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EXHIBIT 8.1
September 11, 2000
World Access, Inc.
Resurgens Plaza, Suite 2210
945 East Paces Ferry Road
Atlanta, Georgia 30326
RE: LONG-FORM TAX OPINION
Ladies and Gentlemen:
We have acted as counsel to World Access, Inc. ("World Access") in
connection with the merger of Star Telecommunications, Inc. ("STAR") with and
into STI Merger Co. ("Merger Sub"), a wholly-owned subsidiary of World Access,
pursuant to the Agreement and Plan of Merger (the "Agreement") dated as of
February 11, 2000, by and among such parties. Unless otherwise indicated herein,
capitalized terms used herein have the meaning ascribed to them in the
Agreement. On June 7, 2000, the parties amended the Agreement (the "Amended
Agreement"). The terms and conditions of the Amended Agreement are set forth in
the Joint Proxy Statement/Prospectus initially dated May 24, 2000 which, as
subsequently amended through the date hereof ("Joint Proxy
Statement/Prospectus"), is included in the Registration Statement, as amended,
on Form S-4 (Reg. No. 333-37750), filed by World Access with the Securities and
Exchange Commission, (the "Registration Statement"). You have requested our
opinion as to the material federal income tax consequences of the STAR merger.
This opinion is being delivered at your request in connection with the filing of
the Registration Statement.
In rendering our opinion, we have examined and relied upon the accuracy
and completeness of the facts, information, covenants and representations
contained in originals or copies, certified or otherwise identified to our
satisfaction, of the Amended Agreement, the Joint Proxy Statement/Prospectus
filed as part of the Registration Statement, the representations made to us by
representatives of STAR and World Access in officer's certificates (the "Tax
Certificates"), copies of which are attached hereto as Exhibit A and Exhibit B,
respectively, and such other documents as we have deemed necessary or
appropriate. In our examination and with your consent, we have assumed the
genuineness of all signatures, the legal capacity of 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. We have also
assumed, with your consent, that: (i) the Merger and the related transactions
described in the Amended Agreement (and all exhibits thereto) will be
consummated as described in the Amended Agreement (and all exhibits thereto) and
the Joint Proxy Statement/Prospectus; (ii) the PT-1 Sale is
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World Access, Inc.
September 11, 2000
Page 2
consummated by STAR prior to the Effective Time of the Merger; (iii) the
respective parties thereto and all parties referred to therein will act in all
respects at all relevant times in conformity with the requirements and
provisions of such documents; and (iv) none of the terms and conditions
contained therein has been or will be waived or modified in any respect prior to
the closing of the Merger. We have further assumed with your consent that all
statements, facts and representations made in the Amended Agreement, Joint Proxy
Statement/Prospectus and the Tax Certificates are true, complete and correct
(without regard to any knowledge or other qualifications set forth therein and
without undertaking to verify such statements, facts and representations by any
independent investigation or review thereof), and that all covenants contained
in the Amended Agreement (and all exhibits thereto) are performed without waiver
or breach of any material provision thereof. To the extent that this opinion
address the federal income tax consequences to holders of STAR Common Stock, we
assume that all such holders hold their STAR Common Stock as a "capital asset"
within the meaning of Section 1221 of the Code. In addition, the conclusions set
forth in this opinion may not be fully applicable to holders of STAR Common
Stock subject to special treatment for federal income tax purposes, as listed
under the caption "Material federal income tax consequences of the STAR merger"
in the Joint Proxy Statement/Prospectus.
Our opinion is based upon our understanding that the facts and
representations set forth in the Amended Agreement, the Joint Proxy
Statement/Prospectus and the Tax Certificates are true, complete and correct as
of the present time and will remain true, complete and correct at all times up
to and including the Effective Time of the Merger and thereafter where relevant.
If the Merger and the related transactions described in the Amended Agreement
and the Joint Proxy Statement/Prospectus are not consummated in accordance with
the terms of such documents or if all of the information, representations or
assumptions upon which we relied are not true and correct at all relevant times,
our opinion might be adversely affected and may not be relied upon.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), proposed,
temporary and final Treasury regulations promulgated thereunder, pertinent
judicial authorities, interpretive rulings of the Internal Revenue Service and
such other authorities as we have considered relevant. We caution that statutes,
regulations, judicial decisions and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. Any
change in the authorities upon which our opinion is based could affect the
conclusions stated herein. In this regard, this opinion represents only
counsel's best legal judgment, has no official status of any kind, is not
binding on the IRS or the courts, and is not a guarantee that the IRS will not
assert a contrary position with respect to such issue or that a court will not
sustain such a contrary position if asserted by the IRS. This opinion is
expressed as of the date hereof and we disclaim any responsibility
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World Access, Inc.
September 11, 2000
Page 3
to advise you of any subsequent changes in the matters stated, represented or
assumed herein, or of any subsequent changes in applicable law.
In order for the Merger to qualify as a "reorganization," Merger Sub
must acquire "substantially all" of STAR's assets within the meaning of Section
368(a)(1)(C) of the Code, notwithstanding the fact that the PT-1 Sale will occur
prior to the Merger and is counted as an asset that STAR should have at the
Effective Time of the Merger for purposes of this calculation. The IRS has
publicly ruled that a target corporation's pre-merger sale of 50% of its
historic business assets for cash did not violate the "substantially all"
requirement where all the remaining assets, including the cash proceeds were
transferred to the acquiring corporation. Rev. Rul. 88-48, 1988-1 C.B. 117.
Further, for advance private letter ruling purposes, the IRS has indicated that
the transfer to the acquiring corporation of seventy percent (70%) of the fair
market value of the target corporation's gross assets and ninety percent (90%)
of the fair market value of the target corporation's net assets will be deemed
to satisfy this "substantially all" requirement. Rev. Proc. 77-37, 1977-2 C.B.
568, Section 3.01 (as amplified and supplemented by the IRS); see also Rev. Rul.
57-518, 1957-2 C.B. 253.
Judicial decisions have been substantially more lenient, and in
addition to the actual percentage of the property transferred, have focused on
the nature of the assets retained by the target corporation and the purpose for
their retention in making this determination. See e.g., Moffat v. Commissioner,
42 T.C. 558, 578 (1964), aff'd 363 F.2d 262 (9th Cir. 1966), cert. denied, 386
U.S. 1016 (1967); Southland Ice Co. v. Commissioner, 5 T.C. 842, 850 n. 4
(1945); Smith v. Commissioner, 34 B.T.A. 702, 705-706 (1936).
Based on IRS' published ruling position on pre-merger asset sales by a
target corporation, STAR's representations that as a factual matter, the IRS
private letter ruling requirements regarding the percentage of its gross assets
and net assets to be transferred to World Access, and the other IRS and judicial
authority concerning this requirement, the "substantially all" requirement will
be met in the Merger and the PT-1 Sale will not prevent the Merger from
constituting a "reorganization" within the meaning of Section 368(a) of the
Code.
Under the "continuity of business enterprise requirement" set forth in
Section 1.368-1(d) of the Treasury regulations, Merger Sub must also continue
STAR's "historic business" or "use a significant portion of STAR's historic
assets in a business" in order for the STAR merger to qualify as a
"reorganization" under the Code. World Access has represented to counsel that as
a factual matter, Merger Sub will continue STAR's "historic business" or "use a
significant portion of STAR's historic business assets in a business" within the
meaning of such Treasury regulations notwithstanding the PT-1 Sale. Based on
World Access' representation as to these factual matters, the IRS and the
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World Access, Inc.
September 11, 2000
Page 4
judicial authority concerning this requirement, the "continuity of business
enterprise" requirement will also be met with respect to the Merger.
Based on the foregoing and subject to the qualifications and
limitations set forth herein, we are of the opinion that:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code;
(ii) World Access, STAR and Merger Sub will each be a "party to the
reorganization" within the meaning of Section 368(b) of the
Code;
(iii) no gain or loss will be recognized by STAR stockholders upon
the exchange of all their STAR Common Stock solely for WAXS
Common Stock in the Merger, except that gain will be
recognized upon the receipt of cash in lieu of a fractional
share interest in WAXS Common Stock;
(iv) if World Access elects to issue a combination of cash and WAXS
Common Stock in the Merger, gain or loss will be recognized by
STAR stockholders participating in the Merger in an amount
equal to the lesser of (A) the amount of gain realized on the
exchange (i.e., the excess of the sum of the cash and the fair
market value of the WAXS Common Stock received over the
aggregate tax basis in the STAR Common Stock surrendered in
the exchange) and (B) the amount of cash received in the
exchange;
(v) no realized loss on the exchange of STAR Common Stock for a
combination of cash and WAXS Common Stock in the Merger can be
recognized for federal income tax purposes;
(vi) the aggregate tax basis of the WAXS Common Stock received in
the Merger will be the same as the aggregate tax basis of the
STAR Common Stock surrendered in the exchange, less any
portion of such basis allocable to any fractional share
interest in WAXS Common Stock for which cash is received,
increased by the amount of any gain recognized in the exchange
(as described in clause (iv) above), and decreased by the
amount of any additional cash received;
(vii) the holding period for the WAXS Common Stock received in the
Merger will include the holding period during which the STAR
Common Stock was held, provided such stock was held as a
capital asset as of the Effective Time of the Merger;
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World Access, Inc.
September 11, 2000
Page 5
(viii) pursuant to Rev. Rul. 74-515, 1974-2 C.B. 118, and assuming no
STAR stockholder exercising appraisal rights owns WAXS Common
Stock after giving effect to the constructive ownership rules
of Section 318 of the Code, each dissenting shareholder will
recognize capital gain or loss on the receipt of cash in
connection with exercising appraisal rights equal to the
difference between the amount of cash received and such
stockholder's adjusted tax basis in the STAR Common Stock,
which will be long-term capital gain or loss if such
dissenting stockholder's STAR Common Stock was held for more
than one year as of the Effective Time of the Merger;
(ix) the STAR "loss group" (within the meaning of Treas. Reg.
Section 1.1502-91(c)(1)) will undergo an "ownership change"
within the meaning of Section 382 of the Code as a result of
the STAR merger; and
(x) no gain or loss will be recognized by World Access or the
World Access stockholders solely as a result of the STAR
merger.
The character of the gain described in clause (iv) above that will be
recognized by a STAR stockholder receiving a combination of cash and WAXS Common
Stock in the Merger will be characterized as capital gain unless the receipt of
such cash is treated as having the effect of the distribution of a dividend
under Section 302 of the Code.
To determine whether any such recognized gain is capital gain or is a
dividend taxed as ordinary income, the Supreme Court has held (and the IRS has
agreed) that a hypothetical redemption is deemed to occur under which a STAR
stockholder that receives a combination of cash and WAXS Common Stock is treated
as (i) hypothetically receiving solely shares of WAXS Common Stock in exchange
for all of its STAR Common Stock, and (ii) having a portion of its shares of
WAXS Common Stock equal in value to the cash actually received in the Merger
redeemed by World Access. Commissioner v. Clark, 489 U.S. 726 (1989); Rev. Rul.
93-61, 1993-2 C.B. 118. The cash received in the hypothetical redemption will
have the effect of distribution of a dividend unless such hypothetical
redemption (i) is "not essentially equivalent to a dividend" or (ii) results in
a "substantially disproportionate" redemption of the WAXS Common Stock, in both
cases after giving effect to the constructive ownership rules of Section 318 of
the Code.
The determination of whether the hypothetical redemption is
"substantially disproportionate" must be made by comparing (i) the percentage of
the WAXS Common Stock that is owned (either actually or constructively) by the
STAR stockholder after the Merger with (ii) the percentage of the WAXS Common
Stock that would have been owned (either actually or constructively) by the STAR
stockholder if the STAR
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World Access, Inc.
September 11, 2000
Page 6
stockholder had received solely WAXS Common Stock, and no cash, in the Merger.
If the percentage described in clause (i) of the preceding sentence is less than
80% of the percentage described in clause (ii) of that sentence, the
hypothetical redemption is considered to be "substantially disproportionate."
The hypothetical redemption will not be "essentially equivalent to a
dividend" if it results in a "meaningful reduction" in the stockholder's
proportionate interest in STAR. Based on Rev. Rul. 75-512; 1975-2 C.B. 112, if a
STAR stockholder that is considered to have a relatively minimal interest in
World Access and no right to exercise control over corporate affairs suffers a
reduction in the stockholder's proportionate interest in World Access, the
stockholder should be regarded as having suffered a meaningful reduction of its
interest in World Access.
The determination of whether a STAR stockholder will satisfy either the
"substantially disproportionate" or the "not essentially equivalent to a
dividend" test will depend on such STAR stockholder's particular facts and
circumstances. The "substantially disproportionate" test will be satisfied if
the stockholder can comply with the objective numerical criteria described above
in light of its own particular facts and circumstances. The "not essentially
equivalent to a dividend" test, however, is not based on any numerical criteria;
rather it is highly subjective. Generally, the receipt of cash by a STAR
stockholder who does not actually or constructively own any World Access stock
(other than the shares of World Access stock that are received in the Merger)
will satisfy those tests. However, because the consequences of the application
of those tests to each STAR stockholder will vary depending on each STAR
stockholder's particular facts and circumstances, there can be no assurance that
any STAR stockholder can satisfy either test. As a result, we express no opinion
as to whether gain recognized by a STAR stockholder who receives a combination
of WAXS Common Stock and cash in the Merger will be treated as capital gain or
ordinary income.
The discussion set forth in the Joint Proxy Statement/Prospectus under
the caption "Material federal income tax consequences of the STAR merger" (the
"Discussion") is not a complete analysis of all aspects of federal income
taxation that may be relevant to a particular STAR stockholder. Because the
federal income tax consequences of the Merger to a STAR stockholder will depend
on that stockholder's particular situation, we express no opinion as to the
completeness of the Discussion as applied to any particular STAR stockholder.
Except as expressly set forth above in this opinion, we express no
opinion as to the tax consequences to any holder of STAR Common Stock, whether
federal, state, local or foreign, of the Merger or of transactions consummated
before or after the Effective Time of the Merger.
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World Access, Inc.
September 11, 2000
Page 7
In addition, we consent to the reference to Long Aldridge & Norman LLP
in the Joint Proxy Statement/Prospectus under the caption "Legal Matters" and
"Material federal income tax consequences of the STAR merger" and to the filing
of this opinion as an exhibit to the Registration Statement. In giving this
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
of the rules and regulations of the Securities and Exchange Commission.
Except as set forth herein, this opinion may not be used, circulated,
quoted or relied upon for any purpose without our express prior written consent.
Very truly yours,
LONG ALDRIDGE & NORMAN LLP
By: /s/ Mark S. Lange
---------------------------------
Mark S. Lange,
a Partner
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EXHIBIT A
OFFICER'S CERTIFICATE REGARDING CERTAIN TAX MATTERS
FOR STAR TELECOMMUNICATIONS, INC.
REGARDING THE MERGER OF STAR
WITH AND INTO STI MERGER CO.
This Officer's Certificate is being delivered to Long Aldridge & Norman
LLP in connection with the delivery of your legal opinion to World Access, Inc.,
a Delaware corporation ("WAXS") with respect to the Agreement and Plan of Merger
(the "Agreement") dated as of February 11, 2000, by and among Star
Telecommunications, Inc., a Delaware corporation ("STAR"), WAXS, and STI Merger
Co., a Delaware corporation and wholly-owned subsidiary of WAXS ("Merger Sub").
On June 7, 2000, the parties amended the Agreement (the "Amended Agreement").
Unless otherwise indicated, capitalized terms used herein have the meaning
ascribed to them in the Amended Agreement. All section references herein, unless
otherwise specified, are to the Internal Revenue Code of 1986, as amended (the
"Code").
DECLARATION
1. The undersigned officer of STAR is familiar with the business
and affairs of STAR, has examined and is familiar, or has consulted with tax
advisors to become familiar, with the tax representations set forth below, and
has made such investigations of factual matters as are reasonably necessary for
the purposes of making the declarations and representations herein. The
undersigned is familiar with the Amended Agreement and all documents relating
thereto, including, but not limited to, all prospectus and proxy materials
prepared in connection with the Merger (collectively, the "Merger Documents").
2. The undersigned understands that the following representations
form the basis of the opinion of Long Aldridge & Norman LLP, counsel to WAXS,
and that any change or inaccuracy in the facts described in such representations
could adversely alter such opinion.
REPRESENTATIONS
The following representations are true, correct, and complete as of the
date hereof and will be true, correct, and complete as of the Effective Time and
thereafter where relevant, and no additional material information is or will be
required to make the following representations not misleading as of such dates:
1. None of the information relating to the Merger (including, but
not limited to, all representations, warranties, covenants, and undertakings)
set forth in the Merger Documents, insofar as such information relates to STAR,
or to the plans and intentions of STAR, contains any untrue statement of
material fact or omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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2. To the knowledge of STAR, there is no plan or intention on the
part of holders of STAR Common Stock nor have any of such stockholders entered
any agreement to sell, exchange or otherwise dispose of a number of shares of
WAXS Common Stock received in the Merger to any person related to WAXS within
the meaning of Treas. Reg. Section 1.368-1(e)(3) that would reduce the STAR
stockholders' aggregate ownership of such WAXS Common Stock to a number of
shares of WAXS Common Stock having a value, as of the Effective Time of the
Merger, of less than fifty percent (50%) of the value of all of the formerly
outstanding STAR Common Stock as of the Effective Time. For purposes of this
representation, shares of STAR Common Stock exchanged for cash or other
property, surrendered by dissenters or exchanged for cash in lieu of fractional
shares of WAXS Common Stock will be treated as outstanding STAR Common Stock as
of the Effective Time.
3. The fair market value of the WAXS Common Stock and cash in
lieu of fractional shares of WAXS Common Stock, together with any cash paid by
WAXS, as the case may be, received by each holder of STAR Common Stock in the
Merger will be approximately equal to the fair market value of the shares of
STAR Common Stock surrendered in the Merger by each STAR stockholder.
4. STAR is not a regulated investment company, a real estate
investment trust, or a corporation fifty percent (50%) or more of the value of
whose total assets (excluding cash, cash items, receivables and U.S. government
securities) are stock or securities and eighty percent (80%) or more of the
value of whose total assets are assets held for investment. For purposes of the
fifty percent (50%) and eighty percent (80%) determinations under the preceding
sentence, stock and securities in any subsidiary corporation shall be
disregarded and the parent corporation shall be deemed to own its ratable share
of the subsidiary's assets. A corporation shall be considered a subsidiary for
purposes of this paragraph if the parent owns fifty percent (50%) or more of the
combined voting power of all classes of stock entitled to vote, or fifty percent
(50%) or more of the total value of shares of all classes of stock outstanding.
5. In the Merger, STAR will transfer to Merger Sub at least
ninety percent (90%) of the fair market value of its net assets, and at least
seventy percent (70%) of the fair market value of its gross assets held
immediately prior to the Merger. For purposes of this representation, amounts
paid by STAR to dissenters or to STAR stockholders who receive cash or other
property, STAR assets used by STAR to pay reorganization expenses, and STAR
assets used for redemptions and distributions (excluding regular, normal
dividends) made by STAR prior to the Effective Time will be included as assets
of STAR held immediately prior to the Merger. For purposes of this
representation, the Net PT-1 Proceeds will also be included as "substituted
assets" of STAR held immediately prior to the Merger within the meaning of Rev.
Rul. 88-48, 1988-1 C.B. 117, because STAR will retain the Net PT-1 Proceeds,
none of the Net PT-1 Proceeds will be distributed to STAR stockholders and the
Net PT-1 Proceeds will be transferred to the Merger Sub in the Merger.
6. Pursuant to the Amended Agreement and for bona fide business
reasons unrelated to taxes, the PT-1 Sale will be consummated prior to the
Effective Time. STAR consummated the merger of PT-1 Communications, Inc.
("PT-1") with and into a wholly-owned subsidiary of
2
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STAR on February 4, 1999. As described in the STAR SEC Reports, PT-1's
operations are primarily focused on the marketing of dial-around services and
prepaid telephone calling cards to the retail marketplace of individual
end-users and, as such, is not the "historic business" of STAR within the
meaning of Treas. Reg. Section 1.368-1(d), which as described in such STAR SEC
Reports, is instead focused on providing switched voice services on a wholesale
basis primarily to U.S.-based long distance carriers. Further, as of the date
hereof, the fair market value of the capital stock of PT-1 held by STAR is less
than fifty percent (50%) of the fair market value of the gross assets of STAR,
and STAR currently expects this statement to remain true when the PT-1 Sale is
consummated prior to the Effective Time.
7. None of the compensation received by any stockholder-employee
of STAR will be separate consideration for, or allocable to, any of the shares
of STAR Common Stock held by such stockholder-employee; none of the shares of
WAXS Common Stock issued in the Merger and received by any stockholder-employee
of STAR will be separate consideration for, or allocable to, any employment
agreement, agreement not to compete or any other compensation owed or owing to
such stockholder-employee; and the compensation paid to any stockholder-employee
of STAR will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services.
8. STAR and each of its stockholders will pay their respective
expenses, if any, incurred in connection with the Merger.
9. There is no intercorporate indebtedness existing between WAXS
and STAR or between STAR and the Merger Sub that was issued, acquired, or will
be settled at a discount.
10. At the Effective Time of the Merger, the fair market value of
the assets of STAR transferred to the Merger Sub will equal or exceed the sum of
its liabilities assumed by the Merger Sub, plus (without duplication) the amount
of liabilities, if any, to which the transferred assets of STAR are subject.
11. The liabilities of STAR assumed by the Merger Sub and the
liabilities of STAR to which the transferred assets of STAR are subject were
incurred by STAR in the ordinary course of its business.
12. STAR is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
13. As described in the STAR SEC Reports, the business carried on
by STAR at the Effective Time is focused on providing switched voice services on
a wholesale basis primarily to U.S. - based long distance carriers, and
constitutes its "historic business" within the meaning of Treas. Reg. Section
1.368-1(d).
14. Prior to the Effective Time, STAR has not distributed the
stock of any corporation in a distribution qualifying for tax-free treatment
under Section 355 of the Code.
3
<PAGE> 11
15. During the five (5) year period ending as of the Effective
Time, neither STAR nor any persons related to STAR within the meaning of Treas.
Reg. Section 1.368-1(e)(3) (but without regard to Treas. Reg. Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (A) acquired STAR Common Stock with
consideration other than shares of WAXS capital stock or STAR Common Stock or
(B) made any "extraordinary distributions" with respect to STAR Common Stock
within the meaning of Treas. Reg. Section 1.368-1T(e)(1)(ii)(A).
16. The principal purposes of STAR for participating in the Merger
are bona fide business purposes unrelated to taxes as set forth in the Merger
Documents, and the terms of the Amended Agreement are the product of
arm's-length negotiations.
17. STAR and each of its Subsidiaries are not currently, have not
been within the last five (5) years, and do not anticipate becoming a "United
States real property holding corporation" within the meaning of Section 897(c)
of the Code.
18. The Amended Agreement and the documents executed therewith
represent the entire understanding of STAR, WAXS and the Merger Sub with respect
to the Merger.
19. Each of the letters sent by STAR to the fourteen (14)
individual employees (whose names are listed on Schedule 3.2(j) Employee
Benefits Matters at part (8) Change of Control Benefits on pages 23, 24 and 25
of the STAR Disclosure Schedules to the Amended Agreement) to which STAR has
granted options and whose options will accelerate upon the Merger (i) was
properly authorized and executed by STAR, (ii) reflects valid action taken by
STAR's Non-Executive Stock Option Committee and (iii) is binding upon each such
employee.
It is understood that (i) your opinion will be based on the
representations set forth herein and on the statements contained in the Merger
Documents (including all schedules and exhibits thereto), and (ii) your opinion
will be subject to certain limitations and qualifications including that they
may not be relied upon if any such representations are not accurate in all
material respects. It is further understood that your opinion will not address
any tax consequence of the Merger or any action taken in connection therewith
except as expressly set forth in such opinion.
Date: September 11, 2000
Very truly yours,
STAR TELECOMMUNICATIONS, INC.
a Delaware corporation
By: /s/ Mary A. Casey
-----------------------------------
Title: President
--------------------------------
4
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EXHIBIT B
OFFICER'S CERTIFICATE REGARDING CERTAIN TAX MATTERS
FOR WORLD ACCESS, INC.
REGARDING THE MERGER OF STAR TELECOMMUNICATIONS, INC.
WITH AND INTO STI MERGER CO.
This Officer's Certificate is being delivered to Long Aldridge & Norman
LLP in connection with the delivery of your legal opinion to World Access, Inc.,
a Delaware corporation ("WAXS") with respect to the Agreement and Plan of Merger
(the "Agreement") dated as of February 11, 2000, by and among Star
Telecommunications, Inc., a Delaware corporation ("STAR"), WAXS, and STI Merger
Co., a Delaware corporation and wholly-owned subsidiary of WAXS ("Merger Sub").
On June 7, 2000, the parties amended the Agreement (the "Amended Agreement").
Unless otherwise indicated, capitalized terms used herein have the meaning
ascribed to them in the Amended Agreement. All section references herein, unless
otherwise specified, are to the Internal Revenue Code of 1986, as amended (the
"Code").
DECLARATION
1. The undersigned officer of WAXS is familiar with the business
and affairs of WAXS, has examined and is familiar, or has consulted with tax
advisors to become familiar, with the tax representations set forth below, and
has made such investigations of factual matters as are reasonably necessary for
the purposes of making the declarations and representations herein. The
undersigned is familiar with the Amended Agreement and all documents relating
thereto, including, but not limited to, all prospectus and proxy materials
prepared in connection with the Merger (collectively, the "Merger Documents").
2. The undersigned understands that the following representations
form the basis of the opinion of Long Aldridge & Norman LLP, counsel to WAXS,
and that any change or inaccuracy in the facts described in such representations
could adversely alter such opinion.
REPRESENTATIONS
To the best of the knowledge and belief of the undersigned, the
following representations regarding the Merger are true, correct, and complete
as of the date hereof and will be true, correct, and complete as of the
Effective Time and thereafter where relevant, and no additional material
information is or will be required to make the following representations not
misleading as of such dates:
1. None of the information relating to the Merger (including, but
not limited to, all representations, warranties, covenants, and undertakings)
set forth in the Merger Documents, insofar as such information relates to WAXS
and Merger Sub, or to the plans and intentions of any of those entities,
contains any untrue statement of material fact or omits a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
<PAGE> 13
2. During the five (5) year period beginning as of the Effective
Time, neither WAXS nor any person "related" to WAXS within the meaning of Treas.
Reg. Section 1.368-1(e)(3) will (A) be under any obligation and will have
entered into any agreement to redeem or repurchase any of the WAXS Common Stock
issued in the Merger or to make any "extraordinary distributions" within the
meaning of Treas. Reg. Section 1.368-1T(e)(1)(ii)(A) in respect of the WAXS
Common Stock and (B) have a plan or intention to reacquire any of the WAXS
Common Stock issued in the Merger either directly or through any transaction,
agreement or arrangement with any other person, except that WAXS may repurchase
shares of WAXS Common Stock on the open market through a broker for the
prevailing market price pursuant to an open-market repurchase program as
described in Rev. Rul. 99-58, 1999-52 I.R.B. 701.
3. As of the Effective Time, neither WAXS nor any person related
to WAXS within the meaning of Treas. Reg. Section 1.368-1(e)(3) will own
beneficially or of record, nor will have owned during the past five (5) years,
any STAR Common Stock or securities of STAR or options or instruments giving the
holder thereof the right to acquire STAR Common Stock or securities of STAR.
4. Prior to or in the Merger, neither WAXS nor any person related
to WAXS within the meaning of Treas. Reg. Section 1.368-1(e)(3) will have
acquired directly or through any transaction, agreement or arrangement with any
other person, any capital stock of STAR with consideration other than shares of
WAXS Common Stock.
5. The fair market value of the WAXS Common Stock and cash in
lieu of fractional shares of WAXS Common Stock, together with any cash paid by
WAXS, as the case may be, received by each holder of STAR Common Stock in the
Merger will be approximately equal to the fair market value of the shares of
STAR Common Stock surrendered in the Merger by each STAR stockholder.
6. Following the Merger, WAXS will cause the Merger Sub to
continue STAR's "historic business" within the meaning of Treas. Reg. ss.
1.368-1(d) or use a significant portion of STAR's historic business assets in a
business. For purposes of this representation, the Merger Sub will be treated as
conducting STAR's historic business or using a significant portion of STAR's
historic business assets in a business if (a) the members of the WAXS "qualified
group" (as defined below in Representation 9), in the aggregate, continue the
historic business of STAR or use a significant portion of STAR's historic
business assets in a business, or (b) the foregoing activities are undertaken by
a partnership in which (1) the members of the WAXS qualified group, in the
aggregate, own at least a thirty-three and one third percent (33 1/3%) interest
in the partnership, or (ii) one or more members of the qualified group has
active and substantial management functions as a partner with respect to the
partnership business and the members of the qualified group, in the aggregate,
own at least a twenty percent (20%) interest in the partnership.
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7. On and prior to the Effective Time, WAXS will be in "control"
of the Merger Sub within the meaning of Section 368(c) of the Code, which is a
newly-formed corporation that was organized for the sole purpose of facilitating
the Merger.
8. WAXS has no plan or intention, and WAXS has no plan or
intention to cause the Merger Sub, to issue additional shares of its capital
stock following the Merger, or take any other action, that would result in WAXS
losing "control" of the Merger Sub within the meaning of Section 368(c) of the
Code.
9. WAXS has no plan or intention following the Merger to
liquidate the Merger Sub; to merge the Merger Sub with and into another
corporation; to sell or otherwise dispose of the stock of the Merger Sub; or to
cause the Merger Sub to sell or otherwise dispose of any of the assets acquired
from STAR, except for dispositions made in the ordinary course of business or
for transfers or successive transfers of all or part of the assets acquired from
STAR to a member(s) of the WAXS qualified group or to a partnership that has a
member(s) of the qualified group as a partner who own, in the aggregate, at
least a thirty-three and one third percent (33 1/3%) interest in the
partnership, or (ii) one or more members of the qualified group has active and
substantial management functions as a partner with respect to the partnership
business and the members of the qualified group, in the aggregate, own at least
a twenty percent (20%) interest in the partnership. For purposes of this
Representation 9, and as set forth under Treas. Reg. Section 1.368-1(d)(4)(ii),
the term "qualified group" shall mean one or more chains of corporations
connected through stock ownership with WAXS, but only if WAXS owns directly
stock meeting the requirements of Section 368(c) of the Code in at least one
other corporation, and stock meeting the requirements of Section 368(c) of the
Code in each of the corporations (except WAXS) is owned directly by one of the
other corporations.
10. WAXS and the Merger Sub will pay their respective expenses, if
any, incurred in connection with the Merger.
11. There is no intercorporate indebtedness existing between WAXS
and STAR or between the Merger Sub and STAR that was issued, acquired, or will
be settled at a discount.
12. Neither WAXS nor the Merger Sub is a regulated investment
company, a real estate investment trust, or a corporation fifty percent (50%) or
more of the value of whose total assets (excluding cash, cash items, receivables
and U.S. government securities) are stock or securities and eighty percent (80%)
or more of the value of whose total assets are assets held for investment. For
purposes of the fifty percent (50%) and eighty percent (80%) determinations
under the preceding sentence, stock and securities in any subsidiary corporation
shall be disregarded and the parent corporation shall be deemed to own its
ratable share of the subsidiary's assets. A corporation shall be considered a
subsidiary for purposes of this paragraph if the parent owns fifty percent (50%)
or more of the combined voting power of all classes of stock entitled to vote,
or fifty percent (50%) or more of the total value of shares of all classes of
stock outstanding.
13. No stock of the Merger Sub will be issued in the Merger.
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14. Neither WAXS nor the Merger Sub is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
15. In the Merger, the Merger Sub will acquire at least ninety
percent (90%) of the fair market value of STAR's net assets, and at least
seventy percent (70%) of the fair market value of STAR's gross assets held
immediately prior to the Merger. For purposes of this representation, amounts
paid by STAR to dissenters or to STAR stockholders who receive cash or other
property, STAR assets used by STAR to pay reorganization expenses, and STAR
assets used for redemptions and distributions (excluding regular, normal
dividends) made by STAR prior to the Effective Time will be included as assets
of STAR held immediately prior to the Merger. For purposes of this
representation, the Net PT-1 Proceeds will also be included as "substituted
assets" of STAR held immediately prior to the Merger within the meaning of Rev.
Rul. 88-48, 1988-1 C.B. 117, because STAR will retain the Net PT-1 Proceeds,
none of the Net PT-1 Proceeds will be distributed to STAR stockholders and the
Net PT-1 Proceeds will be transferred to the Merger Sub in the Merger.
16. None of the compensation received by any stockholder-employee
of STAR will be separate consideration for, or allocable to, any of the shares
of STAR Common Stock held by such stockholder-employee; none of the shares of
WAXS Common Stock issued in the Merger and received by any stockholder-employee
of STAR will be separate consideration for, or allocable to, any employment
agreement, agreement not to compete or any other compensation owed or owing to
such stockholder-employee; and the compensation paid to any stockholder-employee
of STAR will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services.
17. The payment of cash in lieu of fractional shares of WAXS
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to WAXS of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid in
the Merger to STAR stockholders instead of issuing fractional shares of WAXS
Common Stock will not exceed one percent (1%) of the total Merger Consideration
that will be issued in the Merger.
18. Prior to the Effective Time, neither WAXS nor any Subsidiary
of WAXS has distributed the stock of any corporation in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code.
19. The principal purposes of WAXS for participating in the Merger
are bona fide business purposes unrelated to taxes as set forth in the Merger
Documents, and the terms of this Amended Agreement are the product of
arm's-length negotiations.
20. The Amended Agreement and the documents executed therewith
represent the entire understanding of STAR, WAXS and the Merger Sub with respect
to the Merger.
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It is understood that (i) your opinion will be based on the
representation set forth herein and on the statements contained in the Merger
Documents (including all schedules and exhibits thereto), and (ii) your opinion
will be subject to certain limitations and qualifications including that they
may not be relied upon if any such representations are not accurate in all
material respects. It is further understood that your opinion will not address
any tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinion.
Date: September 11, 2000.
Very truly yours,
WORLD ACCESS, INC.,
a Delaware corporation
By: /s/ Michael Mies
-------------------------------------
Title: Senior Vice President--Finance
and Treasurer
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