the full amount of AT&T's claims, resulting
from alleged inaccurate billing by AT&T. Resurgens also alleges false and
deceptive advertising claims, unfair competition and deceptive business
practices claims against AT&T. Resurgens has recorded all disputed invoices
aggregating $16,528 and cannot predict the ultimate outcome of this case.

F-106
<PAGE> 289
CHERRY COMMUNICATIONS INCORPORATED
(D/B/A RESURGENS COMMUNICATIONS GROUP)
(DEBTOR-IN-POSSESSION) AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11. LITIGATION -- (CONTINUED)
Resurgens is party to an action with MidCom Communications Inc. (MidCom).
Resurgens initially sued MidCom during 1996 and MidCom subsequently filed a case
against Resurgens. Resurgens sold a portion of its commercial customer base to
MidCom during 1995, but did not receive the full payment for the customer base
and sued MidCom for $16,200. MidCom filed a counter suit against the Company
asserting that Resurgens' actions related to the sale of the customer base
allegedly breached the contract, violated the Uniform Commercial Code, and
constituted tortious interference with the contract. MidCom filed a $36,000
proof of claim in Resurgens' bankruptcy case. The litigation of both parties has
been stayed and remanded to a bankruptcy court hearing. Given the uncertainty of
this matter, Management is unable to predict the ultimate outcome of this case
and accordingly, has not accrued any liability for this claim.

Coast to Coast Plus, Inc., a former customer, filed suit in November 1996
alleging that it suffered $10,000 in damages from Resurgens' "wrongful"
termination of its long-distance telecommunications services and overbillings
for services Resurgens did not provide. Resurgens filed an answer denying
liability and filed a counterclaim and a third party claim against the
principals of Coast to Coast which asserted four claims: two RICO claims, a
fraud claim, and a breach of contract, including $250 owed for long-distance
services. Management is unable to predict the ultimate outcome of this case and
accordingly, has not accrued any liability for this claim.

First Premier Bank asserted a claim for approximately $44,000 against
Cherry Payment Systems and Dallas Leasing Group, which are companies that were
merged into Resurgens in prior years, for non-payment on past due loans. First
Premier Bank did not file a proof of claim as of the bar date with the Court and
therefore management does not believe it is obligated for this amount. Given the
uncertainty of this asserted claim, Management can not predict the ultimate
outcome of this matter and accordingly, has not accrued any liability for this
claim.

The Companies are also involved in other claims, inquiries and litigation
arising in the ordinary course of business. The Companies believe that these
matters, taken individually or in the aggregate, would not have a material
adverse impact on the Companies' financial position or results of operations.

12. SUBSEQUENT EVENTS

On May 12, 1998 the Companies and World Access, Inc. ("World Access") entered
into a merger agreement whereby World Access will acquire the Companies. The
agreement is subject to, among other things, Bankruptcy Court approval, certain
monthly revenue and gross margin levels, confirmation of Resurgens' Plan of
Reorganization and World Access shareholder approval. Pursuant to the terms of
the agreements, the creditors of Resurgens and shareholders of Cherry U.K. will
receive 3,125,000 and 625,000 shares of World Access common stock, respectively,
in the aggregate at the closing of the mergers. In addition, Resurgens'
creditors and Cherry U.K. shareholders would have the right to receive
additional consideration of up to 6,250,000 and 1,250,000 shares of World Access
common stock, respectively, over the next two and one-half years contingent upon
the achievement of certain financial criteria by the Companies.

F-107
<PAGE> 290

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

BOARD OF DIRECTORS
CHERRY COMMUNICATIONS INCORPORATED AND CHERRY COMMUNICATIONS U.K. LIMITED

We have audited the accompanying balance sheet of Cherry Communications
Incorporated and Cherry Communications U.K. Limited (collectively referred to as
the "Companies") as of December 31, 1996 and the related combined statements of
operations, stockholder's equity (deficit) and cash flows for each of the two
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Cherry
Communications Incorporated and Cherry Communications U.K. Limited as of
December 31, 1996, and the combined results of their operations and their
combined cash flows for each of the two years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Companies will continue as a going concern. As discussed in Notes 2 and 9 to the
financial statements, the Company incurred substantial losses in 1995 and 1996
and have disputed significant net accounts payable balances due its primary
vendor. Although the dispute has been settled, as discussed in Note 10, and 1996
balances payable have been reduced, significant balances converted to notes
payable remain. The Companies' ability to obtain an equity infusion or
replacement financing for these notes is limited by the terms and collateral
arrangements of the settlement. The terms of the settlement agreement will
continue the Companies' dependence on this vendor as one of the Companies'
primary long distance carriers. These matters raise substantial doubt about the
Companies' ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. Continuation of the Companies is
dependent upon the Companies' ability to return to profitability and to achieve
sufficient cash flow from operations, additional debt or equity. The
accompanying combined statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Companies be
unable to continue as a going concern.

/S/ GRANT THORNTON LLP

Chicago, Illinois
July 11, 1997, except for Notes 2 and 10,
as to which the date is July 24, 1997

F-108
<PAGE> 291

CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED BALANCE SHEET
DECEMBER 31, 1996

<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT FOR SHARE
INFORMATION)

ASSETS
<S> <C>
Current assets
Cash and cash equivalents................................. $ 4,836
Accounts receivable
Trade, net of allowance for doubtful accounts of
$41,346................................................ 42,275
Other..................................................... 392
--------
42,667
Prepaid expenses and other................................ 1,170
--------
Total current assets.............................. 48,673
Property and equipment, net................................. 40,447
Other assets
Deposits and other assets, net............................ 3,760
--------
Total assets...................................... $ 92,880
========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities
Current portion of long-term debt......................... $ 12,230
Current portion of capitalized lease obligations.......... 5,083
Accounts payable.......................................... 198,760
Accrued excise and other taxes............................ 3,967
Accrued expenses.......................................... 4,910
Accrued litigation costs.................................. 892
Other liabilities......................................... 500
--------
Total current liabilities......................... 226,342
Long-term obligations
Capitalized lease obligations, less current portion....... 18,272
Long-term debt, less current portion...................... 1,634
--------
Total liabilities................................. 246,248
Commitments and contingencies............................... --
Stockholder's equity (deficit)
Common stock, Cherry Communications Incorporated, no par
value, authorized 10,000 shares, issued and outstanding
1,000 shares........................................... 1
Common stock, Cherry U.K., no par value, authorized and
issued 50,000 shares................................... 84
Additional paid-in capital................................ 61,467
Accumulated deficit....................................... (214,920)
--------
Total stockholder's equity (deficit).............. (153,368)
--------
Total liabilities and stockholder's equity
(deficit)......................................... $ 92,880
========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-109
<PAGE> 292

CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Operating revenues
Carrier long distance..................................... $ 41,646 $ 315,699
Commercial long distance.................................. 24,215 19,739
Residential long distance................................. 12,940 7,857
Other income.............................................. 2,868 9,710
-------- ---------
Total operating revenues.......................... 81,669 353,005
Operating expenses
Cost of services and products............................. 80,982 391,615
Selling, general and administrative expenses.............. 20,447 32,622
Provision for doubtful accounts........................... 6,032 32,004
-------- ---------
Total operating expenses.......................... 107,461 456,241
-------- ---------
Operating loss.................................... (25,792) (103,236)
Other income (expense)
Interest and finance charges.............................. (2,142) (15,299)
Gain on sale of customer base............................. 5,486 1,339
Loss on disposition of property and equipment............. -- (394)
Loss on disposition of investment securities.............. -- (643)
Other income.............................................. 278 93
-------- ---------
Total other expense, net.......................... 3,622 (14,904)
Loss before income tax expense.................... (22,170) (118,140)
Income tax expense.......................................... 5 10
-------- ---------
Net loss.......................................... $(22,175) $(118,150)
======== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-110
<PAGE> 293

CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE TWO YEARS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
CHERRY CHERRY
COMMUNICATIONS COMMUNICATIONS
INCORPORATED U.K. LIMITED UNREALIZED TOTAL
COMMON STOCK COMMON STOCK ADDITIONAL GAIN ON STOCKHOLDER'S
--------------- --------------- PAID-IN ACCUMULATED INVESTMENT EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT SECURITIES (DEFICIT)
------ ------ ------ ------ ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995.............. 1,000 $1 -- $-- $35,672 $ (73,045) $ -- $ (37,372)
Stockholder's contribution of notes
payable and accrued interest payable
of $500............................. -- -- -- -- 25,795 -- -- 25,795
Stockholder's acquisition of common
stock of Cherry Communications U.K.
Limited, November 1995.............. -- -- 50,000 84 -- (1,550) -- (1,466)
Unrealized gain on investment
securities.......................... -- -- -- -- -- -- 476 476
Net loss.............................. -- -- -- -- -- (22,175) -- (22,175)
----- -- ------ --- ------- --------- ----- ---------
Balance, December 31, 1995............ 1,000 1 50,000 84 61,467 (96,770) 476 (34,742)
Change in unrealized gain on
investment securities............... -- -- -- -- -- -- (476) (476)
Net loss.............................. -- -- -- -- -- (118,150) -- (118,150)
----- -- ------ --- ------- --------- ----- ---------
Balance, December 31, 1996............ 1,000 $1 50,000 $84 $61,467 $(214,920) $ -- $(153,368)
===== == ====== === ======= ========= ===== =========
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-111
<PAGE> 294

CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(22,175) $(118,150)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
Loss on disposition of investment securities............ -- 643
Depreciation and amortization........................... 1,118 4,923
Loss on disposition of property and equipment........... -- 394
Gain on sale of customer base........................... (5,486) (1,339)
Increase in receivables................................. (25,672) (15,276)
Increase in prepaid expenses and other.................. (234) (936)
Increase in accounts payable............................ 53,996 146,311
Increase in accrued excise and other taxes.............. 1,913 1,269
Increase in accrued expenses............................ 2,359 2,308
Decrease in accrued litigation costs.................... (5,846) (2,816)
Increase in other liabilities........................... 346 154
-------- ---------
Total adjustments.................................. 22,494 135,635
-------- ---------
Net cash provided by operating activities.......... 319 17,485
Cash flows from investing activities:
Proceeds from sale of customer base....................... 2,486 1,339
Proceeds from sales of investment securities.............. 423 --
Purchases of property and equipment....................... (5,106) (8,141)
Deposits and other assets................................. (1,192) (835)
-------- ---------
Net cash used in investing activities.............. (3,389) (7,637)
Cash flows from financing activities:
Proceeds from notes payable............................... 1,378 313
Payments on notes payable................................. (698) (1,174)
Payments on capitalized lease obligations................. (1,608) (7,010)
Increase in notes payable to stockholder.................. 5,336 --
-------- ---------
Net cash provided by (used in) financing
activities........................................ 4,408 (7,871)
-------- ---------
Net increase in cash and cash equivalents.......... 1,338 1,977
Cash and cash equivalents, beginning of year................ 1,521 2,859
-------- ---------
Cash and cash equivalents, end of year...................... $ 2,859 $ 4,836
======== =========
Supplemental disclosure of cash flow information:
Interest and finance charges.............................. $ 856 $ 2,193
Income taxes paid......................................... 4 12
Supplemental schedule of noncash investing and financing
activities:
Assets received in settlement of accounts receivable...... $ 3,000 $ 1,880
Investment securities assigned to vendors................. -- 2,357
Accounts payable converted into notes payable............. 9,002 --
Capitalized lease obligations incurred.................... 6,195 24,803
Contribution of notes payable and accrued interest to
equity.................................................. 25,795 --
Unrealized gain on investment securities.................. 476 (476)
Decrease in contingency reserve through issuance of notes
payable................................................. -- (4,258)
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-112
<PAGE> 295

CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Cherry Communications Incorporated ("Cherry") commenced operations in 1991
as a successor through merger of five businesses operating in the payment
processing and credit authorization industry, including leasing of bank card
processing machinery. During 1992, Cherry discontinued the operations of the
five businesses and began the new business of a non-switch-based reseller of
long distance services to residential and commercial customers throughout the
United States. In late 1994, Cherry acquired its first long distance switch. As
of December 31, 1996, Cherry is a switch-based carrier operating nine long
distance switch centers throughout the United States and overseas, and has
arrangements with foreign carriers for processing of international calls. Cherry
provides its long distance network services to resellers, agents and end users
consisting of business and residential customers. At December 31, 1996, Cherry
primarily uses one long distance carrier, WorldCom, Inc., as its major long
distance carrier. Although there are a number of long distance carriers, a
change in carriers could disrupt Cherry's ability to service its customers,
which could result in a possible loss of operating revenues.

PRINCIPLES OF COMBINATION

The combined financial statements include the accounts of Cherry and Cherry
U.K. (collectively, the "Companies"). Cherry U.K. was purchased by the
shareholder of Cherry in November 1995. Cherry U.K.'s financial statements are
prepared on a March 31 fiscal year end. For combination purposes, Cherry U.K.'s
financial statements as of and for the year ended March 31, 1997 and for the
period ended March 31, 1996 have been combined with the December 31, 1996 and
1995 financial statements of Cherry, respectively. Significant intercompany
accounts and transactions have been eliminated in combination.

CASH AND CASH EQUIVALENTS

The Companies consider all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
consist of money market fund investments and short-term certificates of deposit.
Exclusive of cash in banks, cash equivalents at December 31, 1996 approximate
fair value. At December 31, 1996, the Companies' certificates of deposits
approximated $2,176,000. The certificates of deposit are collateral for the
Companies' line of credit agreement (note 4).

INVESTMENTS

Short-term investments are comprised of equity securities. Investment
securities are classified as available-for-sale and are stated at fair value as
determined by quoted prices on exchanges. During the year ending December 31,
1996, all of the Companies' investment securities were transferred to the
Companies' primary vendor in partial settlement of outstanding line charges. The
fair value of these securities at the date of transfer approximated $2,357,000.
The Companies recognized a loss of $643,000 from the transfer. During the year
ending December 31, 1995, proceeds from the sale of investment securities was
$423,000 with no realized gain or loss recognized.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization
are generally computed using the straight-line method over the estimated useful
lives of the related assets.

F-113
<PAGE> 296
CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INCOME TAXES

Income taxes on net taxable earnings are payable personally by the
stockholder, pursuant to an election under Subchapter S of the Internal Revenue
Code, which states Cherry is not taxed as a corporation. Accordingly, no
provision has been made for Federal income taxes for Cherry. Cherry U.K. income
taxes are not material to the combined financial statements.

REVENUE RECOGNITION

Revenues are recorded upon placing of calls or rendering of other related
services.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Companies to
concentration of credit risk consist principally of trade receivables.
Concentration of credit risk with respect to these receivables is generally
diversified because the Companies' customer base includes many entities spread
across a large geographic area. The Companies routinely address the financial
strength of its customers and, as a consequence, believe that its receivable
credit risk exposure is limited.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

FOREIGN OPERATIONS

Summarized financial information (in thousands of U.S. dollars) for Cherry
U.K., prior to intercompany eliminations, is:

BALANCE SHEET

<TABLE>
<CAPTION>
MARCH 31,
1997
---------
<S> <C>
Current assets.............................................. $ 712
Property and equipment...................................... 1,633
-------
Total assets...................................... 2,345
Current liabilities, including amount due to Cherry of
$2,952.................................................... 4,137
-------
Net deficiency.................................... $(1,792)
=======
</TABLE>

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1997 1996
---------- ------------
<S> <C> <C>
Revenues.................................................... $2,377 $ 809
Expenses.................................................... 2,214 1,293
------ ------
Net income (loss)................................. $ 163 $ (484)
====== ======
</TABLE>

The functional currency of Cherry U.K. is the U.S. dollar. Consequently,
gains or losses from remeasurement of Cherry U.K.'s accounts are recognized in
operations.

F-114
<PAGE> 297
CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. GOING CONCERN

The accompanying financial statements have been prepared assuming the
Companies will continue as a going concern. The Companies have sustained
significant losses in 1995 and 1996, and has a deficit in stockholder's equity
of approximately $153.4 million at December 31, 1996. As discussed in Note 9 --
Litigation, the Companies have various disputes with carriers for out-bound and
in-bound line charges which affect timing and amounts of collections and
payments. The most significant of these disputes is with WorldCom, Inc.
("WorldCom"), historically the Companies' primary carrier. As discussed in Note
10 -- Subsequent Events, the dispute with WorldCom has been settled as of July
24, 1997, resulting in, among other matters, a settlement of outstanding net
liabilities of $202,415,000 at July 15, 1997 ($175,633,000 at December 31, 1996)
for $165,000,000 in notes. The first new note of $50,000,000 is due on December
31, 1997. The second new note of $115,000,000 is due in quarterly installments
commencing October 23, 1998 through June 23, 2000, with interest payable
quarterly at 10% per annum.

Other terms of the settlement require the Companies to continue to pledge
all assets as collateral for the notes, except for equipment under capitalized
lease obligations; the Companies will issue shares representing 19.9% ownership
to WorldCom; and the sole shareholder must pledge 51% of total outstanding
shares as collateral. WorldCom will subordinate its collateral position up to
$100,000,000 for new borrowings by the Company if 75% of the proceeds from a
single new borrowing of up to $70.0 million or 50% of the proceeds from a single
new borrowing over $70.0 million are used to pay WorldCom.

These developments continue to have a material adverse effect and limit the
Companies' ability to meet its obligations as they come due and to obtain
financing or an equity infusion. The Companies' actions to address its current
liquidity constraints and its financial performance include negotiations with
potential lenders or equity participants. However, there can be no assurances
that the Companies' actions will improve its financial performance or liquidity
position or that it can avoid default on the December 31, 1997 payment of the
$50,000,000 note obligation.

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment and related accumulated depreciation consist of the
following at December 31, 1996 (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-------------
<S> <C> <C>
Equipment under capitalized lease obligations:
Telecommunications equipment.............................. $31,052 5-10 years
Other..................................................... 2,150 7 years
-------
33,202
Furniture, fixtures and equipment........................... 13,227 4-5 years
Leasehold improvements...................................... 1,457 Life of lease
-------
Total property and equipment...................... 47,886
Less accumulated depreciation and amortization.............. 7,439
-------
Net property and equipment........................ $40,447
=======
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1995
and 1996 was $1,068,000 and $4,226,000, respectively.

F-115
<PAGE> 298
CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. LONG-TERM DEBT

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
WorldCom installment note (Note 1) due December, 1995,
bearing interest at 12%. Due to the disputed balances with
WorldCom, Cherry has not paid principal or interest on
this note (1)............................................. $ 679
WorldCom installment note (Note 2) due January, 1996,
bearing interest at 16%. Due to the disputed balances with
WorldCom, Cherry has not paid principal or interest on
this note (1)............................................. 8,323
WorldCom installment note (Note 3) due December, 1995,
bearing interest at 10%. Due to the disputed balances with
WorldCom, Cherry has not paid principal or interest on
this note (1)............................................. 1,378
Illinois Capital Group installment note due September, 1997,
bearing interest at 10% with monthly principal and
interest payments of $60,500.............................. 519
Esplanade at Locust Point installment note due June, 1999,
with monthly payments of $100,000, including interest
imputed at 12.5%.......................................... 2,565
First National Bank of Wheaton $400,000 (as of December 31,
1996) line of credit bearing interest at the prime rate
(8.5% as of December 31, 1996). The line of credit is due
upon demand and is collateralized by certificates of
deposits and general business assets...................... 400
-------
Total long-term obligations................................. 13,864
Less current portion of long-term debt...................... 12,230
-------
Long-term portion of long-term debt......................... $ 1,634
=======
</TABLE>

- ---------------

(1) See Note 10 -- Subsequent Events.

In January 1996, Cherry and Esplanade at Locust Point ("Esplanade") entered
into an agreement as a settlement on an office property lease. As part of the
$5,000,000 settlement, Cherry agreed to pay Esplanade $1,000,000 on February 9,
1996 and then make 40 monthly payments of $100,000 beginning March 1996.
Interest on the note was imputed at a rate of 12.5% as no interest rate was
explicitly stated in the agreement.

In March, 1996, Cherry entered into an agreement with Illinois Capital
Group ("ICG") as a settlement on equipment leases sold to ICG. Under the terms
of the agreement, Cherry is to make 17 equal monthly payments of $60,500,
including interest stated at 10% commencing April 15, 1996, with the final
payment of approximately $56,900 in principal and interest due on September 15,
1997. In the event Cherry or the shareholder interferes with existing leases
under the security agreement, an additional $250,000 penalty provision is due
ICG.

Principal amounts due under all of these debt arrangements at December 31,
1996 mature as follows (in thousands):

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the Companies' financial instruments classified as
current assets or liabilities, including cash and cash equivalents, accounts
receivable, and accounts payable and accrued expenses approximate carrying
value, principally because of the short maturity of these items.
F-116
<PAGE> 299
CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The carrying amounts of the long-term debt payable approximates fair value
due to the interest rates on these agreements approximating Cherry's incremental
borrowing rates.

The fair values of capitalized lease obligations approximate carrying value
based on their effective interest rates compared to current market rates.

NOTE 6. CAPITALIZED LEASE OBLIGATIONS

The Companies lease telecommunications and other equipment through various
equipment lease financing facilities. Such leases have been accounted for as
capitalized lease obligations in accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases."

Future minimum lease payments on these capitalized lease obligations (in
thousands) are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1997........................................................ $ 7,869
1998........................................................ 7,431
1999........................................................ 7,155
2000........................................................ 6,174
2001........................................................ 1,782
Thereafter.................................................. --
-------
Net minimum lease payments........................ 30,411
Less amount representing interest........................... 7,056
-------
Present value of minimum lease payments..................... 23,355
Less current portion of capitalized lease obligations....... 5,083
-------
Long-term portion of capitalized lease obligations.......... $18,272
=======
</TABLE>

The net carrying value of assets under capital leases was $30,083,000 at
December 31, 1996, and is included in property and equipment. Amortization of
these assets is included in depreciation expense.

NOTE 7. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Companies' offices, along with various equipment and roof access
rights, are leased under operating leases expiring in 1997 through 2006. Certain
leases contain escalation clauses based upon increases in the consumer price
index.

Future minimum lease payment on noncancellable operating leases (in
thousands) are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1997........................................................ $1,744
1998........................................................ 1,328
1999........................................................ 935
2000........................................................ 767
2001........................................................ 636
Thereafter.................................................. 2,170
------
$7,580
======
</TABLE>

Rent expense for the years ended December 31, 1995 and 1996, was $972,000
and $2,062,000, respectively.

F-117
<PAGE> 300
CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
USAGE AND DEDICATED CIRCUIT AGREEMENTS

The Companies have entered into agreements with various long distance
providers which require minimum usage. The Companies have also entered into
agreements with various long distance carriers for dedicated circuits. These
agreements guarantee the provider a base monthly charge regardless of the actual
volume of usage or use of dedicated circuits by the Companies or their
customers.

NOTE 8. RELATED PARTY TRANSACTIONS

Effective April 1, 1997, Cherry entered into a ten-year lease agreement for
an office building with shareholder related trusts. Until occupancy on or about
January 1, 1998, Cherry is required to pay 50% of the monthly lease amount or
approximately $11,000 per month. Lease payment terms, as determined by
independent appraisers, over the ten-year period range from $265,000 to $345,000
annually. At December 31, 1996, Cherry had recorded an initial deposit of
$100,000 for the lease. Tenant finish and other improvements to the office
facility are expected to approximate $4,000,000.

NOTE 9. LITIGATION

The Companies are subject to a number of lawsuits, investigations and
claims (some of which involve substantial amounts) arising out of the conduct of
their business, including those relating to commercial transactions and
regulatory matters. One such lawsuit was brought by Cherry against Digital
Communications of America, WorldCom Network Services Inc. and WorldCom Inc.
(collectively referred to as "WorldCom"), asserting various claims including
substantial billing disputes. WorldCom asserted various counterclaims.
Subsequent to December 31, 1996, the parties reached a settlement. See Note 10
Subsequent Events.

Cherry is also party to an action with AT&T in which AT&T filed suit
against Cherry. Cherry purchased long distance and international service from
AT&T from January, 1996 through February, 1997. Cherry disputed the accuracy of
certain charges and AT&T terminated all services. AT&T seeks $17.2 million for
alleged unpaid services. Cherry has counterclaimed against AT&T, alleging offset
claims for the full amount of AT&T's claims, resulting from alleged inaccurate
billing by AT&T. Cherry also alleges false and deceptive advertising claims,
unfair competition and deceptive business practices claims against AT&T. The
litigation is at an early stage. Parties have not yet engaged in discovery.
Cherry has recorded all disputed invoices.

In addition, the Companies are also party to an action with a U.K.-based
carrier in which the carrier filed suit in the U.K. against the Companies. The
Companies purchased international service from this carrier from February, 1996
through April, 1997. The carrier seeks approximately $5.0 million for alleged
unpaid services and finance charges. The litigation is at an early stage. The
Companies recorded all of the carrier's invoices.

The Companies are also involved in other litigation concerning significant
collection matters, some of which have resulted in counterclaims. Based on
advice of counsel, the Companies believe such matters will be resolved within
the limits of its collection reserves.

Coast to Coast Plus, Inc., a former carrier customer, filed suit in
November, 1996 alleging that it suffered $10 million in damages from Cherry's
"wrongful" termination of its long-distance telecommunication services and
overbillings for services Cherry did not provide. Cherry filed an answer denying
liability and filed a counterclaim and a third party claim against the
principals of Coast to Coast which asserted four claims: two RICO claims, a
fraud claim, and a breach of contract, including $250,000 owed for long-distance
services. Deposition and discovery is underway. Based on advice of counsel,
Cherry believes this litigation will not have a material effect on the combined
financial position.

The Companies are also involved in other miscellaneous claims, inquiries
and litigation arising in the ordinary course of business. The Companies believe
that these matters, taken individually or in the aggregate,
F-118
<PAGE> 301
CHERRY COMMUNICATIONS INCORPORATED
AND CHERRY COMMUNICATIONS U.K. LIMITED

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. LITIGATION -- (CONTINUED)
would not have a material adverse impact on the Companies' combined financial
position or results of operations.

NOTE 10. SUBSEQUENT EVENTS

Effective April 1, 1997, Cherry entered into a new lease with a related
party for new office facilities. See Note 8 -- Related Party Transactions.

On July 2, 1997, Cherry entered into a letter of intent with EqualNet
Holding Corp. ("EqualNet") for a proposed business transaction expected to be a
merger of the Company into EqualNet, with Cherry's stockholder retaining 91% of
the combined entity. The transaction is expected to be treated as a reverse
purchase acquisition and is subject to due diligence, shareholder approval and
certain other preconditions.

Effective July 24, 1997, Cherry settled its litigation and claims against
WorldCom. The settlement provides for, among other matters, the following:

(1) All claims of both parties as of July 15, 1997 (estimated by
Cherry to be approximately $202.4 million net accounts, notes and interest
payable) to be converted to two notes payable in the individual amounts of
$50.0 million and $115.0 million. The first note of $50.0 million is
non-interest bearing and due December 31, 1997. The second note of $115.0
million is due in quarterly installments commencing October 23, 1998
through July 23, 2000. Interest is payable at 10% per annum and is due on
March 31, 1998, June 30, 1998, July 23, 1998 and quarterly thereafter.

(2) WorldCom is granted continued security interests in all of the
assets of Cherry, except for the limited security interest granted to
Cherry's bank up to $2.0 million.

(3) The sole shareholder executes a pledge and security agreement
granting a first-priority interest in 51% of the outstanding shares of
Cherry subject to anti-dilution provisions.

(4) On August 1, 1997, Cherry is required to issue common shares
equivalent to 19.9% of the then-outstanding shares of Cherry to WorldCom,
also subject to anti-dilution provisions.

(5) Similar pledge (51%) agreement requirement applies to the
shareholder's interest in Cherry U.K..

(6) WorldCom will subordinate its security interests up to $100.0
million for new borrowings if certain proceeds of such borrowings are
remitted to WorldCom (75% for a single borrowing up to $70.0 million or 50%
for a single borrowing over $70 million).

(7) If Cherry repays both notes by December 30, 1997, it or its
nominee may repurchase the transferred shares totaling 19.9% for $10.

Cherry has reflected the settlement reduction of net payables of
approximately $37.4 million as a reduction of disputed costs and finance charges
of $11.4 million and $26.0 million for the year ended December 31, 1996 and the
six months ended June 30, 1997, respectively.

F-119
<PAGE> 302

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Telco Systems, Inc.

We have audited the accompanying consolidated balance sheets of Telco
Systems, Inc. as of August 30, 1998 and August 31, 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended August 30, 1998. Our audits also
included the accompanying financial statement schedule. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Telco Systems, Inc. at August 30, 1998, and August 31, 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended August 30, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

/s/ ERNST & YOUNG LLP

Boston, Massachusetts
November 4, 1998

F-120
<PAGE> 303

TELCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED AUGUST 30, 1998

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $113,230 $117,843 $ 93,954
Costs and expenses
Cost of products sold....................................... 71,194 74,985 57,285
Research and development.................................... 15,485 15,355 17,991
Sales, marketing and administration......................... 24,300 29,652 30,408
Purchased research and development.......................... 5,135 -- --
Restructuring costs......................................... -- -- 4,209
Gain on investment.......................................... -- (1,070) --
Amortization of intangible assets........................... 795 669 752
Interest income............................................. (728) (670) (1,146)
-------- -------- --------
116,181 118,921 109,499
-------- -------- --------
Pretax loss................................................. (2,951) (1,078) (15,545)
Income tax provision........................................ 300 -- --
-------- -------- --------
Net loss.................................................... $ (3,251) $ (1,078) $(15,545)
======== ======== ========
Shares used in computing net loss per share................. 10,966 10,701 10,357
Net loss per share, basic and diluted....................... $ (.30) $ (.10) $ (1.50)
</TABLE>

See accompanying notes to consolidated financial statements.

F-121
<PAGE> 304

TELCO SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
AUGUST 30, 1998 AND AUGUST 31, 1997

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $18,743 $ 5,406
Marketable securities..................................... 2,244 7,302
Accounts receivable, less allowance for doubtful accounts
of $665 in 1998 ($895 in 1997)......................... 24,336 19,663
Inventories, net.......................................... 12,016 28,370
Other current assets...................................... 3,756 985
------- -------
Total current assets.............................. 61,095 61,726
Plant and equipment, at cost................................ 45,904 46,401
Less accumulated depreciation............................. 37,579 36,712
------- -------
Net plant and equipment........................... 8,325 9,689
Intangible and other assets, less accumulated amortization
of $11,063 in 1998 ($11,651 in 1997)...................... 8,403 7,184
------- -------
Total assets...................................... $77,823 $78,599
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 7,368 $ 7,292
Payroll and related liabilities........................... 2,727 3,492
Other accrued liabilities................................. 11,317 10,528
------- -------
Total current liabilities......................... 21,412 21,312
Restructuring and other long-term liabilities............... 911 1,531
Shareholders' equity:
Series A Participating Cumulative Preferred Stock, 200
shares authorized; no shares outstanding............... -- --
Preferred stock, $.01 par value, 5,000 shares authorized;
no shares outstanding.................................. -- --
Common stock, $.01 par value, 24,000 shares authorized;
shares outstanding: 11,115 at August 30, 1998; (10,805
at August 31, 1997).................................... 111 108
Capital in excess of par value............................ 79,556 76,602
Accumulated deficit....................................... (24,137) (20,886)
Unearned compensation -- restricted stock................. (30) (68)
------- -------
Total shareholders' equity........................ 55,500 55,756
------- -------
Total liabilities and shareholders' equity........ $77,823 $78,599
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-122
<PAGE> 305

TELCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED AUGUST 30, 1998

<TABLE>
<CAPTION>
COMMON STOCK
--------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT TOTAL
------ ------ ------- ------------ ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, August 27, 1995................ 10,231 $102 $71,566 $ -- $ (4,263) $ 67,405
Net loss for year....................... (15,545) (15,545)
Issuance of common stock:
Employee stock purchase plan.......... 56 514 514
Exercise of stock options............. 174 2 1,533 1,535
Restricted stock, net................. 59 1 654 (655) --
Amortization of unearned compensation... 88 88
------ ---- ------- ----- -------- --------
Balance, August 25, 1996................ 10,520 105 74,267 (567) (19,808) 53,997
Net loss for year....................... (1,078) (1,078)
Issuance (cancellations) of common
stock:
Employee stock purchase plan.......... 43 448 448
Exercise of stock options............. 284 3 2,360 2,363
Restricted stock, net................. (42) (473) 473 --
Amortization of unearned compensation... 26 26
------ ---- ------- ----- -------- --------
Balance, August 31, 1997................ 10,805 $108 76,602 (68) (20,886) 55,756
Net loss for year....................... (3,251) (3,251)
Issuance of common stock:
Employee stock purchase plan.......... 43 444 444
Exercise of stock options............. 159 2 1,521 1,523
Restricted stock, net................. 6 59 (59) --
Shares issued for acquisition........... 102 1 999 1,000
Amortization of unearned compensation... (69) 97 28
------ ---- ------- ----- -------- --------
Balance, August 30, 1998................ 11,115 $111 $79,556 $ (30) $(24,137) $ 55,500
====== ==== ======= ===== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-123
<PAGE> 306

TELCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE YEARS ENDED AUGUST 30, 1998
-----------------------------------
1998 1997 1996
--------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash Flows from Operating Activities
Net loss.................................................. $(3,251) $ (1,078) $(15,545)
Depreciation and amortization............................. 4,743 5,094 5,324
Write-off of purchased research and development........... 5,135 -- --
Restructuring costs....................................... -- -- 4,209
Amortization of unearned compensation..................... 28 26 88
Change in assets and liabilities
Accounts receivable, net.................................. (4,623) (1,638) (7,978)
Refundable income taxes................................... -- 702 549
Inventories, net.......................................... 16,354 (4,875) (6,074)
Other current assets...................................... (2,771) (175) 1,775
Other assets.............................................. (2) 1,000 25
Accounts payable and other current liabilities............ 357 (1,512) 9,585
Restructuring liabilities................................. (1,242) (2,192) (1,845)
Long-term liabilities..................................... (533) 536 113
------- -------- --------
Net cash provided by (used in) operating activities......... 14,195 (4,112) (9,774)
Cash Flows from Investing Activities
Additions to plant and equipment, net..................... (2,547) (3,634) (6,336)
Purchase of assets of Jupiter Technology, Inc............. (4,336) -- --
Investment in Synaptyx Corporation........................ (1,000) -- --
Proceeds from sale-lease back............................. -- 2,601 --
Purchase of marketable securities......................... (3,694) (11,674) (24,350)
Maturities of marketable securities....................... 8,752 10,953 28,664
------- -------- --------
Net cash used in investing activities..................... (2,825) (1,754) (2,022)
Cash Flows from Financing Activities
Proceeds and related tax benefits from sale of common
shares under employee stock plans...................... 1,967 2,811 2,049
------- -------- --------
Net cash provided by financing activities................. 1,967 2,811 2,049
------- -------- --------
Increase(decrease) in cash and equivalents.................. 13,337 (3,055) (9,747)
Cash and equivalents at beginning of year................... 5,406 8,461 18,208
------- -------- --------
Cash and equivalents at end of year......................... $18,743 $ 5,406 $ 8,461
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year Income taxes...................... $ 149 $ -- $ 89
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Shares issued for assets of Jupiter Technology, Inc......... $ 1,000 $ -- $ --
Liabilities assumed relating to Jupiter Technology, Inc..... $ 898 $ -- $ --
</TABLE>

See accompanying notes to consolidated financial statements.

F-124
<PAGE> 307

TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The financial statements consolidate the
accounts of Telco Systems, Inc., and its subsidiaries (the Company).
Intercompany accounts and transactions have been eliminated. The Company's
fiscal year ends on the last Sunday in August which included 52 weeks in fiscal
1998 and fiscal 1996 and 53 weeks in fiscal 1997. Certain amounts reported in
prior years have been reclassified to be consistent with the current year's
presentation.

The Company has 50% limited partnership interests in two real estate
partnerships which are accounted for by the equity method of accounting. The
aggregate net investment in these partnerships on the accompanying balance
sheets is not material (See Note 6).

New Accounting Standards. In June 1997, the FASB issued Statement No. 130,
"Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes standards for
reporting comprehensive income and its components in a full set of general
purpose financial statements. SFAS 130 requires that items to be recorded in
comprehensive income, which include unrealized gains/losses on marketable
securities classified as available-for-sale and cumulative translation
adjustments, be displayed with the same prominence as other financial statement
items. The Company does not believe the adoption of SFAS 130 will have a
material impact on the Company's financial results or financial condition. SFAS
130 is required to be adopted in the Company's financial statements for the year
ending August 29, 1999.

In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information," (SFAS 131). SFAS 131
establishes standards for the way public business enterprises report information
about operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in interim
financial reports issued to shareholders. SFAS 131 also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is required to be adopted in the Company's financial
statements for the year ending August 29, 1999. The adoption of SFAS 131 will
have no impact on the Company's financial results or financial condition, but
may result in certain disclosures of segment information.

Use of Estimates in the Preparation of Financial Statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Revenue Recognition. In general, the Company recognizes revenue from
product sales at the time of shipment. In certain contractual situations,
revenue is recognized when the product is accepted by the customer.

Product Warranty. Expected future product warranty liability is provided
for when the product is sold.

Cash Equivalents and Marketable Securities. The Company classifies all of
its marketable securities as available-for-sale securities. These securities are
stated at their fair value. There are currently no unrealized holding gains and
losses. The Company considers all highly liquid investments with maturity of 91
days or less to be cash equivalents. Those instruments with maturities greater
than 91 days are classified as marketable securities. Cash equivalents and
marketable securities are carried at market, and consist of U.S. Government
securities, bank certificates of deposit and corporate issues. All securities
mature within twelve months.

Inventories. Inventories are stated at the lower of cost or market. The
cost of products sold is based on standard costs, which approximate actual costs
as determined by the first-in, first-out method.

F-125
<PAGE> 308
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories at fiscal year end were as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw material................................................ $ 2,655 $12,803
Work-in-process............................................. 2,397 5,605
Finished goods.............................................. 6,964 9,962
------- -------
$12,016 $28,370
======= =======
</TABLE>

In January 1998, the Company entered into an agreement to subcontract the
manufacture of certain products. The agreement commits the Company to annual
purchases of $25 million for the three years ending March 2001. Included in
Other Current Assets at August 30, 1998 is $2.1 million of advances to the
subcontractor.

Plant and Equipment. Additions to plant and equipment are recorded at
cost. Depreciation is determined by using the straight-line method over the
estimated useful lives of the assets -- three to eight years. Leasehold
improvements are amortized on a straight-line basis over the shorter of their
estimated useful life or the lease term.

Plant and equipment, at cost, at fiscal year end were as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment..................................... $33,799 $33,313
Furniture and leasehold improvements........................ 12,105 13,088
------- -------
$45,904 $46,401
======= =======
</TABLE>

Intangible and Other Assets. Intangible assets arising in connection with
business acquisitions were $7,450,000 and $7,122,000 at August 31, 1998 and
August 31, 1997, respectively. They are amortized over lives ranging from five
to twenty-five years using the straight-line method, with an average remaining
life of 8.4 years. The carrying value of goodwill is reviewed periodically based
on the undiscounted cash flows of the entities acquired over the remaining
amortization period. Should this review indicate that goodwill will not be
recoverable, the carrying value will be reduced by the estimated shortfall of
undiscounted cash flows.

Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments, and accounts receivable. The Company's
temporary cash investments, which are principally limited to U.S. Government
securities and bank certificates of deposit, are subject to minimal risk. The
Company routinely assesses the financial strength of its customers and, as a
consequence, believes that its trade accounts receivable credit risk exposure is
limited.

Earnings (Loss) Per Share. In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings Per Share" (FAS 128), which
the Company adopted in the second quarter of fiscal 1998. The Company has
restated all prior period per share amounts to comply with the requirements of
FAS 128. Under the new requirements, primary and fully diluted earnings per
share were replaced by basic and diluted earnings per share. Basic earnings per
share is calculated by dividing net income or loss by the weighted average
number of common shares outstanding during the periods. Diluted earnings per
share is calculated by dividing net income or loss by the sum of the weighted
average number of common shares outstanding plus all additional common shares
that would have been outstanding if potentially dilutive common shares had been
issued. Potentially dilutive common shares were excluded from the diluted
calculation for those periods in which the Company reported a net loss. See Note
9 for a description of the Company's stock plans.

F-126
<PAGE> 309
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 DESCRIPTION OF BUSINESS

The Company is engaged in a single business segment constituting the
development, manufacturing, and marketing of broadband transmission products,
network access products, and bandwidth optimization products for the
telecommunications industry. Regional Bell Operating Companies (RBOC),
independent telephone companies, and interexchange carriers are the primary
users of the Company's products. Sales to the RBOCs accounted for 41% of sales
in fiscal 1998, 39% of sales in fiscal 1997, and 37% of sales in fiscal 1996.
RBOC sales include sales to one RBOC of 36% of sales in fiscal 1998, 33% of
sales in fiscal 1997, and 31% of sales in fiscal 1996. In fiscal 1998, two
additional customers each represented 12% of sales. In fiscal 1997, two
additional customers each represented 11% and 10% of sales. In fiscal 1996, two
additional customers each represented 13% and 11% of sales.

On June 4, 1998, the Company entered into a definitive agreement to merge
with a merger subsidiary of World Access, Inc. The transaction is subject to
stockholder and regulatory approval and is expected to be accounted for as a
purchase. The merger agreement, which was amended as of October 27, 1998,
provides that all shares of the Company's common stock will be converted into
shares of World Access common stock based on the average daily closing price of
World Access common stock as reported on the Nasdaq National Market System for a
predefined period prior to the effective time of the merger (the "Closing
Price"). If the Closing Price is more than $36.00, then each share of the
Company's common stock will be converted into 0.4722 shares of World Access
common stock. If the Closing Price is less than $29.00, then each share of the
Company's common stock will be converted into 0.5862 shares of World Access
common stock, provided that the nominal value of the consideration to be
received will be no less than $12.00 per share. If the Closing Price is between
$29.00 and $36.00, then the ratio will be the quotient of $17.00 divided by the
Closing Price (consideration value based upon the average of the high and low
trading prices of the World Access Common Stock on the day of the merger).
During fiscal 1998, the Company recorded sales of $1,442,000 to World Access.

NOTE 3 INCOME TAXES

The components of the provision (benefit) for income taxes were as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
---------------------
1998 1997 1996
---- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current................................................... $877 $-- $(1,105)
Deferred.................................................. (650) 1,105
---- -- -------
227 --
State:
Current................................................... 73
---- -- -------
$300 $-- $ --
==== == =======
</TABLE>

F-127
<PAGE> 310
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision (benefit) for income taxes differs from the amount computed
using the statutory rate as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------
1998 1997 1996
------- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at statutory rate...................... $(1,105) $(366) $(5,285)
Losses and deductions producing no current tax benefit...... 2,675 123 5,024
Benefit of loss carryforward................................ (855)
Amortization of goodwill.................................... 227 243 247
Tax credits................................................. (727)
State income taxes, net of federal tax benefits............. 48
Other....................................................... 37 14
------- ----- -------
Income tax provision........................................ $ 300 $ -- $ --
======= ===== =======
</TABLE>

The components of deferred tax assets and liabilities at fiscal year end
are as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS
Inventory and other reserves................................ $ 10,693 $ 8,049
Tax credit carryforward..................................... 3,392 4,019
Capitalized research and development expenditures........... 2,946 1,138
Restructuring costs......................................... 1,713 1,863
Net operating loss carryforward............................. 920
Other....................................................... 65 97
-------- --------
18,809 16,086
Valuation reserve........................................... (17,222) (15,009)
-------- --------
Total deferred tax assets......................... 1,587 1,077
-------- --------
DEFERRED TAX LIABILITIES
Accelerated tax deduction................................... 1,323 1,261
Acquisition costs........................................... 246 267
Tax depreciation............................................ (558) (373)
Other....................................................... (74) (78)
-------- --------
Total deferred tax liabilities.................... 937 1,077
-------- --------
Net deferred tax assets........................... $ 650 $ --
======== ========
</TABLE>

SFAS 109, "Accounting for Income Taxes", requires that a valuation reserve
be established if it is "more likely than not" that realization of the tax
benefits will not occur. In fiscal 1998 the valuation reserve increased by
$2,213,000 due primarily to the purchased research and development charge
related to the Jupiter acquisition (see Note 8) which was capitalized for income
tax purposes. This net increase also reflected the recognition of $650,000 of
net deferred tax assets, included in Other Current Assets, attributable to 1998
current income tax liabilities available to benefit future income tax losses, if
any.

The Company had unused research and development and investment tax credit
carryforwards of $3,400,000 at August 30, 1998, which expire from fiscal years
1999 through 2013.

F-128
<PAGE> 311
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 ACCRUED LIABILITIES

Accrued liabilities at fiscal year end were as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued income taxes........................................ $ 1,507 $ 919
Restructuring costs......................................... 1,513 2,485
Warranty and rework......................................... 1,903 2,027
All other accrued liabilities............................... 6,394 5,097
------- -------
$11,317 $10,528
======= =======
</TABLE>

NOTE 5 LINE OF CREDIT

The Company maintains a $20 million secured line of credit with Fleet Bank
which is available until December 31, 1998. At August 30, 1998, $351,100 was
reserved to support various guarantees relating to European Community customs
and duties in effect at that date. The Company had no borrowings against the
credit line at August 30, 1998.

NOTE 6 LEASE COMMITMENTS

The Company leases a 216,000 square-foot manufacturing, research and
administration facility in Norwood, Massachusetts, from a limited partnership in
which the Company has a 50% interest. Neither the Company nor the other partners
have made or anticipate making any substantial capital contributions or advances
to the partnership. Under the partnership agreement, the Company, in addition to
its 50% interest, is entitled to a priority payment (which would proportionately
increase with an increase in the property value) out of the proceeds of any sale
or future refinancing of the property. The gross rent payable is $1.5 million
annually through January 31, 1999. For the remainder of the lease term ending
January 31, 2004, gross rent payable is $1.7 million annually.

In June 1997, the Company entered into a sale-leaseback arrangement for
certain computer and other electronic equipment which provided cash of
approximately $2.6 million. The operating leases contained in the arrangement
cover periods from two to four years.

The Company leases other facilities and certain equipment under
noncancelable operating leases expiring at various dates through 2005. The
Company is required to pay property taxes, insurance and normal maintenance
costs. Certain of the lease agreements provide for five-year renewal options,
and future lease payments could increase based on the Consumer Price Index.

Minimum annual lease commitments under non-cancelable operating leases for
facilities and equipment as of August 30, 1998 are set forth in the following
table. Amounts relating to excess facilities included herein have been accrued
as discussed in Note 7:

<TABLE>
<CAPTION>
GROSS LEASE SUB-LEASE NET LEASE
FISCAL YEAR PAYMENTS INCOME PAYMENTS
- ----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
1999.................................................... $ 2,931 $ 509 $2,422
2000.................................................... 2,166 509 1,657
2001.................................................... 2,089 412 1,677
2002.................................................... 1,704 69 1,635
2003.................................................... 1,704 1,704
Beyond.................................................. 710 -- 710
------- ------ ------
$11,304 $1,499 $9,805
======= ====== ======
</TABLE>

F-129
<PAGE> 312
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Rent expense under operating leases was $2.7 million in fiscal 1998, $3.1
million in fiscal 1997, and $2.9 million in fiscal 1996.

NOTE 7 RESTRUCTURING COSTS

During fiscal 1996, the Company's management approved a plan to restructure
its operations and recognized the following charges (in thousands):

<TABLE>
<S> <C>
Excess Facilities........................................... $2,225
Write-down of assets to net realizable value................ 1,589
Employee severance costs.................................... 1,034
Restructuring credit relating to 1993 excess facilities
costs..................................................... (639)
------
$4,209
======
</TABLE>

The plan included the consolidation and move of manufacturing operations
from the Company's Fremont, California facility to its facility located in
Norwood, Massachusetts. During fiscal 1997, the relocation plan was accomplished
within original cost estimates. At August 30, 1998, the remaining fiscal 1993
and 1996 restructuring reserves for excess facility costs aggregated $1.5
million.

NOTE 8 ACQUISITIONS

On January 26, 1998, the Company acquired substantially all of the assets
of Jupiter Technology, Inc., a privately held company engaged in the development
of ATM and frame relay access equipment. The transaction was accounted for using
the purchase method at a cost of $6.2 million, including issuance of 101,636
shares of common stock. The purchase price included $5.1 million which
represented the value of in-process technology that had not yet reached
technological feasibility and had no alternative use. This amount was expensed
during fiscal 1998. In addition, the purchase price included $1.1 million of
goodwill, which will be amortized over five years.

In August 1998, the Company acquired a minority equity interest of Synaptyx
Corporation, a privately held communications network hardware company, for $1
million with an option to acquire 100% equity ownership. The $1 million
investment is accounted for under the cost method and included in Intangible and
Other Assets at August 30, 1998. In October 1998, the Company exercised its
option and acquired the remaining ownership for $9 million in equity securities
of the Company. The Synaptyx Acquisition Agreement provides for the Company to
issue an additional $4 million of common stock to be paid upon achievement of
certain revenue goals. The acquisition will be accounted for as a purchase.

NOTE 9 STOCK PLANS

Under the Company's 1980 Stock Option Plan, the 1988 Non-Qualified Stock
Option Plan, and the 1990 Stock Option Plan (the Plans), officers, directors,
and key employees have been granted options to purchase shares of the Company's
common stock at a price equal to the market value at the date of grant. Options
normally become exercisable ratably over a 48 month period, commencing six
months from the date of grant, and expire after ten years. At August 30, 1998,
1,551,423 shares of common stock were reserved for issuance under the Plans.

On May 20, 1997, the Board of Directors approved an amendment to the
Company's 1990 Stock Option Plan and reduced the exercise price of certain stock
options granted to employees between May 15, 1996 and May 13, 1997 at exercise
prices ranging from $11.50 to $20.875 per share. The exercise price was adjusted
to be equal to the current market price on that day. Stock options granted to
the Company's Board of Directors and to employees in conjunction with a general
option grant on March 5, 1997 were excluded from this action. Approximately
388,581 shares were reduced to the new exercise price of $9.625.

F-130
<PAGE> 313
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On February 15, 1996, 92,000 restricted shares of the Company's common
stock were granted and issued to certain key employees. Shares were awarded in
the name of each of the participants who have all the rights of other
stockholders, subject to certain restrictions and forfeiture provisions. At
August 30, 1998, no shares carried restrictions.

On February 11, 1998, 6,000 restricted shares of the Company's common stock
were issued to certain key employees. Shares were awarded in the name of each of
the participants who have all the rights of other stockholders, subject to
certain restrictions and forfeiture provisions. At August 30, 1998, all 6,000
shares carried restrictions. Restrictions on shares expire ratably on the
anniversary date of the award over the next two-year period following the date
of grant.

A summary of the activity in the stock option plans for fiscal 1998, 1997,
and 1996 is presented as follows:

<TABLE>
<CAPTION>
AVAILABLE OPTIONS OPTION PRICE
STOCK OPTION PLANS FOR OPTIONS OUTSTANDING PER SHARE
- ------------------ ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
Balance at August 27, 1995...................... 179,752 959,299 $ 2.25 - $16.75
Authorized under 1990 Plan.................... 350,000
Grants........................................ (572,305) 572,305 $ 9.63 - $16.38
Exercised..................................... (173,895) $ 3.00 - $16.25
Canceled...................................... 182,887 (182,887) $ 3.38 - $16.38
-------- ---------
Balance at August 25, 1996...................... 140,334 1,174,822 $ 2.13 - $16.75
Authorized under 1990 Plan.................... 450,000
Grants........................................ (902,831) 902,831 $13.09 - $20.88
Exercised..................................... (284,370) $ 2.13 - $16.38
Canceled...................................... 677,297 (677,297) $ 3.00 - $20.88
Expired....................................... (1,000) -- $ 3.00
-------- ---------
Balance at August 31, 1997...................... 363,800 1,115,986 $ 2.25 - $19.00
Authorized under 1990 Plan.................... 250,000
Grants........................................ (477,180) 477,180 $10.00 - $18.25
Exercised..................................... (165,353) $ 2.25 - $13.88
Canceled...................................... 173,290 (173,290) $ 3.38 - $17.13
Expired....................................... (13,010) -- $ --
----------- ----------- ---------------------
Balance at August 30, 1998...................... 296,900 1,254,523 $ 3.75 - $19.00
=========== =========== =====================
</TABLE>

At August 30, 1998, August 31, 1997, and August 25, 1996, there were
664,907 shares, 464,589 shares, and 464,767 shares exercisable, respectively.

Under the Company's 1983 Employee Stock Purchase Plan, eligible employees
may purchase shares of common stock through payroll deductions (up to a maximum
of 10% of their salary) at a price equal to 85% of the lower of the stock's fair
market value at the beginning or at the end of each six month offering period.
During fiscal 1998, an additional 100,000 shares were authorized under the Plan.
There were 58,534 shares issuable under the Plan for fiscal 1998 of which 36,969
were outstanding at August 30, 1998. For fiscal 1997 and 1996 38,947 shares and
56,010 shares, respectively, were issued under the Plan. At August 30, 1998,
115,707 shares of common stock were reserved for issuance under the Plan.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard 123 (SFAS 123), "Accounting for Stock-Based
Compensation". SFAS 123 requires that companies either recognize compensation
expense for grants of stock, stock options and other equity instruments based on
fair value, or provide pro forma disclosure of net income and earnings per share
in the notes to the financial statements. The Company adopted the
disclosure-only provisions of SFAS 123 in fiscal 1997 and has applied APB
Opinion No. 25 and related interpretations in accounting for its plans.

F-131
<PAGE> 314
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
STOCK OPTIONS EMPLOYEE STOCK
AND AWARDS PURCHASE PLANS
---------------------------------- ------------------------------
1998 1997 1996 1998 1997 1996
---------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Weighted Average fair
value of shares...... $ 7.37 $ 8.36 $ 10.54 $ 3.23 $ 6.00 $ 4.16
Shares Granted......... 477,180 902,831 631,305 58,534 38,947 56,010
Assumptions:
Risk-free interest
rate.............. 5.25% 5.9% 6.0% 4.9% 5.0% 5.0%
Expected
volatility........ 71% 146.2% 144.4% 68% 88.0% 87.2%
Expected life of
grants:........... 5.4 years 5.5 years 5.5 years .5 years .5 years .5 years
Dividend yield....... None None None None None None
</TABLE>

Had compensation costs for the Company's stock option plans and employee
stock purchase plans been determined on the fair market value at the grant dates
for such awards, the Company's net loss and net loss per share would approximate
the pro forma amounts below:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported............................................ $(3,251) $(1,078) $(15,545)
Pro forma.............................................. $(6,143) $(4,380) $(16,787)
Net loss per share:
As reported............................................ $ (.30) $ (.10) $ (1.50)
Pro forma.............................................. $ (.56) $ (.41) $ (1.62)
</TABLE>

The effects of applying SFAS 123 for the purpose of providing pro forma
disclosures may not be indicative of the effects on reported net income and net
income per share for future years, as the pro forma disclosures include the
effects of only those awards granted after August 27, 1995.

OUTSTANDING AND EXERCISABLE BY
PRICE RANGE
AS OF AUGUST 30, 1998

<TABLE>
<CAPTION>
SHARES OUTSTANDING
------------------------------ SHARES EXERCISABLE
WEIGHTED AVERAGE -------------------------------------
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 8/30/98 LIFE PRICE AT 8/30/98 PRICE
- ------------------------ ----------- ---------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Stock option plan
$3.75 -- $9.50..... 123,124 6.68 $ 8.82 93,641 $ 8.62
$9.63 -- $9.63..... 279,266 8.11 $ 9.63 144,582 $ 9.63
$9.88 -- $11.38..... 377,851 7.78 $10.64 207,710 $10.82
$11.75 -- $13.25..... 348,246 8.33 $12.91 137,961 $13.00
$13.88 -- $19.00..... 126,036 7.25 $16.59 81,013 $16.18
--------- ---- ------ ------- ------
$3.75 -- $19.00..... 1,254,523 7.84 $11.45 664,907 $11.35
========= ==== ====== ======= ======
Stock purchase plan
$8.18............... 36,969 -- $ 8.18 36,969 $ 8.18
========= ==== ====== ======= ======
</TABLE>

F-132
<PAGE> 315
TELCO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution savings plan under the
provisions of Internal Revenue Code Section 401(k). Under the terms of the Plan,
the Company contributes up to 3% of base pay to a fund which is held by a
trustee. All employees are eligible to participate in the Plan and are entitled,
upon termination or retirement, to receive their vested portion of the savings
fund assets. The unvested portion remains in the Plan and is used to reduce
future Plan expense. Total Plan expense was $391,000 in fiscal 1998, $468,000 in
fiscal 1997, and $547,000 in fiscal 1996.

NOTE 11. STOCKHOLDER RIGHTS PLAN

On February 19, 1997, the Board of Directors of Telco Systems, Inc. adopted
a Stockholder Rights Plan (the "Plan") and distributed one Right for each
outstanding share of the Company's Common Stock, par value $.01 per share. The
Rights were issued to holders of record of Common Stock outstanding on February
19, 1997. Each share of Common Stock issued after February 19, 1997 will also
include one Right subject to certain limitations. Each Right when it becomes
exercisable will initially entitle the registered holder to purchase from the
Company one one-hundredth (1/100th) of a share of Series A Participating
Cumulative Preferred Stock, par value $.01 per share ("Series A Preferred
Stock"), of the Company at a price of $50.00 (the "Exercise Price").

Currently, the Rights are attached to the Company's common stock. These
Rights are not now exercisable and cannot be transferred separately. The Rights
become exercisable and separately transferable when the Board learns that any
person or group (other than Kopp Investment Advisors, Inc. and its affiliates or
associates (collectively "KIA")), has acquired 15% or more of the Company's
outstanding common stock or on such date as may be designated by the Board
following the announcement of a tender or exchange offer for outstanding shares
of common stock which could result in the offeror becoming the beneficial owner
of 15% or more of the Company's outstanding common stock. Under such
circumstances, holders of the Rights will be entitled to purchase, for the
Exercise Price, that number of hundredths of a share of Series A.

Preferred Stock equivalent to the number of shares of the Company's common
stock (or under certain circumstances other equity securities) having a market
value of two times the Exercise Price. 15% holders (other than KIA), however,
are not entitled to exercise their Rights under such circumstances. As a result,
their voting and equity interests in the Company would be substantially diluted
should the rights ever be exercised.

The Rights expire in February 2007, but may be redeemed earlier by the
Company in accordance with the provisions of the Rights Plan at a price of $.01
per Right.

On June 4, 1998, the Plan was amended to allow for the merger with World
Access, Inc. without the Rights becoming exercisable.

F-133
<PAGE> 316

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE YEARS ENDED
AUGUST 30, 1998
-------------------
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Allowance for Doubtful Accounts:
Balance at beginning of period............................ $ 895 $676 $649
Charges to costs and expenses............................. 200 292 102
Deductions................................................ (430) (73) (75)
----- ---- ----
Balance at end of period.................................. $ 665 $895 $676
===== ==== ====
</TABLE>

F-134
<PAGE> 317

APPENDIX A

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

AMONG

WORLD ACCESS, INC.,

WAXS INC.,

TAIL ACQUISITION CORPORATION

AND

TELCO SYSTEMS, INC.

DATED AS OF JUNE 4, 1998, AS AMENDED AS OF OCTOBER 27, 1998
<PAGE> 318

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS........................................................ A-1
SECTION 1.01. Certain Defined Terms....................................... A-1
ARTICLE II THE MERGER........................................................ A-7
SECTION 2.01. The Merger.................................................. A-7
SECTION 2.02. Closing..................................................... A-8
SECTION 2.03. Effective Time.............................................. A-8
SECTION 2.04. Effect of the Merger........................................ A-8
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporation.................................. A-8
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............... A-9
SECTION 3.01. Conversion of Securities.................................... A-9
SECTION 3.02. Exchange of Shares Other than Treasury Shares............... A-9
SECTION 3.03. Stock Transfer Books........................................ A-10
SECTION 3.04. No Fractional Share Certificates............................ A-10
SECTION 3.05. Options to Purchase Company Common Stock.................... A-11
SECTION 3.06. Certain Adjustments......................................... A-11
SECTION 3.07. Undistributed Amounts....................................... A-12
SECTION 3.08. Dissenters' Rights.......................................... A-12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... A-12
SECTION 4.01. Organization and Qualification; Subsidiaries................ A-12
SECTION 4.02. Certificate of Incorporation and Bylaws..................... A-12
SECTION 4.03. Capitalization.............................................. A-13
SECTION 4.04. Authority Relative to this Agreement........................ A-13
SECTION 4.05. No Conflict; Required Filings and Consents.................. A-14
SECTION 4.06. Permits; Compliance with Laws............................... A-14
SECTION 4.07. SEC Filings; Financial Statements........................... A-15
SECTION 4.08. Absence of Certain Changes or Events........................ A-16
SECTION 4.09. Employee Benefit Plans; Labor Matters....................... A-16
SECTION 4.10. Certain Tax Matters......................................... A-18
SECTION 4.11. Contracts; Debt Instruments................................. A-18
SECTION 4.12. Litigation.................................................. A-18
SECTION 4.13. Environmental Matters....................................... A-19
SECTION 4.14. Intellectual Property....................................... A-19
SECTION 4.15. Taxes....................................................... A-19
SECTION 4.16. Rule 145 Affiliates......................................... A-20
SECTION 4.17. Brokers..................................................... A-20
SECTION 4.18. Certain Business Practices.................................. A-20
SECTION 4.19. Transaction Expenses........................................ A-20
SECTION 4.20. Interested Party Transactions............................... A-20
SECTION 4.21. Charter Anti-takeover Provisions and State Takeover
Statutes.................................................. A-20
SECTION 4.22. Opinion of Financial Advisor................................ A-20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF WAG, PARENT AND MERGER SUB....... A-20
SECTION 5.01. Organization and Qualification; Subsidiaries................ A-20
SECTION 5.02. Certificate of Incorporation and Bylaws..................... A-21
SECTION 5.03. Capitalization.............................................. A-21
SECTION 5.04. Authority Relative to this Agreement........................ A-22
SECTION 5.05. No Conflict; Required Filings and Consents.................. A-22
</TABLE>

A-i
<PAGE> 319

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.06. Permits; Compliance with Laws............................... A-23
SECTION 5.07. SEC Filings; Financial Statements........................... A-23
SECTION 5.08. Absence of Certain Changes or Events........................ A-24
SECTION 5.09. Employee Benefit Plans; Labor Matters....................... A-24
SECTION 5.10. Certain Tax Matters......................................... A-26
SECTION 5.11. Contracts; Debt Instruments................................. A-26
SECTION 5.12. Litigation.................................................. A-26
SECTION 5.13. Environmental Matters....................................... A-26
SECTION 5.14. Intellectual Property....................................... A-26
SECTION 5.15. Taxes....................................................... A-27
SECTION 5.16. Brokers..................................................... A-27
SECTION 5.17. Certain Business Practices.................................. A-27
SECTION 5.18. Opinion of Financial Advisor................................ A-27
SECTION 5.19. Interested Party Transactions............................... A-27
SECTION 5.20. Ownership of Company Capital Stock.......................... A-28
ARTICLE VI COVENANTS......................................................... A-28
SECTION 6.01. Conduct of Business by the Company Pending the Closing...... A-28
SECTION 6.02. Conduct of Business by WAG and Parent Pending the Closing... A-30
SECTION 6.03. Notices of Certain Events................................... A-30
SECTION 6.04. Access to Information; Confidentiality...................... A-31
SECTION 6.05. No Solicitation of Transactions............................. A-31
SECTION 6.06. Letters of Accountants...................................... A-32
SECTION 6.07. Subsequent Financial Statements............................. A-32
SECTION 6.08. Control of Operations....................................... A-32
SECTION 6.09. Further Action; Consents; Filings........................... A-32
ARTICLE VII ADDITIONAL AGREEMENTS............................................ A-33
SECTION 7.01. Registration Statement; Proxy Statement..................... A-33
SECTION 7.02. Stockholders' Meetings...................................... A-34
SECTION 7.03. Rule 145 Affiliates......................................... A-35
SECTION 7.04. Directors' and Officers' Indemnification.................... A-35
SECTION 7.05. No Shelf Registration....................................... A-36
SECTION 7.06. Public Announcements........................................ A-36
SECTION 7.07. Nasdaq Listing.............................................. A-36
SECTION 7.08. Blue Sky.................................................... A-36
SECTION 7.09. Company Stock Options....................................... A-36
SECTION 7.10. Tax Treatment............................................... A-37
SECTION 7.11. Obligations of Parent and WAG............................... A-37
SECTION 7.12. Company Employees........................................... A-37
SECTION 7.13. Board of Directors of Parent and WAG........................ A-38
ARTICLE VIII CONDITIONS TO THE MERGER........................................ A-38
SECTION 8.01. Conditions to the Obligations of Each Party to Consummate
the Merger................................................ A-38
SECTION 8.02. Conditions to the Obligations of the Company................ A-39
SECTION 8.03. Conditions to the Obligations of WAG and Parent............. A-39
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................. A-40
SECTION 9.01. Termination................................................. A-40
SECTION 9.02. Effect of Termination....................................... A-41
SECTION 9.03. Amendment................................................... A-41
SECTION 9.04. Waiver...................................................... A-41
SECTION 9.05. Expenses.................................................... A-41
</TABLE>

A-ii
<PAGE> 320

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE X GENERAL PROVISIONS................................................. A-42
SECTION 10.01. Non-Survival of Representations and Warranties.............. A-42
SECTION 10.02. Notices..................................................... A-42
SECTION 10.03. Severability................................................ A-42
SECTION 10.04. Assignment; Binding Effect; Benefit......................... A-43
SECTION 10.05. Incorporation of Exhibits................................... A-43
SECTION 10.06. Governing Law............................................... A-43
SECTION 10.07. Waiver of Jury Trial........................................ A-43
SECTION 10.08. Construction................................................ A-43
SECTION 10.09. Counterparts................................................ A-43
SECTION 10.10. Acknowledgement............................................. A-44
SECTION 10.11. Entire Agreement............................................ A-44

EXHIBITS AND SCHEDULE

Exhibit 1.00(a) Form of Stockholder Proxy Agreement
Exhibit 7.03 Form of Company Affiliate Agreement
Schedule A to First
Amendment Supplement to Company Disclosure Schedule
</TABLE>

A-iii
<PAGE> 321

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of June 4, 1998,
as amended by the First Amendment thereto dated as of October 27, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Agreement"),
among WORLD ACCESS, INC., a corporation organized and existing under the laws of
the State of Delaware ("WAG"), WAXS INC., a corporation organized and existing
under the laws of the State of Delaware and a wholly-owned subsidiary of WAG
("Parent"), TAIL ACQUISITION CORPORATION, a corporation organized and existing
under the laws of the State of Delaware ("Merger Sub") and a direct wholly-owned
subsidiary of Parent, and TELCO SYSTEMS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Company");

WITNESSETH:

WHEREAS, the boards of directors of WAG, Parent, Merger Sub and the Company
have each determined that it is fair to and in the best interests of their
respective stockholders to combine the respective businesses of WAG, Parent and
the Company by means of a merger (the "Merger") of the Company with and into
Merger Sub upon the terms and subject to the conditions set forth herein and in
accordance with the General Corporation Law of the State of Delaware;

WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent and Merger Sub to enter into this Agreement, Parent has
entered into a proxy agreement substantially in the form attached hereto as
Exhibit 1.00(a), dated as of the date hereof (the "Stockholders Proxy
Agreement"), with each of the Company's directors and senior executive officers
and Kopp Investment Advisors, Inc., a corporation organized and existing under
the laws of the State of Minnesota (each, a "Principal Stockholder"), pursuant
to which each Principal Stockholder has granted to Parent a proxy to vote all of
the shares of Company Capital Stock (as hereinafter defined) held by such
Principal Stockholder, all upon the terms and subject to the conditions set
forth therein;

WHEREAS, on February 24, 1998, WAG, Parent, NACT Telecommunications, Inc.,
a Delaware corporation and a majority-owned subsidiary of WAG ("NACT"), WAXS
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent, and NACT Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent, entered into that certain Agreement and Plan of Merger and
Reorganization pursuant to which, among other things, each of WAG and NACT will
become wholly-owned subsidiaries of Parent (the "Holding Company
Reorganization"); and

WHEREAS, for United States Federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (together with the rules and
regulations promulgated thereunder, the "Code");

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Certain Defined Terms. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to be equally applicable to
the singular and plural number of the terms so defined, unless the context
otherwise requires):

"Affected Employee" shall have the meaning specified in Section 7.12(a).

"affiliate" shall have the meaning specified in rule 144 promulgated under
the Securities Act.

A-1
<PAGE> 322

"Agreement" shall have the meaning specified in the preamble to this
Agreement.

"Alternative Merger" shall have the meaning specified in Section 2.01.

"Average Tax Value" shall mean the average of the high and low trading
prices of the WAG Common Stock or, in the event that the Holding Company
Reorganization shall have been consummated, the Parent Common Stock on the date
of the Closing, in either case as reported on Nasdaq.

"Beneficial Owner" shall mean, with respect to any shares of capital stock,
a person who shall be deemed to be the beneficial owner of such shares (i) which
such person or any of its affiliates or associates (as such term is defined in
rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
such shares of capital stock; provided, however, that a Person shall not be
deemed the beneficial owner of, or to beneficially own, any security if the
agreement, arrangement or understanding (written or oral) to vote such security
arises solely from a revocable proxy or consent given to such person pursuant to
a definitive proxy statement filed with the SEC and otherwise in accordance with
the rules and regulations under the Exchange Act.

"Blue Sky Laws" shall mean state securities or "blue sky" laws.

"Broadview" shall mean Broadview Associates LLC.

"business day" shall mean any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized by law, regulation or executive order to close in New York, New York.

"Capital Increase" shall have the meaning specified in Section 7.01(a).

"Cash Consideration Pool" shall mean an amount of cash determined by the
Parent in its sole discretion upon irrevocable notice given to the Company in
accordance with Section 10.02 hereof on the Determination Date, provided that
such amount does not exceed the excess of (a) 55% of the Tax Consideration over
(b) the estimated aggregate amount of cash paid or to be paid to Dissenting
Stockholders, if applicable, plus the estimated aggregate amount of cash paid or
to be paid in lieu of fractional shares of WAG Common Stock or Parent Common
Stock, as the case may be, pursuant to Section 3.04, such estimates to be
determined as provided in Schedule A hereto.

"Cash Deposit" shall have the meaning specified in Section 3.04.

"Certificate of Merger" shall have the meaning specified in Section 2.03.

"Closing" shall have the meaning specified in Section 2.02.

"Closing Date Market Price" shall mean the average of the daily closing
price of the WAG Common Stock, in the event that the Holding Company
Reorganization shall not have been consummated, or Parent Common Stock, in the
event that the Holding Company Reorganization shall have been consummated, in
either case as reported on Nasdaq on each of the twenty consecutive trading days
ending on the Determination Date, provided that, in the event that the Holding
Company Reorganization shall have been consummated during such twenty-day
period, the Closing Date Market Price shall be calculated by reference to the
average of the daily closing price of the WAG Common Stock or the Parent Common
Stock, as the case may be, for the number of days such stock was traded during
such period.

"Code" shall mean the meaning specified in the recitals hereto.

"Common Stock Exchange Ratio" shall have the meaning specified in Section
3.01(a).

A-2
<PAGE> 323

"Company Fairness Opinion" shall mean the written opinion of Broadview
delivered to the board of directors of the Company (i) to the effect that the
exchange ratio to be offered the holders of the Company Common Stock in the
Merger is fair to the holders of such stock from a financial point of view, and
(ii) which has been authorized by Broadview for inclusion in the Proxy
Statement.

"Company" shall have the meaning specified in the preamble to this
Agreement.

"Company 1997 10-K" shall have the meaning specified in Section 4.02.

"Company Affiliate Agreement" shall have the meaning specified in Section
7.03(a).

"Company Benefit Plans" shall have the meaning specified in Section
4.09(a).

"Company Capital Stock" shall mean the Company Common Stock, the Company
Junior Common Stock and the Company Preferred Stock.

"Company Common Stock" shall mean the Common Stock, par value $0.01 per
share, of the Company.

"Company Disclosure Schedule" shall mean the disclosure schedule delivered
by the Company to Parent prior to the execution of this Agreement and forming a
part hereof.

"Company Junior Common Stock" shall mean the Series A Junior Common Stock,
par value $0.01 per share, of the Company.

"Company Licenses" shall have the meaning specified in Section 4.14.

"Company Material Adverse Effect" shall mean any change in or effect on the
business of the Company and the Company Subsidiaries that is, or would
reasonably be expected to be, materially adverse to the business, assets
(including intangible assets), liabilities (contingent or otherwise), condition
(financial or otherwise) or results of operations of the Company and the Company
Subsidiaries taken as a whole, other than any change or effect relating to this
Agreement or the transactions contemplated hereby or the announcement thereof.

"Company Material Contract" shall have the meaning specified in Section
4.11.

"Company Permits" shall have the meaning specified in Section 4.06.

"Company Preferred Stock" shall mean the Series A Participating Cumulative
Preferred Stock, $0.01 per share par value, of the Company.

"Company Products" shall have the meaning specified in Section 4.06(b).

"Company Third Party Products" shall have the meaning specified in Section
4.06(b).

"Company Reports" shall have the meaning specified in Section 4.07(a).

"Company Stockholders' Meeting" shall have the meaning specified in Section
7.01(a).

"Company Stock Option" shall have the meaning specified in Section 3.05.

"Company Stock Plans" shall mean the Company's 1980 Stock Option Plan, the
Company's 1988 Non-Statutory Stock Option Plan and the Company's 1990 Stock
Option Plan.

"Company Stock Purchase Plans" shall have the meaning specified in Section
4.03.

"Company Subsidiaries" shall have the meaning specified in Section 4.01.

A-3
<PAGE> 324

"Competing Transaction" shall mean any of the following involving the
Company or any Company Subsidiary whose business constitutes 30% or more of the
net revenues, net income or assets of the Company and its subsidiaries, taken as
a whole, as the case may be (other than the Merger contemplated by this
Agreement):

(i) any merger, consolidation, share exchange, business combination or
other similar transaction;

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 15 percent or more of the assets of such party and its
subsidiaries, taken as a whole, in a single transaction or series of
related transactions except for the sale of inventory in the ordinary
course of business; or

(iii) any tender offer or exchange offer for 15 percent or more of the
outstanding voting securities of such party or the filing of a registration
statement under the Securities Act in connection therewith.

"Confidentiality Agreement" shall mean the Mutual Non-Disclosure and
Confidentiality agreement dated as of November 7, 1997 between WAG and the
Company.

"Costs" shall have the meaning specified in Section 7.04(b).

"Delaware General Corporation Law" shall mean the General Corporation Law
of the State of Delaware.

"Determination Date" shall mean the third business day prior to the date on
which the Effective Time is expected to occur.

"$" shall mean United States Dollars.

"Effective Time" shall have the meaning specified in Section 2.03.

"Environmental Law" shall mean any Law and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Material, as in effect as of the date hereof.

"Environmental Permit" shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
applicable Environmental Law.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.

"Exchange Agent" shall have the meaning specified in Section 3.02.

"Exchange Fund" shall have the meaning specified in Section 3.02.

"Expenses" shall mean, with respect to any party hereto, all reasonable
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates, but excluding any allocation of overhead) incurred by such party or
on its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of its obligations pursuant to this
Agreement and the consummation of the Merger, the preparation, printing, filing
and mailing of the Registration Statement and the Proxy Statement, the
solicitation of stockholder approvals, the filing of HSR Act notice, if any, and
all other matters related to the closing of the Merger.

"FCC" shall have the meaning specified in Section 4.06(b).

"Governmental Entity" shall mean any United States federal, state or local
or any foreign governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or arbitral body.

"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.

"Hazardous Material" shall mean (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any

A-4
<PAGE> 325

chemical, material or substance defined or regulated as toxic or hazardous or as
a pollutant or contaminant or waste under any applicable Environmental Law.

"Holding Company Reorganization" shall have the meaning specified in the
recitals to this Agreement.

"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, together with the rules and regulations promulgated
thereunder.

"Indemnified Parties" shall have the meaning specified in Section 7.04(b).

"IRS" shall mean the United States Internal Revenue Service.

"Law" shall mean any Federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement or
rule of law of the United States or any other jurisdiction, and any other
similar act or law.

"Listed Agreements" shall have the meaning specified in Section 7.12(c).

"Merger" shall have the meaning specified in the recitals to this
Agreement.

"Merger Consideration" shall have the meaning specified in Section 3.01(a).

"Merger Sub" shall have the meaning specified in the preamble to this
Agreement.

"Merger Sub Common Stock" shall have the meaning specified in Section
3.01(c).

"Multiemployer Plan" shall have the meaning specified in Section 4.09(b).

"Multiple Employer Plan" shall have the meaning specified in Section
4.09(b).

"NACT" shall have the meaning specified in the recitals to this Agreement.

"Nasdaq" shall mean The Nasdaq Stock Market National Market.

"Nominal Consideration" shall mean the value determined by multiplying the
Closing Date Market Price by the product of (i) the number of shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Common Stock to be cancelled pursuant to
Section 3.01(b) hereof) and (ii) the Common Exchange Ratio.

"Parent" shall have the meaning specified in the preamble to this
Agreement.

"Parent 1997 10-K" shall have the meaning specified in Section 5.02.

"Parent Affiliate Agreement" shall have the meaning specified in Section
7.03(b).

"Parent Benefit Plans" shall have the meaning specified in Section 5.09(a).

"Parent Common Stock" shall mean the Common Stock, par value $0.01 per
share, of Parent.

"Parent Disclosure Schedule" shall mean the disclosure schedule delivered
by Parent to the Company prior to the execution of this Agreement and forming a
part hereof.

"Parent Fairness Opinion" shall mean the written opinion of
Robinson-Humphrey delivered to the board of directors of Parent and WAG (i) to
the effect that the consideration to be paid in the Merger is fair, from a
financial point of view, to Parent and WAG, and (ii) which has been authorized
by Robinson-Humphrey for inclusion in the Proxy Statement.

"Parent Licenses" shall have the meaning specified in Section 5.14.

"Parent Material Adverse Effect" shall mean (i) prior to the consummation
of the Holding Company Reorganization, any change in or effect on the business
of WAG and the Parent Subsidiaries that is, or would reasonably be expected to
be, materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of WAG and the Parent Subsidiaries taken as a whole, other
than any change or effect relating to this Agreement or the transactions
contemplated hereby or the announcement thereof and (ii) after the consummation
of the Holding Company

A-5
<PAGE> 326

Reorganization, any change in or effect on the business of Parent and the Parent
Subsidiaries that is, or would reasonably be expected to be, materially adverse
to the business, assets (including intangible assets), liabilities (contingent
or otherwise), condition (financial or otherwise) or results of operations of
Parent and the Parent Subsidiaries taken as a whole, other than any change or
effect relating to this Agreement or the transactions contemplated hereby or the
announcement thereof.

"Parent Material Contract" shall have the meaning specified in Section
5.11.

"Parent Permits" shall have the meaning specified in Section 5.06(a).

"Parent Reports" shall have the meaning specified in Section 5.07(a).

"Parent Stockholders' Meeting" shall have the meaning specified in Section
7.01(a).

"Parent Stock Plans" shall mean WAG's 1991 Stock Option Plan, WAG's 1998
Incentive Compensation Plan, WAG's Outside Directors' Warrant Plan, and WAG's
Directors Warrant Incentive Plan, all of which are to be assumed by Parent upon
consummation of the Holding Company Reorganization.

"Parent Subsidiaries" shall have the meaning specified in Section 5.01.

"person" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association, entity
or government or political subdivision, agency or instrumentality of a
government.

"Presurrender Dividends" shall have the meaning specified in Section 3.02.

"Principal Stockholder" shall have the meaning specified in the recitals
hereto.

"Proxy Statement" shall have the meaning specified in Section 7.01(a).

"Registration Statement" shall have the meaning specified in Section
7.01(a).

"Representatives" shall have the meaning specified in Section 6.04(a).

"Restraints" shall have the meaning specified in Section 8.01(c).

"Resurgens Transaction" shall mean the pending acquisition by WAG and
Parent of (i) Cherry Communications Incorporated (d/b/a Resurgens Communications
Group) ("RCG") pursuant to that certain Agreement and Plan of Merger and
Reorganization dated as of May 12, 1998 to which WAG, Parent, RCG and certain
other persons are parties, and (ii) Cherry Communications U.K. Limited ("Cherry
U.K.") pursuant to that certain Share Exchange Agreement and Plan of
Reorganization dated as of May 12, 1998 to which WAG, Parent, the sole
shareholder of Cherry U.K. and Cherry U.K. are parties.

"Rights" shall have the meaning specified in Section 3.01(a).

"Rights Agreement" shall have the meaning specified in Section 4.03.

"Robinson-Humphrey" shall mean The Robinson-Humphrey Company, LLC.

"Rule 145 Affiliate" shall mean, with respect to any specified person, any
other persons who are "affiliates" of such specified person within the meaning
of rule 145 (c) or (d) promulgated under the Securities Act.

"SEC" shall mean the Securities and Exchange Commission.

"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.

"Share Consideration Pool" shall mean that number of shares of WAG Common
Stock determined by (i) subtracting from the Nominal Consideration the amount of
the Cash Consideration Pool and (ii) dividing the number obtained therefrom by
the Closing Date Market Price.

"Stockholders Proxy Agreement" shall have the meaning specified in the
recitals to this Agreement.

A-6
<PAGE> 327

"subsidiary" shall mean, with respect to any person, any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other subsidiary
of such person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.

"Superior Proposal" shall have the meaning specified in Section 6.06.

"Surviving Corporation" shall have the meaning specified in Section 2.01.

"Tax Consideration" shall mean the value determined by multiplying the
Average Tax Value by the product of (i) the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be cancelled pursuant to Section 3.01(b)
hereof) and (ii) the Common Exchange Ratio; provided, however, that if the
Closing Date Market Price is less than $20.47, then for purposes of this
calculation, the Common Exchange Ratio shall equal the quotient of (x) $12.00
divided by (y) the Closing Date Market Price.

"Taxes" shall mean any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Entity or taxing authority, including taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customers' duties, tariffs and similar charges.

"Terminating Company Breach" shall have the meaning specified in Section
9.01(g).

"Terminating Parent Breach" shall have the meaning specified in Section
9.01(h).

"Top-Up Consideration Pool" shall mean an amount of cash and/or a number of
shares of WAG Common Stock (which shares shall be valued at the Closing Date
Market Price) that have an aggregate value equal to the amount (if any)
determined by subtracting (i) the Nominal Consideration from (ii) the number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be cancelled
pursuant to Section 3.01(b) hereof) multiplied by $12.00 per share (the product
thereof being referred to herein as the "Top-Up Amount"), with the proportion of
cash comprising a part thereof equalling the ratio of the Cash Consideration
Pool to the sum of the Cash Consideration Pool and the value of the Share
Consideration Pool (where the value of the shares in such pool is determined by
reference to the Closing Date Market Price).

"U.S. GAAP" shall mean United States generally accepted accounting
principles.

"WAG Common Stock" shall mean the Common Stock, par value $0.01 per share,
of WAG.

ARTICLE II

THE MERGER

SECTION 2.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law, at the Effective Time, the Company shall be merged with and into Merger
Sub; provided, however, that if the Holding Company Reorganization shall not
have occurred prior to the Effective Time, then notwithstanding anything herein
to the contrary, (a) the Company shall be merged with and into WAG and the
provisions of this Agreement thereupon shall be deemed amended to the extent
necessary to provide therefor and (b) Parent and WAG shall waive any failure to
satisfy Section 8.03(a) or 8.03(b) to the extent such non-compliance results
only from any differences between the structure of such modified Merger and the
Merger. As a result of the Merger, the separate corporate existence of the
Company shall cease and Merger Sub shall continue as the surviving corporation
of the Merger (the "Surviving Corporation"). Parent may, upon notice to the
Company given not less than five business days prior to the Determination Date
and with the Company's consent (which

A-7
<PAGE> 328

will not be unreasonably withheld), elect to amend this Agreement to provide for
a merger of the Company with and into Parent or one or more direct or indirect
subsidiaries of WAG or of Parent (an "Alternative Merger"); provided, however,
that (i) any such Alternative Merger shall not alter or change the amount or
kind of consideration to be issued to holders of Company Capital Stock or
Company Stock Options as provided for in this Agreement, (ii) any such
Alternative Merger shall not adversely affect the tax or accounting treatment
provided for herein and shall not materially delay consummation of the
transactions contemplated hereby, (iii) in the event of any such election, the
Company shall have the opportunity to update the Company Disclosure Schedule to
reflect additional items that are required to be set forth therein only as a
result of any differences between the Alternative Merger structure and that of
the Merger, and (iv) Parent and WAG shall waive any failure to satisfy Section
8.03(a) or 8.03(b) to the extent such non-compliance results only from any
differences between the structure of the Alternative Merger and that of the
Merger.

SECTION 2.02. Closing. Unless this Agreement shall have been terminated
and the Merger shall have been abandoned pursuant to Section 9.01 and subject to
the satisfaction or waiver of the conditions set forth in Article VIII, the
consummation of the merger shall take place one business day following the date
of the Company Stockholders' Meeting or, if such conditions shall not then have
been satisfied or waived, as promptly as practicable thereafter (and in any
event within one business day) after satisfaction or waiver of the conditions
set forth in Article VIII, at a closing (the "Closing") to be held at such
location as is agreed to by the parties hereto, unless another date is agreed to
by the Company and Parent.

SECTION 2.03. Effective Time. At the time of the Closing, the parties
shall cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with the relevant
provisions of, the Delaware General Corporation Law (the date and time of such
filing, or such later time as may be agreed by the parties hereto and specified
in the Certificate of Merger, being the "Effective Time").

SECTION 2.04. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Delaware
General Corporation Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein, all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.

SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporation. Unless otherwise agreed by the Company and Parent
prior to the Effective Time, at the Effective Time:

(a) the certificate of incorporation and bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation and bylaws of the Surviving Corporation until thereafter
amended as provided by Law and such certificate of incorporation or bylaws;

(b) the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation until their
successors are elected or appointed and qualified or until their
resignation or removal; and

(c) the directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation until
their successors are elected or appointed and qualified or until their
resignation or removal.

A-8
<PAGE> 329

ARTICLE III

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

SECTION 3.01. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:

(a) Each share of Company Common Stock (together with the right to
purchase one-hundredth (1/100th) of a share of Company Preferred Stock (the
"Rights")) issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Common Stock to be cancelled pursuant to
Section 3.01(b) and, if applicable, any shares of Company Common Stock
which are held by stockholders entitled to and validly exercising appraisal
rights pursuant to Section 262 of the Delaware General Corporation Law
("Dissenting Stockholders")) and all rights in respect thereof shall
forthwith cease to exist and shall be converted into and become
exchangeable for the following (the "Merger Consideration"):

(i) subject to subsection (ii) below, that number of shares of WAG
Common Stock (the "Common Exchange Ratio") equal to the quotient of (A)
$17.00 divided by (B) the Closing Date Market Price; provided, however,
that (x) if the Closing Date Market Price is less than $29.00, then the
Common Exchange Ratio shall be equal to .5862, and (y) if the Closing
Date Market Price is more than $36.00, then the Common Exchange Ratio
shall be equal to .4722;

(ii) in lieu of the shares of WAG Common Stock provided by
subsection (i) above, at the election of Parent upon irrevocable notice
given to the Company in accordance with Section 10.02 hereof on the
Determination Date, a pro rata portion of (A) the Cash Consideration
Pool and (B) the Share Consideration Pool; and

(iii) in the case of either subsection (i) or subsection (ii)
above, if the aggregate Nominal Consideration is less than the Top-Up
Amount, a pro rata portion of the Top-Up Consideration Pool.

(b) Each share of Company Capital Stock held in the treasury of the
Company and each share of Company Capital Stock owned by WAG or Parent (in
each case, together with any Rights) or of the Company immediately prior to
the Effective Time shall be cancelled and extinguished without any
conversion thereof and no payment shall be made with respect thereto; and

(c) Each share of common stock, par value $0.01 per share, of Merger
Sub ("Merger Sub Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, $0.01 par value per share, of the
Surviving Corporation.

SECTION 3.02 Exchange of Shares Other than Treasury Shares. Subject to
the terms and conditions hereof, at or prior to the Effective Time, WAG shall
appoint an exchange agent reasonably acceptable to the Company to effect the
exchange of shares of Company Common Stock for the Merger Consideration, in
accordance with the provisions of this Article III (the "Exchange Agent"). From
time to time after the Effective Time, WAG shall deposit, or cause to be
deposited, certificates representing WAG Common Stock, the amount of the Cash
Consideration Pool and the amount of cash (if any) comprising a portion of the
Top-Up Consideration Pool for conversion of shares of Company Common Stock, in
accordance with the provisions of Section 3.01 (such certificates, together with
any dividends or distributions with respect thereto, and funds comprising the
Cash Consideration Pool and the Top-Up Consideration Pool (if any) being herein
referred to as the "Exchange Fund"). Commencing immediately after the Effective
Time and until the appointment of the Exchange Agent shall be terminated, each
holder of a certificate or certificates theretofore representing shares of
Company Common Stock may surrender the same to the Exchange Agent and, after the
appointment of the Exchange Agent shall be terminated, any such holder may
surrender any such certificate to WAG. Such holder shall be entitled upon such
surrender to receive in exchange therefor a certificate or certificates
representing the number of full shares of WAG Common Stock, the portion of the
Cash Consideration Pool and the portion of the Top-Up Consideration Pool into
which the shares of Company Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been

A-9
<PAGE> 330

converted in accordance with the provisions of Section 3.01, together with a
cash payment in lieu of fractional shares, if any, in accordance with Section
3.04, and the Merger Consideration shall be deemed to have been issued at the
Effective Time. Until so surrendered and exchanged, each outstanding certificate
which, prior to the Effective Time, represented issued and outstanding shares of
Company Common Stock shall be deemed for all corporate purposes of WAG, other
than the payment of dividends and other distributions, if any, to evidence
ownership of the number of full shares of WAG Common Stock, the portion of the
Cash Consideration Pool and the portion of the Top-Up Consideration Pool into
which the shares of Company Common Stock theretofore represented thereby shall
have been converted at the Effective Time in accordance with the provisions of
Section 3.01. Unless and until any such certificate theretofore representing
shares of Company Common Stock is so surrendered, no dividend or other
distribution, if any, payable to the holders of record of WAG Common Stock as of
any date subsequent to the Effective Time shall be paid to the holder of such
certificate in respect thereof. Upon the surrender of any such certificate
theretofore representing shares of Company Common Stock, however, the record
holder of the certificate or certificates representing shares of WAG Common
Stock issued in exchange therefor shall receive from the Exchange Agent or from
WAG, as the case may be, (i) payment of the amount of dividends and other
distributions, if any, which as of any date subsequent to the Effective Time and
until such surrender shall have become payable with respect to such number of
shares of WAG Common Stock ("Presurrender Dividends") and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of WAG Common Stock. No interest shall be payable with respect to the
payment of Presurrender Dividends upon the surrender of certificates theretofore
representing shares of Company Common Stock. After the appointment of the
Exchange Agent shall have been terminated, such holders of WAG Common Stock
which have not received payment of Presurrender Dividends shall look only to WAG
for payment thereof. Notwithstanding the foregoing provisions of this Section
3.02, risk of loss and title to such certificates representing shares of Company
Common Stock shall pass only upon proper delivery of such certificates to the
Exchange Agent, and neither the Exchange Agent nor any party hereto shall be
liable to a holder of shares of Company Capital Stock for any Merger
Consideration, or dividends or distributions thereon, delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law
or to a transferee pursuant to Section 3.03. References in this Section 3.02 to
Company Common Stock shall be deemed to include the associated Rights.

SECTION 3.03 Stock Transfer Books. (a) At the Effective Time, each of the
stock transfer books of the Company with respect to shares of Company Common
Stock shall be closed, and there shall be no further registration of transfers
of shares of Company Common Stock thereafter on the records of any such stock
transfer books. In the event of a transfer of ownership of shares of Company
Common Stock that is not registered in the stock transfer records of the
Company, at the Effective Time, a certificate or certificates representing the
number of full shares of WAG Common Stock into which such shares of Company
Common Stock shall have been converted shall be issued to the transferee
together with a cash payment representing the portion of the Cash Consideration
Pool and the Top-Up Consideration Pool into which such shares shall have been
converted in accordance with Section 3.01 and cash in lieu of fractional shares,
if any, in accordance with Section 3.04, and a cash payment in the amount of
Presurrender Dividends, if any, in accordance with Section 3.02, if the
certificate or certificates representing such shares of Company Capital Stock is
or are surrendered as provided in Section 3.02, accompanied by all documents
required to evidence and effect such transfer and by evidence of payment of any
applicable stock transfer tax.

(b) Notwithstanding anything to the contrary herein, certificates
surrendered for exchange by any person constituting a Rule 145 Affiliate of the
Company shall not be exchanged until Parent shall have received from such person
an executed Company Affiliate Agreement, as provided in Section 7.03.

SECTION 3.04. No Fractional Share Certificates. Unless WAG otherwise
determines, no scrip or fractional share certificates for WAG Common Stock shall
be issued upon the surrender for exchange of certificates evidencing shares of
Company Capital Stock, and an outstanding fractional share interest shall not
entitle the owner thereof to vote, to receive dividends or to any rights of a
stockholder of WAG or of the Surviving Corporation with respect to such
fractional share interest. In lieu of fractional shares, each holder of

A-10
<PAGE> 331

shares of Company Common Stock who, except for the provisions of this Section
3.04, would be entitled to receive a fractional share of WAG Common Stock shall,
upon surrender of the certificate or certificates representing shares of Company
Common Stock, be entitled to receive an amount in cash (rounded to the nearest
whole cent), without interest, equal to the product obtained by multiplying (a)
the fractional share interest to which such holder would otherwise be entitled
(after taking into account all shares of Company Capital Stock held at the
Effective Time by such holder) by (b) the closing price for a share of WAG
Common Stock reported on Nasdaq on the first business day immediately prior to
the Effective Time. At or prior to the Effective Time, Parent shall pay to the
Exchange Agent an amount in cash (the "Cash Deposit") sufficient for the
Exchange Agent to pay each holder of Company Common Stock the amount of cash in
lieu of fractional shares to which such holder is entitled pursuant to this
Section 3.04. As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding, to such holders of Company Common
Stock, subject to and in accordance with the terms of Section 3.02. In no event
shall either (i) the total cash consideration paid to holders of Company Common
Stock in lieu of fractional shares exceed one percent (1%) of the value of the
total consideration issued to holders of Company Common Stock in exchange for
their Company Capital Stock or (ii) any record holder of Company Common Stock,
directly or indirectly, receive cash in an amount equal to or greater than the
value of one full share of WAG Company Stock.

SECTION 3.05. Options to Purchase Company Common Stock. At the Effective
Time, each option granted by the Company to purchase shares of Company Common
Stock (each, a "Company Stock Option") which is outstanding and unexercised
immediately prior to the Effective Time shall be assumed by WAG and converted
into an option to purchase shares of WAG Common Stock in such number and at such
exercise price as provided below and otherwise having the same terms and
conditions as in effect immediately prior to the Effective Time (except to the
extent that such terms, conditions and restrictions may be altered in accordance
with their terms as a result of the Merger, including vesting as such shall
(except as provided in Section 6.01(b)) be accelerated at the Effective Time
pursuant to the terms of such Company Stock Options):

(a) the number of shares of WAG Common Stock to be subject to the new
option shall be equal to the product of (i) the number of shares of Company
Common Stock subject to the original option and (ii) the Common Exchange
Ratio; provided, however, that if the value of the Top-Up Consideration
Pool is greater than zero, the Common Exchange Ratio for purposes of this
Section 3.05(a) shall be equal to the quotient of $12.00 divided by the
Closing Date Market Price;

(b) the exercise price per share of Parent Common Stock under the new
option shall be equal to the quotient of (i) the exercise price per share
of Company Common Stock under the original option divided by (ii) the
Common Exchange Ratio; provided, however, that if the value of the Top-Up
Consideration Pool is greater than zero, then the Common Exchange Ratio for
purposes of this Section 3.05(b) shall be equal to the quotient of $12.00
divided by the Closing Date Market Price; and

(c) upon each exercise of options by a holder thereof, the aggregate
number of shares of WAG Common Stock deliverable upon such exercise shall
be rounded, if necessary, to the nearest whole share and the aggregate
exercise price shall be rounded up, if necessary, to the nearest cent.

The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.

SECTION 3.06. Certain Adjustments. If between the date of this Agreement
and the Effective Time, the outstanding shares of Company Capital Stock or WAG
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, then the exchange ratios established
pursuant to the provisions of Section 3.01 shall be adjusted accordingly to
provide to the holders of Company Capital Stock the same economic effect as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination,

A-11
<PAGE> 332

exchange, dividend or increase. In the event the Holding Company Reorganization
is consummated prior to the Effective Time, all references in this Article III
to WAG and to WAG Common Stock shall be deemed to be references to Parent and
Parent Common Stock, respectively.

SECTION 3.07. Undistributed Amounts. Any portion of the Exchange Fund or
the Cash Deposit which remains undistributed for six months after the Effective
Time shall be delivered to WAG, and any holder of Company Common Stock who has
not theretofore complied with the provisions of this Article III shall
thereafter look only to WAG for satisfaction of their claims for WAG Common
Stock or any cash in lieu of fractional shares of WAG Common Stock and any
Presurrender Dividends.

SECTION 3.08. Dissenters' Rights. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding shares of Company Common
Stock held by a Dissenting Stockholder shall not be converted as described in
Section 3.01(a) but, as of the Effective Time, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist and
shall become the right to receive such consideration as may be determined to be
due to such Dissenting Stockholder pursuant to the laws of the State of
Delaware; provided, however, that the shares of Company Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Stockholder who
shall, after the Effective Time withdraw his or her demand for appraisal or lose
his or her right of appraisal, in either case pursuant to the Delaware General
Corporation Law, shall be deemed to be converted as of the Effective Time into
the right to receive the Merger Consideration. The Company shall give Parent (i)
prompt notice of any written demands for appraisal of shares of Company Common
Stock received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demands.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub that:

SECTION 4.01. Organization and Qualification; Subsidiaries. (a) The
Company and each directly and indirectly owned subsidiary of the Company (the
"Company Subsidiaries") has been duly organized and is validly existing and in
good standing (to the extent applicable) under the laws of the jurisdiction of
its incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and each Company Subsidiary is duly
qualified or licensed to do business, and is in good standing (to the extent
applicable), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.

(b) Section 4.01 of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, a true and complete list of each Company Subsidiary,
together with (i) the jurisdiction of incorporation or organization of each
Company Subsidiary and the percentage of each Company Subsidiary's outstanding
capital stock or other equity interests owned by the Company or another Company
Subsidiary and (ii) an indication of whether each Company Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Section 4.01 of the Company Disclosure Schedule, neither
the Company nor any Company Subsidiary owns an equity interest in any
partnership or joint venture arrangement or other business entity that is
material to the financial condition, results of operations, business or
prospects of the Company and the Company Subsidiaries, taken as a whole.

SECTION 4.02. Certificate of Incorporation and Bylaws. The copies of the
Company's certificate of incorporation and bylaws that are incorporated by
reference as exhibits to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1997 (the "Company 1997 10-K") are true, complete and

A-12
<PAGE> 333

correct copies thereof. Such certificate of incorporation and bylaws are in full
force and effect. The Company is not in violation of any of the provisions of
its certificate of incorporation or bylaws.

SECTION 4.03. Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Company Common Stock, 1,000,000 shares of which
have been designated as Company Junior Common Stock, and 5,000,000 shares of
preferred stock, 200,000 of which have been designated as Company Preferred
Stock. As of the date hereof (i) 11,036,944 shares of Company Common Stock are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) no shares of Company Common Stock are held in the treasury
of the Company, (iii) no shares of Company Common Stock are held by the Company
Subsidiaries, (iv) 1,629,407 shares of Company Common Stock are reserved for
future issuance pursuant to employee stock options or stock incentive rights
granted under the Company Stock Plans, (v) 116,260 shares of Company Common
Stock are reserved for future issuance pursuant to the Company's 1983 Employee
Stock Purchase Plan and the Company's 1997 Foreign Employee Stock Purchase Plan
(collectively, the "Company Stock Purchase Plans"), (vi) 200,000 shares of
Company Preferred Stock are reserved for issuance pursuant to the Rights; and
(vii) no shares of Company Junior Common Stock are issued and outstanding.
Except for shares of Company Common Stock issuable pursuant to the Company Stock
Plans or pursuant to agreements or arrangements described in Section 4.03 of the
Company Disclosure Schedule or in the Company Reports and other than the Rights,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which the Company is a party or by which the
Company is bound relating to the issued or unissued capital stock of the Company
or any Company Subsidiary or obligating the Company or any Company Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. Section 4.03 of the Company Disclosure
Schedule sets forth a complete and correct list as of the date hereof of (w) the
number of options to purchase Company Common Stock outstanding and the number of
shares of Company Common Stock issuable thereunder, (x) the exercise price of
each such outstanding stock option, (y) the vesting schedule of each such
outstanding stock option and (z) the grantee or holder of each such option. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
prior to the Effective Time on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as described in Section
4.03 of the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Company Capital Stock or any capital stock of
any Company Subsidiary. Each outstanding share of capital stock of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Company Subsidiary is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where the failure to own such shares free and clear would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 4.03 of the Company
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any Company Subsidiary to provide funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Company Subsidiary or any other person. Prior to the execution and delivery of
this Agreement, the Company has entered into Amendment No. 1 to that certain
Rights Agreement dated as of February 19, 1997 between the Company and The First
National Bank of Boston, a national banking association, as Rights Agent (the
"Rights Agreement"), relating to the Rights to amend the definition of
"Acquiring Person" set forth in Section 1 of the Rights Agreement.

SECTION 4.04. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate such transactions (other than the approval of this
Agreement and the Merger by the holders of a majority of the outstanding shares
of Company Common Stock entitled to vote with respect thereto at the Company
Stockholders' Meeting and the filing and recordation of the Certificate of
Merger as required by the Delaware General Corporation Law). This

A-13
<PAGE> 334

Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.

SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation of
the Merger will not, (i) conflict with or violate any provision of the
certificate of incorporation or bylaws of the Company or any equivalent
organizational documents of any Company Subsidiary, (ii) assuming that all
consents, approvals, authorizations and permits described in Section 4.05(b)
have been obtained and all filings and notifications described in Section
4.05(b) have been made, conflict with or violate any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected or (iii) except as set
forth in Section 4.05(a) of the Company Disclosure Schedule, result in any
breach of or constitute a default (or an event which with the giving of notice
or lapse of time or both would reasonably be expected to become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Company Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not reasonably be expected, individually or in the
aggregate, (A) to have a Company Material Adverse Effect or (B) to prevent or
materially delay the performance by the Company of its obligations pursuant to
this Agreement or the consummation of the Merger.

(b) The execution and delivery of this Agreement by the Company do not, and
the performance by the Company of its obligations hereunder and the consummation
of the Merger will not, require any consent, approval, authorization or permit
of, or filing by the Company with or notification by the Company to, any
Governmental Entity, except (i) pursuant to applicable requirements of the
Exchange Act, the Securities Act, Blue Sky Laws, the rules and regulations of
Nasdaq, state takeover laws, the premerger notification requirements of the HSR
Act, if any, the filing and recordation of the Certificate of Merger as required
by the Delaware General Corporation Law, and as set forth in Section 4.05(b) of
the Company Disclosure Schedule, and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not reasonably be expected, individually or in the aggregate, (A) to have
a Company Material Adverse Effect or (B) to prevent or materially delay the
performance by the Company of its obligations pursuant to this Agreement or the
consummation of the Merger.

SECTION 4.06. Permits; Compliance with Laws. The Company and the Company
Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, establishment registrations, product listings, permits, easements,
variances, exceptions, consents, certificates, identification and registration
numbers, approvals and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties or to
produce, store, distribute and market its products or otherwise to carry on its
business as it is now being conducted (collectively, the "Company Permits"),
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect, and, as of the date of this
Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened, except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary is in conflict with, or in default or violation of, (i) any
Law applicable to the Company or any Company Subsidiary or by which any property
or asset of the Company or any Company Subsidiary is bound or affected or (ii)
any Company Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Except as
set forth in Section 4.06(a) of the Company Disclosure Schedule, since August
31, 1997, neither the Company nor any Company Subsidiary has received from any
Governmental Entity any written notification with respect to possible conflicts,
defaults or violations of Laws, except for written notices relating to possible
conflicts,

A-14
<PAGE> 335

defaults or violations that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.

(b) Except as disclosed on Section 4.06(b) of the Company Disclosure
Schedule, since August 31, 1997, there have been no written notices, citations
or decisions by any governmental or regulatory body that any product produced,
manufactured or marketed at any time by the Company or any of the Company
Subsidiaries (the "Company Products"), other than a Company Third Party Product
(as defined below), is defective or fails to meet any applicable standards
promulgated by any such governmental or regulatory body, and no senior executive
officer of the Company or any of the Company Subsidiaries knows of any such
defect or failure which has not been remedied or is in the process of being
remedied. In the case of products which are produced or manufactured by third
parties and are distributed by the Company or any of the Company Subsidiaries
(the "Company Third Party Products"), to the knowledge of any of the senior
executive officers of the Company or any of the Company Subsidiaries, since
August 31, 1997, there have been no written notices, citations or decisions by
any governmental or regulatory body that any Company Third Party Product
distributed at any time by the Company or any of the Company Subsidiaries is
defective or fails to meet any applicable standards promulgated by any such
governmental or regulatory body, and none of the senior executive officers of
the Company or any of the Company Subsidiaries knows of any such defect or
failure which has not been remedied or is in the process of being remedied. The
Company and each of the Company Subsidiaries (i) has complied with the laws,
regulations, policies, procedures and specifications applicable to the Company
with respect to the design, manufacture, testing and inspection of Company
Products in the United States and the operation of manufacturing facilities in
the United States promulgated by the United States Federal Communications
Commission (the "FCC"), and (ii) has complied with the laws, regulations,
policies, procedures and specifications applicable to the Company or such
Company Subsidiary, as applicable, in any jurisdiction outside the United States
with respect to the design, manufacture, testing and inspection of Company
Products and the operation of manufacturing facilities outside of the United
States, except in the case of clause (i) or (ii) for such non-compliance as
would not have a Company Material Adverse Effect. Except as disclosed on Section
4.06(b) of the Company Disclosure Schedule, since August 31, 1997, there have
been no recalls, field notifications or seizures ordered or, to the knowledge of
any of the senior executive officers of the Company or any of its Subsidiaries,
threatened by any such governmental or regulatory body with respect to any of
the Company Products, other than Company Third Party Products, and neither the
Company nor any of the Company Subsidiaries has independently engaged in recalls
or field notifications. In the case of Company Third Party Products distributed
by the Company or any of the Company Subsidiaries, neither the Company nor any
of the Company Subsidiaries has received any notices or any recalls, field
notifications or seizures ordered or threatened by any such governmental or
regulatory body with respect to any of such Company Third Party Products, and
neither the Company nor any of the Company Subsidiaries has independently
engaged in recalls or field notifications.

(c) Except as set forth on Section 4.06(c)(i) of the Company Disclosure
Schedule, the Company or one or more of the Company Subsidiaries has obtained,
in all countries where the Company or such Company Subsidiary, as applicable, is
marketing or has marketed the Company Products, all applicable licenses,
registrations, approvals, clearances and authorizations required to be obtained
by it by local, state or Federal agencies in such countries regulating the
safety, effectiveness and market clearance of the Company Products in such
countries that are currently marketed by the Company or such Company Subsidiary,
as applicable, except where the failure to obtain such licenses, registrations,
approvals, clearances and authorizations would not have a Company Material
Adverse Effect. Section 4.06(c)(ii) of the Company Disclosure Schedule sets
forth a list of all licenses, registrations, approvals, permits and device
listings relating to Company Products. Section 4.06(c)(iii) of the Company
Disclosure Schedule sets forth a description of all inspections by regulatory
authorities, recalls, product actions and audits of Company Products since
August 31, 1997.

SECTION 4.07. SEC Filings; Financial Statements. (a) Except as disclosed
in Section 4.07 of the Company Disclosure Schedule, the Company has timely filed
all forms, reports, statements and documents required to be filed by it (A) with
the SEC and Nasdaq since August 31, 1995 through the date of this Agreement
(collectively and as amended, the "Company Reports") and (B) with any other
Governmental Entities, including state regulatory authorities. Each Company
Report (i) was prepared in accordance with

A-15
<PAGE> 336

the requirements of the Securities Act, the Exchange Act or the rules and
regulations of Nasdaq, as the case may be, and (ii) did not at the time it was
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each form, report, statement and document referred to in
clause (b) of this paragraph was prepared in all material respects in accordance
with the requirements of applicable Law. Except as disclosed in Section 4.07 of
the Company Disclosure Schedule, no Company Subsidiary is subject to the
periodic reporting requirements of the Exchange Act or required to file any
form, report or other document with the SEC, Nasdaq, any other stock exchange or
any other comparable Governmental Entity.

(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company Reports filed since August 31, 1997
was prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly, in all material respects, the consolidated
financial position of the Company and the consolidated Company Subsidiaries as
at the respective dates thereof and for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which did not have and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect and as permitted by Form 10-Q of the SEC).

(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of the Company and the Company Subsidiaries as
reported in the Company Reports, including the notes thereto, none of the
Company or any Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with U.S. GAAP, except for liabilities or obligations incurred in the
ordinary course of business consistent with past practice since August 31, 1997
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect.

SECTION 4.08. Absence of Certain Changes or Events. Since August 31,
1997, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 4.08 of the Company Disclosure Schedule or as disclosed in any
Company Report filed since August 31, 1997 and prior to the date hereof, the
Company and the Company Subsidiaries have conducted their businesses only in the
ordinary course consistent with past practice and, since such date, there has
not been (i) any Company Material Adverse Effect, excluding any changes and
effects resulting from changes in economic, regulatory or political conditions
or changes in conditions generally applicable to the industries in which the
Company and the Company Subsidiaries are involved, (ii) any event that would
reasonably be expected to prevent or materially delay the performance of its
obligations pursuant to this Agreement and the consummation of the Merger by the
Company, (iii) any material change by the Company in its accounting methods,
principles or practices, (iv) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of Company Capital Stock or
any redemption, purchase or other acquisition of any of the Company's securities
or (v) any increase in the compensation or benefits or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary except in the ordinary course of business
consistent with past practice.

SECTION 4.09. Employee Benefit Plans; Labor Matters. (a) Section 4.09(a)
of the Company Disclosure Schedule lists all employee benefit plans (as defined
in Section 3(3) of ERISA) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, severance or other contracts
or agreements, whether legally enforceable or not, to which the Company or any
Company Subsidiary is a party, with respect to which the Company or any Company
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Company Subsidiary for the benefit of any
current or former employee, officer or director of the Company or any Company
Subsidiary (collectively, the "Company Benefit Plans"). With respect to each
Company Benefit Plan, the Company has delivered or made available to Parent a
true, complete and correct

A-16
<PAGE> 337

copy of (i) such Company Benefit Plan and the most recent summary plan
description related to such Company Benefit Plan, if a summary plan description
is required therefor, (ii) each trust agreement or other funding arrangement
relating to such Company Benefit Plan, (iii) the most recent annual report (Form
5500) filed with the IRS) with respect to such Company Benefit Plan, (iv) the
most recent actuarial report or financial statement relating to such Company
Benefit Plan and (v) the most recent determination letter issued by the IRS with
respect to such Company Benefit Plan, if it is qualified under Section 401(a) of
the Code. Neither the Company nor any Company Subsidiary has any express or
implied commitment, whether legally enforceable or not, (i) to create, incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.

(b) None of the Company Benefit Plans is a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Company or any Company Subsidiary could incur liability
under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). None of the
Company Benefit Plans provides for or promises retiree medical, disability or
life insurance benefits to any current or former employee, officer or director
of the Company or any Company Subsidiary.

(c) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all contributions required to be made
under the terms of any of the Company Benefit Plans as of the date of this
Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Reports prior to the date of this Agreement. Except as set forth in Section
4.09(c) of the Company Disclosure Schedule, with respect to the Company Benefit
Plans, no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company or any
Company Subsidiary could be subject to any liability under the terms of such
Company Benefit Plans, ERISA, the Code or any other applicable Law which would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. No legal action, suit or claim is pending or, to the
knowledge of the Company, threatened with respect to any Company Benefit Plan
(other than claims for benefits in the ordinary course).

(d) Except as disclosed in Section 4.09(d) of the Company Disclosure
Schedule or except as would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect: (i) each Company Benefit
Plan which is intended to be qualified under Section 401(a) of the Code or
Section 401(k) of the Code has received a favorable determination letter from
the IRS that it is so qualified and each trust established in connection with
any Company Benefit Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code has received a determination letter
from the IRS that it is so exempt, and no fact or event has occurred since the
date of such determination letter from the IRS to adversely affect the qualified
status of any such Company Benefit Plan or the exempt status of any such trust;
(ii) each trust maintained or contributed to by the Company or any Company
Subsidiary which is intended to be qualified as a voluntary employees'
beneficiary association and which is intended to be exempt from federal income
taxation under Section 501(c)(9) of the Code has received a favorable
determination letter from the IRS that it is so qualified and so exempt, and no
fact or event has occurred since the date of such determination by the IRS to
adversely affect such qualified or exempt status; (iii) there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Company Benefit Plan; (iv) neither the
Company nor any Company Subsidiary has incurred any liability for any penalty or
tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the Code or any
liability under Section 502 of ERISA, and no fact or event exists which could
give rise to any such liability; (v) no complete or partial termination has
occurred within the five years preceding the date hereof with respect to any
Company Benefit Plan; (vi) no Company Benefit Plan is subject to Title IV of
ERISA; (vii) none of the assets of the Company or any Company Subsidiary is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; neither the Company nor any Company Subsidiary has been required to
post any security under Section 307 of ERISA or Section 401(a)(29) of the Code;
and no fact or event exists which could give rise to any such lien or
requirement to post any such security; (viii) all

A-17
<PAGE> 338

contributions, premiums or payments required to be made with respect to any
Company Benefit Plan have been made on or before their due dates; and (ix) all
such contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any government entity and no fact
or event exists which could give rise to any such challenge or disallowance.

(e) Except as set forth in Section 4.09(e) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As of
the date of this Agreement, there is no labor dispute, strike or work stoppage
against the Company or any Company Subsidiary pending or, to the knowledge of
the Company, threatened which may interfere with the respective business
activities of the Company or any Company Subsidiary, except where such dispute,
strike or work stoppage would not reasonably be expected to have a Company
Material Adverse Effect. As of the date of this Agreement, to the knowledge of
the Company, there is no charge or complaint against the Company or any Company
Subsidiary pending before the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, except where such unfair
labor practice, charge or complaint would not reasonably be expected to have a
Company Material Adverse Effect.

(f) The Company has delivered or made available to Parent true, complete
and correct copies of (i) all employment agreements with officers and all
consulting agreements of the Company and each Company Subsidiary providing for
annual compensation in excess of $100,000, (ii) all severance plans, agreements,
programs and policies of the Company and each Company Subsidiary with or
relating to their respective employees or consultants, and (iii) all plans,
programs, agreements and other arrangements of the Company and each Company
Subsidiary with or relating to their respective employees or consultants which
contain "change of control" provisions.

SECTION 4.10. Certain Tax Matters. Except as disclosed in the Company
Reports, neither the Company nor, to the knowledge of the Company, any of its
affiliates has taken or agreed to take any action that would reasonably be
expected to prevent the Merger from constituting a transaction qualifying under
Section 368 of the Code. The Company is not aware of any agreement, plan or
other circumstances that would reasonably be expected to prevent the Merger from
so qualifying under Section 368 of the Code.

SECTION 4.11. Contracts; Debt Instruments. Except as disclosed in the
Company Reports or in Section 4.11 of the Company Disclosure Schedule, there is
no contract or agreement that is material to the business, financial condition
or results of operations of the Company and the Company Subsidiaries taken as a
whole (each, a "Company Material Contract"). Except as disclosed in the Company
Reports or in Section 4.11 of the Company Disclosure Schedule, neither the
Company nor any Company Subsidiary is in violation of or in default under (nor
does there exist any condition which with the passage of time or the giving of
notice would reasonably be expected to cause such a violation of or default
under) any loan or credit agreement, note, bond, mortgage, indenture or lease,
or any other contract, license, agreement, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Set forth
in Section 4.11 of the Company Disclosure Schedule is a description of any
material changes to the amount and terms of the indebtedness of the Company and
its subsidiaries as described in the notes to the financial statements
incorporated in the Company 1997 10-K.

SECTION 4.12. Litigation. Except as disclosed in the Company Reports or
in Section 4.12 of the Company Disclosure Schedule, there is no suit, claim or
action or, to the knowledge of the Company, proceeding or investigation pending
or threatened against the Company or any Company Subsidiary before any
Governmental Entity that would reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect, and, except as disclosed to
Parent, to the knowledge of the Company, there are no existing facts or
circumstances that would reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to Parent, the Company
is not aware of any facts or circumstances which would reasonably be expected to
result in the denial of insurance coverage under policies issued to the Company
and the Company Subsidiaries in respect of such suits, claims, actions,
proceedings

A-18
<PAGE> 339

and investigations for which the Company has a reasonable expectation of
obtaining insurance coverage, except in any case as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or as a result of the execution of this Agreement and consummation of
transactions hereunder. Except as disclosed in the Company Reports or in Section
4.12 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is subject to any outstanding order, writ, injunction or decree which
would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.

SECTION 4.13. Environmental Matters. Except as disclosed in the Company
Reports or in Section 4.13 of the Company Disclosure Schedule, or as would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (i) the Company and the Company Subsidiaries are in
compliance with all applicable Environmental Laws; (ii) all past noncompliance
of the Company or any Company Subsidiary with Environmental Laws or
Environmental Permits has been resolved without any pending, ongoing or future
obligation, cost or liability; and (iii) neither the Company nor any Company
Subsidiary has released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by the Company or any Company Subsidiary, in violation of any
Environmental Law.

SECTION 4.14. Intellectual Property. Except as set forth in Section 4.14
of the Company Disclosure Schedule, or as would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, (i)
the Company and the Company Subsidiaries own or possess adequate licenses or
other valid rights to use all patents, patent applications, patent rights,
trademarks, trademark rights, trade names, trade dress, trade name rights,
copyrights and copyright registrations and applications, copyright rights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the respective businesses of the Company and the Company
Subsidiaries as currently conducted, free and clear of all liens, and (ii) the
Company is unaware of any assertion or claim challenging the ownership, use or
validity of any of the foregoing. Section 4.14 of the Company Disclosure
Schedule lists all material licenses, sublicenses and other agreements to which
the Company or any Company Subsidiary is a party and pursuant to which (i) any
third party is authorized to use any intellectual property right of the Company
or any Company Subsidiary or (ii) the Company or any Company Subsidiary is
authorized to use any intellectual property rights (other than pursuant to
shrink-wrap and software licenses) of a third party (collectively, the "Company
Licenses"), and includes the identity of all parties thereto, a description of
the nature and subject matter thereof, the royalty provisions, if any, therein
and the term thereof. The material Company Licenses are valid and binding
obligations of the Company, enforceable in accordance with their terms, and
there are no material breaches or defaults thereunder. Except as set forth in
Section 4.14 of the Company Disclosure Schedule, the conduct of the respective
businesses of the Company and the Company Subsidiaries as currently conducted
does not infringe upon any patent, patent right, license, trademark, trademark
right, trade dress, trade name, trade name right, service mark, copyright or
copyright right of any third party that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. To the
knowledge of the Company, there are no infringements of any proprietary rights
owned by or licensed by or to the Company or any Company Subsidiary that could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.

SECTION 4.15. Taxes. Except as set forth in Section 4.15 of the Company
Disclosure Schedule and except for such matters that would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) the Company and each of the Company Subsidiaries has timely filed or
shall timely file all returns and reports required to be filed by it with any
taxing authority, taking into account any extension of time to file granted to
or obtained on behalf of the Company and the Company Subsidiaries, (ii) all
Taxes shown to be payable on such returns or reports have been or will be paid,
(iii) as of the date hereof, no deficiencies for any amount of Tax have been
asserted or assessed by any taxing authority against the Company or any Company
Subsidiary that are not adequately reserved for and (iv) the most recent
financial statements contained in the Company Reports reflect an adequate
reserve in accordance with U.S. GAAP for all taxes payable by the Company and
the Company Subsidiaries for all taxable periods and

A-19
<PAGE> 340

portions thereof accrued through the date of such financial statements. Within
ten days after the date hereof, the Company and the Company Subsidiaries will
make available to Parent or its legal counsel for inspection copies of all
income and sales and use tax returns for all periods since the date of the
Company's and the Company Subsidiaries' incorporation.

SECTION 4.16. Rule 145 Affiliates. Section 4.16 of the Company Disclosure
Schedule sets forth the name and address of each person who is, in the Company's
reasonable judgment, a Rule 145 Affiliate of the Company.

SECTION 4.17. Brokers. Except for Broadview, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of the Company.

SECTION 4.18. Certain Business Practices. None of the Company, any
Company Subsidiary or any directors, officers, agents or employees of the
Company or any Company Subsidiary (in their capacities as such) has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (iii) consummated any transaction, made any
payment, entered into any agreement or arrangement or taken any other action in
violation of Section 1128B(b) of the Social Security Act, as amended, or (iv)
made any other unlawful payment.

SECTION 4.19. Transaction Expenses. Section 4.19 of the Company
Disclosure Schedule sets forth the Company's current, good faith, itemized
estimate, as of the date of this Agreement, of the fees and expenses the Company
will incur in connection with consummating the Merger and the other transactions
contemplated hereby.

SECTION 4.20. Interested Party Transactions. Except as set forth in
Section 4.20 of the Company Disclosure Schedule or in the Company Reports and
except for transactions of the type described in the Company Reports which have
occurred since August 1, 1997 in the ordinary course of business, since August
31, 1997, no executive officer, director or stockholder of the Company or any of
the Company Subsidiaries has engaged in any business dealings with the Company
or any of the Company Subsidiaries (other than any such business dealings that
would not required to be disclosed in a proxy statement satisfying the
requirements of Regulation 14A promulgated under the Exchange Act filed on the
date hereof).

SECTION 4.21. Charter Anti-takeover Provisions and State Takeover
Statutes. The board of directors of the Company has approved by a majority of
the Disinterested Directors (as defined in the Company's Certificate of
Incorporation) the Merger, this Agreement, the Stockholders Proxy Agreement and
the transactions contemplated hereby and thereby, and such approval is
sufficient to render inapplicable to the Merger, this Agreement, the
Stockholders Proxy Agreement, and the transactions contemplated hereby and
thereby the provisions of the Company's Certificate of Incorporation requiring
the supermajority approval of the Company's stockholders and the provisions of
Section 203 of the Delaware General Corporation Law. To the knowledge of the
Company, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement, the Stockholders
Proxy Agreement or the transactions contemplated hereby or thereby.

SECTION 4.22. Opinion of Financial Advisor. The Company has received the
Company Fairness Opinion.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF WAG, PARENT AND MERGER SUB

WAG, Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:

SECTION 5.01. Organization and Qualification; Subsidiaries. WAG, Parent,
Merger Sub and each other subsidiary of Parent or WAG (the "Parent
Subsidiaries") has been duly organized and is validly existing

A-20
<PAGE> 341

and in good standing (to the extent applicable) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. WAG, Parent, Merger Sub and each
other Parent Subsidiary is duly qualified or licensed to do business, and is in
good standing (to the extent applicable), in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.

(b) Section 5.01 of the Parent Disclosure Schedule sets forth, as of the
date of this Agreement, a true and complete list of each Parent Subsidiary,
together with (i) the jurisdiction of incorporation or organization of each
Parent Subsidiary and the percentage of each Parent Subsidiary's outstanding
capital stock or other equity interests owned by Parent or another Parent
Subsidiary and (ii) an indication of whether each Parent Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Section 5.01 of the Parent Disclosure Schedule, neither
Parent nor any Parent Subsidiary owns an equity interest in any partnership or
joint venture arrangement or other business entity that is material to the
financial condition, results of operations, business or prospects of Parent and
the Parent Subsidiaries, taken as a whole.

SECTION 5.02. Certificate of Incorporation and Bylaws. The copies of
WAG's certificate of incorporation and bylaws that are incorporated by reference
as exhibits to WAG's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "Parent 1997 10-K") are true, complete and correct copies
thereof. Parent has heretofore furnished the Company with true, complete and
correct copies of the certificate of incorporation and bylaws of each of Parent
and Merger Sub. Such certificates and bylaws are in full force and effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
certificate or bylaws.

SECTION 5.03. Capitalization. The authorized capital stock of Parent
consists of 40,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock. As of the date hereof (i) 1,000 shares of Parent Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
nonassessable and owned by WAG, and (ii) no shares of Parent Common Stock are
held by the Parent Subsidiaries. As of the date hereof, there are no shares of
preferred stock of Parent issued and outstanding. The authorized capital stock
of WAG consists of 40,000,000 shares of WAG Common Stock and 10,000,000 shares
of preferred stock. As of the date hereof, (i) 21,878,713 shares of WAG Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of WAG Common Stock are held in the treasury
of WAG, (iii) no shares of WAG Common Stock are held by the Parent Subsidiaries,
(iv) 4,621,774 shares of WAG Common Stock are reserved for future issuance
pursuant to stock options under the Parent Stock Plans, (v) 617,340 shares of
WAG Common Stock are reserved for issuance pursuant to outstanding warrants to
purchase shares of WAG Common Stock, and (vi) 3,105,485 shares of WAG Common
Stock are reserved for issuance upon conversion of WAG's 4.5% Convertible
Subordinated Notes due 2002. As of the date hereof, there are no shares of
preferred stock of WAG issued and outstanding. Upon consummation of the Holding
Company Reorganization, the Parent will succeed to the capitalization of WAG.
Except for the shares of WAG Common Stock issuable pursuant to the Parent Stock
Plans, the Holding Company Reorganization or the Resurgens Transaction or
pursuant to agreements or arrangements described in Section 5.03 of the Parent
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which either WAG or Parent is a
party or by which either WAG or Parent is bound relating to the issued or
unissued capital stock of WAG, Parent, Merger Sub or any other Parent Subsidiary
or obligating Parent, Merger Sub or any other Parent Subsidiary to issue or sell
any shares of capital stock of, or other equity interests in, WAG, Parent,
Merger Sub or any other Parent Subsidiary. All shares of WAG Common Stock
subject to issuance (and all shares of Parent Common Stock upon consummation of
the Holding Company Reorganization) as aforesaid, upon issuance prior to the

A-21
<PAGE> 342

Effective Time on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. Except as described in Section 5.03 of the Parent Disclosure
Schedule, there are no outstanding contractual obligations of WAG, Parent,
Merger Sub or any other Parent Subsidiary to repurchase, redeem or otherwise
acquire any shares of WAG Common Stock, Parent Common Stock or any capital stock
of any Parent Subsidiary. Each outstanding share of capital stock of each Parent
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by WAG, Parent or another Parent Subsidiary is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on WAG's, Parent's or such other Parent
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where the failure to own such shares free and clear would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Except as set forth in Section 5.03 of the Parent
Disclosure Schedule, there are no outstanding contractual obligations of WAG,
Parent, Merger Sub or any other Parent Subsidiary to provide funds to, or make
any material investment (in the form of a loan, capital contribution or
otherwise) in, any Parent Subsidiary or any other person.

SECTION 5.04. Authority Relative to this Agreement. WAG, Parent and
Merger Sub have all necessary corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by WAG, Parent and Merger Sub and the consummation by WAG, Parent
and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of WAG, Parent or Merger Sub are necessary to authorize
this Agreement or to consummate such transactions (other than the approval of
the issuance of the WAG Common Stock or the Parent Common Stock, as the case may
be, pursuant to the Merger and the increase in the authorized WAG Common Stock
or Parent Common Stock (after the Holding Company Reorganization) to 100,000,000
shares by the holders of a majority of the outstanding shares of WAG Common
Stock, in the event that the Holding Company Reorganization shall not have been
consummated by the time of the Parent Stockholders' Meeting, or Parent Common
Stock, in the event that the Holding Company Reorganization shall have been so
consummated, and the filing and recordation of the Certificate of Merger as
required by the Delaware General Corporation Law). This Agreement has been duly
executed and delivered by WAG, Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of WAG, Parent and Merger Sub, enforceable against
WAG, Parent and Merger Sub in accordance with its terms.

SECTION 5.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by WAG, Parent and Merger Sub do not,
and the performance by WAG, Parent and Merger Sub of their obligations hereunder
and the consummation of the Merger will not, (i) conflict with or violate any
provision of the certificate or articles of incorporation, as the case may be,
or bylaws of WAG, Parent or Merger Sub or any equivalent organizational
documents of any other Parent Subsidiary, (ii) assuming that all consents,
approvals, authorizations and permits described in Section 5.05(b) have been
obtained and all filings and notifications described in Section 5.05(b) have
been made, conflict with or violate any Law applicable to Parent or any other
Parent Subsidiary or by which any property or asset of WAG, Parent, Merger Sub
or any other Parent Subsidiary is bound or affected or (iii) except as set forth
in Section 5.05(a) of the Parent Disclosure Schedule, result in any breach of or
constitute a default (or an event which with the giving of notice or lapse of
time or both would reasonably be expected to become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of WAG, Parent, Merger Sub or any other Parent Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not reasonably be expected, individually or in the
aggregate, (A) to have a Parent Material Adverse Effect or (B) to prevent or
materially delay the performance by WAG, Parent or Merger Sub of its obligations
pursuant to this Agreement or the consummation of the Merger.

A-22
<PAGE> 343

(b) The execution and delivery of this Agreement by WAG, Parent and Merger
Sub do not, and the performance by WAG, Parent and Merger Sub of their
respective obligations hereunder and the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by WAG,
Parent or Merger Sub with or notification by WAG, Parent or Merger Sub to, any
Governmental Entity, except (i) pursuant to applicable requirements of the
Exchange Act, the Securities Act, Blue Sky Laws, the rules and regulations of
Nasdaq, state takeover laws, the premerger notification requirements of the HSR
Act, if any, and the filing and recordation of the Certificate of Merger as
required by the Delaware General Corporation Law and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not reasonably be expected, individually or in
the aggregate, (A) to have a Parent Material Adverse Effect or (B) to prevent or
materially delay the performance by WAG, Parent or Merger Sub of its obligations
pursuant to this Agreement or the consummation of the Merger.

SECTION 5.06. Permits; Compliance with Laws. WAG, Parent, Merger Sub and
each other Parent Subsidiary is in possession of all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity necessary for WAG, Parent, Merger Sub or any other Parent
Subsidiary to own, lease and operate its properties or to store, distribute and
market its products or otherwise to carry on its business as it is now being
conducted (collectively, the "Parent Permits"), except where the failure to
have, or the suspension or cancellation of, any of the Parent Permits would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, and, as of the date of this Agreement, no suspension or
cancellation of any of the Parent Permits is pending or, to the knowledge of
Parent or WAG, threatened, except where the failure to have, or the suspension
or cancellation of, any of the Parent Permits would not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.
None of WAG, Parent, Merger Sub or any other Parent Subsidiary is in conflict
with, or in default or violation of, (i) any Law applicable to WAG, Parent,
Merger Sub or any other Parent Subsidiary or by which any property or asset of
WAG, Parent, Merger Sub or any other Parent Subsidiary is bound or affected or
(ii) any Parent Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Except as
set forth in Section 5.06(a) of the Parent Disclosure Schedule, since December
31, 1997, neither WAG or Parent nor any Parent Subsidiary has received from any
Governmental Entity any written notification with respect to possible conflicts,
defaults or violations of Laws, except for written notices relating to possible
conflicts, defaults or violations that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.07. SEC Filings; Financial Statements. (a) WAG has timely filed
all forms, reports, statements and documents required to be filed by it (A) with
the SEC and Nasdaq since December 31, 1995 through the date of this Agreement
(collectively and as amended, the "Parent Reports") and (B) with any other
Governmental Entities, including state regulatory authorities. Except as
disclosed in Section 5.07(a) of the Parent Disclosure Schedule, each Parent
Report (i) was prepared in accordance with the requirements of the Securities
Act, the Exchange Act or the rules and regulations of Nasdaq, as the case may
be, and (ii) did not at the time it was filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each form, report,
statement and document referred to in clause (b) of this paragraph was prepared
in all material respects in accordance with the requirements of applicable Law.
Except as disclosed in Section 5.07(a) of the Parent Disclosure Schedule, no
Parent Subsidiary is subject to the periodic reporting requirements of the
Exchange Act or required to file any form, report or other document with the
SEC, Nasdaq, any other stock exchange or any other comparable Governmental
Entity.

(b) Except as is provided in Section 5.07(b) of the Parent Disclosure
Schedule, each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Parent Reports filed since December
31, 1997 was prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly, in all material respects, the consolidated
financial position of Parent and the consolidated Parent Subsidiaries as at the

A-23
<PAGE> 344

respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which did not have and would not be
reasonably expected to have, individually or in the aggregate, to have a Parent
Material Adverse Effect and as permitted by Form 10-Q of the SEC).

(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of WAG and the Parent Subsidiaries as reported in the
Parent Reports, including the notes thereto, or as disclosed in Section 5.07(c)
of the Parent Disclosure Schedule, none of WAG, Parent or any Parent Subsidiary
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with U.S. GAAP, except for
liabilities or obligations incurred in the ordinary course of business
consistent with past practice since December 31, 1997 that have not had and
would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.

SECTION 5.08. Absence of Certain Changes or Events. Since December 31,
1997, except as contemplated by or as disclosed in this Agreement, as set forth
in Section 5.08 of the Parent Disclosure Schedule or as disclosed in any Parent
Report filed since December 31, 1997 and the date hereof, WAG, Parent and the
Parent Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Parent Material Adverse Effect, excluding any changes and effects resulting from
changes in economic, regulatory or political conditions or changes in conditions
generally applicable to the industries in which WAG, Parent and the Parent
Subsidiaries are involved, (ii) any event that would reasonably be expected to
prevent or materially delay the performance of its obligations pursuant to this
Agreement and the consummation of the Merger by Merger Sub, (iii) any material
change by WAG in its accounting methods, principles or practices, (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of the shares of WAG Common Stock or Parent Common Stock or any redemption,
purchase or other acquisition of any of WAG's or Parent's securities, or (v) any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of Parent,
WAG or any Parent Subsidiary except in the ordinary course of business
consistent with past practice.

SECTION 5.09. Employee Benefit Plans; Labor Matters. (a) With respect to
all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally
enforceable or not, to which WAG, Parent or any Parent Subsidiary is a party,
with respect to which WAG, Parent or any Parent Subsidiary has any obligation or
which are maintained, contributed to or sponsored by WAG, Parent or any Parent
Subsidiary for the benefit of any current or former employee, officer or
director of WAG, Parent or any Parent Subsidiary (collectively, the "Parent
Benefit Plans"), Parent has delivered or made available to the Company a true,
complete and correct copy of (i) such Parent Benefit Plan and the most recent
summary plan description related to such Parent Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Parent Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS with respect to such Parent Benefit Plan,
(iv) the most recent actuarial report or financial statement relating to such
Parent Benefit Plan and (v) the most recent determination letter issued by the
IRS with respect to such Parent Benefit Plan, if it is qualified under Section
401(a) of the Code. Neither WAG, Parent nor any Parent Subsidiary has any
express or implied commitment, whether legally enforceable or not, (i) to
create, incur liability with respect to or cause to exist any other employee
benefit plan, program or arrangement, (ii) to enter into any contract or
agreement to provide compensation or benefits to any individual or (iii) to
modify, change or terminate any Parent Benefit Plan, other than with respect to
a modification, change or termination required by ERISA or the Code.

A-24
<PAGE> 345

(b) None of the Parent Benefit Plans is a Multiemployer Plan or a Multiple
Employer Plan. None of the Parent Benefit Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of WAG, Parent or any Parent Subsidiary.

(c) Each Parent Benefit Plan has been administered in all material respects
in accordance with its terms and all contributions required to be made under the
terms of any of the Parent Benefit Plans as of the date of this Agreement have
been timely made or have been reflected on the most recent consolidated balance
sheet filed or incorporated by reference in the Parent Reports prior to the date
of this Agreement. With respect to the Parent Benefit Plans, no event has
occurred and, to the knowledge of WAG or Parent, there exists no condition or
set of circumstances in connection with which WAG, Parent or any Parent
Subsidiary could be subject to any liability under the terms of such Parent
Benefit Plans, ERISA, the Code or any other applicable Law which would
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. No legal action, suit or claim is pending or, to WAG's
and Parent's knowledge, threatened with respect to any Parent Benefit Plan
(other than claims for benefits in the ordinary course).

(d) Other than as disclosed in Section 5.09(d) of the Parent Disclosure
Schedule or except as would not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect: (i) each Parent Benefit Plan
which is intended to be qualified under Section 401(a) of the Code or Section
401(k) of the Code has received a favorable determination letter from the IRS
that it is so qualified and each trust established in connection with any Parent
Benefit Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
it is so exempt, and no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Parent Benefit Plan or the exempt status of any such trust; (ii) each
trust maintained or contributed to by WAG, Parent or any Parent Subsidiary which
is intended to be qualified as a voluntary employees' beneficiary association
and which is intended to be exempt from federal income taxation under Section
501(c)(9) of the Code has received a favorable determination letter from the IRS
that it is so qualified and so exempt, and no fact or event has occurred since
the date of such determination by the IRS to adversely affect such qualified or
exempt status; (iii) there has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Parent Benefit Plan; (iv) neither WAG, Parent nor any Parent Subsidiary has
incurred any liability for any penalty or tax arising under Section 4971, 4972,
4980, 4980B or 6652 of the Code or any liability under Section 502 of ERISA, and
no fact or event exists which could give rise to any such liability; (v) no
complete or partial termination has occurred within the five years preceding the
date hereof with respect to any Parent Benefit Plan; (vi) no reportable event
(within the meaning of Section 4043 of ERISA) has occurred or is expected to
occur with respect to any Parent Benefit Plan subject to Title IV of ERISA;
(vii) no Parent Benefit Plan had an accumulated funding deficiency (within the
meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived, as of the most recently ended plan year of such Parent Benefit Plan;
(viii) none of the assets of WAG, Parent or any Parent Subsidiary is the subject
of any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code;
neither WAG, Parent nor any Parent Subsidiary has been required to post any
security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no
fact or event exists which could give rise to any such lien or requirement to
post any such security; (ix) all contributions, premiums or payments required to
be made with respect to any Parent Benefit Plan have been made on or before
their due dates; (x) all such contributions have been fully deducted for income
tax purposes and no such deduction has been challenged or disallowed by any
government entity and no fact or event exists which could give rise to any such
challenge or disallowance; and (xi) as of the Effective Time, no Parent Benefit
Plan which is subject to Title IV of ERISA will have an "unfunded benefit
liability" (within the meaning of Section 4001(a)(18) of ERISA).

(e) Except as set forth in Section 5.09(e) of the Parent Disclosure
Schedule, neither WAG or Parent nor any Parent Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by WAG, Parent or any Parent Subsidiary and no collective bargaining
agreement is being negotiated by WAG, Parent or any Parent Subsidiary. As of the
date of this Agreement, there is no labor dispute, strike or work stoppage
against WAG, Parent or any Parent Subsidiary pending or, to the knowledge of WAG
or Parent, threatened which may interfere with the respective business
activities of WAG, Parent or

A-25
<PAGE> 346

any Parent Subsidiary, except where such dispute, strike or work stoppage would
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. As of the date of this Agreement, to the knowledge of
WAG or Parent, there is no charge or complaint against WAG, Parent or any Parent
Subsidiary pending before the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing, except where such unfair
labor practice, charge or complaint would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.10. Certain Tax Matters. Except as disclosed in the Parent
Reports, neither WAG or Parent nor, to the knowledge of WAG or Parent, any of
its affiliates has taken or agreed to take any action that would reasonably be
expected to prevent the Merger from constituting a transaction qualifying under
Section 368 of the Code. Neither WAG nor Parent is aware of any agreement, plan
or other circumstances that would reasonably be expected to prevent the Merger
from so qualifying under Section 368 of the Code.

SECTION 5.11. Contracts; Debt Instruments. Except as disclosed in the
Parent Reports or in Section 5.11 of the Parent Disclosure Schedule, there is no
contract or agreement that is material to the business, financial condition or
results of operations of WAG, Parent and the Parent Subsidiaries taken as a
whole (each, a "Parent Material Contract"). Except as disclosed in the Parent
Reports, neither WAG or Parent nor any Parent Subsidiary is in violation of or
in default under (nor does there exist any condition which with the passage of
time or the giving of notice would reasonably be expected to cause such a
violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture or lease, or any other contract, license, agreement,
arrangement or understanding to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Set forth in Section 5.11 of the Parent Disclosure
Schedule is a description of any material changes to the amount and terms of the
indebtedness of WAG, Parent and the Parent Subsidiaries as described in the
notes to the financial statements incorporated in the Parent 1997 10-K.

SECTION 5.12. Litigation. Except as disclosed in the Parent Reports or in
Section 5.12 of the Parent Disclosure Schedule, there is no suit, claim or
action or, to the knowledge of WAG or Parent, proceeding or investigation
pending or threatened against WAG, Parent or any Parent Subsidiary before any
Governmental Entity that would reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect, and, except as disclosed to
the Company, to the knowledge of WAG or Parent, there are no existing facts or
circumstances that would reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Except as disclosed to the Company, neither
WAG nor Parent is aware of any facts or circumstances which would reasonably be
expected to result in the denial of insurance coverage under policies issued to
WAG, Parent and the Parent Subsidiaries in respect of such suits, claims,
actions, proceedings and investigations, except in any case as would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or as a result of the execution of this Agreement and
consummation of transactions hereunder. Except as disclosed in the Parent
Reports, neither WAG or Parent nor any Parent Subsidiary is subject to any
outstanding order, writ, injunction or decree which would reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.13. Environmental Matters. Except as disclosed in the Parent
Reports or as would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect, (i) WAG, Parent and the Parent
Subsidiaries are in compliance with all applicable Environmental Laws; (ii) all
past noncompliance of WAG, Parent or any Parent Subsidiary with Environmental
Laws or Environmental Permits has been resolved without any pending, ongoing or
future obligation, cost or liability; and (iii) neither WAG or Parent nor any
Parent Subsidiary has released a Hazardous Material at, or transported a
Hazardous Material to or from, any real property currently or formerly owned,
leased or occupied by WAG or Parent or any Parent Subsidiary in violation of any
Environmental Law.

SECTION 5.14. Intellectual Property. Except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) WAG, Parent and the Parent Subsidiaries own or possess adequate
licenses or other valid rights to use all patents, patent applications, patent
rights, trademarks, trademark rights, trade names, trade dress, trade name
rights, copyrights and copyright

A-26
<PAGE> 347

registrations and applications, copyright rights, service marks, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
respective businesses of WAG, Parent and the Parent Subsidiaries as currently
conducted, free and clear of all liens, and (ii) neither WAG nor Parent is aware
of any assertion or claim challenging the ownership, use or validity of any of
the foregoing. Section 5.14 of the Parent Disclosure Schedule lists all material
licenses, sublicenses and other agreements to which WAG, Parent or any Parent
Subsidiary is a party and pursuant to which (i) any third party is authorized to
use any intellectual property right of WAG, Parent or any Parent Subsidiary or
(ii) WAG, Parent or any Parent Subsidiary is authorized to use any intellectual
property rights (other than pursuant to shrink-wrap and software licenses) of a
third party (collectively, the "Parent Licenses"), and includes the identity of
all parties thereto, a description of the nature and subject matter thereof, the
royalty provisions, if any, therein and the term thereof. The material Parent
Licenses are valid and binding obligations of Parent, enforceable in accordance
with their terms, and there are no material breaches or defaults thereunder.
Except as set forth in Section 5.14 of the Parent Disclosure Schedule, the
conduct of the respective businesses of WAG, Parent and the Parent Subsidiaries
as currently conducted does not infringe upon any patent, patent right,
trademark, trademark right, trade dress, trade name, trade name right, service
mark, copyright or copyright right of any third party that would reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. To the knowledge of WAG or Parent, there are no infringements of any
proprietary rights owned by or licensed by or to WAG, Parent or any Parent
Subsidiary that would reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.

SECTION 5.15. Taxes. Except as set forth in Section 5.15 of the Parent
Disclosure Schedule and except for such matters that would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, (i) WAG, Parent, Merger Sub and each other Parent Subsidiary has timely
filed or shall timely file all returns and reports required to be filed by it
with any taxing authority, taking into account any extension of time to file
granted to or obtained on behalf of WAG, Parent, Merger Sub and the other Parent
Subsidiaries, (ii) all Taxes shown to be payable on such returns or reports have
been or will be paid, (iii) as of the date hereof, no deficiency for any amount
of Tax has been asserted or assessed by a taxing authority against WAG, Parent,
Merger Sub or any other Parent Subsidiary that have been adequately reserved
for, and (iv) the most recent financial statements contained in the Parent
Reports reflect an adequate reserve in accordance with U.S. GAAP for all Taxes
payable by WAG, Parent, Merger Sub and the other Parent Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements.

SECTION 5.16. Brokers. Except for Robinson-Humphrey, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of WAG or Parent.

SECTION 5.17. Certain Business Practices. None of WAG, Parent, any Parent
Subsidiary or any directors, officers, agents or employees of WAG, Parent or any
Parent Subsidiary (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction, made any payment, entered
into any agreement or arrangement or taken any other action in violation of
Section 1128B(b) of the Social Security Act, as amended, or (iv) made any other
unlawful payment.

SECTION 5.18. Opinion of Financial Advisor. Parent and WAG have received
the Parent Fairness Opinion.

SECTION 5.19. Interested Party Transactions. Except as set forth in
Section 5.19 of the Parent Disclosure Schedule or in the Parent Reports, since
December 31, 1997, no executive officer, director or stockholder of Parent or
WAG or any of the Parent Subsidiaries has engaged in any business dealings with
Parent or WAG or any of the Parent Subsidiaries (other than any such business
dealings that would not

A-27
<PAGE> 348

required to be disclosed in a proxy statement satisfying the requirements of
Regulation 14A promulgated under the Exchange Act filed on the date hereof).

SECTION 5.20. Ownership of Company Capital Stock. Except for the
Stockholders Proxy Agreement, none of WAG, Parent, or to WAG's or Parent's
knowledge, any of their affiliates, (i) beneficially owns (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Capital Stock.

ARTICLE VI

COVENANTS

SECTION 6.01. Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 6.01 of the Company Disclosure Schedule or as
expressly contemplated by any other provision of this Agreement, unless Parent
shall otherwise agree in writing, (x) the respective businesses of the Company
and the Company Subsidiaries shall be conducted only in, and the Company and the
Company Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (y) the Company shall use all
reasonable efforts to keep available the services of such of the current
officers, significant employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and the
Company Subsidiaries with such of the corporate partners, customers, suppliers
and other persons with which the Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, except as set
forth in Section 6.01 of the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, neither the Company nor
any Company Subsidiary shall, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed:

(a) amend or otherwise change its certificate of incorporation or
bylaws or equivalent organizational documents;

(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of the Company or any Company Subsidiary of any
class, or securities convertible into or exchangeable or exercisable for
any shares of such capital stock, or any options, warrants or other rights
of any kind to acquire any shares of such capital stock, or any other
ownership interest (including any phantom interest), of the Company or any
Company Subsidiary except (A) pursuant to the Rights Agreement, (B)
pursuant to the Company Stock Purchase Plans, (C) for issues of Company
Common Stock pursuant to options outstanding on the date hereof and
disclosed as such pursuant to Section 4.03 and (D) for employee stock
option grants to non-executive officers and directors of the Company;
provided, however, that (v) such grants are at fair market value, at a
level consistent with past practice and have vesting schedules consistent
with past practice, (w) Parent has received notice of the Company's
intention to grant such options, (x) the aggregate amount of such granted
options does not exceed 150,000 shares of Company Common Stock, (y) no
person shall receive a grant in excess of 7,000 shares of Company Common
Stock and (z) the vesting of such granted options shall not be accelerated
as a result of the Merger, or (ii) any material property or assets of the
Company or any Company Subsidiary, except in the ordinary course of
business;

(c) (i) acquire (including by merger, consolidation, or acquisition of
stock or assets) any interest in any corporation, partnership, other
business organization or person or any division thereof; (ii) except for
borrowings under existing credit facilities, incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person for borrowed money or make any loans or advances;
(iii) terminate, cancel or request any material change in, or agree to any
material change in, any Company Material Contract

A-28
<PAGE> 349

(other than the Rights Agreement) or enter into any contract or agreement
material to the business, results of operations or financial condition of
the Company and the Company Subsidiaries taken as a whole; or (iv) make or
authorize any capital expenditure, other than capital expenditures in the
ordinary course of business consistent with past practice that have been
budgeted for fiscal year 1998 and disclosed to Parent or capital
expenditures that are not, in the aggregate, in excess of $750,000 for the
Company and the Company Subsidiaries taken as a whole;

(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any Company Subsidiary may pay
dividends or make other distributions to the Company or any other Company
Subsidiary;

(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock, except
pursuant to cashless exercise of stock options;

(f) amend or change the period (or permit any acceleration, amendment
or change not required by the terms of any of the Company Stock Plans) of
exercisability of options granted under the Company Stock Plans or
authorize cash payments in exchange for any Company Stock Options granted
under any of such plans;

(g) increase the compensation payable or to become payable to, or pay
or enter into any agreement or understanding to pay any bonus to, its
directors, officers, consultants or employees (other than increases in
compensation for non-officer employees that are in the ordinary course of
business consistent with past practice and the payment of bonuses to
non-officer employees that are in the ordinary course of business
consistent with past practice, provided that Parent has received notice of
the Company's intention to implement such increase), or grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement which provides benefits upon a change in control of the Company
that would be triggered by the Merger with, any director, officer,
consultant or other employee of the Company or any Company Subsidiary who
is not currently entitled to such benefits from the Merger or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any director, officer, consultant or employee of the Company or any
Company Subsidiary, except to the extent required by applicable Law or the
terms of a collective bargaining agreement;

(h) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice;

(i) take any action to change accounting policies or procedures, other
than actions in the ordinary course of business consistent with past
practice or as required by U.S. GAAP;

(j) make any tax election or settle or compromise any material
Federal, state or local United States income tax liability, or any income
tax liability of any other jurisdiction, other than those made in the
ordinary course of business consistent with past practice and those for
which specific reserves have been recorded on the consolidated balance
sheet of the Company and the consolidated the Company Subsidiaries dated as
of August 31, 1997 included in the Company 1997 10-K and only to the extent
of such reserves;

(k) enter into or amend any contract, agreement, commitment or
arrangement with, or enter into any transaction with, or make any payment
to or on account or behalf of, other than any such transactions or payments
pursuant to the agreements set forth on Section 6.01(m) of the Company
Disclosure Schedule, any affiliate of the Company or of any Principal
Stockholder other than compensation and benefits in the ordinary course of
business;

(l) knowingly take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of
the Code; or

A-29
<PAGE> 350

(m) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect in any material
respect or prevent the Company from consummating the Merger or result in
any of the conditions to the Merger set forth herein not being satisfied.

SECTION 6.02. Conduct of Business by WAG and Parent Pending the
Closing. Each of WAG and Parent agrees that, between the date of this Agreement
and the Effective Time, except (i) as set forth in Section 6.02 of the Parent
Disclosure Schedule, (ii) subject to paragraph (e) below, for any actions taken
by WAG or Parent relating to any other acquisitions or business combinations
(including the Holding Company Reorganization and the Resurgens Transaction) or
(iii) as expressly contemplated by any other provision of this Agreement, unless
the Company shall otherwise agree in writing, (x) the respective businesses of
WAG, Parent and the Parent Subsidiaries shall be conducted only in, and WAG,
Parent and the Parent Subsidiaries shall not take any action except in, the
ordinary course of business consistent with past practice and (y) WAG and Parent
shall use all reasonable efforts to keep available the services of such of the
current officers, significant employees and consultants of WAG, Parent and the
Parent Subsidiaries and to preserve the current relationships of WAG, Parent and
the Parent Subsidiaries with such of the corporate partners, customers,
suppliers and other persons with which WAG, Parent or any Parent Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, except (i) as
set forth in Section 6.02 of the Parent Disclosure Schedule, (ii) subject to
paragraph (e) below, for any actions taken by WAG or Parent relating to any
other acquisitions or business combinations (including the Holding Company
Reorganization and the Resurgens Transaction) or (iii) as expressly contemplated
by any other provision of this Agreement, neither WAG or Parent nor any Parent
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of the Company, which consent shall not be unreasonably
withheld or delayed:

(a) amend or otherwise change its certificate of incorporation or
bylaws or equivalent organizational documents;

(b) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any Parent Subsidiary may pay
dividends or make other distributions to Parent or any other Parent
Subsidiary;

(c) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

(d) sell, transfer, license, sublicense or otherwise dispose of any
material assets;

(e) acquire (other than in connection with the Holding Company
Reorganization and the Resurgens Transaction) or enter into any agreement
to acquire all or substantially all of the capital stock or assets of any
other person or business unless upon advice of counsel such transaction
would not reasonably be expected to materially delay or impede the
consummation of the Merger;

(f) knowingly take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of
the Code; or

(g) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of WAG,
Parent or Merger Sub contained in this Agreement untrue or incorrect in any
material respect or prevent WAG, Parent or Merger Sub from performing or
cause WAG, Parent or Merger Sub not to perform its covenants hereunder or
result in any of the conditions to the Merger set forth herein not being
satisfied.

SECTION 6.03. Notices of Certain Events. Each of Parent, WAG and the
Company shall give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the Merger; (ii) any notice or other
communication

A-30
<PAGE> 351

from any Governmental Entity in connection with the Merger; (iii) any actions,
suits, claims, investigations or proceedings commenced or, to its knowledge,
threatened against, relating to or involving or otherwise affecting WAG, Parent,
the Company, the Parent Subsidiaries or the Company Subsidiaries that relate to
the consummation of the Merger; (iv) the occurrence of a default or event that,
with the giving of notice or lapse of time or both, will become a default under
any Company Material Contract or Parent Material Contract; and (v) any change
that would reasonably be expected to have a Company Material Adverse Effect or a
Parent Material Adverse Effect or to delay or impede the ability of either the
Company or Parent (or WAG) to perform its obligations pursuant to this Agreement
and to effect the consummation of the Merger.

SECTION 6.04. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which WAG, Parent or the Company or any of the Parent
Subsidiaries or the Company Subsidiaries is a party or pursuant to applicable
Law or the regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, from the
date of this Agreement to the Effective Time, WAG and Parent shall (and shall
cause the Parent Subsidiaries to) and the Company shall (and shall cause the
Company Subsidiaries to) (i) provide to the other (and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, "Representatives")) access at reasonable times
upon prior notice to its and its subsidiaries' officers, employees, agents,
properties, offices and other facilities and to the books and records thereof,
and (ii) furnish promptly such information concerning its and its subsidiaries'
business, properties, contracts, assets, liabilities and personnel as the other
party or its Representatives may reasonably request. No investigation conducted
pursuant to this Section 6.04 shall affect or be deemed to modify any
representation or warranty made in this Agreement.

(b) The parties hereto shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement with respect to the information disclosed pursuant to
this Section 6.04.

SECTION 6.05. No Solicitation of Transactions. The Company shall not,
directly or indirectly, and shall instruct its officers, directors, employees,
subsidiaries, agents or advisors or other representatives (including any
investment banker, attorney or accountant retained by it), not to, directly or
indirectly, solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including any
proposal or offer to its stockholders) that constitutes, or may reasonably be
expected to lead to, any Competing Transaction, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any Company Subsidiary, or any investment banker,
financial advisor, attorney, accountant or other representative retained by the
Company or any Company Subsidiary, to take any such action; provided, however,
that (i) nothing contained in this Section 6.05 shall prohibit the board of
directors of the Company from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer not made in violation of
this Section 6.05, (ii) with regard to such an offer, after receiving the advice
of outside counsel, the board of directors of the Company determines in good
faith that it is highly probable that failing to do so would violate its
fiduciary duties, nothing contained in this Section 6.05 shall prohibit the
board of directors of the Company from considering and negotiating (including
furnishing nonpublic information) an unsolicited bona fide written acquisition
proposal which (A) was not received in violation of this Section 6.05, (B) if
executed or consummated would be a Competing Transaction and (C) is not subject
to financing or financing is, in the good faith judgment of the board of
directors of the Company after consultation with its financial advisors, highly
likely of being obtained by such third party, or (iii) if after receiving the
advice of outside counsel, the board of directors of the Company determines in
good faith that it is highly probable that failing to do so would violate its
fiduciary duties, nothing contained in this Section 6.05 shall prohibit the
board of directors of the Company from approving or recommending to the
stockholders of the Company an unsolicited bona fide written acquisition
proposal which (A) was not received in violation of this Section 6.05, (B) if
executed or consummated would be a Competing Transaction, (C) is not subject to
financing or financing is, in the good faith judgment of the board of directors
of the Company after consultation with its financial advisors, highly

A-31
<PAGE> 352

likely of being obtained by such third party and (D) the board of directors of
the Company determines in good faith, after advice of its financial advisor to
such effect, is more favorable to the Company's stockholders than the
transaction contemplated by this Agreement (any such acquisition proposal, a
"Superior Proposal"). The Company shall notify Parent promptly, and in no event
later than one day after receipt, if any proposal or offer, or any inquiry or
contact with any person with respect thereto, regarding a Competing Transaction
is made. The Company immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to a Competing Transaction. Subject to the fiduciary duties of the Board
of Directors of the Company, the Company shall not release any third party from,
or waive any provision of, any confidentiality or standstill agreement to which
it is a party. The Company shall use its best efforts to ensure that its
officers, directors, employees, subsidiaries, agents and advisors or other
representatives (including any investment banker, attorney or accountant
retained by it) are aware of the restrictions described in this Section 6.05.

SECTION 6.06. Letters of Accountants. Each of the Company and Parent
shall use all reasonable efforts to cause to be delivered to the other "comfort"
letters of each of Ernst & Young LLP and Price Waterhouse LLP, respectively,
each such letter dated and delivered as of the date the Registration Statement
shall have become effective and as of the Effective Time, and addressed to
Parent and the Company, respectively, in form reasonably satisfactory to the
recipient thereof and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with mergers such as
the Merger contemplated hereby.

SECTION 6.07. Subsequent Financial Statements. Prior to the Effective
Time, each of the Company and Parent (or WAG if the Holding Company
Reorganization has not yet been consummated) (i) shall consult with the other
prior to making publicly available its financial results for any period and (ii)
shall consult with the other prior to the filing of, and shall timely file with
the SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and
Current Report on Form 8-K required to be filed by such party under the Exchange
Act and shall promptly deliver to the other copies of each such report filed
with the SEC.

SECTION 6.08. Control of Operations. Nothing contained in this Agreement
shall give Parent and/or WAG, directly or indirectly, the right to control or
direct the operations of the Company and the Company Subsidiaries prior to the
Effective Time. Prior to the Effective Time, each of Parent (and WAG) and the
Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its respective operations.

SECTION 6.09. Further Action; Consents; Filings. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by WAG,
Parent, Merger Sub, the Company or the Surviving Corporation or any of their
respective subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Merger and (iii) make all
necessary filings, and thereafter make any other required or appropriate
submissions, with respect to this Agreement and the Merger required under (A)
the rules and regulations of Nasdaq, (B) the Securities Act, the Exchange Act
and any other applicable Federal or state securities Laws, (C) the HSR Act, and
(D) any other applicable Law. The parties hereto shall cooperate and consult
with each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling parties and their
advisors prior to filing, and giving due consideration to their views with
respect thereto. No party shall consent to any voluntary extension of any
statutory deadline or waiting period or to any voluntary delay of the
consummation of the Merger at the behest of any Governmental Entity without
prior consultation of the other parties hereto, and due consideration of such
parties' views with respect thereto.

(b) Each of the parties hereto shall promptly give (or cause their
respective subsidiaries to give) any notices regarding the Merger, this
Agreement or the transactions contemplated hereby or thereby to third

A-32
<PAGE> 353

parties required under applicable Law or by any contract, license, lease or
other agreement to which it or any of its subsidiaries is bound, and use, and
cause its subsidiaries to use, all reasonable efforts to obtain any third party
consents required under any such contract, license, lease or other agreement in
connection with the consummation of the Merger or the other transactions
contemplated by this Agreement.

(c) Parent shall give the Company the notices provided for in the
definition of "Cash Consideration Pool" and in Section 3.01(a)(ii) on the
Determination Date.

ARTICLE VII

ADDITIONAL AGREEMENTS

SECTION 7.01. Registration Statement; Proxy Statement. (a) As promptly as
practicable after the execution of this Agreement, WAG, Parent and the Company
shall jointly prepare, and the Company, WAG and Parent shall file with the SEC,
a document or documents that will constitute (i) the prospectus forming part of
the registration statement on Form S-4 of WAG and Parent (together with all
amendments thereto, the "Registration Statement"), in connection with the
registration under the Securities Act of the WAG Common Stock or the Parent
Common Stock to be issued to the Company's stockholders pursuant to the Merger
and (ii) the proxy statement or information statement with respect to the Merger
relating to the special meeting of the Company's stockholders (the "Company
Stockholders' Meeting") and WAG's or Parent's stockholders, as the case may be
(the "Parent Stockholders' Meeting"), to be held to consider approval of this
Agreement and the Merger contemplated hereby, in the case of the Company
Stockholders' Meeting, and approval of the issuance of Parent Common Stock or
WAG Common Stock, as the case may be, in the Merger, and the approval of an
increase in the authorized WAG Common Stock or Parent Common Stock (after the
Holding Company Reorganization) to 150,000,000 shares (such increase, the
"Capital Increase"), in the case of the Parent Stockholders' Meeting (together
with any amendments thereto, the "Proxy Statement"). Copies of the Proxy
Statement shall be provided to Nasdaq in accordance with its rules. If
applicable, each of the parties hereto shall use all reasonable efforts to cause
the Registration Statement to become effective as promptly as practicable after
the date hereof, and, prior to the effective date of the Registration Statement,
the parties hereto shall take all action required under any applicable Laws in
connection with the issuance of shares of WAG Common Stock or Parent Common
Stock pursuant to the Merger. WAG, Parent or the Company, as the case may be,
shall furnish all information concerning WAG, Parent or the Company as the other
parties may reasonably request in connection with such actions and the
preparation of the Registration Statement, if applicable, and Proxy Statement.
As promptly as practicable after the effective date of the Registration
Statement, the Proxy Statement shall be mailed to the stockholders of the
Company and of Parent or WAG, as applicable. Each of the parties hereto shall
cause the Proxy Statement to comply as to form and substance in all material
respects with the applicable requirements of (i) the Exchange Act, (ii) the
Securities Act, (iii) the rules and regulations of Nasdaq and (iv) the Delaware
General Corporation Law.

(b) The Proxy Statement shall include (i) subject to the fiduciary duties
of the Board of Directors of the Company, (A) the approval of the Merger and the
recommendation of the board of directors of the Company to the Company's
stockholders that they vote in favor of approval of this Agreement and the
Merger contemplated hereby, and (B) the Company Fairness Opinion, and (ii)
subject to the fiduciary duties of the Board of Directors of WAG or Parent, as
the case may be, (A) the approval of the issuance of Parent Common Stock or WAG
Common Stock, as the case may be, in the Merger and the Capital Increase and the
recommendation of the board of directors of WAG or Parent to WAG's or Parent's
stockholders, as applicable, that they vote in favor of issuance of shares of
Parent Common Stock or WAG Common Stock, as the case may be, in the Merger and
the Capital Increase, and (B) the Parent Fairness Opinion.

(c) No amendment or supplement to the Proxy Statement, if applicable, or
the Registration Statement shall be made without providing the other parties the
opportunity to review and comment thereon. If applicable, each of the parties
hereto shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the WAG Common

A-33
<PAGE> 354

Stock or the Parent Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or of any request by the SEC or Nasdaq for
amendment of the Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.

(d) None of the information supplied by the Company for inclusion or
incorporation by reference in the Registration Statement, if applicable, or the
Proxy Statement shall, at the respective times filed with the SEC or other
regulatory agency and, in addition, (A) in the case of the Proxy Statement, at
the date it or any amendments or supplements thereto are mailed to stockholders
of WAG or Parent in connection with the Parent Stockholders' Meeting, and to
stockholders of the Company in connection with the Company Stockholders'
Meeting, at the time of the Company Stockholders' Meeting, and at the time of
the Parent Stockholders' Meeting, and (B) in the case of the Registration
Statement, when it becomes effective under the Securities Act and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Company or any Company Subsidiary, or their
respective officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Registration
Statement, if applicable, or Proxy Statement, the Company shall promptly inform
Parent and an appropriate amendment or supplement shall promptly be filed with
the SEC. All documents that the Company is responsible for filing with the SEC
in connection with the Merger will comply as to form in all material respects
with the applicable requirements of the rules and regulations of Nasdaq, the
Delaware General Corporation Law, the Securities Act and the Exchange Act.

(e) None of the information supplied by WAG or Parent for inclusion or
incorporation by reference in the Registration Statement, if applicable, or the
Proxy Statement shall, at the respective times filed with the SEC or other
regulatory agency and, in addition, (A) in the case of the Proxy Statement, at
the date it or any amendments or supplements thereto are mailed to stockholders
of WAG or Parent in connection with the Parent Stockholders' meeting, and to
stockholders of the Company in connection with the Company Stockholders'
Meeting, at the time of the Company Stockholders' Meeting and at the time of the
Parent Stockholders' Meeting, and (B) in the case of the Registration Statement,
when it becomes effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to WAG or Parent or any Parent Subsidiary, or their
respective officers or directors, should be discovered by Parent that should be
set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company and an appropriate amendment
or supplement shall promptly be filed with the SEC. All documents that WAG or
Parent is responsible for filing with the SEC in connection with the Merger will
comply as to form in all material respects with the applicable requirements of
the rules and regulations of Nasdaq, the Delaware General Corporation Law, the
Securities Act and the Exchange Act.

SECTION 7.02. Stockholders' Meetings. Subject to the fiduciary duties of
the Company's Board of Directors, in the case of the Company Stockholders'
Meeting, or the fiduciary duties of WAG's or Parent's Board of Directors, in the
case of the Parent Stockholders' Meeting, the Company shall call and hold the
Company Stockholders' Meeting and Parent shall call and hold the Parent
Stockholders' Meeting, as promptly as practicable after the Registration
Statement becomes effective for the purpose of voting upon the approval of this
Agreement and the transactions contemplated hereby pursuant to the Proxy
Statement, and the Company and Parent shall use all reasonable efforts to hold
the Company Stockholders' Meeting and the Parent Stockholders' Meeting on the
same day and as soon as practicable after the date on which the Registration
Statement becomes effective. If applicable and subject to the fiduciary duties
of the Board of Directors of the Company, the Company shall use all reasonable
efforts to solicit from its stockholders proxies in favor of the approval of
this Agreement and the Merger contemplated hereby pursuant to the Proxy
Statement and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required by the Delaware General Corporation Law
or applicable stock exchange requirements to obtain such

A-34
<PAGE> 355

approval. If applicable and subject to the fiduciary duties of the Board of
Directors of Parent or WAG, Parent or WAG, as applicable, shall use all
reasonable efforts to solicit from its stockholders proxies in favor of the
issuance of Parent Common Stock or WAG Common Stock, as the case may be, in the
Merger and the Capital Increase contemplated hereby pursuant to the Proxy
Statement and shall take all other action necessary or advisable to secure the
vote of stockholders required by the Delaware General Corporation Law or
applicable stock exchange requirements to obtain such approval, if required.
Each of the parties hereto shall, subject to the fiduciary duties of its Board
of Directors, take all other action necessary or, in the opinion of the other
parties hereto, advisable to promptly and expeditiously secure any vote or
consent of stockholders required by applicable Law and such party's certificate
of incorporation, as the case may be, and bylaws to effect the Merger.

SECTION 7.03. Rule 145 Affiliates. Not fewer than 45 days prior to the
Effective Time, the Company shall deliver to Parent a list of names and
addresses of each person who was, in the Company's reasonable judgment, at the
record date for the Company Stockholders' Meeting, a Rule 145 Affiliate of the
Company. The Company shall provide Parent such information and documents as
Parent shall reasonably request for purposes of reviewing such list. The Company
shall use all reasonable efforts to deliver or cause to be delivered to Parent,
prior to the Effective Time, an affiliate agreement in the form attached hereto
as Exhibit 7.03 (each, a "Company Affiliate Agreement"), executed by each of the
Rule 145 Affiliates of the Company identified in the above-referenced list. The
foregoing notwithstanding, Parent shall be entitled to place the legend only as
specified in the Company Affiliate Agreement on the certificates evidencing any
of the Parent Common Stock to be received by (i) any Rule 145 Affiliate of the
Company or (ii) any person Parent reasonably identifies (by written notice to
the Company) as being a person who may be deemed an "affiliate" within the
meaning of rule 145(c) or (d) promulgated under the Securities Act, and to issue
appropriate stop transfer instructions to the transfer agent for such Parent
Common Stock, consistent with the terms of the Company Affiliate Agreement,
regardless of whether such person has executed a Company Affiliate Agreement and
regardless of whether such person's name and address appear on Section 4.16 of
the Company Disclosure Schedule.

SECTION 7.04. Directors' and Officers' Indemnification. (a) The
certificate of incorporation and bylaws of the Surviving Corporation shall
contain the provisions with respect to indemnification that are set forth, as of
the date of this Agreement, in the certificate of incorporation and bylaws of
the Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who at or at any
time prior to the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company.

(b) From and after the Effective Time, Parent, WAG and the Surviving
Corporation shall indemnify and hold harmless each present and former director
and officer of the Company (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted under Delaware law and under
its charter documents as in effect on the date hereof to indemnify such
Indemnified Parties, and WAG and Parent shall also advance expenses as incurred
to the fullest extent permitted under Delaware law upon receipt from the
applicable Indemnified Party to whom expenses are to be advanced of an
undertaking to repay such advances if it is ultimately determined such person is
not entitled to indemnification.

(c) In the event that either of the Surviving Corporation, Parent or WAG or
any of its successors or assigns (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision will be made so that the successors and assigns of Parent, WAG or the
Surviving Corporation, as applicable, will assume the obligations thereof set
forth in this Section 7.04.

A-35
<PAGE> 356

(d) The provisions of this Section 7.04 (i) are intended to be for the
benefit of, and will be enforceable by, each Indemnified Party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.

(e) For six years after the Effective Time, WAG or the Surviving
Corporation shall maintain in effect the Company's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable to the Company's directors
and officers currently covered by such insurance than those of such policy in
effect on the date hereof, provided that WAG may substitute therefor policies of
WAG or the Parent Subsidiaries containing terms with respect to coverage and
amount no less favorable to such directors or officers; provided, further, that
in no event shall WAG or the Surviving Corporation be required to pay aggregate
premiums for insurance under this Section 7.04(e) in excess of 150% of the
aggregate premiums paid by the Company in 1997 on an annualized basis for such
purpose; and, provided further, that if WAG or the Surviving Corporation is
unable to obtain the amount of insurance required by this Section 7.04(e) for
such aggregate premium, then WAG or the Surviving Corporation shall obtain as
much insurance as can be obtained for an annual premium equal to 150% of the
1997 premium.

(f) WAG shall cause the Surviving Corporation or any successor thereto to
comply with its obligations under this Section 7.04.

SECTION 7.05. No Shelf Registration. Parent shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Parent Common Stock received
pursuant hereto by the persons who may be deemed to be "affiliates" of the
Company or Parent within the meaning of rule 145 promulgated under the
Securities Act.

SECTION 7.06. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement without the prior written
approval of the other, except to the extent required by applicable Law or the
requirements of the rules and regulations of Nasdaq, in which case the issuing
party shall use all reasonable efforts to consult with the other party before
issuing any such release or making any such public statement.

SECTION 7.07. Nasdaq Listing. Each of the parties hereto shall use all
reasonable efforts to obtain, prior to the Effective Time, the approval for
including in Nasdaq, effective upon official notice of issuance, of the shares
of WAG Common Stock or Parent Common Stock, as the case may be, into which the
shares of Company Capital Stock will be converted pursuant to Article III and
the shares of WAG Common Stock or Parent Common Stock, as the case may be, which
will be issuable upon exercise of Company Stock Options pursuant to Section
3.05.

SECTION 7.08. Blue Sky. Each of the parties hereto shall use all
reasonable efforts to obtain prior to the Effective Time all necessary blue sky
permits and approvals required under Blue Sky Laws to permit the distribution of
the shares of WAG Common Stock or Parent Common Stock, as the case may be, to be
issued in accordance with the provisions of this Agreement.

SECTION 7.09. Company Stock Options. (a) At the Effective Time, Parent,
in the case the Holding Company Reorganization shall have been consummated, or
WAG, in the case the Holding Company Reorganization shall not have been
consummated, shall assume, by virtue of this Agreement and without any further
action on the part of the Company, all of the Company's obligations with respect
to each outstanding Company Stock Option, whether previously vested or unvested.
Unless otherwise elected by Parent prior to the Effective Time, Parent or WAG
shall make such assumption in such manner that Parent or WAG (i) is a
corporation "assuming a stock option in a transaction to which Section 424(a)
applies" within the meaning of Section 424 of the Code or (ii) to the extent
that Section 424 of the Code does not apply to such Company Stock Option, would
be such a corporation were Section 424 of the Code applicable to such Company
Stock Option; and, if not so otherwise elected, after the Effective Time, all
references to the Company in the

A-36
<PAGE> 357

Company Stock Plans and the applicable Company Stock Option agreements shall be
deemed to refer to WAG, prior to the Holding Company Reorganization, or Parent,
following the Holding Company Reorganization, which shall have assumed the
Company Stock Plans as of the Effective Time by virtue of this Agreement and
without any further action on the part of the Company, Parent or WAG. Each
Company Stock Option so assumed under this Agreement shall continue to have, and
be subject to, the same terms and conditions set forth in the applicable Company
Stock Plan and the applicable Company Stock Option as in effect immediately
prior to the Effective Time, except as otherwise provided in Section 3.05.
Parent shall use all reasonable efforts to ensure that Company Stock Options
intended to qualify as incentive stock options under Section 422 of the Code
prior to the Effective Time continue to so qualify after the Effective Time.

(b) With respect to the Company Stock Plans, WAG or Parent, as the case may
be, shall take all corporate action necessary or appropriate to (i) reserve for
issuance the number of shares that will be subject to Company Stock Options
referred to in this Section 7.09 and (ii), no later than the Effective Time,
file a registration statement on Form S-8 (or any successor or other appropriate
form) with respect to the shares of WAG Common Stock or Parent Common Stock, as
the case may be, subject to such plan to the extent such registration statement
is required under applicable law in order for such shares of common stock to be
sold without restriction, and WAG and Parent shall use its best efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectuses contained therein) for so long as such
benefits and grants remain payable and such options under such plans remain
outstanding.

SECTION 7.10. Tax Treatment. Each of Parent, WAG and the Company shall
use best efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code and to obtain the opinions of counsel
referred to in Sections 8.02(c) and 8.03(c). In addition, following the
Effective Time, each of WAG, Parent and the Surviving Corporation agree not to
take any action that would cause the Merger to fail to so qualify.

SECTION 7.11. Obligations of Parent and WAG. Prior to consummation of the
Holding Company Reorganization, WAG will take all action necessary to cause
Parent and Merger Sub to perform their respective obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth
herein. Following consummation of the Holding Company Reorganization, Parent
will take all action necessary to cause WAG and Merger Sub to perform their
respective obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth herein.

SECTION 7.12. Company Employees. (a) Individuals who are employed by the
Company or the Company Subsidiaries as of the Effective Time shall remain
employees of the Surviving Corporation or the Surviving Corporation's
subsidiaries, as applicable, immediately following the Effective Time (each such
employee, an "Affected Employee"). For a period of one year immediately
following the Effective Time, the annual cash compensation for each Affected
Employee shall not be reduced without such Affected Employee's consent and the
insurance coverage, benefits and vacation and 401(k) participation benefits
provided to Affected Employees shall be, in the aggregate, not less favorable
than those provided to such employees immediately prior to the Effective Time.
Following the Effective Time, for purposes of determining eligibility, vesting
and level of benefits under all employee benefit plans (but not for pension
benefit accrual purposes) and, if applicable, for purposes of satisfying any
waiting periods concerning "preexisting conditions" and the satisfaction of any
"copayment" or deductible requirements, service with the Company or a Company
Subsidiary or any predecessor thereto prior to the Effective Time shall be
treated, to the extent permitted by law, as service with an "employer" to the
same extent as if such persons had been employees of WAG, Parent or a Parent
Subsidiary, and provided further that this Section 7.12(a) shall not be
construed to limit the ability of the applicable employer to terminate the
employment of any Affected Employee or to review employee benefits programs from
time to time and to make such changes as they deem appropriate.

(b) WAG and the Parent agree to honor, or to cause the appropriate
subsidiary to honor, in accordance with their terms all Company Benefit Plans;
provided, however, that the foregoing shall not prevent any party from amending
or terminating any such plan, contact, agreement, arrangement or understanding
in accordance with its terms.

A-37
<PAGE> 358

(c) For the purpose of all Company Benefit Plans which include the term
"change in control", WAG and Parent acknowledge that the Merger constitutes a
"change in control" for all purposes pursuant to any such Company Benefit Plans.
In addition, WAG and Parent acknowledge that, with respect to the Senior
Termination Benefits Agreements listed in Schedule 7.12(c) (the "Listed
Agreements"), in light of WAG's and Parent's plans relating to management
assignments and responsibilities with respect to the business of the Company
from and after the Effective Time, each employee who is a party to any such
contract may, following consummation of the Merger, terminate employment
thereunder and, upon such termination, be entitled to termination payments and
benefits described therein.

SECTION 7.13. Board of Directors of Parent and WAG. Immediately prior to
the Effective Time, the boards of directors of Parent and WAG shall take all
action necessary to cause an individual mutually acceptable to the boards of
directors of the Company, on the one hand, and the boards of directors of Parent
and WAG, on the other hand, to be elected to fill the vacancy on the boards of
directors of Parent and WAG at the Effective Time; provided, however, that if
the Holding Company Reorganization shall have been consummated prior to the
Effective Time, then the individual selected pursuant to the foregoing provision
shall not be elected to serve as a director of WAG.

ARTICLE VIII

CONDITIONS TO THE MERGER

SECTION 8.01. Conditions to the Obligations of Each Party to Consummate
the Merger. The respective obligations of the parties hereto to consummate the
Merger, or to permit the consummation of the Merger, are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following
conditions:

(a) the Registration Statement shall have been declared effective by
the SEC under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
SEC and no proceeding for that purpose shall have been initiated by the SEC
and not concluded or withdrawn;

(b) this Agreement and the Merger shall have been duly approved by the
requisite vote of stockholders of the Company and the issuance of the
shares of WAG Common Stock or Parent Common Stock in the Merger and the
Capital Increase shall have been duly approved by the requisite vote of the
stockholders of WAG or Parent, as the case may be, in any such case in
accordance with the Delaware General Corporation Law;

(c) no court of competent jurisdiction shall have issued or entered
any order, writ, injunction or decree, and no other Governmental Entity
shall have issued any order (collectively, "Restraints"), which is then in
effect and has the effect of making the Merger illegal or otherwise
prohibiting its consummation;

(d) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or be
terminated;

(e) except with respect to the HSR Act (which is addressed in Section
8.01(d)), all consents, approvals and authorizations legally required to be
obtained to consummate the Merger shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization would not reasonably be expected to result in a
change in or have an effect on the business of the Company or Parent that
is materially adverse to the business, assets (including intangible
assets), liabilities (contingent or otherwise), condition (financial or
otherwise) or results of operations of WAG, Parent and the Parent
Subsidiaries, taken as a whole; and

(f) the shares of WAG Common Stock or Parent Common Stock, as the case
may be, into which the shares of Company Capital Stock will be converted
pursuant to Article III and the shares of WAG Common Stock or Parent Common
Stock, as the case may be, issuable upon the exercise of Company Stock
Options pursuant to Section 3.05 shall have been authorized for inclusion
in Nasdaq, subject to official notice of issuance.

A-38
<PAGE> 359

SECTION 8.02. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:

(a) each of the representations and warranties of WAG, Parent and
Merger Sub contained in this Agreement that is qualified by materiality or
Parent Material Adverse Effect shall be true, complete and correct on and
as of the Effective Time as if made at and as of the Effective Time (other
than representations and warranties which address matters only as of a
certain date which shall be true, complete and correct as of such certain
date) and each of the representations and warranties that is not so
qualified shall be true, complete and correct in all material respects on
and as of the Effective Time as if made at and as of the Effective Time
(other than representations and warranties which address matters only as of
a certain date which shall be true, complete and correct in all material
respects as of such certain date), in each case except as contemplated or
permitted by this Agreement, and the Company shall have received a
certificate of the Chairman or President and Chief Financial Officer of WAG
and of Parent to such effect;

(b) WAG and Parent shall each have performed or complied in all
material respects with all material agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time and the Company shall have received a certificate of the
Chairman or President and Chief Financial Officer of WAG and of Parent to
that effect; and

(c) Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the
Company, shall have issued its opinion, such opinion dated on or about the
date of the Closing, addressed to the Company, and reasonably satisfactory
to it, based upon certain representations of the Company and assumptions,
to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization qualifying under the provisions of Section 368
of the Code and that each of the Company, Merger Sub and Parent will be a
party to the reorganization within the meaning of Section 368(b) of the
Code, which opinion shall not have been withdrawn or modified in any
material respect.

SECTION 8.03. Conditions to the Obligations of WAG and Parent. The
obligations of WAG and Parent to consummate the Merger, or to permit the
consummation of the Merger, are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:

(a) each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality or Company
Material Adverse Effect shall be true, complete and correct on and as of
the Effective Time as if made at and as of the Effective Time (other than
representations and warranties which address matters only as of a certain
date which shall be true, complete and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall
be true, complete and correct in all material respects on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true, complete and correct in all material respects as
of such certain date), in each case except as contemplated or permitted by
this Agreement, and Parent shall have received a certificate of the
Chairman or President and Chief Financial Officer of the Company to such
effect;

(b) the Company shall have performed or complied in all material
respects with all material agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time and Parent shall have received a certificate of the Chairman
or President and Chief Financial Officer of the Company to that effect; and

(c) Rogers & Hardin LLP, counsel to WAG and Parent, shall have issued
its opinion, such opinion dated on or about the date of the Closing,
addressed to Parent, and reasonably satisfactory to it, based upon certain
representations of Parent and assumptions, to the effect that the Merger
will be treated for Federal income tax purposes as a reorganization
qualifying under the provisions of Section 368 of the Code and that each of
Parent, Merger Sub and the Company will be a party to the reorganization
within the meaning of Section 368(b) of the Code, which opinion shall not
have been withdrawn or modified in any material respect.

A-39
<PAGE> 360

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

SECTION 9.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite adoption and approval of this Agreement, as follows:

(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and the Company;

(b) by either Parent or the Company, if the Effective Time shall not
have occurred on or before December 31, 1998; provided, however, that in
the event that the Effective Time has not occurred by such time solely due
to the failure to satisfy the condition specified in Section 8.01(d) or
8.01(e), then such date may be extended, at the option of Parent or the
Company, until January 31, 1999; provided further, that the right to
terminate this Agreement under this Section 9.01(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
shall have caused, or resulted in, the failure of the Effective Time to
occur on or before such date;

(c) by either Parent or the Company, if any Restraint shall have been
entered and shall have become final and nonappealable, provided that the
party seeking to terminate this Agreement pursuant to this Section 9.01(c)
shall have used best efforts to prevent the entry of and to remove such
Restraint;

(d) by the Company, if prior to the Parent Stockholders' Meeting, the
board of directors of WAG or Parent, as the case may be, withdraws,
modifies or changes its recommendation of the issuance of the WAG Common
Stock or the Parent Common Stock, as applicable, in the Merger or the
Capital Increase in a manner adverse to the Company or its stockholders or
shall have resolved to do so;

(e) by Parent, if prior to the Company Stockholders' Meeting, (i) the
board of directors of the Company withdraws, modifies or changes its
recommendation of this Agreement or the Merger in a manner adverse to
Parent or its stockholders or shall have resolved to do so, or (ii) the
board of directors of the Company shall have recommended to the
stockholders of the Company a Competing Transaction or shall have resolved
to do so, or (iii) a tender offer or exchange offer for 15 percent or more
of the outstanding shares of capital stock of the Company shall have been
commenced and the board of directors of the Company shall have failed to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders);

(f) by Parent or the Company, (i) if this Agreement and the Merger
shall fail to receive the requisite votes for approval at the Company
Stockholders' Meeting or any adjournment or postponement thereof or (ii) if
the issuance of shares of WAG Common Stock or Parent Common Stock, as the
case may be, in the Merger or the Capital Increase shall fail to receive
the requisite votes for approval at the Parent Stockholders' Meeting or any
adjournment or postponement thereof;

(g) by Parent (i) if the Closing Date Market Price is less than $12.00
per share, or (ii) upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue,
incomplete or incorrect, in either case such that the conditions set forth
in Section 8.03 would not be satisfied (a "Terminating Company Breach");
provided, however, that if such Terminating Company Breach is curable by
the Company through the exercise of its reasonable efforts within 30 days
and for so long as the Company continues to exercise such reasonable
efforts, Parent may not terminate this Agreement under this Section
9.01(g); and provided further that the immediately preceding proviso shall
not in any event be deemed to extend any date set forth in paragraph (b) of
this Section 9.01;

(h) by the Company, upon breach of any representation, warranty,
covenant or agreement on the part of Parent, WAG and Merger Sub set forth
in this Agreement, or if any representation or warranty of Parent shall
have become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.02 would not be satisfied (a "Terminating
Parent Breach"); provided, however, that if such

A-40
<PAGE> 361

Terminating Parent Breach is curable by Parent through the exercise of its
reasonable efforts within 30 days and for so long as Parent continues to
exercise such reasonable efforts, the Company may not terminate this
Agreement under this Section 9.01(h); and provided further that the
preceding proviso shall not in any event be deemed to extend any date set
forth in paragraph (b) of this Section 9.01; or

(i) by the Company at any time prior to the Company Stockholders'
Meeting, if, as a result of a Superior Proposal by a third party, the Board
of Directors of the Company determines in good faith after consultation
with outside counsel that it is highly probable that the Board of Directors
would violate its fiduciary duties under applicable law if it failed to
accept the Superior Proposal.

SECTION 9.02. Effect of Termination. Except as provided in Section 9.05,
in the event of termination of this Agreement pursuant to Section 9.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any party hereto or any of its affiliates or any of its
or their officers or directors, and all rights and obligations of each party
hereto shall cease, subject to the remedies of the parties hereto set forth in
Section 9.05(b); provided, however, that nothing herein shall relieve any party
hereto from liability for the willful or intentional breach of any of its
representations and warranties or the willful or intentional breach of any of
its covenants or agreements set forth in this Agreement.

SECTION 9.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after the
approval of this Agreement by the stockholders of the Company, WAG or Parent, as
the case may be, no amendment may be made, except such amendments that have
received the requisite stockholder approval and such amendments as are permitted
to be made without stockholder approval under the Delaware General Corporation
Law, as applicable. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.

SECTION 9.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for or waive compliance with the performance of
any obligation or other act of any other party hereto or (b) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto. Any such extension or waiver shall be valid
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.

SECTION 9.05. Expenses. (a) Except as set forth in this Section 9.05, all
Expenses incurred in connection with this Agreement and the Merger shall be paid
by the party incurring such Expenses, whether or not the Merger is consummated,
except that Parent and the Company each shall pay one-half of all Expenses
incurred solely for printing, filing and mailing the Registration Statement and
the Proxy Statement and all SEC and other regulatory filing fees incurred in
connection with the Registration Statement and the Proxy Statement and any fees
required to be paid under the HSR Act.

(b) In the event that (i) Parent shall terminate this Agreement pursuant to
Section 9.01(e); (ii) the Company shall terminate this Agreement pursuant to
Section 9.01(i); or (iii) (A) Parent shall terminate this Agreement pursuant to
Section 9.01(f) which termination is permissible solely due to the Company's
stockholders having failed to approve and adopt this Agreement and the Merger at
the Company Stockholders' Meeting, (B) at the time of such failure to so approve
this Agreement, there shall exist or be proposed a Competing Transaction with
respect to the Company and (C) within 12 months thereafter, the Company shall
enter into a definitive agreement with respect to any Competing Transaction or
any Competing Transaction shall be consummated; then, in the case of clause (i),
(ii) or (iii) of this Section 9.05(b), promptly (and in any event within two
business days following demand therefor) after such termination or, in the case
of clause (iii) of this Section 9.05(b), promptly after the execution and
delivery of such agreement or such consummation, the Company shall pay to Parent
an amount equal to $5,500,000 plus all of Parent's Expenses, as evidenced by
reasonable documentation, up to an aggregate of $1,000,000.

(c) In the event that the Company shall terminate this Agreement pursuant
to Section 9.01(d) or Section 9.01(f)(ii), Parent shall pay to the Company
within two business days after such termination an amount equal to $5,500,000 in
the event of termination pursuant to Section 9.01(d) or $2,000,000 in the event
of termination pursuant to Section 9.01(f)(ii), in either case, plus all of the
Company's Expenses, as

A-41
<PAGE> 362

evidenced by reasonable documentation, and in an amount no greater than
$1,000,000, by wire transfer of immediately available funds to an account
designated by the Company; provided, however, that, in the event both the
Company and Parent would otherwise be entitled to payments under this Section
9.05 in connection with the termination of this Agreement pursuant to both
Sections 9.01(f)(i) and (f)(ii), neither party shall be required to make any
payment under this Section 9.05.

(d) In the event that Parent shall terminate this Agreement pursuant to
Section 9.01(f)(i) and Parent is not otherwise entitled to payment pursuant to
Section 9.05(b), the Company shall pay to Parent within two business days after
such termination an amount equal to $2,000,000 plus all of Parent's Expenses, as
evidenced by reasonable documentation, and in an amount no greater than
$1,000,000, by wire transfer of immediately available funds to an account
designated by Parent; provided, however, that, in the event both the Company and
Parent would otherwise be entitled to payments under this Section 9.05 in
connection with the termination of this Agreement pursuant to both Sections
9.01(f)(i) and (f)(ii), neither party shall be required to make any payment
under this Section 9.05.

(e) Any payment required to be made pursuant to Section 9.05(b) shall be
made to Parent not later than the date of the entry into an agreement referred
to therein and two business days after delivery to the Company of notice of
demand for payment and shall be made by wire transfer of immediately available
funds to an account designated by Parent in the notice of demand for payment
delivered pursuant to this Section 9.05(e). In no event shall the Company be
entitled to collect amounts pursuant to this Section 9.05 relating to more than
one specified event.

(f) In the event that Parent terminates this Agreement pursuant to Section
9.01(g)(i), the Company shall pay to the Parent within two business days after
such termination an amount equal to $1,000,000 in full satisfaction of any and
all obligations hereunder.

ARTICLE X

GENERAL PROVISIONS

SECTION 10.01. Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be. This Section 10.01 shall not limit any covenant or
agreement herein which by its terms contemplates performance after the Effective
Time. Each party agrees that, except for the representations and warranties
contained in this Agreement and the Parent Disclosure Schedule and the Company
Disclosure Schedule, no party hereto has made any other representations and
warranties, and each party hereby disclaims any other representations and
warranties made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other representatives, with respect to the
execution and delivery of this Agreement or the Merger contemplated herein,
notwithstanding the delivery or disclosure to any other party or any party's
representatives of any documentation or other information with respect to any
one or more of the foregoing.

SECTION 10.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or by a nationally recognized courier service to the respective
parties at their addresses set forth on the signature pages to this Agreement
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 10.02).

SECTION 10.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a

A-42
<PAGE> 363

mutually acceptable manner to the fullest extent permitted by applicable Law in
order that the Merger may be consummated as originally contemplated to the
fullest extent possible.

SECTION 10.04. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise)
without the prior written consent of the other parties hereto; provided,
however, that Parent may assign its rights, interests and obligations hereunder
to any successor or parent entity of Parent whose shares are registered under
Section 12 of the Exchange Act (or will be so registered at the Effective Time).
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Notwithstanding anything contained in this Agreement to
the contrary, other than Section 7.04, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights or remedies under
or by reason of this Agreement.

SECTION 10.05. Incorporation of Exhibits. The Parent Disclosure Schedule,
the Company Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part of this Agreement for all
purposes as if fully set forth herein.

SECTION 10.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
DELAWARE LAW). WAG, PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY DELAWARE OR FEDERAL COURT SITTING IN THE CITY
OF WILMINGTON, DELAWARE, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, AND WAG, PARENT, MERGER SUB AND THE COMPANY EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH DELAWARE STATE COURT OR SUCH FEDERAL COURT. WAG,
PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.

SECTION 10.07. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

SECTION 10.08. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter" and
other equivalent words refer to this Agreement as a whole and not solely to the
particular Article or Section in which such word is used. When a reference is
made in this Agreement to a Section or Exhibit, such reference shall be to a
Section of, or an Exhibit to, this Agreement unless otherwise indicated. ANY
INFORMATION CONTAINED IN ANY SCHEDULE OR EXHIBIT TO THIS AGREEMENT SHALL BE
DEEMED TO HAVE BEEN DISCLOSED IN ALL SUCH SCHEDULES AND EXHIBITS. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever any of the words "include", "includes" or "including" is
used in this Agreement, it shall be deemed to be followed by the words "without
limitation".

SECTION 10.09. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate

A-43
<PAGE> 364

counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.

SECTION 10.10. Acknowledgement. The Company hereby acknowledges and
agrees that neither the consummation of, nor the failure to consummate, the
acquisition of RCG and Cherry U.K. shall in any way give the Company a right to
terminate the Merger Agreement or the Merger.

SECTION 10.11. Entire Agreement. This Agreement (as amended as of October
27, 1998, including the Exhibits, the Mutual Nondisclosure and Confidentiality
Agreement dated as of November 7, 1997 among WAG and the Company, the Parent
Disclosure Schedule and the Company Disclosure Schedule) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement shall
be binding upon any party hereto unless made in writing and signed by all
parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.

WORLD ACCESS, INC.

By: /s/ STEVEN A. ODOM

------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive
Officer

2240 Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Telephone: (404) 231-2025
Telecopy: (404) 365-9847
Attention: Chief Executive Officer

with a copy to:

Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street
Atlanta, Georgia 30303
Telephone: (404) 522-4700
Telecopy: (404) 525-2224
Attention: Steven E. Fox

WAXS INC.

By: /s/ STEVEN A. ODOM

------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive
Officer

c/o WAG
2240 Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Telephone: (404) 231-2025
Telecopy: (404) 365-9847
Attention: Chief Executive Officer

A-44
<PAGE> 365

TAIL ACQUISITION CORP.

By: /s/ STEVEN A. ODOM

------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive
Officer

c/o WAG
2240 Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Telephone: (404) 231-2025
Telecopy: (404) 365-9847
Attention: Chief Executive Officer

TELCO SYSTEMS, INC.

By: /s/ WILLIAM B. SMITH

------------------------------------
Name: William B. Smith
Title: President and Chief Executive
Officer

63 Nahatan Street
Norwood, Massachusetts 02062
Telephone: (781) 551-0300
Telecopy: (781) 255-2180
Attention: Chief Executive Officer

with a copy to:

Skadden, Arps, Slate, Meagher & Flom
LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Lou R. Kling and Eric J.
Friedman

A-45
<PAGE> 366

SCHEDULE A TO FIRST AMENDMENT

Supplement to Company Disclosure Schedule

For purposes of calculating the Cash Consideration Pool, the aggregate
amount of cash paid or to be paid to Dissenting Stockholders, if applicable,
shall be estimated for such purpose only to equal 1.5 times the product of (x)
the quotient of (i) the Tax Consideration divided by (ii) the number of shares
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be cancelled
pursuant to Section 3.01(b) hereof) and (y) the aggregate number of shares of
Company Common Stock subject to demands for appraisal in accordance with the
Delaware General Corporation Law. In addition, for purposes of calculating the
Cash Consideration Pool, the cash paid or to be paid in lieu of fractional
shares of WAG Common Stock or Parent Common Stock, as the case may be, pursuant
to Section 3.04 shall be estimated for such purpose only to equal .99 times the
product of (x) the aggregate number of holders of record of Company Common Stock
immediately prior to the Effective Time and (y) the closing price for a share of
WAG Common Stock or Parent Common Stock, as the case may be, reported on Nasdaq
on the first business day immediately prior to the Effective Time.

Pursuant to that certain Stock Purchase and Merger Option Agreement dated
as of August 7, 1998 by and among Synaptyx Corporation ("Synaptyx"), Jeremy E.
Parsons and Gabriel Mayo, as amended by the First Amendment thereto dated as of
October 23, 1998, the Company acquired Synaptyx on terms previously disclosed
to, and approved by, WAG, and the representations and warranties of the Merger
Agreement are hereby modified accordingly.

A-46
<PAGE> 367

APPENDIX B

[LETTERHEAD]
October 16, 1998

Boards of Directors
World Access, Inc.
and WAXS INC.
945 E. Paces Ferry Rd.
Suite 2240
Atlanta, GA 30326

Gentlemen:

We understand that World Access, Inc. (the "Company") and WAXS INC., a
wholly-owned subsidiary of the Company that will become the Company's parent
upon completion of the pending holding company reorganization ("Holdco"), are
considering a proposed business combination with Telco Systems, Inc. ("Telco").
We understand that under this transaction (the "Proposed Transaction"), a
subsidiary of Holdco will be merged with and into Telco (the "Merger"), and each
outstanding share of common stock, par value $0.01 per share ("Telco Common
Stock") of Telco will be converted into the right to receive the consideration
(the "Merger Consideration") consisting of the number of shares of common stock,
par value $0.01 per share, ("Company Common Stock") of the Company (or Holdco)
equal to the Common Exchange Ratio, provided that (i) the value of the
consideration to be received by holders of Telco Common Stock shall not be less
than $12.00 per share (the "Minimum Value") and (ii) the Company (or Holdco) may
elect to pay cash in lieu of issuing shares of Company Common Stock so long as
such cash does not comprise more than 55% of the total consideration to be
received by Telco stockholders (the "Aggregate Cash Pool"). The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger and Reorganization dated June 4, 1998 between the
Company, Holdco, Tail Acquisition Corporation and Telco, as proposed to be
amended by the First Amendment thereto (as so amended, the "Merger Agreement").
Capitalized terms used herein but not defined herein shall have the meaning
ascribed to them in the Merger Agreement.

Subject to giving effect to the Minimum Value and the amount the Aggregate
Cash Pool, the Common Exchange Ratio is equal to the quotient of $17.00 divided
by the Closing Date Market Price, provided that if the Closing Date Market Price
determined on the Closing Date is less than $29.00, then the Common Exchange
Ratio shall be equal to 0.5862 shares of the Company Common Stock; and if the
Closing Date Market Price is more than $36.00, then the Common Exchange Ratio
shall be equal to 0.4722 shares of Company Common Stock.

We have been requested by the Company and Holdco to render our opinion with
respect to the fairness, from a financial point of view, to the Company and
Holdco of the Merger Consideration in the Proposed Transaction.

In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement and the proposed First Amendment thereto, (2) such other publicly
available information concerning the Company and Telco which we believe to be
relevant to our inquiry, (3) financial and operating information with respect to
the business, operations and prospects of the Company and Telco furnished to us
by the Company or Telco, (4) trading histories of the Company's Common Stock and
Telco Common Stock and a comparison of these trading histories with those of
other companies which we deemed relevant, (5) a comparison of the historical
financial results and present financial condition of each of the Company and
Telco with those of other companies which we deemed relevant, (6) a comparison
of the financial terms of the Proposed Transaction with the financial terms of
certain other recent transactions which we deemed relevant, (7) certain
potential pro forma effects of the Merger on the Company, and (8) certain
historical data relating to percentage premiums paid in acquisitions of publicly
traded companies. In addition, we have had discussions with the managements of
the Company and Telco concerning their respective businesses, operations,
assets, present condition and future prospects and undertook such other studies,
analyses and investigations as we deemed appropriate.
B-1
<PAGE> 368

We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial forecasts/ projections
of the Company and Telco, we have assumed that such forecasts/projections have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of the Company and Telco as to the
future financial performance of the Company and Telco. In arriving at our
opinion, we have conducted only a limited physical inspection of the properties
and facilities of the Company and Telco and have not made nor obtained any
evaluations or appraisals of the assets or liabilities of the Company or Telco.
Our opinion is necessarily based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this letter.

We have acted as financial advisor to the Company and Holdco in connection
with the Proposed Transaction and will receive a fee for our services. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of the rendering of this opinion. We have also performed various investment
banking services for the Company in the past (including serving as a managing
underwriter in the follow-on public equity offering by the Company on September
26, 1996 and as financial advisor in the Company's pending acquisitions of
Cherry Communications Incorporated d/b/a Resurgens Communication Group and
Cherry Communications U.K. Limited) and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the
equity securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.

Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Merger Consideration in
the Proposed Transaction is fair to the Company and Holdco.

THE ROBINSON-HUMPHREY COMPANY, LLC

B-2
<PAGE> 369

APPENDIX B-1

[LETTERHEAD]

October 27, 1998

Board of Directors
World Access, Inc.
and WAXS INC.
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326

Gentlemen:

On October 16, 1998, we issued to you our written opinion to the effect
that, in connection with the proposed business combination pursuant to that
certain Agreement and Plan of Merger and Reorganization by and among World
Access, Inc. (the "Company"), WAXS INC. ("Holdco"), Tail Acquisition Corporation
and Telco Systems, Inc. dated as of June 4, 1998, as proposed to be amended by
the First Amendment thereto (as proposed to be amended, the "Merger Agreement"),
from a financial point of view, the Merger Consideration payable pursuant to the
Merger Agreement is fair to the Company and Holdco. We hereby confirm that
opinion, which speaks as of its date, and, in doing so, state that we have not
become aware of any information that would cause us to withdraw or modify such
opinion.

THE ROBINSON-HUMPHREY COMPANY, LLC

B-3
<PAGE> 370

APPENDIX C

[LETTERHEAD]

October 26, 1998

CONFIDENTIAL

Board of Directors
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062

Dear Members of the Board:

We understand that Telco Systems, Inc. (the "Company" or "Telco Systems"),
World Access, Inc. ("WAG"), WAXS INC., a wholly-owned subsidiary of WAG
("Parent"), and Tail Acquisition Corporation, a wholly-owned subsidiary of WAG
(the "Merger Sub"), are parties to an Agreement and Plan of Merger and
Reorganization, dated June 4, 1998 (the "Agreement"), providing for the merger
of the Company and Merger Sub (the "Merger"). We also understand that the
parties now propose to amend the Agreement to provide that, pursuant to the
Merger, each share of Telco Systems common stock ("Telco Systems Common Stock")
shall be converted into the right to receive shares of WAG common stock ("WAG
Common Stock") or a combination of cash (subject to the limitation provided in
the First Amendment (the "Amendment")) and WAG Common Stock in accordance with
the "Common Exchange Ratio" and, if applicable, a pro-rata portion of the
"Top-Up Consideration Pool" (as such terms are defined in the Amendment). The
Merger is intended to be a reorganization within the meaning of Section 368 of
the United States Internal Revenue Code of 1986, as amended. The terms and
conditions of the above described Merger are more fully detailed in the
Agreement and Amendment.

You have requested our opinion as to whether the consideration to be
received by Telco Systems stockholders in the Merger is fair, from a financial
point of view, to such stockholders.

Broadview International LLC focuses on providing merger and acquisition
advisory services to information technology ("IT"), communications, and media
companies. In this capacity, we are continually engaged in valuing such
businesses, and we maintain an extensive database of IT, communications, and
media mergers and acquisitions for comparative purposes. We are currently acting
as financial advisor to Telco Systems' Board of Directors and will receive a fee
from Telco Systems upon the successful conclusion of the Merger.

In rendering our opinion, we have, among other things:

(1) reviewed the terms of the Agreement and the associated exhibits
thereto dated June 4, 1998;

(2) reviewed the terms of the Amendment;

(3) reviewed Telco Systems' annual report and Form 10-K for the fiscal
year ended August 31, 1997, including the audited financial statements
included therein, Telco Systems' Form 10-Q for its quarterly period ended
May 31, 1998, including the unaudited financial statements included
therein, and the unaudited financial information of Telco Systems for its
twelve months ended August 30, 1998 included in a Telco Systems press
release dated September 17, 1998;

(4) reviewed certain internal financial and operating information,
including projections through February 29, 2000, for Telco Systems prepared
by Telco Systems' management;

(5) participated in discussions with Telco Systems' management
concerning the operations, business strategy, current financial performance
and prospects for Telco Systems;

(6) discussed with Telco Systems' management its view of the strategic
rationale for the Merger;

C-1
<PAGE> 371

Telco Systems, Inc. Board of Directors
October 26, 1998
Page 2

(7) reviewed the recent reported closing prices and trading activity
for Telco Systems Common Stock;

(8) compared certain aspects of the financial performance of Telco
Systems with public companies we deemed comparable;

(9) considered the effect on Telco Systems of the possible payment of
up to $6,500,000 in the event it determined not to proceed with the
transaction contemplated by the Agreement in lieu of entering into the
Amendment;

(10) analyzed available information, both public and private,
concerning other mergers and acquisitions we believe to be comparable in
whole or in part to the Merger;

(11) reviewed WAG's annual report and Form 10-K for the fiscal year
ended December 31, 1997, including the audited financial statements
included therein, and WAG's Form 10-Q/A for the three months ended June 30,
1998, including the unaudited financial statements included therein;

(12) reviewed certain internal financial and operating information for
WAG including projections through December 31, 2003, with and without the
Resurgens Transaction (as defined in the Agreement) prepared by WAG
management;

(13) participated in discussions with WAG management and RCG (as
defined in the Agreement) management concerning the operations, business
strategy, financial performance and prospects for WAG, RCG and Cherry U.K.
(as defined in the Agreement);

(14) reviewed the recent reported closing prices and trading activity
for WAG Common Stock;

(15) discussed with WAG management its view of the strategic rationale
for the Merger;

(16) compared certain aspects of the financial performance of WAG with
public companies we deemed comparable;

(17) considered the total number of shares of WAG Common Stock
outstanding with and without the Resurgens Transaction and the average
weekly trading volume of WAG Common Stock;

(18) reviewed recent equity analyst reports covering Telco Systems and
WAG;

(19) prepared pro forma consolidated income statements through
December 31, 1999 based on forecasts through December 31, 1999 provided by
the managements of WAG and Telco Systems;

(20) assisted in negotiations and discussions related to the Merger
among Telco Systems, WAG and their financial and legal advisors; and

(21) conducted other financial studies, analyses and investigations as
we deemed appropriate for purposes of this opinion.

In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement and the Amendment) that was publicly available or furnished to us
by Telco Systems, WAG or WAG's financial advisor. With respect to the financial
projections and forecasts examined by us, we have assumed that they were
reasonably prepared and reflected the best available

C-2
<PAGE> 372

Telco Systems, Inc. Board of Directors
October 26, 1998
Page 3

estimates and good faith judgments of the management of Telco Systems and WAG as
to the future performance of Telco Systems and WAG, respectively. We have
neither made nor obtained an independent appraisal or valuation of any of WAG's
or Telco Systems' assets.

Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by Telco Systems stockholders in the Merger is
fair, from a financial point of view, to such stockholders.

For purposes of this opinion, we have assumed that neither Telco Systems
nor WAG is currently involved in any material transaction other than the
following: the Merger, other transactions of which we are aware including those
relating to the Synaptyx transaction, the Resurgens Transaction, the Holding
Company Reorganization and those activities undertaken in the ordinary course of
conducting their respective businesses. Our opinion is necessarily based upon
market, economic, financial and other conditions as they exist and can be
evaluated as of the date of this opinion, and any change in such conditions may
impact this opinion. We express no opinion as to the price at which WAG Common
Stock will trade at any time.

This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Telco Systems in
connection with its consideration of the Merger and does not constitute a
recommendation to any Telco Systems stockholder as to how such stockholder
should vote on the Merger. This opinion may not be published or referred to, in
whole or part, without our prior written permission, which shall not be
unreasonably withheld. Broadview International LLC hereby consents to references
to and the inclusion of this opinion in its entirety in the Joint Proxy
Statement/Prospectus to be distributed to Telco Systems stockholders in
connection with the Merger.

Sincerely,

Broadview International LLC

C-3
<PAGE> 373

APPENDIX D

STOCKHOLDERS PROXY AGREEMENT

STOCKHOLDERS PROXY AGREEMENT (this "Agreement"), dated as of June 4, 1998,
among WAXS INC., a Delaware corporation ("Parent"), and each other person and
entity listed on the signature pages hereof (each, a "Stockholder").

WITNESSETH:

WHEREAS, as of the date hereof each Stockholder owns (either beneficially
or of record) the number of shares of common stock, par value $0.01 per share
("Company Common Stock"), of Telco Systems, Inc., a Delaware corporation (the
"Company"), set forth opposite such Stockholder's name on Exhibit A hereto (all
such shares of Company Capital Stock owned by the Stockholders and any shares of
Company Capital Stock hereafter acquired by the Stockholders prior to the
termination of this Agreement being referred to herein as the "Shares");

WHEREAS, (i) Kopp Investment Advisors, Inc. ("Kopp") has "investment power"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
("Rule 13d-3")) with respect to 3,614,569 Shares owned by clients who have the
right to terminate their advisory agreements with Kopp ("Client Shares"), and
(ii) Kopp has "voting power" (as defined in Rule 13d-3) with respect to 415,600
Client Shares ("Client Voting Shares") (the Client Shares that are not Client
Voting Shares are referred to herein as "Client Advisory Shares");

WHEREAS, Parent and the Company, among others, propose to enter into an
Agreement and Plan of Merger and Reorganization, dated as of the date hereof (as
the same may be amended from time to time, the "Merger Agreement"; capitalized
terms herein not otherwise defined herein shall have the meanings ascribed
thereto in the Merger Agreement), which provides, upon the terms and subject to
the conditions thereof, for the merger of a subsidiary of Parent with and into
the Company (the "Merger"); and

WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has requested that each Stockholder agree, and, in
order to induce Parent to enter into the Merger Agreement, each Stockholder has
agreed, to grant Parent proxies to vote such Stockholder's Shares;

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:

ARTICLE I

TRANSFER AND VOTING OF SHARES

SECTION 1.01. Transfer of Shares. During the term of this Agreement, and
except as otherwise provided herein, each Stockholder (other than Kopp with
respect to the Client Shares) shall not (a) sell, pledge or otherwise dispose of
any of its Shares if such transaction would result in the Stockholder no longer
having the power to vote or cause to be voted the Shares, (b) deposit its Shares
into a voting trust or enter into a voting agreement or arrangement with respect
to such Shares or grant any proxy with respect thereto or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect acquisition or sale, assignment, transfer or other disposition of
any of the Company Capital Stock if such transaction would result in the
Stockholder no longer having the power to vote or cause to be voted the Shares.

SECTION 1.02. Voting of Shares; Further Assurances. (a) Each Stockholder,
by this Agreement, with respect to those Shares that it owns of record, does
hereby constitute and appoint Parent, or any nominee of Parent, with full power
of substitution, during and for the term of this Agreement, as its true and
lawful attorney and proxy, for and in its name, place and stead, to vote each of
such Shares as its proxy, at every annual, special or adjourned meeting of the
stockholders of the Company (including the right to sign its name (as
stockholder) to any consent, certificate or other document relating to the
Company that the law of the
D-1
<PAGE> 374

State of Delaware may permit or require) (i) in favor of the adoption of the
Merger Agreement and approval of the Merger and the other transactions
contemplated by the Merger Agreement, (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination between
the Company and any person or entity (other than the Merger) or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled, and (iii) in favor
of any other matter relating to consummation of the transactions contemplated by
the Merger Agreement. Each Stockholder further agrees to cause the Shares owned
by it beneficially to be voted in accordance with the foregoing. Each
Stockholder acknowledges receipt and review of a copy of the Merger Agreement.
Notwithstanding anything in this Section 1.02(a) to the contrary, the Client
Advisory Shares shall not be subject to this Section 1.02(a) and the Client
Voting Shares shall cease to be subject to this Section 1.02(a) if and when the
owner of such Client Voting Shares terminates its advisory agreement with Kopp.

(b) Each Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Parent the power to carry out the provisions of this Agreement.

(c) Nothing contained in this Agreement shall be deemed to restrict a
Stockholder who is also a director of the Company from taking actions in his
capacity as a director as may be permitted under the Merger Agreement.

SECTION 1.03. Term of Agreement. This Agreement shall be effective as of
the date hereof and shall expire on the earlier of (a) the Effective Time and
(b) the date of the termination of the Merger Agreement pursuant to its terms.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS

Each Stockholder, severally and not jointly, hereby represents and warrants
to Parent as follows:

SECTION 2.01. Due Organization, etc. Such Stockholder (if it is a
corporation, partnership or other legal entity) is duly organized and validly
existing under the laws of the jurisdiction of its organization. Such
Stockholder has full power and authority (corporate or otherwise) to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action (corporate or otherwise) on the part of such Stockholder. This Agreement
has been duly executed and delivered by or on behalf of such Stockholder and,
assuming its due authorization, execution and delivery by Parent, constitutes a
legal, valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

SECTION 2.02. No Conflicts; Required Filings and Consents. (a) The
execution and delivery of this Agreement by such Stockholder do not, and the
performance of this Agreement by such Stockholder will not, (i) conflict with or
violate the Certificate of Incorporation or ByLaws or similar organizational
documents of such Stockholder (in the case of a Stockholder that is a
corporation, partnership or other legal entity), (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to such
Stockholder or by which it or any of its properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the property or assets of
such Stockholder or (if such Stockholder is a corporation) any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such
D-2
<PAGE> 375

Stockholder or any of its properties is bound or affected, except for any such
breaches, defaults or other occurrences that would not cause or create a
material risk of non-performance or delayed performance by such Stockholder of
its obligations under this Agreement.

(b) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Exchange Act, and the HSR
Act and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by such Stockholder of its obligations under
this Agreement.

SECTION 2.03. Title to Shares. Other than with respect to Kopp to the
extent described in its Schedule 13D dated May 13, 1998 and in Exhibit A hereto,
such Stockholder is the record or beneficial owner of its Shares free and clear
of any proxy or voting restriction other than pursuant to this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent hereby represents and warrants to each Stockholder as follows:

SECTION 3.01. Due Organization, etc. Parent is a corporation duly
organized and validly existing under the laws of the State of Delaware. Parent
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by Parent have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and, assuming its due authorization, execution and
delivery by the Stockholders, constitutes a legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms.

SECTION 3.02. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent do not, and the performance
of this Agreement by Parent will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws of Parent, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Parent or by
which Parent or any of its properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent is
a party or by which it or any of its properties is bound or affected, except for
any such breaches, defaults or other occurrences that would not cause or create
a material risk of non-performance or delayed performance by Parent of its
obligations under this Agreement.

(b) The execution and delivery of this Agreement by Parent do not, and the
performance of this Agreement by Parent will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except (i) for applicable
requirements, if any, of the Exchange Act and the HSR Act and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay the performance
by Parent of its obligations under this Agreement.

ARTICLE IV

GENERAL PROVISIONS

SECTION 4.01. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail

D-3
<PAGE> 376

(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:

(a) If to Parent

WAXS INC.
945 E. Paces Ferry Road, Suite 2240
Atlanta, Georgia 30326
Attention: Chief Executive Officer
Telecopier No.: (404) 365-9847

with a copy to:

Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Steven E. Fox
Telecopier No.: (404) 525-2224

(b) If to a Stockholder, to such Stockholder's address set forth on
Exhibit A.

SECTION 4.02. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

SECTION 4.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

SECTION 4.04. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.

SECTION 4.05. Assignment. This Agreement shall not be assigned by
operation of law or otherwise; provided, however, that Parent may assign its
rights, interests and obligations hereunder to any successor or parent entity of
Parent whose shares are registered under Section 12 of the Exchange Act (or will
be so registered at the Closing).

SECTION 4.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

SECTION 4.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.

SECTION 4.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE. PARENT AND
EACH OF THE STOCKHOLDERS EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY DELAWARE STATE OR FEDERAL COURT SITTING IN THE CITY OF WILMINGTON, DELAWARE,
IN ANY ACTION OR PROCEEDING
D-4
<PAGE> 377

ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND PARENT AND EACH OF THE
STOCKHOLDERS HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH DELAWARE STATE COURT OR SUCH
FEDERAL COURT. PARENT AND EACH OF THE STOCKHOLDERS EACH HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.

SECTION 4.09. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.

WAXS INC.

By: /s/ STEVEN A. ODOM
------------------------------------
Name: Steven A. Odom
Title: Chairman and Chief Executive
Officer

STOCKHOLDERS:

/s/ DEAN C. CAMPBELL
--------------------------------------
Dean C. Campbell

/s/ STEWARD A. FLASCHEN
--------------------------------------
Steward A. Flaschen

/s/ EDWARD J. FONTENOT
--------------------------------------
Edward J. Fontenot

/s/ SHELDON HORING
--------------------------------------
Sheldon Horing

/s/ WILLIAM B. SMITH
--------------------------------------
William B. Smith

/s/ WILLIAM J. STUART
--------------------------------------
William J. Stuart

/s/ RICHARD J. NARDONE
--------------------------------------
Richard J. Nardone

/s/ PHILIP D. WILSON
--------------------------------------
Philip D. Wilson

/s/ DAVID A. LEBEAU
--------------------------------------
David A. LeBeau

/s/ LEROY C. KOPP
--------------------------------------
LeRoy C. Kopp

D-5
<PAGE> 378

/s/ LEROY C. KOPP
--------------------------------------
LeRoy C. Kopp Individual Retirement
Account

KOPP INVESTMENT ADVISORS, INC.
PROFIT SHARING TRUST

By: /s/ LEROY C. KOPP
------------------------------------
LeRoy C. Kopp as trustee

KOPP FAMILY FOUNDATION

By: /s/ LEROY C. KOPP
---------------------------------
LeRoy C. Kopp
Director

KOPP INVESTMENT ADVISORS, INC.,
FOR ITSELF AND AS ATTORNEY-IN-
FACT FOR CERTAIN OF ITS CLIENTS

By: /s/ LEROY C. KOPP
------------------------------------
LeRoy C. Kopp
President

D-6
<PAGE> 379

EXHIBIT A

LIST OF STOCKHOLDERS

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMPANY
COMMON STOCK
OWNED
BENEFICIALLY
NAME AND ADDRESS OF STOCKHOLDER AND OF RECORD
- ------------------------------- ----------------
<S> <C>
LeRoy C. Kopp............................................... 100,000
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
LeRoy C. Kopp IRA........................................... 130,000
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
Kopp Investment Advisors, Inc............................... 7,000
Profit Sharing Trust
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
Kopp Family Foundation...................................... 30,000
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
Kopp Investment Advisors, Inc............................... 200,000
7701 France Avenue South
Suite 500
Edina, MN 55435
Kopp Investment Advisors, Inc............................... 3,614,569
as attorney-in-fact*
c/o Kopp Investment Advisors, Inc.
7701 France Avenue South
Suite 500
Edina, MN 55435
Dean C. Campbell............................................ 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
Dr. Steward A. Flaschen..................................... 51,458**
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
</TABLE>

D-7
<PAGE> 380

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMPANY
COMMON STOCK
OWNED
BENEFICIALLY
NAME AND ADDRESS OF STOCKHOLDER AND OF RECORD
- ------------------------------- ----------------
<S> <C>
Edward J. Fontenot.......................................... 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
Dr. Sheldon Horing.......................................... 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
Dr. William B. Smith, President & CEO....................... 10,422
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
William J. Stuart, VP & CFO................................. 400
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
Richard J. Nardone.......................................... 1,838
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
Philip D. Wilson............................................ 0
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
David A. LeBeau............................................. 1,022
Telco Systems, Inc.
63 Nahatan Street
Norwood, MA 02062
(781) 551-0300
</TABLE>

- ---------------

* Kopp disclaims beneficial ownership of all Client Shares as they are managed
on behalf of clients under agreements terminable at will. Except for this
Agreement, Kopp has no agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Shares in the
Company.
** Includes 29,958 shares held indirectly by Dr. Flaschen in the Steward S.
Flaschen Revocable Investment Trust, 16,042 shares held indirectly by Dr.
Flaschen in the Joyce D. Flaschen Revocable Investment Trust and 5,458 shares
held indirectly by Dr. Flaschen in the Steward S. Flaschen Defined Benefit
Pension Plan.

D-8
<PAGE> 381

APPENDIX E

SEC. 262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec. 251
(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec. 264
of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale
E-1
<PAGE> 382

of all or substantially all of the assets of the corporation. If the certificate
of incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or

(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
E-2
<PAGE> 383

effective date of the merger or consolidation, any stockholder shall have the
right to withdraw his demand for appraisal and to accept the terms offered upon
the merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the requirements
of subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the court, and the costs thereof shall be borne by the
surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and
the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any state.

E-3
<PAGE> 384

(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation. (Last
amended by Ch. 120, L. '97, eff. 7-1-97.)

E-4
<PAGE> 385

APPENDIX F

CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
WORLD ACCESS, INC.

World Access, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:

FIRST: That, the Board of Directors of the Corporation unanimously adopted
a resolution setting forth proposed amendment to the Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable, and
directing that said amendment be presented to the stockholders of the
Corporation for consideration at a special meeting of the stockholders or by
written consent of the stockholders. The resolutions setting forth the proposed
amendment is as follows:

RESOLVED, that the Certificate of Incorporation of the Corporation be
amended to change the number of shares of stock that the Corporation has
authority to issue and that such amendment be effected by deleting the
first paragraph of ARTICLE IV and substituting the following paragraph in
lieu thereof:

CAPITAL STOCK

"The total number of shares of stock that the corporation shall have
authority to issue is One Hundred Sixty Million (160,000,000), consisting
of One Hundred Fifty Million (150,000,000) shares of common stock, $.01 par
value per share ("Common Stock"), and Ten Million (10,000,000) shares of
preferred stock, $.01 par value per share ("Preferred Stock")."

The designation, relative rights, preferences and limitations of the shares
remain as stated in the original Certificate of Incorporation.

SECOND: That, pursuant to resolution of the Board of Directors of the
Corporation, a special meeting of the stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.

THIRD: That the aforesaid amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed as of this day of , 1998.

WORLD ACCESS, INC.

By:

------------------------------------
Mark A. Gergel
Executive Vice President
<PAGE> 386

APPENDIX G

WORLD ACCESS, INC.
1998 INCENTIVE EQUITY PLAN

ARTICLE I

NAME AND PURPOSE

1.1 Name. The name of this Plan is the "World Access, Inc. 1998 Incentive
Equity Plan."

1.2 Purpose. The purpose of the Plan is to attract, motivate and retain
the best available personnel for service as officers, key employees, directors,
consultants, independent contractors and other agents of the Company, to provide
additional equity ownership opportunities to such individuals and align the
long-term interests of these individuals with those of the Company's
stockholders.

ARTICLE II

DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION

2.1 General Definitions. The following words and phrases, when used in the
Plan, unless otherwise specifically defined or unless the context clearly
otherwise requires, shall have the following respective meanings:

(a) Affiliate. A Parent or Subsidiary or any other entity designated
by the Committee in which the Company owns at least a 50% interest
(including, but not limited to, partnerships and joint ventures).

(b) Agreement. The document which evidences the grant of any Benefit
under the Plan and which sets forth the Benefit and the terms, conditions
and provisions of, and restrictions relating to, such Benefit.

(d) Board. The Board of Directors of the Company.

(e) Change of Control. (i) The acquisition at any time by a Person or
Group (excluding, for this purpose, the Company or any Subsidiary or any
employee benefit plan of the Company or any Subsidiary) or beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly, of securities representing 50% or more of the combined voting
power in the election of directors of the then-outstanding securities of
the Company or any successor of the Company; (ii) the termination of
services as directors, for any reason other than death, disability or
retirement from the Board, during any period of two consecutive years or
less, of individuals who at the beginning of such period constituted a
majority of the Board of Directors, unless the election of or nomination
for election of each new director during such period was approved by a vote
of at least two-thirds of the directors still in office who were directors
at the beginning of the period; (iii) approval by the stockholders of the
Company of any merger or consolidation or statutory share exchange as a
result of which the Common Stock shall be changed, converted or exchanged
(other than a merger or share exchange with a wholly-owned Subsidiary of
the Company) or liquidation of the Company or any sale or disposition of
50% or more of the assets or earning power of the Company; or (iv) approval
by the stockholders of the Company of any merger or consolidation or
statutory share exchange to which the Company is a party as a result of
which the Persons who were stockholders of the Company immediately prior to
the effective date of the merger or consolidation or statutory share
exchange shall have beneficial ownership of less than 50% of the combined
voting power in the election of directors of the surviving corporation
following the effective date of such merger or consolidation or statutory
share exchange; provided, however, no Change in Control shall be deemed to
have occurred if, prior to such time as a Change in Control would otherwise
be deemed to have occurred, the Company's Board of Directors deems
otherwise. A "Change in Control" shall not include any reduction in
ownership of an Affiliate so long as the entity continues to meet the
definitions of those terms as contained in this Section.

(f) Code. The Internal Revenue Code of 1986, as amended. Any
reference to the Code includes the regulations promulgated thereunder.

(g) Company. World Access, Inc.

G-1
<PAGE> 387

(h) Committee. The Board's Compensation Committee or its successor.

(i) Common Stock. The Company's $0.01 par value common stock.

(j) Consultant. A Person engaged by the Company or any Affiliate to
provide consulting services to the Company or any Affiliate.

(k) Directors. A duly-elected member of the Board.

(l) Effective Date. The date that the Plan is approved by the
stockholders of the Company, which must occur within 12 months after
adoption by the Board. Any grants of Benefits prior to the approval by the
stockholders of the Company shall be void if such approval is not obtained.

(m) Employee. Any Person employed by the Company and all Affiliates.

(n) Exchange Act. The Securities Exchange Act of 1934, as amended.

(o) Fair Market Value. The closing price of a Share on The Nasdaq
National Market on a given date, or, in the absence of sales on a given
date, the closing price on The Nasdaq National Market on the last day on
which a sale occurred prior to such date.

(p) Fiscal Year. The taxable year of the Company which is the
calendar year.

(q) Group. Any two or more Persons acting as a partnership, limited
partnership, syndicate, or other group acting in concert for the purpose of
acquiring, holding or disposing of voting stock of the Company.

(r) Independent Contractor. A Person engaged to provide services to
the Company or any Affiliate on an independent basis and not as an
Employee.

(s) ISO. An Incentive Stock Option as defined in Section 422 of the
Code.

(t) NQSO. A Non-Qualified Stock Option, which is an Option that does
not meet the statutory requirements of an ISO.

(u) Option. An option to purchase Shares granted under the Plan.

(v) Other Stock Based Award. An award under ARTICLE XVI that is
valued in whole or in part by reference to, or is otherwise based on,
Common Stock.

(w) Parent. Any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if, at the time of the grant
of an Option or other Benefit, each of the corporations (other than the
Company or a Subsidiary) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.

(x) Participant. An Employee, Director, Consultant, Independent
Contractor or other agent who is granted a Benefit under the Plan.

(y) Performance Share. A Share awarded to a Participant under ARTICLE
XV of the Plan.

(z) Person. An individual, corporation, partnership, limited
liability company, joint venture, association, syndicate, trust,
unincorporated organization or other entity.

(aa) Plan. The World Access, Inc. 1998 Incentive Equity Plan and all
amendments and supplements to it.

(ab) Restricted Stock. Shares issued under ARTICLE XIV of the Plan.

(ac) Rule 16b-3. Rule 16b-3 promulgated by the SEC, as amended, or
any successor rule in effect from time to time.

(ad) SEC. The Securities and Exchange Commission.

(ae) Share. A share of Common Stock.

G-2
<PAGE> 388

(af) Subsidiary. Any Person (other than an individual), other than
the Company, in an unbroken chain of Persons (other than individuals)
beginning with the Company, if, at the time of grant of an Option or other
Benefit, each of such Persons, other than the last such Person in the
unbroken chain, owns stock possessing 50% or more of the total combined
voting power of all classes of stock or other equity interests in one of
the other such Persons in such chain.

2.2 Other Definitions. In addition to the above definitions, certain words
and phrases used in the Plan and any Agreement may be defined in other portions
of the Plan or in such Agreement.

2.3 Conflicts in Plan. In the case of any conflict in the terms of the
Plan, or between the Plan and an Agreement, relating to a Benefit, the
provisions in the ARTICLE of the Plan which specifically grants such Benefit
shall control those in a different ARTICLE or in such Agreement.

ARTICLE III

COMMON STOCK

3.1 Numbers of Shares. The number of Shares which may be issued or sold or
for which Options, Restricted Stock or Performance Shares may be granted under
the Plan shall be 5,000,000. Such Shares may be authorized but unissued Shares,
reacquired Shares, Shares acquired on the open market specifically for
distribution under this Plan, or any combination thereof.

3.2 Reusage. If an Option expires or is terminated, surrendered or
canceled without having been fully exercised, if Restricted Stock or Performance
Shares are forfeited, or if any other grant results in any Shares not being
issued, the unused Shares covered by any such Benefit shall again be available
for grant under the Plan to any Participant.

3.3 Adjustments. If there is any change in the Common Stock of the Company
by reason of any stock split, stock dividend, spin-off, split-up, spin-out,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares, or any other similar transactions, the number of shares available for
grant under the Plan or subject to or granted pursuant to a Benefit and the
price thereof, as applicable, shall be appropriately adjusted by the Committee.

ARTICLE IV

ELIGIBILITY

4.1 Determined By Committee. The Participants and the Benefits they
receive under the Plan shall be determined by the Committee in its sole
discretion. In making its determinations, the Committee shall consider past,
present and expected future contributions of Participants and potential
Participants to the Company and any Affiliate. Members of the Committee and any
other Persons whose participation in the Plan would cause disqualification of
this or any other benefit plan intended to be qualified under Rule 16b-3 are
ineligible to participate in the Plan.

ARTICLE V

ADMINISTRATION

5.1 Committee. The Plan shall be administered by the Company's
Compensation Committee or its successors. The Committee shall consist of two or
more members of the Board who are "non-employee directors" as defined in Rule
16b-3 and are "outside directors" as defined in Code Section 162(m) and the
regulations thereunder.

G-3
<PAGE> 389

5.2 Authority. Subject to the terms of the Plan, the Committee shall have
sole discretionary authority to:

(a) determine the individuals to whom Benefits are granted, the type
and amounts of Benefits to be granted and the date of issuance and duration
of all such grants;

(b) determine the terms (including any pricing terms), conditions and
provisions of, and restrictions relating to, each Benefit granted and any
modification or amendment thereof;

(d) prescribe, amend and rescind rules and regulations relating to the
Plan;

(e) determine the content and form of all Agreements;

(f) determine all questions relating to Benefits under the Plan;

(g) maintain accounts, records and ledgers relating to Benefits;

(h) maintain records concerning its decisions and proceedings;

(i) employ agents, attorneys, accountants or other Persons for such
purposes as the Committee considers necessary or desirable; and

(j) do and perform all acts which it may deem necessary or appropriate
for the administration of the Plan and to carry out the purposes of the
Plan

5.3 Delegation. Except as required by Rule 16b-3 with respect to grants of
Options, Restricted Stock, Performance Shares, Other Stock Based Awards, or
other Benefits to individuals who are subject to Section 16 of the Exchange Act
or as otherwise required for compliance with Rule 16b-3 or other applicable law,
the Committee may delegate all or any part of its authority under the Plan to
any Employee, Employees or committee of Employees.

5.4 Decisions of Committee and its Delegates. All decisions made by the
Committee, or (unless the Committee has specified an appeal process to the
contrary) any other Person or Persons to whom the Committee has delegated
authority, pursuant to the provisions hereof shall be final and binding on all
Persons.

ARTICLE VI

AMENDMENT OF PLAN

6.1 Power of Committee. The Committee shall have the sole right and power
to amend the Plan at any time and from time to time, provided, however, that the
Committee may not amend the Plan, without approval of the stockholders of the
Company, in a manner which would:

(a) cause outstanding Options which are intended to qualify as ISOs to
fail to so qualify;

(b) cause the Plan to fail to meet the requirements of Rule 16b-3; or

ARTICLE VII

TERM AND TERMINATION OF PLAN

7.1 Term. The Plan shall be effective as of the Effective Date. No Benefit
shall be granted pursuant to the Plan on or after the tenth anniversary date of
the adoption of the Plan by the Board, but Benefits granted prior to such tenth
anniversary may extend beyond that date to the date(s) specified in the
Agreement(s) covering such Benefits.

7.2 Termination. Subject to ARTICLE VIII, the Plan may be terminated at
any time by the Committee.

G-4
<PAGE> 390

ARTICLE VIII

MODIFICATION OF TERMINATION OF BENEFITS

8.1 General. Subject to the provisions of Section 8.2, the amendment or
termination of the Plan shall not adversely affect a Participant's rights to or
under any Benefit granted prior to such amendment or termination.

8.2 Committee's Right. Except as may be provided in an Agreement, any
Benefit granted may be converted, modified, forfeited or canceled, prospectively
or retroactively in whole or in part, by the Committee in its sole discretion,
but, subject to Section 8.3, no such action may impair the rights of any
Participant without his or her consent. Except as may be provided in an
Agreement, the Committee may, in its sole discretion, in whole or in part, waive
any restrictions or conditions applicable to, or may accelerate the vesting of,
any Benefit.

8.3 Termination of Benefits under Certain Conditions. The Committee in its
sole discretion may cancel any unexpired, unpaid, or deferred Benefits at any
time if the Participant is not in compliance with all applicable provisions of
this Plan or with any Agreement or if the Participant, whether or not he or she
is then an Employee, Director, Consultant, Independent Contractor or other
agent, acts in a manner contrary to the best interests of the Company or any
Affiliate.

8.4 Awards to Foreign Nationals and Employees Outside the United
States. To the extent the Committee deems it necessary, appropriate or
desirable to comply with foreign law or practice and to further the purpose of
this Plan, the Committee may, without amending this Plan, (i) establish special
rules applicable to Benefits granted to Participants who are foreign nationals,
are employed or provide services to the Company outside the United States, or
both, including rules that differ from those set forth in this Plan, and (ii)
grant Benefits to such Participants in accordance with those rules.

ARTICLE IV

CHANGE OF CONTROL

9.1 Right of Committee. The occurrence of a Change of Control shall not
limit the Committee's authority to take any action, in its sole discretion,
permitted by Section 8.2. The Committee, in its sole discretion, may specify in
any Agreement the effect (if any) a Change of Control will have on such
Agreement and the Benefits granted thereunder.

ARTICLE X

AGREEMENTS AND CERTAIN BENEFITS

10.1 Grant Evidenced by Agreement. The grant of any Benefit under the Plan
may be evidenced by an Agreement which shall describe the specific Benefit
granted and the terms and conditions thereof. The granting of any benefit shall
be subject to, and conditioned upon, the recipient's execution of any Agreement,
all capitalized terms used in the Agreement shall have the same meaning as in
the Plan, and the Agreement shall be subject to all of the terms of the Plan.

10.2 Provisions of Agreement. Each Agreement shall contain such provisions
as the Committee shall determine in its sole discretion to be necessary,
desirable and appropriate for the Benefit granted which may include, but not
necessarily be limited to, the following: description of the type of Benefit;
the Benefit's duration; its transferability; if an Option, the exercise price,
the exercise period and the Person or Persons who may exercise the Option; the
effect upon such Benefit of the Participant's death, disability, change of
duties or termination of employment; the Benefit's conditions; when, if, and how
any Benefit may be forfeited, converted into another Benefit, modified,
exchanged for another Benefit, or replaced; and the restrictions on any Shares
purchased or granted under the Plan.

G-5
<PAGE> 391

10.3 Certain Benefits. Except as provided in Section 17.4 hereof, any
Benefit granted to an individual who is subject to Section 16 of the Exchange
Act (as well as any ISO granted to any Participant) shall not be transferable
other than by will or the laws of descent and distribution, and shall be
exercisable during the Participant's lifetime only by the Participant, his or
her guardian or legal representative. The designation of a beneficiary by such
individual shall not constitute a transfer.

ARTICLE XI

TANDEM AWARDS

11.1 Tandem Awards. Benefits may be granted by the Committee in its sole
discretion individually or in tandem.

ARTICLE XII

PAYMENT, DIVIDENDS, DEFERRAL AND WITHHOLDING

12.1 Payment. Upon the exercise of an Option or in the case of any other
Benefit that requires a payment by a Participant to the Company, the amount due
the Company is to be paid:

(a) in cash;

(b) by the surrender of all or part of a Benefit (including the
Benefit being exercised);

(c) by the tender to the Company of Shares owned by the Participant
and registered in his or her name having a Fair Market Value equal to the
amount due to the Company;

(d) in other property, rights and credits, deemed acceptable by the
Committee, including the Participant's promissory note; or

(e) by any combination of the payment methods specified in (a) through
(d) above.

Notwithstanding the foregoing, any method of payment other than in cash may
be used only with the consent of the Committee or if and to the extent so
provided in an Agreement. The proceeds of the sale of Shares purchased pursuant
to an Option and any payment to the Company for other Benefits shall be added to
the general funds of the Company or to the reacquired Shares held by the
Company, as the case may be, and used for general corporate purposes of the
Company as the Board shall determine.

12.2 Dividend Equivalents. In the sole discretion of the Committee, grants
of Benefits in Shares or Share equivalents may include dividend or dividend
equivalent payments or dividend credit rights.

12.3 Optional Deferral. The right to receive any Benefit under the Plan
may, at the request of the Participant, be deferred for such period and upon
such terms as the Committee shall determine, which may include crediting of
dividends on deferrals denominated in shares.

12.4 Code Section 162(m). The Committee, in its sole discretion, may
require that one or more Agreements contain provisions which provide that, in
the event Section 162(m) of the Code, or any successor provision relating to
excessive Employee remuneration, would operate to disallow a deduction by the
Company for all or part of any Benefit under the Plan, a Participant's receipt
of the portion of such Benefit that would not be deductible by the Company shall
be deferred until the next succeeding year or years in which the Participant's
remuneration does not exceed the limit set forth in such provision of the Code.

12.5 Withholding. The Company may, at the time any distribution is made
under the Plan, or at the time any Option is exercised, withhold from such
distribution of Shares issuable upon the exercise of an Option, any amount
necessary to satisfy federal, state and local withholding requirements with
respect to such distribution or exercise of such Option. Such withholding may be
satisfied, at the Company's option, either by cash or the Company's withholding
of Shares. Agreements may contain withholding provisions applicable only to
Participants who are subject to Section 16 of the Exchange Act.

G-6
<PAGE> 392

ARTICLE XIII

OPTIONS

13.1 Types of Options. It is intended that both ISOs and NQSOs may be
granted by the Committee under the Plan.

13.2 Option Price. The purchase price for Shares under any ISO shall be no
less than the Fair Market Value of the Shares at the time the Option is granted
(or, in the case of a greater-than-10% stockholder under Section 422(b)(6) of
the Code, 110% of Fair Market Value).

13.3 Other Requirements for ISOs. The terms of each Option which is
intended to qualify as an ISO shall meet all requirements of Section 422 of the
Code or any successor statute in effect from time to time, including (without
limitation) the requirement that the grantee be an Employee of the Company, a
Parent and/or a Subsidiary.

13.4 NQSOs. The terms of each NQSO shall provide that such Option will not
be treated as an ISO.

13.5 Determination by Committee. Except as otherwise provided in Sections
13.2 through Section 13.4, the terms of all Options shall be determined by the
Committee.

ARTICLE XIV

RESTRICTED STOCK

14.1 Description. The Committee may grant Benefits in Shares as Restricted
Stock with such terms and conditions as may be determined in the sole discretion
of the Committee. Shares of Restricted Stock shall be issued and delivered at
the time of the grant or as otherwise determined by the Committee, but shall be
subject to forfeiture until provided otherwise in the applicable Agreement or
the Plan. Each certificate representing Shares of Restricted Stock shall bear a
legend referring to the Plan and any risk of forfeiture of the Shares and
stating that such Shares are nontransferable until all restrictions have been
satisfied and the legend has been removed. At the discretion of the Committee,
the grantee may or may not be entitled to full voting and dividend rights with
respect to all shares of Restricted Stock from the date of grant. The Committee
may (but is not obligated to) require that any dividends on such shares shall be
automatically deferred and reinvested in additional Restricted Stock subject to
the same restrictions as the underlying Benefit.

14.2 Cost of Restricted Stock. Grants of Shares of Restricted Stock shall
be made at such cost as the Committee shall determine and may be issued for no
monetary consideration, subject to applicable state law.

14.3 Nontransferability. Shares of Restricted Stock shall not be
transferable until after the removal of the legend with respect to such Shares.

ARTICLE XV

PERFORMANCE SHARES

15.1 Description. Performance Shares represent the right of a Participant
to receive Shares or cash equal to the Fair Market Value of such shares at a
future date in accordance with the terms and conditions of a grant. The terms
and conditions shall be determined by the Committee, in its sole discretion, but
generally are expected to be based substantially upon the attainment of targeted
financial and/or operational performance objectives.

15.2 Grant. The Committee may grant an award of Performance Shares at such
times, in such amounts and under such terms and conditions as it deems
appropriate.

G-7
<PAGE> 393

ARTICLE XVI

OTHER STOCK BASED AWARDS AND OTHER BENEFITS

16.1 Other Stock Based Awards. The Committee shall have the right to grant
Other Stock Based Awards which may include, without limitation, the grant of
Shares based on certain conditions, the payment of cash based on the market
performance of the Common Stock, and the grant of securities convertible into
Shares.

16.2 Other Benefits. The Committee shall have the right to provide other
types of Benefits under the Plan in addition to those specifically listed, if
the Committee believes that such Benefits would further the purposes for which
the Plan has been established.

ARTICLE XVII

MISCELLANEOUS PROVISIONS

17.1 Termination of Service. If the employment of a Participant with or
the provision of services by a Participant to the Company terminates for any
reason, all unexercised, deferred, and unpaid Benefits may be exercisable or
paid only in accordance with rules established by the Committee. These rules may
provide, as the Committee in its sole discretion may deem appropriate, for the
expiration, forfeiture, continuation, or acceleration of the vesting, except as
may be provided in an Agreement, of all or part of the Benefits.

17.2 Unfunded Status of the Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments or deliveries of Shares not yet made to a Participant by the Company,
nothing contained herein shall give any rights that are greater than those of a
general creditor of the Company. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Shares or payments hereunder consistent with the foregoing.

17.3 Designation of Beneficiary. A Participant may file with the Committee
a written designation of a beneficiary or beneficiaries (subject to such
limitations as to the classes and number of beneficiaries and contingent
beneficiaries as the Committee may from time to time prescribe) to exercise, in
the event of the death of the Participant, an Option, or to receive, in such
event, any Benefits. The Committee reserves the right to review and approve
beneficiary designations. A Participant may from time to time revoke or change
any such designation of beneficiary and any designation of beneficiary under the
Plan shall be controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Committee shall be in doubt as to the right of
any such beneficiary to exercise any Option or to receive any Benefit, the
Committee may determine to recognize only an exercise by the legal
representative of the recipient, in which case the Company, the Committee and
the members thereof shall not be under any further liability to anyone.

17.4 Nontransferability. Unless otherwise determined by the Committee or
specified in an Agreement (and subject to Section 10.3 hereof), (i) no Benefit
granted under this Plan may be transferred or assigned by the Participant to
whom it is granted other than by beneficiary designation, will, pursuant to the
laws of descent and distribution, or pursuant to a qualified domestic relations
order, and (ii) a Benefit granted under this Plan may be exercised, during the
Participant's lifetime, only by the Participant or by the Participant's guardian
or legal representative; except that, no ISO may be transferred or assigned
pursuant to a qualified domestic relations order or exercised, during the
Participant's lifetime, by the Participant's guardian or legal representative.

17.5 Rule 16b-3. With respect to Participants subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Plan administrators fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.

17.6 Underscored References. The underscored references contained in the
Plan and in any Agreement are included only for convenience, and they shall not
be construed as a part of the Plan or Agreement or in any respect affecting or
modifying its provisions.

G-8
<PAGE> 394

17.7 Number and Gender. The masculine, feminine and neuter, wherever used
in the Plan or in any Agreement, shall refer to either the masculine, feminine
or neuter; and, unless the context otherwise requires the singular shall include
the plural and the plural the singular.

17.8 Governing Law. The place of administration of the Plan and each
Agreement shall be in the State of Georgia. The corporate law of the Company's
state of incorporation shall govern issues related to the validity and issuance
of Shares. Otherwise, this Plan and each Agreement shall be construed and
administered in accordance with the laws of the State of Georgia, without giving
effect to principles relating to conflict of laws.

17.9 Purchase for Investment. The Committee may require each Person
purchasing or receiving shares pursuant to a Benefit to represent to and agree
with the Company in writing that such Person is acquiring the Shares for
investment and without a view to distribution or resale. The certificates for
such Shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer. All certificates for Shares delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under all applicable laws,
rules and regulations, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate references to such restrictions.

17.10 No Employment Contract. Neither the adoption of the Plan nor any
Benefit granted hereunder shall confer upon any Employee, Director, Consultant,
Independent Contractor or other agent any right to continued employment with or
services to the Company or any Affiliate, nor shall the Plan or any Benefit
interfere in any way with the right of the Company or any Affiliate to terminate
the employment or provision of services of any of its Employees, Directors,
Consultants, Independent Contractors or other agents at any time.

17.11 No Effect on Other Benefits. The receipt of Benefits under the Plan
shall have no effect on any benefits to which a Participant may be entitled from
the Company or any Affiliate under another plan or otherwise, or preclude a
Participant from receiving any such benefits.

G-9
<PAGE> 395

APPENDIX H

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made as of ,
1998 by and between WORLD ACCESS, INC., a Delaware corporation (the "Company"),
and ("Indemnitee"), a director and/or officer of the Company.

WHEREAS, Article XI of the Certificate of Incorporation of the Company (the
"Certificate") provides that the Company, among other things, shall indemnify
and hold harmless all persons whom it shall have the power to indemnify under
Section 145 of the General Corporation Law of the State of Delaware to the
fullest extent permitted thereunder; and

WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to enhance Indemnitee's continued service to the
Company and Indemnitee's reliance on the provisions of Article XI of the
Certificate requiring indemnification under certain circumstances, and in part
to provide Indemnitee with specific contractual assurance that indemnification
protection will be available and to implement such provision, the Company wishes
to provide in this Agreement for the indemnification of, and the advancement of
expenses to, Indemnitee to the fullest extent permitted by law;

NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

SECTION 1. Right to Indemnification. The Company shall to the fullest
extent permitted by applicable law as then in effect indemnify and hold harmless
the Indemnitee in the event that he was or is a party to or is involved or
becomes involved in any manner (including, without limitation, as a party,
intervenor or a witness) or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including,
without limitation, any action, suit or proceeding by or in the right of the
Company to procure a judgment in its favor) (a "Proceeding") by reason of the
fact that he, or a person of whom he is the legal representative, is or was a
director and/or officer of the Company, or is or was serving at the request of
the Company as a director, officer, partner (limited or general) or agent of
another corporation, partnership, joint venture, limited liability company,
trust or other enterprise (including, without limitation, service with respect
to an employee benefit plan) against all expenses, liabilities and losses
(including attorneys' fees, judgments, fines, taxes, penalties and amounts paid
or to be paid in settlement) reasonably incurred by him in connection with such
Proceeding. Such indemnification shall be a contract right and shall include the
right to receive payment in advance of any expenses incurred by the Indemnitee
in connection with such Proceeding, consistent with the provisions of applicable
law as then in effect.

SECTION 2. Indemnification Not Exclusive Right. The right of
indemnification provided in this Agreement shall not be exclusive of and shall
be in addition to, and not in lieu of, any other rights to which the Indemnitee
may otherwise be entitled under applicable law, the Bylaws or otherwise. Nothing
in this Agreement shall diminish or otherwise restrict the Indemnitee's right to
indemnification under applicable law, the Certificate or otherwise. The
provisions of this Agreement shall inure to the benefits of the heirs,
executors, administrators and other legal representatives of the Indemnitee and
shall be applicable to Proceedings commenced or continuing after the adoption of
this Agreement, whether arising from acts or omissions occurring before or after
its execution and delivery.

SECTION 3. Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies. In furtherance, but not in limitation of the
foregoing provisions, the following procedures, presumptions and remedies shall
apply with respect to the advancement of expenses and the right to
indemnification under this Agreement:

3.1. Advancement of Expenses. All reasonable expenses incurred by or
on behalf of the Indemnitee in the defense of or other involvement in or
otherwise in connection with any Proceeding shall be advanced to the
Indemnitee by the Company within twenty (20) days after the receipt by the
Company of a statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall

H-1
<PAGE> 396

reasonably evidence the expenses incurred by the Indemnitee and, if
required by law at the time of such advance, shall include or be
accompanied by an undertaking by or on behalf of the Indemnitee to repay
the amounts advanced if it should ultimately be determined that the
Indemnitee is not entitled to be indemnified against such expenses pursuant
to this Agreement.

3.2. Procedure for Determination of Entitlement to
Indemnification. 3.2.1. To obtain indemnification under this Agreement,
the Indemnitee shall submit to the Secretary of the Company a written
request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine whether
and to what extent the Indemnitee is entitled to indemnification (the
"Supporting Documentation"). The determination of the Indemnitee's
entitlement to indemnification shall be made not later than sixty (60) days
after receipt by the Company of the written request for indemnification,
together with the Supporting Documentation. The Secretary of the Company
shall, promptly upon receipt of such a request for indemnification, advise
the Board of Directors of the Company (the "Board of Directors") in writing
that the Indemnitee has requested indemnification.

3.2.2. The Indemnitee's entitlement to indemnification under this
Agreement shall be determined in one of the following ways: (A) by a
majority vote of the Disinterested Directors (as hereinafter defined), even
though less than a quorum of the Board of Directors; (B) by a written
opinion of Independent Counsel (as hereinafter defined) if (x) a Change of
Control (as hereinafter defined) shall have occurred and the Indemnitee so
requests or (y) there are no Disinterested Directors, or a majority of
Disinterested Directors, even though less than a quorum, so directs; (C) by
the stockholders of the Company (but only if a majority of the
Disinterested Directors, even though less than a quorum of the Board of
Directors, presents the issue of entitlement to indemnification to the
stockholders for their determination); or (D) as provided in Section 3.3.

3.2.3. In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
3.2.2, a majority of the Disinterested Directors, or in the absence of any
Disinterested Directors, a majority of the Board of Directors, shall select
the Independent Counsel, but only an Independent Counsel to which the
Indemnitee does not reasonably object; provided, however, that if a Change
of Control shall have occurred, the Indemnitee shall select such
Independent Counsel, but only an Independent Counsel to which the Board of
Directors does not reasonably object.

3.3. Presumptions and Effect of Certain Proceedings. Except as otherwise
expressly provided in this Agreement, the Indemnitee shall be presumed to be
entitled to indemnification under this Agreement upon submission of a request
for indemnification, together with the Supporting Documentation in accordance
with Section 3.2.1, and thereafter the Company shall have the burden of proof to
overcome that presumption in reaching a contrary determination. In any event, if
the person or persons empowered under Section 3.2 to determine entitlement to
indemnification shall not have been appointed or shall not have made a
determination within sixty (60) days after receipt by the Company of the request
therefor together with the Supporting Documentation, the Indemnitee shall be
deemed to be entitled to indemnification and shall be entitled to such
indemnification unless (A) Indemnitee misrepresented or failed to disclose a
material face in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. The termination
of any Proceeding described in Section 1, or of any claim, issue or matter
herein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, adversely affect the right
of the Indemnitee to indemnification or create a presumption that the Indemnitee
did act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Company or, with respect to any
criminal Proceeding, that the Indemnitee had reasonable cause to believe that
his conduct was unlawful.

3.4. Remedies of Indemnitee. 3.4.1. In the event that a determination is
made pursuant to Section 3.2 that the Indemnitee is not entitled to
indemnification under this Agreement, the Indemnitee shall be entitled to seek
an adjudication of his entitlement to such indemnification either, at the
Indemnitee's sole option, in (x) an appropriate court of the State of Delaware
or any other court of competent jurisdiction or (y) an arbitration to be
conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association; it being understood that any such judicial proceeding
or arbitration shall be de novo and the

H-2
<PAGE> 397

Indemnitee shall not be prejudiced by reason of such adverse shall have the
burden of proving that the Indemnitee is not entitled to indemnification under
this Agreement.

3.4.2. If a determination shall have been made or deemed to have been made,
pursuant to Sections 3.2 or 3.3, that the Indemnitee is entitled to
indemnification, the Company shall be obligated to pay the amounts constituting
such indemnification within five (5) days after such determination has been made
or deemed to have been made and shall be conclusively bound by such
determination unless (A) the Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In the event
that advancement of expenses is not timely made pursuant to Section 3.1 or
payment of indemnification is not made within five (5) days after a
determination of entitlement to indemnification has been made or deemed to have
been made pursuant to Section 3.2 or 3.3, the Indemnitee shall be entitled to
seek judicial enforcement of the Company's obligation to pay to the Indemnitee
such advancement of expenses or indemnification. Notwithstanding the foregoing,
the Company may bring an action, in an appropriate court in the State of
Delaware or any other court of competent jurisdiction, contesting the right of
the Indemnitee to receive indemnification hereunder due to the occurrence of an
event described in subclause (A) or (B) of this subsection 3.4.2 (a
"Disqualifying Event"); provided, however, that in any such action the Company
shall have the burden of proving the occurrence of such Disqualifying Event.

3.4.3. The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 3.4 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.

3.4.4. In the event that the Indemnitee, pursuant to this Section 3.4,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Agreement, the
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all expenses actually and reasonably
incurred by him if the Indemnitee prevails in such judicial adjudication or
arbitration. If it shall be determined in such judicial adjudication or
arbitration that the Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, all such expenses incurred by
the indemnitee in connection with such judicial adjudication or arbitration
shall be paid.

3.5. Definitions. For the purposes of this Section 3:

3.5.1. "Change in Control" means a change in control of the Company of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided that, without limitation,
such a change in control shall be deemed to have occurred if (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Act)
becomes after the date hereof the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of
the Company's then outstanding securities without the prior approval of at
least two-thirds of the members of the Board of Directors in office
immediately prior to such acquisition; (B) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than
a majority of the Board of Directors thereafter; or (C) during any period
of two (2) consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (including for this purpose any
new director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board of
Directors.

3.5.2. "Disinterested Director" means a director of the Company who is
not or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.

H-3
<PAGE> 398

3.5.3. "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five (5) years has been,
retained to represent (A) the Company or the Indemnitee in any matter
material to either such party or (B) any other party to the Proceeding
giving rise to a claim for indemnification under this Agreement.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would have
a conflict of interest in representing either the Company or the Indemnitee
in an action to determine the Indemnitee's rights under this Agreement.

SECTION 4. Notification and Defense of Claim. 4.1. Promptly after receipt
of notice of the commencement of any action, suit or proceeding, Indemnitee
will, if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof, but the omission so
to notify the Company will not relieve the Company from any liability that the
Company may have to Indemnitee under this Agreement unless the Company is
materially prejudiced thereby. With respect to any such action, suit or
proceeding as to which Indemnitee notifies the Company of the commencement
thereof, (A) the Company will be entitled to participate therein at its own
expense, and (B) except as otherwise provided below, the Company, jointly with
any other indemnifying party similarly notified, will be entitled to assume the
defense thereof with counsel reasonably satisfactory to Indemnitee. After notice
from the Company to Indemnitee of the Company's election so to assume the
defense thereof, the Company will not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of investigation
or as otherwise provided below. Indemnitee shall have the right to employ
Indemnitee's own counsel in such action, suit or proceeding, but the fees and
disbursements of such counsel incurred after notice from the Company of the
Company's assumption of the defense thereof shall be at the expense of
Indemnitee unless (i) the employment by counsel by Indemnitee has been
authorized by the Company, (ii) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such action, (iii) such action, suit or proceeding
seeks penalties or other relief against Indemnitee with respect to which the
Company could not provide monetary indemnification to Indemnitee (such as
injunctive relief or incarceration), or (iv) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and disbursements of counsel shall be at the expense of the Company.
The Company shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Company, or as to which Indemnitee
shall have reached the conclusion specified in (ii) above, or which involves
penalties or other relief against Indemnitee of the type referred to in (iii)
above. It is acknowledged that a director or former director shall be entitled
under circumstances specified in the Certificate to expenses of separate legal
counsel up to the amount specified therein.

4.2. The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without the Company's written consent. The Company shall not settle any action
or claim in any manner that would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Company nor Indemnitee will
unreasonably withhold consent to any proposed settlement.

SECTION 5. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(A) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraph of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (B) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.

SECTION 6. Company's Right to Indemnification. Nothing in this Agreement
shall diminish, limit or otherwise restrict or modify in any way the Company's
right to indemnification or contribution from an

H-4
<PAGE> 399

Indemnitee or an Indemnitee's obligation to indemnify or hold harmless the
Company under any agreement, instrument, commitment or understanding now or
hereafter in effect.

SECTION 7. Cancellation. The Company may cancel the provisions of this
Agreement prospectively only upon thirty (30) days' prior written notice to
Indemnitee in order to afford Indemnitee an opportunity to resign as officer
and/or director rather than continue to serve absent indemnification provided
under this Agreement; it being understood that "prospectively only" shall mean
that the Agreement shall remain in full force and effect for all acts or
omissions that occur through the effective date of cancellation.

SECTION 8. Amendments and Waiver. No amendment, modification or discharge
or this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by both of the parties hereto. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure of any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any of such provisions, rights or privileges hereunder. No delay or failure
on the part of any party in exercising any right, power or privilege under this
Agreement or under any other instruments given in connection with or pursuant to
this Agreement shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
exercise of any other right, power or privilege.

SECTION 9. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
and delivery of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.

SECTION 10. No Duplication of Payment. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, the Certificate or otherwise) of the
amounts otherwise indemnifiable hereunder.

SECTION 11. Governing Law; Headings. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles-of conflicts of laws. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning of interpretation of this Agreement.

SECTION 12. Successors; Binding Agreement. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
by agreement in form and substance reasonably satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. This Agreement shall inure to the benefit of and be
enforceable by Indemnitee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Indemnitee should die while any amounts would still be payable to Indemnitee
hereunder if Indemnitee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Indemnitee's devisee, legatee, or other designee, or if there be no
such designee, to Indemnitee's estate.

H-5
<PAGE> 400

SECTION 13. Notice. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, as follows:

If to Indemnitee:

If to the Company:

World Access, Inc.
945 E. Paces Ferry Road, Suite 2240
Atlanta, GA 30326
Attention: Chief Executive Officer

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

SECTION 14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, Indemnitee has executed and delivered this Agreement,
and the Company has caused this Agreement to be executed and delivered, all as
of the day and year first above written.

WORLD ACCESS, INC.

By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------

INDEMNITEE

By:
--------------------------------------
Name:
--------------------------------------

H-6
<PAGE> 401

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate or limit the personal liability of directors of a
corporation to the corporation or to any of its stockholders for monetary
damages for a breach of fiduciary duty as a director, except (i) for breach of
the director's duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
certain unlawful dividends and stock repurchases, or (iv) for any transaction
from which the director derived an improper personal benefit.

Section 145 of the DGCL provides that in the case of any action other than
one by or in the right of the corporation, a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
in such capacity on behalf of another corporation or enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

Section 145 of the DGCL provides that in the case of an action by or in the
right of a corporation to procure a judgment in its favor, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any action or suit by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation in such capacity on behalf of another corporation
or enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under standards similar to those set forth in the
preceding paragraph, except that no indemnification may be made in respect of
any action or claim as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that such person is fairly
and reasonably entitled to indemnification.

Articles X and XI of the Company's Certificate of Incorporation provides
for indemnification of directors, officers and employees to the fullest extent
permissible under the DGCL.

II-1
<PAGE> 402

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

The following exhibits are filed herewith or incorporated herein by
reference.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger and Reorganization, dated as of
June 4, 1998 (as amended as of October 27, 1998), among WAXS
INC., World Access, Inc., Tail Acquisition Corporation, and
Telco Systems, Inc. (incorporated by reference to Appendix A
to the Joint Proxy Statement/Prospectus included as part of
this registration statement).
3.1 -- Certificate of Incorporation of World Access, Inc. (formerly
known as WAXS INC. (incorporated by reference to Exhibit 3.1
to the Registrant's Registration Statement on Form S-4 (No.
333-65839))).
3.1(a) -- Certificate of Amendment to Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to the
Registrant's Current Report on Form 8-K filed on October 28,
1998).
3.2 -- Bylaws of World Access, Inc. (formerly known as WAXS INC.
(incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-4 (No.
333-65839))).
5.1 -- Opinion letter of Rogers & Hardin LLP as to the legality of
the securities being registered by this registration
statement.
8.1 -- Opinion letter of Skadden, Arps, Slate, Meagher & Flom LLP
as to certain tax matters.
8.2 -- Opinion letter of Rogers & Hardin LLP as to certain tax
matters.
23.1 -- Consent of Rogers & Hardin LLP with respect to its opinion
as to the legality of securities being registered by this
registration statement (contained in Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to its opinion as to certain tax matters (contained
in Exhibit 8.1).
23.3 -- Consent of Rogers & Hardin LLP with respect to its opinion
as to certain tax matters (contained in Exhibit 8.2).
23.4 -- Consent of PricewaterhouseCoopers LLP, independent public
accountants, with respect to financial statements of World
Access, Inc.
23.5 -- Consent of Tedder, Grimsley & Company, P.A., independent
auditors, with respect to the financial statements of
Advanced TechCom, Inc.
23.6 -- Consent of KPMG Peat Marwick LLP, independent auditors, with
respect to financial statements of NACT Telecommunications,
Inc.
23.7 -- Consent of Deloitte & Touche, LLP, independent auditors,
with respect to the financial statements of Advanced
TechCom, Inc.
23.8 -- Consent of The Robinson-Humphrey Company, LLC with respect
to its fairness opinion regarding the Merger.
23.9 -- Consent of Broadview International LLC with respect to its
fairness opinion regarding the Merger (incorporated by
reference to Appendix C to the Joint Proxy
Statement/Prospectus included as part of this registration
statement).
</TABLE>

II-2
<PAGE> 403

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
23.10 -- Consent of Ernst & Young LLP, independent auditors, with
respect to consolidated financial statements of Telco
Systems, Inc.
23.11 -- Consent of Ernst & Young LLP, independent auditors, with
respect to financial statements of Cherry Communications,
Inc. and Cherry Communications U.K. Limited.
23.12 -- Consent of Grant Thornton LLP, independent auditors, with
respect to financial statements of Cherry Communications,
Inc. and Cherry Communications U.K. Limited.
24.1 -- Powers of attorney (included on page II-6).
99.1 -- Form of Proxy for World Access.
99.2 -- Form of Proxy for Telco Systems.
</TABLE>

(b) Financial Statement Schedules

Financial statements and schedules not included herein have been omitted
because of the absence of conditions under which they are required or because
the required information, where material, is shown in the consolidated financial
statements or notes thereto incorporated by reference in the Joint Proxy
Statement/Prospectus.

The opinions of The Robinson-Humphrey Company, LLC and Broadview
International LLC with respect to the Merger are attached as Appendix B and
Appendix C, respectively, to the Joint Proxy Statement/Prospectus filed as a
part of this registration statement.

ITEM 22. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes (i) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement (A) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (B) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement; and (C) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; (ii) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (iii) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(c) (i) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of
the applicable form.

II-3
<PAGE> 404

(ii) The undersigned registrant hereby undertakes that every prospectus:
(A) that is filed pursuant to paragraph (c)(i) immediately
preceding or (B) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that such a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference in the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.

(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-4
<PAGE> 405

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on November 9, 1998.

WORLD ACCESS, INC.

By: /s/ STEVEN A. ODOM
------------------------------------
Steven A. Odom
Chairman of the Board
and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
each of Steven A. Odom and Mark A. Gergel, as his attorney-in-fact, each with
the power of substitution, to sign this Registration Statement on his behalf
individually and in the capacity stated below and to file all supplements,
amendments and post-effective amendments to this Registration Statement, and any
and all instruments or documents filed as a part of or in connection with this
Registration Statement or any amendment or supplement thereto, and any such
attorney-in-fact may make such changes and additions to this Registration
Statement as such attorney-in-fact may deem necessary or appropriate.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN A. ODOM Chairman of the Board and November 9, 1998
------------------------------------------------ Chief Executive Officer
Steven A. Odom

/s/ MARK A. GERGEL Executive Vice President and November 9, 1998
------------------------------------------------ Chief Financial Officer
Mark A. Gergel (Principal Financial
Officer)

/s/ HENSLEY E. WEST Director and President November 9, 1998
------------------------------------------------ (Chief Operating Officer)
Hensley E. West

/s/ MARTIN D. KIDDER Vice President, Controller November 9, 1998
------------------------------------------------ and Secretary (Principal
Martin D. Kidder Accounting Officer)

/s/ STEPHEN J. CLEARMAN Director November 9, 1998
------------------------------------------------
Stephen J. Clearman

/s/ JOHN D. PHILLIPS Director November 9, 1998
------------------------------------------------
John D. Phillips

Director November , 1998
------------------------------------------------
Stephen E. Raville
</TABLE>

II-5
<PAGE> 406

INDEX TO EXHIBITS

The Exhibit numbers in the following list correspond to the numbers
assigned to such exhibits in Item 601 and Regulation S-K.

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
- ------- ----------- ----------
<C> <S> <C> <C>
2.1 -- Agreement and Plan of Merger and Reorganization, dated as of
June 4, 1998 (as amended as of October 27, 1998), among WAXS
INC., World Access, Inc., Tail Acquisition Corporation, and
Telco Systems, Inc. (incorporated by reference to Appendix A
to the Joint Proxy Statement/Prospectus included as part of
this registration statement).
3.1 -- Certificate of Incorporation of World Access, Inc. (formerly
known as WAXS INC (incorporated by reference to Exhibit 3.1
to the Registrant's Registration Statement on Form S-4 (No.
333-65839))).
3.1(a) -- Certificate of Amendment to Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to the
Registrant's Current Report on Form 8-K filed on October 28,
1998).
3.2 -- Bylaws of World Access, Inc. (formerly known as WAXS INC
(incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-4 (No.
333-65839))).
5.1 -- Opinion letter of Rogers & Hardin LLP as to the legality of
the securities being registered by this registration
statement.
8.1 -- Opinion letter of Skadden, Arps, Slate, Meagher & Flom LLP
as to certain tax matters.
8.2 -- Opinion letter of Rogers & Hardin LLP as to certain tax
matters.
23.1 -- Consent of Rogers & Hardin LLP with respect to its opinion
as to the legality of securities being registered by this
registration statement (contained in Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to its opinion as to certain tax matters (contained
in Exhibit 8.1).
23.3 -- Consent of Rogers & Hardin LLP with respect to its opinion
as to certain tax matters (contained in Exhibit 8.2).
23.4 -- Consent of PricewaterhouseCoopers LLP, independent public
accountants, with respect to financial statements of World
Access, Inc.
23.5 -- Consent of Tedder, Grimsley & Company, P.A., independent
auditors, with respect to the financial statements of
Advanced TechCom, Inc.
23.6 -- Consent of KPMG Peat Marwick LLP, independent auditors, with
respect to financial statements of NACT Telecommunications,
Inc.
23.7 -- Consent of Deloitte & Touche, LLP, independent auditors,
with respect to financial statements of Advanced TechCom,
Inc.
23.8 -- Consent of The Robinson-Humphrey Company, LLC with respect
to its fairness opinion regarding the Merger.
23.9 -- Consent of Broadview International LLC with respect to its
fairness opinion regarding the Merger (incorporated by
reference to Appendix C to the Joint Proxy
Statement/Prospectus included as part of this registration
statement).
23.10 -- Consent of Ernst & Young LLP, independent auditors, with
respect to consolidated financial statements of Telco
Systems, Inc.
</TABLE>
<PAGE> 407

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
- ------- ----------- ----------
<C> <S> <C> <C>
23.11 -- Consent of Ernst & Young LLP, independent auditors, with
respect to financial statements of Cherry Communications,
Inc. and Cherry Communications U.K. Limited.
23.12 -- Consent of Grant Thornton LLP, independent auditors, with
respect to financial statements of Cherry Communications,
Inc. and Cherry Communications U.K. Limited.
24.1 -- Powers of attorney (included on page II-6).
99.1 -- Form of Proxy for World Access.
99.2 -- Form of Proxy for Telco Systems.
</TABLE>

<PAGE> 1

EXHIBIT 5.1

November 9, 1998

World Access, Inc.
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326

Gentlemen:

We have acted as counsel to World Access, Inc. (formerly known as WAXS INC.
(the "Company")) in connection with the registration by the Company on Form S-4
(hereinafter referred to, together with any amendments thereto, as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of an aggregate of up to 8,082,282 shares of common stock,
$.01 par value per share, of the Company (the "Shares") issuable pursuant to
that certain Agreement and Plan of Merger and Reorganization dated as of June 4,
1998, as amended, by and among the Company, WA Telcom Products Co., Inc.
(formerly known as World Access, Inc.), Tail Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company, and Telco Systems, Inc.
(as so amended, the "Merger Agreement").

This opinion is being furnished to you in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act.

In connection with this opinion, we have examined such corporate records
and documents and have made such examinations of law as we have deemed
necessary. In rendering this opinion, we have relied, without investigation,
upon various certificates of public officials and of officers and
representatives of the Company. In our examination of documents, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals and the conformity with the originals of all documents
submitted to us as copies.

Based upon the foregoing and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that the
Company has the corporate power and authority under the General Corporation Law
of the State of Delaware and its Certificate of Incorporation and Bylaws to
issue the Shares, and the Shares, when issued in accordance with the Merger
Agreement, will be validly issued, fully paid and nonassessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement and as an exhibit to applications to the securities commissioners of
the various states and other jurisdictions of the United States for registration
or qualification of the Shares in such states and other jurisdictions. We
further consent to the reference to our firm under the caption "Legal Matters"
in the Joint Proxy Statement/Prospectus which is a part of the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission.

Very truly yours,

/s/ ROGERS & HARDIN

--------------------------------------
ROGERS & HARDIN

<PAGE> 1

EXHIBIT 8.1

November 9, 1998

Telco Systems, Inc.
63 Nahatan Street
Norwood, Massachusetts 02062

Ladies and Gentlemen:

We have acted as counsel to Telco Systems Inc., a Delaware corporation
("Telco Systems"), in connection with the proposed merger (the "Merger") of
Telco Systems with and into Tail Acquisition Corporation ("Merger Sub"), a
Delaware corporation and wholly-owned subsidiary of World Access, Inc., a
Delaware corporation (formerly known as WAXS INC., "New World Access"), pursuant
to the Agreement and Plan of Merger and Reorganization dated as of June 4, 1998,
as amended as of October 27, 1998 by and among WA Telcom Products Co., Inc.
(formerly known as World Access, Inc., "Old World Access"), New World Access,
Merger Sub and Telco Systems (the "Merger Agreement"). Capitalized terms used
but not defined herein shall have the meanings ascribed to such terms in the
Merger Agreement.

This opinion is being furnished to you, at your request, in connection with
the filing by New World Access of the Registration Statement on Form S-4 (the
"Registration Statement") filed on the date hereof with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").

In rendering our opinion set forth below, we have examined and, with the
consent of Old World Access, New World Access, Merger Sub and Telco Systems,
relied upon the accuracy and completeness (which we have neither investigated
nor verified) of the facts, information, covenants, representations and
warranties contained in originals or copies, certified or otherwise identified
to our satisfaction, of the Merger Agreement, including the Exhibits thereto,
the Registration Statement and such other documents and corporate records as we
have deemed necessary or appropriate as a basis for our opinion set forth below.
In addition, we have relied upon certain statements, representations and
covenants made by Old World Access, New World Access, Merger Sub and Telco
Systems, including representations and covenants set forth in letters from New
World Access and Telco Systems dated the date hereof (the "Tax Certificates"),
and we have assumed that the Tax Certificates will be complete and accurate, and
will be re-executed by appropriate officers of New World Access and Telco
Systems, as of the Effective Time.

In rendering our opinion set forth below, we have assumed that (i) the
Merger will be consummated in accordance with the terms of the Merger Agreement
and as described in the Registration Statement and that none of the terms and
conditions contained therein will be waived or modified in any respect prior to
the Effective Time and (ii) the Registration Statement, the Merger Agreement and
the Tax Certificates reflect all the material facts relating to the Merger, New
World Access, Old World Access, Merger Sub, and Telco Systems. Our opinion is
conditioned upon, among other things, the initial and continuing accuracy and
completeness of the facts, information, covenants, representations and
warranties made by Old World Access, New World Access, Merger Sub and Telco
Systems (including, without limitation, those set forth in the Merger Agreement
and the Tax Certificates). Any material change or inaccuracy in the facts
referred to, set forth or assumed herein, in the Registration Statement, the
Merger Agreement or in the Tax Certificates (giving effect to all events
occurring subsequent to the Effective Time) may affect the conclusions stated
herein.

We have also assumed the genuineness of all signatures, the legal capacity
of all natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
documents.

In rendering our opinion set forth below, we have considered applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations promulgated thereunder (the "Regulations"), pertinent
judicial authorities, rulings of the Internal Revenue Service and such other
<PAGE> 2

Telco Systems, Inc.
November 9, 1998
Page 2

authorities as we have considered relevant. It should be noted that such laws,
the Code, the Regulations, judicial decisions and administrative interpretations
are subject to change at any time and, in some circumstances, with retroactive
effect. Additionally, there can be no assurance that contrary positions will not
be taken by the Internal Revenue Service. A material change in any of the
authorities upon which our opinion is based could affect our conclusions herein.

Based solely upon and subject to the foregoing and the other limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that, under current law:

(1) The Merger will qualify as a "reorganization" for U.S. federal
income tax purposes under Section 368(a) of the Code and Telco Systems, New
World Access and Merger Sub will each be a party to such "reorganization"
within the meaning of Section 368(b) of the Code;

(2) The statements in the Joint Proxy Statement/Prospectus, which
forms part of the Registration Statement (the "Joint Proxy
Statement/Prospectus"), under the caption "The Merger -- Federal Income Tax
Consequences," insofar as such statements purport to summarize the material
federal income tax consequences of the Merger to Telco Systems and the
holders of Telco Systems Common Stock under the laws of the United States
referred to therein and subject to the qualifications referred to therein,
fairly summarize such consequences in all material respects.

Except as expressly set forth above, we express no other opinion,
including, without limitation, any opinion as to whether any events subsequent
to the Effective Time will be viewed as part of the plan of reorganization for
U.S. federal income tax purposes and the effect, if any, of such events on our
conclusions herein.

This opinion is for your benefit and is not to be used, circulated, quoted
or otherwise referred to for any purpose, except we consent to the filing of
this opinion as an Exhibit to the Registration Statement and to the use of our
name in the Joint Proxy Statement/Prospectus under the captions "The
Merger -- Federal Income Tax Consequences" and "Legal Matters." In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder.

The opinion expressed herein is as of the date hereof, and we disclaim any
undertaking to advise you of changes of facts stated or assumed herein or any
subsequent changes in applicable law.

Very truly yours,

/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

--------------------------------------------

<PAGE> 1

EXHIBIT 8.2

November 9, 1998

World Access, Inc.
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326

Re: Federal Income Tax Consequences of the Proposed Merger of
Telco Systems, Inc. with and into Tail Acquisition Corporation

Gentlemen:

We have acted as counsel to World Access, Inc. (formerly known as WAXS INC.
(the "Company")) in connection with the proposed merger (the "Merger") of Telco
Systems, Inc., a Delaware corporation ("Telco Systems"), with and into Tail
Acquisition Corporation ("Merger Sub"), a Delaware corporation and wholly-owned
subsidiary of the Company, pursuant to that certain Agreement and Plan of Merger
and Reorganization dated as of June 4, 1998, as amended by that certain First
Amendment thereto dated as of October 27, 1998, by and among WA Telcom Products
Co., Inc. (formerly known as World Access, Inc.), the Company, Merger Sub and
Telco Systems (as so amended, the "Merger Agreement"). In our capacity as
counsel to the Company and as provided in the Merger Agreement, we have been
requested to render our opinion regarding certain of the federal income tax
consequences of the Merger.

We understand that this opinion will be filed as an exhibit to the
Registration Statement on Form S-4 (the "Registration Statement") that will be
filed by the Company with the Securities and Exchange Commission relating to the
securities that will be issued by the Company pursuant to the Merger Agreement
and that this opinion will be referred to in the Joint Proxy
Statement/Prospectus that will be a part of the Registration Statement,
including references to this firm in the section thereof entitled "THE MERGER --
Federal Income Tax Consequences." We hereby specifically consent to such uses of
and references to this opinion.

All terms used herein without definition shall have the respective meanings
specified in the Merger Agreement and, unless otherwise indicated, all section
references herein are to the Internal Revenue Code of 1986, as amended.

INFORMATION RELIED UPON

In rendering this opinion, we have examined such documents as we have
deemed appropriate, including the Merger Agreement and the Registration
Statement. In the course of such examination, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that all such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate. We have also obtained
such additional information and representations as we have deemed relevant and
necessary through consultations with various representatives of the Company and
Telco Systems. In addition, we have obtained written certificates from the
managements of the Company and Telco Systems to verify certain relevant facts
that have been represented to us or that we have assumed in rendering this
opinion. With your consent, we have assumed that the representations made in
such certificates are true on the date hereof and will be true at the Effective
Time.
<PAGE> 2

OPINION

Based upon the foregoing, it is our opinion that:

1. The Merger will qualify as a "reorganization" within the meaning of
Section 368 of the Code, and each of the Company, Merger Sub, and Telco
Systems will be "a party to a reorganization" within the meaning of Section
368(b).

2. No gain or loss will be recognized by the Company, Merger Sub or
Telco Systems in the Merger.

The opinion expressed herein is based upon existing statutory, regulatory,
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, such opinion is based solely on the documents that we have
examined, the additional information that we have obtained and the
representations that have been made to us, and this opinion cannot be relied
upon if any of the facts contained in such documents or in such additional
information is, or later becomes, inaccurate or if any of the representations
made to us is, or later becomes, inaccurate.

The opinion expressed herein is limited to the tax matters specifically
covered thereby, and we have not been asked to address, nor have we addressed,
any other tax consequences of the Merger.

Very truly yours,

/s/ ROGERS & HARDIN

ROGERS & HARDIN

<PAGE> 1

EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Joint Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of World Access,
Inc. of our report dated March 5, 1998 relating to the financial statements of
World Access, Inc., which appears in such Joint Proxy Statement/Prospectus. We
also consent to the application of such report to the Financial Statement
Schedule for the three years ended December 31, 1997 listed in the Index to
Financial Statements when such schedule is read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included this schedule. We also consent to the reference to us under
the heading "Experts" in such Joint Proxy Statement/ Prospectus.

/s/ PricewaterhouseCoopers LLP

Atlanta, Georgia
November 9, 1998

<PAGE> 1

EXHIBIT 23.5

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in the Joint Proxy Statement/Prospectus constituting
part of this Registration Statement on Form S-4 of World Access, Inc. of our
report on the consolidated financial statements of Advanced TechCom, Inc. and
Subsidiaries dated March 27, 1998, which appears in such Joint Proxy
Statement/Prospectus. We also consent to the use of our name as it appears under
the caption "Experts."

/s/ TEDDER GRIMSLEY & COMPANY, P.A.

Lakeland, Florida
November 9, 1998

<PAGE> 1

EXHIBIT 23.6

CONSENT OF INDEPENDENT AUDITORS

We consent to the inclusion of our report dated December 4, 1997, with
respect to the balance sheets of NACT Telecommunications, Inc. as of September
30, 1997 and 1996, and the related statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended September
30, 1997, and related schedule which report appears in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of World Access, Inc. dated November 9, 1998, and to the reference to our
firm under the heading "Experts" in the Joint Proxy Statement/Prospectus.

/s/ KPMG PEAT MARWICK LLP

Salt Lake City, Utah
November 9, 1998

<PAGE> 1

EXHIBIT 23.7

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement of World Access, Inc.
on Form S-4 of our report on the consolidated financial statements of Advanced
TechCom, Inc. and Subsidiary dated February 26, 1997 (October 15, 1997 as to
Notes 2 and 13, and the last paragraph of Note 5) (which expresses an
unqualified opinion and includes an explanatory paragraph referring to certain
subsequent events, including entering into an agreement to subcontract certain
of ATI's manufacturing, raising of additional equity and the receipt of a
commitment for additional financing), appearing in the Joint Proxy
Statement/Prospectus which is a part of such Registration Statement, and to the
reference to us under the heading "Experts" in the Joint Proxy
Statement/Prospectus which is part of such Registration Statement.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
November 6, 1998

<PAGE> 1

EXHIBIT 23.8

CONSENT OF THE ROBINSON-HUMPHREY COMPANY, LLC

We hereby consent to the use of our opinion letter dated October 16, 1998
and our written confirmation thereof dated October 27, 1998, each addressed to
the Boards of Directors of World Access, Inc. (formerly known as WAXS INC.,
"World Access") and WA Telcom Products Co., Inc. (formerly known as World
Access, Inc.), included as Appendix B and Appendix B-1, respectively, to the
Joint Proxy Statement/ Prospectus of World Access, Holdco and Telco Systems,
Inc. ("Telco") which forms part of the Registration Statement dated as of the
date hereof on Form S-4 relating to the proposed merger of Telco with and into
Tail Acquisition Corporation, a wholly owned subsidiary of World Access, and to
the references to such opinion therein.

In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended or the rules and regulations of the Securities and Exchange
Commission thereunder.

/s/ THE ROBINSON-HUMPHREY COMPANY, LLC

November 9, 1998
Atlanta, Georgia

<PAGE> 1

EXHIBIT 23.10

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated November 4, 1998, with respect to the consolidated
financial statements and schedule of Telco Systems, Inc. included in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of World Access, Inc.

/s/ ERNST & YOUNG LLP

Boston, Massachusetts
November 5, 1998

<PAGE> 1

EXHIBIT 23.11

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of World Access, Inc. and to the use therein of our report dated June 5, 1998
with respect to the combined financial statements of Cherry Communications
Incorporated (d/b/a Resurgens Communications Group) and Cherry Communications UK
Limited for the year ended December 31, 1997.

/s/ ERNST & YOUNG LLP

Atlanta, Georgia
November 5, 1998

<PAGE> 1

EXHIBIT 23.12

CONSENT OF INDEPENDENT AUDITORS

We have issued our report dated July 11, 1997, except for Notes 2 and 10 as
to which the date is July 24, 1997, accompanying the combined financial
statements of Cherry Communications Incorporated and Cherry Communications U.K.
Limited for each of the two years in the period ended December 31, 1996,
included in this Registration Statement of World Access, Inc. on Form S-4. We
consent to the use of the aforementioned report in this Form S-4 and to the use
of our name as it appears under the caption "Experts."

/s/ GRANT THORNTON LLP

Chicago, Illinois
November 5, 1998

<PAGE> 1

PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 30, 1998

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WORLD ACCESS,
INC.

The Board recommends a vote FOR the following proposals:

1. To approve the Agreement and Plan of Merger and Reorganization relating to
the merger of Telco Systems, Inc. with and into Tail Acquisition Corporation,
a wholly owned subsidiary of World Access, Inc., with Telco Systems, Inc.
thereupon becoming a wholly owned subsidiary of World Access, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]

2. To approve the Amendment to the Certificate of Incorporation of World Access
to increase the number of authorized shares of common stock to 150,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]

3. To adopt the World Access, Inc. 1998 Incentive Equity Plan.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

4. To ratify and approve the Indemnification Agreements with the directors and
certain officers of World Access.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

The undersigned appoints Steven A. Odom and Mark A. Gergel, and each of
them, with full power of substitution, the proxies and attorneys of the
undersigned, to vote as specified hereon at the Special Meeting of Stockholders
(the "Special Meeting") of World Access, Inc. (the "Company") to be held on
November 30, 1998 at 10:00 a.m. local time, and at any adjournments or
postponements thereof, with all powers (other than the power to revoke the proxy
or vote the proxy in a manner not authorized by the executed form of proxy) that
the undersigned would have if personally present at the Special Meeting, to act
in their discretion upon any other matter or matters that may properly be
brought before the Special Meeting and to appear and vote all the shares of
Common Stock of the Company that the undersigned may be entitled to vote. The
undersigned hereby acknowledges receipt of the accompanying Joint Proxy
Statement/Prospectus, and hereby revokes any proxy or proxies heretofore given
by the undersigned relating to the Special Meeting.

UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED AS IF MARKED FOR THE
PROPOSALS ABOVE.

Signature
-------------------------------

Signature if
jointly held

-------------------------------

Dated:

------------------------------,
1998

PLEASE DATE AND SIGN AS NAME
APPEARS HEREON. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR ATTORNEY,
PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN
IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED
CORPORATE OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON. JOINT OWNERS SHOULD
EACH SIGN.

<PAGE> 1

PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 30, 1998

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TELCO SYSTEMS,
INC.

The Board recommends a vote FOR the proposal to approve the Agreement and Plan
of Merger and Reorganization relating to the merger of Telco Systems, Inc. with
and into Tail Acquisition Corporation, a wholly owned subsidiary of World
Access, Inc., with Telco Systems, Inc. thereupon becoming a wholly owned
subsidiary of World Access, Inc.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

The undersigned appoints William B. Smith and William J. Stuart, and each of
them, with full power of substitution, the proxies and attorneys of the
undersigned, to vote as specified hereon at the Special Meeting of Stockholders
(the "Special Meeting") of Telco Systems, Inc. (the "Company") to be held on
November 30, 1998 at 10:00 a.m. local time, and at any adjournments or
postponements thereof, with all powers (other than the power to revoke the proxy
or vote the proxy in a manner not authorized by the executed form of proxy) that
the undersigned would have if personally present at the Special Meeting, to act
in their discretion upon any other matter or matters that may properly be
brought before the Special Meeting and to appear and vote all the shares of
Common Stock of the Company that the undersigned may be entitled to vote. The
undersigned hereby acknowledges receipt of the accompanying Joint Proxy
Statement/Prospectus, and hereby revokes any proxy or proxies heretofore given
by the undersigned relating to the Special Meeting.

UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED AS IF MARKED FOR THE
PROPOSAL ABOVE.

Signature
-------------------------------

Signature if
jointly held

-------------------------------

Dated:

------------------------------,
1998