AGREEMENT
This agreement ("Agreement") is entered into as of June 28, 1999 (the
"Effective Date"), by and among COMMUNICATION TELESYSTEMS INTERNATIONAL,
d.b.a. WorldxChange Communications, a California corporation ("CTS"), XXXX
XXXXX, as Trustee of that certain D&K Grantor Retained Annuity Trust dated
June 15, 1998 (the "Trust"), XXXXX X. XXXXXX AND XXXXXXXX XXXXXX,
individuals residing in San Diego, California (collectively, the "Abbotts"),
and XXXXXX XXXXX, an individual residing in San Diego, California ("Soren").
RECITALS
A. CTS is the maker of three subordinated promissory notes, each dated
August 25, 1998, in favor of Xxxxxx Klaurer Xxxxxxxx & Co., Inc. ("GKM") in
the aggregate initial principal amount of $55,000,000 (collectively, the
"Notes").
B. CTS is the maker of a subordinated promissory note, dated August 25,
1998, in favor of Tel-Save in the initial principal amount of $1,200,000 (the
"Accrued Interest Note").
C. CTS and GKM entered into that certain Security Agreement dated August
25, 1998 (the "Security Agreement"), pursuant to which CTS provided security
for repayment of the Notes and of the Accrued Interest Note, among other
things.
D. The Abbotts and GKM entered into that certain Pledge Agreement dated
August 25, 1998 (the "Xxxxxx Pledge Agreement"), pursuant to which the Abbotts
granted a limited guaranty of the Notes and of the Accrued Interest Note,
pledged certain shares of CTS stock (the "Xxxxxx Pledged Shares"), as
security for such limited guaranty, and delivered appropriate stock
certificates and stock powers pursuant to such pledge.
E. Soren and GKM entered into that certain Pledge Agreement dated August
25, 1998 (the "Soren Pledge Agreement"), pursuant to which Soren granted a
limited guaranty of the Notes and of the Accrued Interest Note, pledged
certain shares of CTS stock (the "Soren Pledged Shares") as security for such
limited guaranty, and delivered appropriate stock certificates and stock
powers pursuant to such pledge.
F. GKM assigned to Xxx-Xxxx.xxx, Inc. ("Tel-Save") all of the rights,
title, and interest of GKM in the Notes, the Security Agreement, the Xxxxxx
Pledge Agreement, the Xxxxxx Pledged Shares, the Soren Pledge Agreement, the
Soren Pledged Shares, and all related stock certificates and stock powers.
G. CTS consented to such assignment from GKM to Tel-Save and
acknowledged Tel-Save as the payee of the Notes and the Secured Party under
(and as defined in) the Security
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Agreement.
H. The Abbotts consented to such assignment from GKM to Tel-Save and
acknowledged Tel-Save as the Secured Party under (and as defined in) the
Xxxxxx Pledge Agreement.
I. Soren consented to such assignment from GKM to Tel-Save and
acknowledged Tel-Save as the Secured Party under (and as defined in) the
Soren Pledge Agreement.
J. Pursuant to that certain Exchange Agreement dated January 2, 1999
(the "Exchange Agreement"), Tel-Save granted to the Trust a participation
interest in all of the rights, title, and interest of Tel-Save in the Notes,
the Accrued Interest Note, the Security Agreement, the Xxxxxx Pledge
Agreement, the Soren Pledge Agreement, the Abbot Pledged Shares, the Soren
Pledged Shares, all related stock certificates and stock powers, that certain
Intercreditor Agreement dated as of August 25, 1998, between Foothill Capital
Corporation, a California corporation, Tel-Save, and GKM, and the Financing
Statement that was filed in connection with the Secured Agreement and that
showed CTS as the Debtor and Tel-Save as the Security Party (such documents,
other than the Exchange Agreement, to be referred to hereinafter collectively
as the "Note Documents").
K. Pursuant to that certain Agreement dated March 15, 1999 (the
"Amendment Agreement"), certain covenants and provisions of the Accrued
Interest Note and the Notes were modified. The Amendment Agreement also
provides for exchange of the Accrued Interest Note and the Notes in return
for Amended and Restated notes. The parties are in the process of arranging
such exchange, and all subsequent references in this Agreement to the Accrued
Interest Notes and the Note shall also refer to the Amended and Restated
Accrued Interest Note and the Amended and Restated Notes, when such Amended
and Restated notes are issued.
L. Pursuant to that certain Modification Of The Exchange Agreement dated
March 15, 1999, Tel-Save sold to the Trust the participation of interest of
Tel-Save in the Note Documents, so that the Trust is now the sole owner and
holder of the Note Documents.
M. The parties hereto acknowledge and agree that the aggregate principal
balance owing on the Notes at the date hereof is 45,200,000.
N. The parties hereto acknowledge and agree that the principal balance
owing on the Accrued Interest Note on the date hereof is *.
O. The parties hereto desire to modify certain of the covenants and
provisions of the Accrued Interest Note and the Notes and to enter into
certain other agreements as hereinafter set forth.
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NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that:
1. INCORPORATION OF RECITALS. All Recitals to this Agreement are
hereby incorporated by this reference herein and constitute agreements among
the parties hereto.
2. MODIFICATIONS OF CALL RIGHTS UNDER THE NOTES. Each of the Notes
contains certain "Call Rights" (as defined in the Notes). As of the Effective
Date, the second paragraph (unnumbered) of each Note shall be amended to read
in full as follows:
"In the event that the Maker shall close a private placement or
public offering of its Common Stock an ("Equity Offering"), the
Holder shall have the right (the "Call Right") to require the Maker
to use up to an amount (the "Amount") of the net proceeds received
by the Maker from the Equity Offering to repay any accrued but
unpaid interest and any unpaid principal balance under this Note;
provided, however, the Holder shall have, within ten business days
from receipt of a written notice by the Maker of a proposed Equity
Offering, notified the Maker in writing of the exercise of its Call
Right with respect to such proposed Equity Offering. The Amount
shall be expressed herein as an aggregate amount to be applicable
to this Note and two other notes issued by Maker concurrently
herewith, which three promissory notes are in the initial
aggregate principal amount of $55,000,000. The Amount shall be
divided among such three promissory notes pro rata based on the
initial principal amount of each such promissory note. The Maker
shall provided the Holder with reasonable written notice of any
proposed Equity Offering.
"(a) In the event that, after the Effective Date and prior to
June 30, 1999, Maker closes one or more Equity Offerings to Gold &
Xxxxx Transfer S.A. and/or Atocha, L.P., the Amount shall be 0% of
the net proceeds up to an aggregate amount of $30,000,000 received
by the Maker from such offering(s),"
"(b) With respect to any Equity Offering other than those
described in sub-paragraph 2(a) above, the Amount shall be limited
to an amount equal to 35% of the net proceeds by the Maker from
such Equity Offering."
3. EFFECT ON AMENDMENT AGREEMENT. Except as expressly modified by this
Agreement, the provisions of the Amendment Agreement, including Sections 3
and 4 thereof, shall remain in full force and effect.
4. CERTAIN CONSENTS AND WAIVERS.
(a) Each of CTS, the Xxxxxx'x, and Soren (collectively, the "CTS
Parties") acknowledges and consents to each of the assignments and transfers
referred to in this
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Agreement, including without limitation the assignments and transfers
referred to in the Recitals to this Agreement.
(b) Each of the CTS Parties acknowledges and certifies that, as of
the date hereof, no default or Event of Default exists under any of the Note
documents, nor would a default or Event of Default exist thereunder with
notice of the passage of time or both.
(c) CTS acknowledges and agrees that it has waived the effect of
Section 4.10 of the Security Agreement and that such Section is of no further
force or effect.
(d) Each of the CTS Parties represents and warrants to, and agrees
with, each of the Trust that at the date hereof: (i) The Trust is not in
default under any of the Note Documents: (ii) none of the CTS Parties has
suffered any damage under any of the Note Documents, and none of the CTS
Parties has, under any of the Note Documents, any cause of action, right of
set-off or counterclaim, or any other claim of any nature whatsoever under any
of the Note Documents against the Trust or any trustee, director, officer,
attorney, agent, employee, or affiliate of any of the Trust (collectively,
"CTS Parties' Claims"); and (iii) each of the CTS Parties hereby waives and
relinquishes any and all CTS Parties' Claims.
(e) The Trust represents and warrants to, and agrees with, each of
the CTS Parties that, at the date hereof: (i) none of the CTS Parties is
in default under any of the Note Documents; (ii) The Trust has not suffered
any damage under any of the Note Documents, and the Trust does not have,
under any of the Note Documents, any cause of action, right of set-off or
counterclaim, or any other claim of any nature whatsoever under any of the
Note Documents against any of the CTS Parties or any director, officer,
attorney, agent, employee, or affiliate of any of the CTS Parties
(collectively, "Trust Claims"); and (iii) the Trust hereby waives and
relinquishes any and all Trust Claims.
(f) CTS agrees that the Security Agreement remains in full force
and effect on the date hereof and that its force and effect will not be
affected by any of the transactions contemplated hereby, subject only to the
express confirmation of the prior modification of the Security Agreement by
this Agreement, and that the Security Agreement provides collateral security
for the Accrued Interest Note and for the Notes.
(g) Each of the Abbotts agrees that the Xxxxxx Pledge Agreement
remains in full force and effect on the date hereof and that its force and
effect will not be affected by any of the transactions contemplated hereby,
and that it provides collateral security for the Accrued Interest Note and
for the Notes.
(h) Soren agrees that the Soren Pledge Agreement remains in full
force and effect on the date hereof and that its force and effect will not be
affected by any of the transactions contemplated hereby, and that it provides
collateral security for the Accrued Interest
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Note and for the Notes.
(j) CTS acknowledges and agrees that it may not reduce or offset
against any of its obligations under any of the Notes or the Accrued
Interest Note for any reason whatsoever. Without limiting the generality
of the foregoing, nothing in this Agreement shall be deemed or construed to
create such a right of offset.
5. CERTAIN AGREEMENTS.
(a) The Trust represents and warrants to CTS that the Trust has not
transferred or assigned any of the Note Documents, or any interest therein, to
any other person or entity.
(b) The Trust shall not have any obligation or responsibility with
regard to the offer, purchase, or sale of any Equity Offering. Without
limiting the generality of the foregoing, and except for the agreements of the
Trust expressly set forth in this Agreement, the Trust does not make any
representation, warranty, or covenant regarding CTS, any Equity Offering, or
such offer, purchase, or sale and expressly disclaims any such representation,
warranty, or covenant, express or implied.
6. ADDITIONAL COVENANTS. Within 10 days following the receipt by CTS,
after the Effective Date and before June 30, 1999, of net proceeds of at
least $30,000,000 from one or more private placement of its common stock to
Gold & Xxxxx Transfer S.A. and/or Atocha, L.P.:
(a) The Trust shall deliver to CTS the Accrued Interest Note and
the Notes in exchange for a Second Amended and Restated Accrued Interest Note
and Second Amended and Restated Notes that shall be of identical terms as the
promissory notes exchanged therefor except that the provisions of Section 2
of this Agreement shall be incorporated into the Second Amended and Restated
Promissory Notes.
(b) At the time of the transactions identified in this Section 6,
each of the Abbotts and Soren shall reconfirm in writing that their
respective Pledge Agreements remain in full force and effect.
7. TERMINATION. If, after the Effective Date and before June 30, 1999,
CTS has not received net proceeds of at least $30,000,000 from one or more
private placements of its common stock to Gold & Xxxxx Transfer S.A. and/or
Atocha, L.P., then: (a) Sections 2 and 6 of this Agreement shall be of no
further force or effect; and (b) the provisions set forth in Section 2 hereof
amending the Accrued Interest Note and Notes shall be rescinded as of the
Effective Date, shall be of no further force or effect, and the Accrued
Interest Notes and the Notes shall revert to their forms as they existed
prior to such amendments.
8. BINDING EFFECT; TRANSFER. This Agreement is binding upon and inures to
the benefit of the successors and assigns of each of the parties. This
Agreement is also binding upon
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any transferees of the Accrued Interest Note or any of the Notes. The Trust
agrees not to assign or transfer the Accrued Interest Note or any of the
Notes without first: (1) informing the assignee or transferee of the terms of
this Agreement; (ii) providing such assignee or transferee with a copy of
this Agreement; and (iii) notifying CTS in writing of the proposed transfer.
The possible modifications in Section 2 hereof shall apply only to the
provisions and periods specifically referred to therein and no other,
further, or broader modifications or possible extensions, or any waiver or
consent, is inferred or shall be implied.
9. GOVERNING LAW. This Agreement is and shall be deemed to be a contract
entered into and made pursuant to the laws of the State of New York and shall
in all respects be governed, construed, applied, and enforced in accordance
with the laws of the State of New York without regard to choice of law
principles. The parties hereby agree that the venue of any legal action or
proceeding with respect to this Agreement and the rights and obligations of
the parties hereto shall lie in any state or federal court in the State of
New York. Each of the parties further consents to and hereby submits itself to
the jurisdiction of the above-mentioned courts situated in the State of New
York.
10. FULL FORCE AND EFFECT OF CERTAIN DOCUMENTS. Each of the parties
hereto agrees that, at the date hereof each of the Note Documents is in full
force and effect except as modified by this Agreement and the Exhibits hereto.
11. FURTHER COOPERATION. Each of the parties hereto agrees to cooperate
with each of the other parties hereto, including without limitation by
executing and delivering appropriate documents, to more fully effectuate the
purpose of this Agreement.
12. LEGEND. Within ten (10) days after the execution of this Agreement
by all parties, the Trust shall cause the following legend to be stamped or
otherwise imprinted (while in the presence of an officer of CTS) on the
Accrued Interest Note and each of the Notes:
"THIS NOTE AND THE INDEBTEDNESS EVIDENCED BY THIS NOTE ARE SUBJECT TO
AGREEMENTS DATED AS OF MARCH 15, 1999 AND JUNE 8, 1999, BY AND BETWEEN
THE MAKER (AS DEFINED HEREIN), XXX-XXXX.xxx, INC., AND TEL-SAVE, INC.,
AND OTHER PARTIES, COPIES OF WHICH AGREEMENT MAY BE OBTAINED FROM THE
SECRETARY OF THE MAKER (AS DEFINED HEREIN)."
(BALANCE OF PAGE LEFT INTENTIONALLY BLANK)
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IN WITNESS WHEREOF, CTS and the Trust have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, and the
Abbotts and Soren have executed this Agreement as of the date first above
written to be effective as of the Effective Date.
COMMUNICATION TELESYSTEMS
INTERNATIONAL d.b.a.
WORLDXCHANGE
COMMUNICATIONS, A CALIFORNIA
CORPORATION
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------
Title: Executive Vice-President
-------------------------------
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XXXX XXXXX, AS TRUSTEE OF THAT CERTAIN
D&K GRANTOR RETAINED ANNUITY TRUST
DATED JUNE 15, 1998
/s/ Xxxx Xxxxx
-----------------------------------
XXXXX X. XXXXXX
/s/ Xxxxx X. Xxxxxx
-----------------------------------
XXXXXXXX XXXXXX
/s/ Xxxxxxxx Xxxxxx
-----------------------------------
XXXXXX X. XXXXX
/s/ Xxxxxx X. Xxxxx
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