PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of June 9, 1999, is
entered into by and among STAR TELECOMMUNIACTIONS, INC., a Delaware corporation
("Star") and certain of its Subsidiaries identified on the signature pages
hereof (each a "Pledgor" and collectively, "Pledgors"), and FOOTHILL CAPITAL
CORPORATION, a California corporation, as agent for the Lender Group (in such
capacity, together with its successor, if any, in such capacity, "Secured
Party"), with reference to the following:
WHEREAS, each undersigned Pledgor beneficially owns the specified
Equity Interests identified as Pledged Interests in the Persons identified as
Issuers on SCHEDULE A attached hereto (or any addendum thereto);
WHEREAS, Star and certain of its Affiliates identified therein as
"Obligors" have entered into that certain Loan and Security Agreement, dated as
of even date herewith (the "Loan Agreement"), with the financial institutions
identified therein as "Lenders" and Foothill Capital Corporation, as agent for
the Lenders (individually and collectively, the "Lender Group"), pursuant to
which the Lender Group has agreed to make certain financial accommodations to
the Obligors;
WHEREAS, to induce the Lender Group to make the financial
accommodations provided to Obligors pursuant to the Loan Agreement, each Pledgor
desires to pledge, grant, transfer, and assign to Secured Party for the benefit
of the Lender Group a security interest in the Collateral (as hereinafter
defined) to secure the Secured Obligations (as hereinafter defined), as provided
herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
(a) DEFINITIONS. All initially capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed thereto in the Loan
Agreement. As used in this Agreement:
"AGREEMENT" shall mean this Pledge Agreement.
"CHIEF EXECUTIVE OFFICE" shall mean where Pledgor is deemed located
pursuant to Section 9-103(3)(d) of the Code.
"COLLATERAL" shall mean the Pledged Interests, the Future Rights, and
the Proceeds, collectively.
"EQUITY INTERESTS" means all shares, units, options, warrants,
interests,
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participations, or other equivalents (regardless of how designated) of or in
a corporation, partnership, limited liability company, or equivalent entity,
whether voting or nonvoting, including general partner partnership interests,
limited partner partnership interests, common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"FUTURE RIGHTS" shall mean: (a) all Equity Interests (other than
Pledged Interests) of the Issuers, and all securities convertible or
exchangeable into, and all warrants, options, or other rights to purchase,
Equity Interests of the Issuers derived from the Pledged Interests; (b) to the
extent of the applicable Pledgor's interest therein, all Equity Interests of,
all securities convertible or exchangeable into, and all warrants, options, or
other rights to purchase Equity Interests of any Person in which such Pledgor,
after the date of this Agreement, acquires a direct equity interest,
irrespective of whether such Person is or becomes a Subsidiary of such Pledgor;
and (c) the certificates or instruments representing such additional Equity
Interests, convertible or exchangeable securities, warrants, and other rights
and all dividends, cash, options, warrants, rights, instruments, and other
property or proceeds from time to time received, receivable, or otherwise
distributed in respect of, in exchange for, or as a replacement of, any or all
of such Equity Interests (including any cash, Equity Interests, or other
securities or instruments issued after any recapitalization, readjustment,
reclassification, merger or consolidation with respect to the Issuers).
"HOLDER" and "HOLDERS" shall have the meanings ascribed thereto in
SECTION 3 of this Agreement.
"ISSUERS" shall mean each of the Persons identified as an Issuer on
SCHEDULE A attached hereto (or any addendum thereto), and any successors
thereto, whether by merger or otherwise.
"LIEN" shall mean any lien, mortgage, pledge, assignment (including
any assignment of rights to receive payments of money), security interest,
charge, or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, or any agreement to
give any security interest).
"LOAN AGREEMENT" shall have the meaning ascribed thereto in the
recitals to this Agreement.
"PLEDGED INTERESTS" shall mean all of the Equity Interests identified
as Pledged Interests on SCHEDULE A attached hereto (or any addendum thereto).
"PLEDGOR" shall have the meaning ascribed thereto in the preamble to
this Agreement.
"PROCEEDS" shall mean all proceeds (including proceeds of proceeds) of
the Pledged Interests and Future Rights including all: (a) rights, benefits,
distributions, premiums, profits, dividends, interest, cash, instruments,
documents of title, accounts, contract rights, inventory, equipment, general
intangibles, deposit accounts, chattel paper,
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and other property from time to time received, receivable, or otherwise
distributed in respect of any of the Pledged Interests, Future Rights, or
proceeds thereof (including any claims against securities intermediaries
under Article 8 of the Code or otherwise); (b) "proceeds," as such term is
used in Section 9306 of the Code; (c) proceeds of any insurance, indemnity,
warranty, or guaranty (including guaranties of delivery) payable from time to
time with respect to any of the Pledged Interests, Future Rights, or proceeds
thereof; (d) payments (in any form whatsoever) made or due and payable to any
Pledgor from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Pledged
Interests, Future Rights, or proceeds thereof; and (e) other amounts from
time to time paid or payable under or in connection with any of the Pledged
Interests, Future Rights, or proceeds thereof.
"SECURED OBLIGATIONS" shall mean all liabilities, obligations, or
undertakings owing by Obligors to the Lender Group of any kind or description
arising out of or outstanding under, advanced or issued pursuant to, or
evidenced by the Loan Agreement, the other Loan Documents, or this Agreement,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which any
Obligor is required to pay pursuant to any of the foregoing, by law, or
otherwise.
"SECURED PARTY" shall have the meaning ascribed thereto in the
preamble to this Agreement, together with its successors or assigns.
"SECURITIES ACT" shall have the meaning ascribed thereto in SECTION
9(c) of this Agreement.
(b) CONSTRUCTION.
(i) Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and to the singular
include the plural, the part includes the whole, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement. Article, section, subsection, exhibit, and schedule references are
to this Agreement unless otherwise specified. All of the exhibits or schedules
attached to this Agreement shall be deemed incorporated herein by reference.
Any reference to any of the following documents includes any and all
alterations, amendments, restatements, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable: this Agreement, the Loan
Agreement, or any of the other Loan Documents.
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(ii) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against the Lender Group or any Pledgor,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all of the parties and their respective counsel
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of the parties
hereto.
(iii) In the event of any direct conflict between the express
terms and provisions of this Agreement and of the Loan Agreement, the terms and
provisions of the Loan Agreement shall control.
2. PLEDGE. (a) As security for the prompt payment and performance of
its Secured Obligations (other than in respect of the Term Loan Amount) in full
when due, whether at stated maturity, by acceleration or otherwise (including
amounts that would become due but for the operation of the provisions of the
Bankruptcy Code), each Pledgor hereby pledges, grants, transfers, and assigns to
Secured Party, for the benefit of the Lender Group, a security interest in all
of such Pledgor's right, title, and interest in and to the Collateral.
(b) As security for the prompt payment and performance of its Secured
Obligations in respect of the Term Loan Amount (including without limitation,
the principal thereof, interest thereon, and the fees and expenses specifically
related thereto) in full when due, whether at stated maturity, by acceleration
or otherwise (including amounts that would become due but for the operation of
the provisions of the Bankruptcy Code), each Pledgor hereby pledges, grants,
transfers, and assigns to Secured Party, for the benefit of the Lender Group, a
security interest in all of such Pledgor's right, title, and interest in and to
the Collateral.
(c) PRIORITY OF LIENS. The Liens granted to Secured Party for the
benefit of the Lender Group under subsection 2(a) shall have priority over the
Liens granted to Secured Party for the benefit of the Lender Group under
subsection 2(b).
3. DELIVERY AND REGISTRATION OF COLLATERAL.
(a) All certificates or instruments representing or evidencing the
Collateral shall be promptly delivered by each Pledgor to Secured Party for the
benefit of the Lender Group or Secured Party's designee pursuant hereto at a
location designated by Secured Party and shall be held by or on behalf of
Secured Party pursuant hereto, and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured Party.
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(b) After the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right, at any time in its discretion and
without notice to any Pledgor, to transfer to or to register on the books of the
Issuers (or of any other Person maintaining records with respect to the
Collateral) in the name of Secured Party, as agent for the Lender Group, or any
of its nominees any or all of the Collateral. In addition, Secured Party shall
have the right at any time to exchange certificates or instruments representing
or evidencing Collateral for certificates or instruments of smaller or larger
denominations.
(c) If, at any time and from time to time, any Collateral (including
any certificate or instrument representing or evidencing any Collateral) is in
the possession of a Person other than the Lender Group or a Pledgor (a
"Holder"), then the applicable Pledgor shall immediately, at Secured Party's
option, either cause such Collateral to be delivered into Lender Group's
possession, or execute and deliver to such Holder a written
notification/instruction, and take all other steps necessary to perfect the
security interest of Secured Party held for the benefit of the Lender Group in
such Collateral, including obtaining from such Holder a written acknowledgement
that such Holder holds such Collateral for the Lender Group, all pursuant to
Sections 9115 of the Code or other applicable law governing the perfection of
Secured Party's security interest in the Collateral in the possession of such
Holder. Each such notification/instruction and acknowledgement shall be in form
and substance satisfactory to Secured Party.
(d) Any and all Collateral (including dividends, interest, and other
cash distributions) at any time received or held by any Pledgor shall be so
received or held in trust for the Lender Group, shall be segregated from other
funds and property of such Pledgor and shall be forthwith delivered to Secured
Party for the benefit of the Lender Group in the same form as so received or
held, with any necessary endorsements; PROVIDED that cash dividends or
distributions received by a Pledgor, if and to the extent they are not
prohibited by the Loan Agreement, may be retained by such Pledgor in accordance
with SECTION 4 and used in the ordinary course of such Pledgor's business.
(e) If at any time and from time to time any Collateral consists of
an uncertificated security or a security in book entry form, then the applicable
Pledgor shall immediately cause such Collateral to be registered or entered, as
the case may be, in the name of Secured Party, as agent for the Lender Group, or
otherwise cause Secured Party's security interest thereon to be perfected in
accordance with applicable law.
4. VOTING RIGHTS AND DIVIDENDS.
(a) So long as no Event of Default shall have occurred and be
continuing, each Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of the Loan Documents and shall be
entitled to receive and retain any cash dividends or distributions paid in
respect of the Collateral.
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(b) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting and other consensual
rights or receive and retain cash dividends or distributions that it would
otherwise be entitled to exercise or receive and retain, as applicable pursuant
to SECTION 4(a), shall cease, and all such rights shall thereupon become vested
in Secured Party on behalf of the Lender Group, who shall thereupon have the
sole right to exercise such voting or other consensual rights and to receive and
retain such cash dividends and distributions. Each Pledgor shall execute and
deliver (or cause to be executed and delivered) to Secured Party for the benefit
of the Lender Group all such proxies and other instruments as Secured Party may
reasonably request for the purpose of enabling Secured Party on behalf of the
Lender Group to exercise the voting and other rights which it is entitled to
exercise and to receive the dividends and distributions that it is entitled to
receive and retain pursuant to the preceding sentence.
5. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents, warrants,
and covenants as follows:
(a) Such Pledgor has taken all steps it deems necessary or
appropriate to be informed on a continuing basis of changes or potential changes
affecting the Collateral (including rights of conversion and exchange, rights to
subscribe, payment of dividends, reorganizations or recapitalization, tender
offers and voting rights), and such Pledgor agrees that the Lender Group shall
have no responsibility or liability for informing such Pledgor of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto;
(b) All information herein or hereafter supplied to Lender Group by
or on behalf of such Pledgor in writing with respect to the Collateral is, or in
the case of information hereafter supplied will be, accurate and complete in all
material respects;
(c) Pledgors are and will be the sole legal and beneficial owner of
the Collateral (including the Pledged Interests and all other Collateral
acquired by any Pledgor after the date hereof) free and clear of any adverse
claim, Lien, or other right, title, or interest of any party other than the Lien
created pursuant to this Agreement and Permitted Liens;
(d) This Agreement, and the delivery to Secured Party on behalf of
the Lender Group of the Pledged Interests representing Collateral (or the
delivery to all Holders of the Pledged Interests representing Collateral of the
notification/instruction referred to in SECTION 3 of this Agreement), creates a
valid, perfected, and first priority security interest in one hundred percent
(100%) of the Pledged Interests in favor of Secured Party for the benefit of the
Lender Group securing payment of the Secured Obligations, and all actions
necessary to achieve such perfection have been duly taken;
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(e) SCHEDULE A to this Agreement is true and correct and complete in
all material respects; without limiting the generality of the foregoing: (i)
except as set forth on SCHEDULE A, all the Pledged Interests are in certificated
form, and, except to the extent registered in the name of Secured Party on
behalf of the Lender Group or its nominee pursuant to the provisions of this
Agreement, are registered in the name of such Pledgor; and (ii) the Pledged
Interests as to each of the Issuers constitute at least the percentage of all
the Equity Interests of such Issuer as set forth in SCHEDULE A to this
Agreement;
(f) There are no presently existing Future Rights or Proceeds owned
by Pledgor, except as set forth in SCHEDULE C hereto;
(g) The Pledged Interests have been duly authorized and validly
issued and are fully paid and nonassessable;
(h) Neither the pledge of the Collateral pursuant to this Agreement
nor the extensions of credit represented by the Secured Obligations violates
Regulation T, U or X of the Board of Governors of the Federal Reserve System;
and
(i) Each such Xxxxxxx has taken all necessary actions and obtained
all necessary consents required under the Governing Documents of the respective
Issuers to pledge the Collateral hereunder and by the execution, delivery and
performance of this Agreement there will have been no violation or breach of the
Governing Documents of the respective Issuers.
6. FURTHER ASSURANCES.
(a) Each Pledgor hereby agrees that from time to time, at the expense
of such Pledgor, that such Pledgor will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
reasonably desirable, as requested by Secured Party, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party on behalf of the Lender Group to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, each Pledgor will: (i) at the request of
Secured Party, xxxx conspicuously each of its records pertaining to the
Collateral with a legend, in form and substance reasonably satisfactory to
Secured Party, indicating that such Collateral is subject to the security
interest granted hereby; (ii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or reasonably desirable, as requested by Secured Party, in order to
perfect and preserve the security interests granted or purported to be granted
hereby; (iii) allow inspection of the Collateral by Secured Party or Persons
designated by Secured Party; and (iv) appear in and defend any action or
proceeding that may affect such Pledgor's title to or Secured Party's security
interest in the Collateral.
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(b) Each Pledgor hereby authorizes Secured Party on behalf of the
Lender Group to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law. A carbon, photographic, or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) Each Pledgor will furnish to Lender Group, upon the request of
Secured Party: (i) a certificate executed by an authorized officer of Pledgor,
and dated as of the date of delivery to Secured Party, itemizing in such detail
as Secured Party may request, the Collateral which, as of the date of such
certificate, has been delivered to the Lender Group by Pledgor pursuant to the
provisions of this Agreement; and (ii) such statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Lender Group may reasonably request.
7. COVENANTS OF PLEDGOR. Each Pledgor shall:
(a) Perform each and every covenant in the Loan Documents applicable
to such Pledgor;
(b) At all times keep at least one complete set of its records
concerning substantially all of the Collateral at its Chief Executive Office as
set forth in SCHEDULE B hereto, and not change the location of such records
without giving Secured Party at least thirty (30) days prior written notice
thereof;
(c) To the extent it may lawfully do so, use its best efforts to
prevent the Issuers from issuing Future Rights or Proceeds, except for
additional shares or securities or cash dividends and other distributions, if
any, that are not prohibited by the terms of the Loan Agreement to be paid by
any Issuer to such Pledgor; PROVIDED, HOWEVER, that immediately upon its
acquisition (directly or indirectly) thereof, to the extent that such Future
Rights or Proceeds constitute additional shares or securities, it shall (i)
pledge such additional shares or securities hereunder and (ii) promptly (and in
any event within three Business Days) deliver to Secured Party a Pledge
Amendment, duly executed by such Pledgor, in substantially the form of EXHIBIT 1
hereto (a "Pledge Amendment"), in respect of the additional shares or
securities, together with all certificates or other instruments representing or
evidencing the same. Each Pledgor hereby (i) authorizes Secured Party to attach
each Pledge Amendment to this Agreement, (ii) agrees that all capital stock and
other equity securities listed on any Pledge Amendment delivered to Secured
Party shall for all purposes hereunder constitute Pledged Shares, and (iii) is
deemed to have made, upon such delivery, the representations and warranties
contained in SECTION 5 hereof with respect to such Pledged Collateral; and
(d) Upon receipt by such Pledgor of any material notice, report, or
other communication from any of the Issuers or any Holder relating to all or any
part of the Collateral, deliver such notice, report or other communication to
Secured Party as soon as possible, but in no event later than five (5) days
following the receipt thereof by such Pledgor.
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8. SECURED PARTY AS PLEDGOR'S ATTORNEY-IN-FACT.
(a) Each Pledgor hereby irrevocably appoints Secured Party on behalf
of the Lender Group as such Pledgor's attorney-in-fact, with full authority in
the place and stead of such Pledgor and in the name of such Pledgor, Secured
Party or otherwise, from time to time at Secured Party's discretion, to take any
action and to execute any instrument that Secured Party may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including:
(i) after the occurrence and during the continuance of an Event of Default, to
receive, endorse, and collect all instruments made payable to Pledgor
representing any dividend, interest payment or other distribution in respect of
the Collateral or any part thereof to the extent permitted hereunder and to give
full discharge for the same and to execute and file governmental notifications
and reporting forms; (ii) to issue any notifications/instructions Secured Party
deems necessary pursuant to SECTION 3 of this Agreement; or (iii) after the
occurrence and during the continuance of an Event of Default, to arrange for the
transfer of the Collateral on the books of any of the Issuers or any other
Person to the name of Secured Party on behalf of the Lender Group or to the name
of Secured Party's nominee.
(b) In addition to the designation of Secured Party as each Pledgor's
attorney-in-fact in SUBSECTION (a), each Pledgor hereby irrevocably appoints
Secured Party as such Pledgor's agent and attorney-in-fact, after the occurrence
and during the continuation of an Event of Default, to make, execute and deliver
any and all documents and writings which may be necessary or appropriate for
approval of, or be required by, any regulatory authority located in any city,
county, state or country where such Pledgor or any of the Issuers engage in
business, in order to transfer or to more effectively transfer any of the
Pledged Interests or otherwise enforce Secured Party's rights hereunder.
9. REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance
of an Event of Default:
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(a) Secured Party on behalf of the Lender Group may exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party on default under the Code (irrespective of whether the Code applies to the
affected items of Collateral), and Secured Party on behalf of the Lender Group
may also without notice (except as specified below) sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the
Collateral. To the maximum extent permitted by applicable law, the Lender Group
may be the purchaser of any or all of the Collateral at any such sale and shall
be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply all or any part of the Secured Obligations as a credit on
account of the purchase price of any Collateral payable at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and each Pledgor hereby waives (to
the extent permitted by law) all rights of redemption, stay, or appraisal that
it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Each Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten (10) calendar days
notice to such Pledgor of the time and place of any public sale or the time
after which a private sale is to be made shall constitute reasonable
notification. The Lender Group shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender Group may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the maximum extent
permitted by law, each Pledgor hereby waives any claims against the Lender Group
arising because the price at which any Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale, even if Secured Party accepts the first offer received ad does not offer
such Collateral to more than one offeree.
(b) Each Pledgor hereby agrees that any sale or other disposition of
the Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, or other financial institutions in the City of Los
Angeles, California in disposing of property similar to the Collateral shall be
deemed to be commercially reasonable.
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(c) Each Pledgor hereby acknowledges that the sale by the Lender
Group of any Collateral pursuant to the terms hereof in compliance with the
Securities Act of 1933 as now in effect or as hereafter amended, or any similar
statute hereafter adopted with similar purpose or effect (the "Securities Act"),
as well as applicable "Blue Sky" or other state securities laws may require
strict limitations as to the manner in which the Lender Group or any subsequent
transferee of the Collateral may dispose thereof. Each Pledgor hereby
acknowledges and agrees that in order to protect Secured Party's interest it may
be necessary to sell the Collateral at a price less than the maximum price
attainable if a sale were delayed or were made in another manner, such as a
public offering under the Securities Act. Each Pledgor has no objection to sale
in such a manner and agrees that the Lender Group shall have no obligation to
obtain the maximum possible price for the Collateral under such circumstances.
Without limiting the generality of the foregoing, each Pledgor hereby agrees
that, upon the occurrence and during the continuation of an Event of Default,
the Lender Group may, subject to applicable law, from time to time attempt to
sell all or any part of the Collateral by a private placement, restricting the
bidders and prospective purchasers to those who will represent and agree that
they are purchasing for investment only and not for distribution. In so doing,
the Lender Group may solicit offers to buy the Collateral or any part thereof
for cash, from a limited number of investors deemed by the Lender Group, in its
reasonable judgment, to be institutional investors or other responsible parties
who might be interested in purchasing the Collateral. If the Lender Group shall
solicit such offers, then the acceptance by the Lender Group of one of the
offers shall be deemed to be a commercially reasonable method of disposition of
the Collateral.
(d) If Secured Party on behalf of the Lender Group shall determine to
exercise its right to sell all or any portion of the Collateral pursuant to this
Section, each Pledgor agrees that, upon request of Secured Party, such Pledgor
will, at its own expense:
(i) use its best efforts to execute and deliver, and cause the
Issuers and the directors and officers thereof to execute and deliver, all such
instruments and documents, and to do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of Secured Party, advisable to
register such Collateral under the provisions of the Securities Act, and to
cause the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectuses which, in the opinion of Secured Party, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(ii) use its best efforts to, or to cause the Issuer to, qualify
the Collateral under the state securities laws or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the Collateral, as
requested by Secured Party;
(iii) cause the Issuers to make available to their respective
security holders, as soon as practicable, an earnings statement which will
satisfy the provisions of Section 11(a) of the Securities Act;
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(iv) execute and deliver, or cause the officers and directors of
the Issuers to execute and deliver, to any person, entity or governmental
authority as Secured Party may choose, any and all documents and writings which,
in Secured Party's reasonable judgment, may be necessary or appropriate for
approval, or be required by, any regulatory authority located in any city,
county, state or country where such Pledgor or the Issuers engage in business,
in order to transfer or to more effectively transfer the Pledged Interests or
otherwise enforce Lender Group's rights hereunder; and
(v) do or cause to be done all such other acts and things as may
be necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
Each Pledgor acknowledges that there is no adequate remedy at law for failure by
it to comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.
(E) EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY
LAW: (i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE
TIME LENDER GROUP DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN
THIS SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS
OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW
EXISTING OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a)
OF THIS SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.
10. APPLICATION OF PROCEEDS. After the occurrence and during the
continuance of an Event of Default, any cash held by Secured Party on behalf of
the Lender Group as Collateral and all cash proceeds received by Secured Party
for the benefit of the Lender Group in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral pursuant to the
exercise by Secured Party of its remedies as a secured creditor as provided in
SECTION 9 shall be applied from time to time by Secured Party as provided in the
Loan Agreement.
11. DUTIES OF SECURED PARTY. The powers conferred on Secured Party for
the benefit of the Lender Group hereunder are solely to protect its interests in
the Collateral and shall not impose on it any duty to exercise such powers.
Except as provided in Section 9207 of the Code, the Lender Group shall have no
duty with respect to the Collateral or any responsibility for taking any
necessary steps to preserve rights against any Persons with respect to any
Collateral.
12. CHOICE OF LAW AND VENUE. THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF
12
THE STATE OF NEW YORK. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY
IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH
SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH PLEDGOR AND
SECURED PARTY ON BEHALF OF THE LENDER GROUP WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 12.
13. AMENDMENTS; ETC. No amendment or waiver of any provision of this
Agreement nor consent to any departure by any Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by Secured
Party on behalf of the Lender Group, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of Lender Group to exercise, and no delay in
exercising any right under this Agreement, any other Loan Document, or otherwise
with respect to any of the Secured Obligations, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right under this
Agreement, any other Loan Document, or otherwise with respect to any of the
Secured Obligations preclude any other or further exercise thereof or the
exercise of any other right. The remedies provided for in this Agreement or
otherwise with respect to any of the Secured Obligations are cumulative and not
exclusive of any remedies provided by law.
14. NOTICES. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and shall be delivered in the manner set forth in the Loan Agreement
15. CONTINUING SECURITY INTEREST. This Agreement shall create continuing
security interests in the Collateral and shall: (i) remain in full force and
effect until the indefeasible payment in full of the Secured Obligations (other
than Contingent Surviving Obligations), including the cash collateralization,
expiration, or cancellation of all Secured Obligations, if any, consisting of
letters of credit, and the full and final termination of any commitment to
extend any financial accommodations under the Loan Agreement; (ii) be binding
upon each Pledgor and its successors and assigns; and (iii) inure to the benefit
of the Lender Group and its successors, transferees, and assigns. Upon the
indefeasible payment in full of the Secured Obligations (other than Contingent
Surviving Obligations), including the cash collateralization, expiration, or
cancellation of all Secured Obligations, if any, consisting of letters of
credit, and the full and final termination of any commitment to extend any
financial accommodations under the Loan Agreement, the security interests
granted herein shall automatically terminate and all rights to the Collateral
shall revert to the applicable Pledgor. Upon any such termination, Secured
Party will, at the applicable Pledgor's expense, execute
13
and deliver to such Pledgor such documents as such Pledgor shall reasonably
request to evidence such termination. Such documents shall be prepared by
the applicable Pledgor and shall be in form and substance reasonably
satisfactory to Secured Party.
16. SECURITY INTEREST ABSOLUTE. To the maximum extent permitted by law,
all rights of the Lender Group, all security interests hereunder, and all
obligations of the Pledgors hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of any of the Secured
Obligations or any other agreement or instrument relating thereto, including any
of the Loan Documents;
(b) any change in the time, manner, or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from any of the Loan Documents, or any
other agreement or instrument relating thereto;
(c) any exchange, release, or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty for all or any of the Secured Obligations; or
(d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, any Pledgor.
To the maximum extent permitted by law, each Pledgor hereby waives any right to
require the Lender Group to: (A) proceed against or exhaust any security held
from such Pledgor; or (B) pursue any other remedy in the Lender Group's power
whatsoever.
17. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
18. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
19. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
14
20. WAIVER OF MARSHALING. Each Pledgor and Secured Party on behalf of
the Lender Group acknowledges and agrees that in exercising any rights under or
with respect to the Collateral: (i) the Lender Group is under no obligation to
marshal any Collateral; (ii) may, in its absolute discretion, realize upon the
Collateral in any order and in any manner it so elects; and (iii) may, in its
absolute discretion, apply the proceeds of any or all of the Collateral to the
Secured Obligations in any order and in any manner it so elects. Each Pledgor
and Secured Party on behalf of the Lender Group hereby waive any right to
require the marshaling of any of the Collateral.
21. WAIVER OF JURY TRIAL.
EACH PLEDGOR AND SECURED PARTY ON BEHALF OF THE LENDER GROUP HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PLEDGOR AND SECURED
PARTY ON BEHALF OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[Remainder of page left intentionally blank]
15
IN WITNESS WHEREOF, each Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first written above.
STAR TELECOMMUNICATIONS, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
CEO TELECOMMUNICATIONS, INC.,
a California corporation
By: /s/
--------------------------
Title:
CEO CALIFORNIA
TELECOMMUNICATIONS, INC.,
a California corporation
By: /s/
--------------------------
Title:
PT-1 COMMUNICATIONS, INC.,
a New York corporation
By: /s/
--------------------------
Title:
PT-1 LONG DISTANCE, INC.,
a New York corporation
By: /s/
--------------------------
Title:
S-1
XXXXXX COM, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
LUCIUS ENTERPRISES, INC.,
a California corporation
By: /s/
--------------------------
Title:
AS TELECOMMUNICATIONS, INC.,
an Arizona corporation
By: /s/
--------------------------
Title:
PT-1 TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
PT-1 HOLDINGS I, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
S-2
PT-1 HOLDINGS II, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
NATIONWIDE DISTRIBUTORS, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
TECHNOLOGY LEASING, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
PT-1 PHONECARD, L.P.,
a Texas limited partnership
By: /s/
--------------------------
Title:
PLATFORM SERVICES, L.P.,
a Delaware limited partnership
By: /s/
--------------------------
Title:
S-3
PT-1 COMMUNICATIONS PUERTO RICO, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
INVESTMENT SERVICES, INC.,
a Delaware corporation
By: /s/
--------------------------
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent
By: /s/
--------------------------
Title:
S-4
SCHEDULE A
TO
PLEDGE AGREEMENT
Pledgor: Star Telecommunications, Inc., a Delaware corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's Jurisdiction
Number of Certificate Certificate Percentage of
Issuer Interests Class Number(s) Issued Ownership Incorporation
------ --------- ----- ----------- ----------- ---------- -------------
CEO California
Telecommunications, Inc. 100% California
CEO Telecommunications, Inc. 100% California
PT-1 Communications, Inc. 100% New York
AS Telecommunications, Inc. 100% Delaware
Xxxxxx Com, Inc. 100% Delaware
Lucius Enterprises, Inc. 100% California
Grupo Industrial Arvilla,
SA de C.V. 100% Mexico
Star Telecom Australia PTY
Ltd. 100% Australia
A-1
Pledgor: PT-1 Communications, Inc., a New York corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's Jurisdiction
Number of Certificate Certificate Percentage of
Issuer Interests Class Number(s) Issued Ownership Incorporation
------ --------- ----- ----------- ----------- ---------- -------------
PT-1 Long Distance, Inc. 100% Delaware
PT-1 Holdings I, Inc. 100% Delaware
PT-1 Technologies, Inc. 100% Delaware
PT-1 Holdings II, Inc. 100% Delaware
Nationwide Distributors, Inc. 100% Delaware
Technology Leasing, Inc. 100% Delaware
Investment Services, Inc. 100% Delaware
PT-1 Communications 100% Delaware
Puerto Rico, Inc.
PT-1 Communications 100% Canada
Canada, Inc.
Grupo Industrial Xxxxxxx, 100% Mexico
S.A. de C.V.
Star Telecommunications 100% Australia
Australia PTY, Ltd.
A-2
Pledgor: PT-1 Holdings I, Inc., a Delaware corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's
Number of Certificate Certificate Percentage Jurisdiction
Issuer Interests Class Number(s) Issued Ownership of Formation
------ --------- ----- ----------- ------------- ---------- ------------
PT-1 Phonecard, L.P. Texas
Pledgor: PT-1 Holdings II, Inc., a Delaware corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's
Number of Certificate Certificate Percentage Jurisdiction
Issuer Interests Class Number(s) Issued Ownership of Formation
------ --------- ----- ----------- ------------- ---------- ------------
Platform Services,
L.P. Delaware
Pledgor: PT-1 Technologies, Inc., a Delaware corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's
Number of Certificate Certificate Percentage Jurisdiction
Issuer Interests Class Number(s) Issued Ownership of Formation
------ --------- ----- ----------- ------------- ---------- ------------
PT-1 Phonecard, L.P. Texas
Platform Services, L.P. Delaware
A-3
Pledgor: Investment Services, Inc., a Delaware corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's
Number of Certificate Certificate Percentage Jurisdiction
Issuer Interests Class Number(s) Issued Ownership of Formation
------ --------- ----- ----------- ------------- ---------- ------------
Morningside,
S.A. de C.V. 100% Mexico
Xxxxxxxx,
X.X. de C.V. 100% Mexico
Bayonne, S.A.
de C.V. 100% Mexico
Pledgor: Lucius Enterprises, Inc., a California corporation
PLEDGED INTERESTS
Former Name,
if any, in
which Pledgor's
Number of Certificate Certificate Percentage Jurisdiction
Issuer Interests Class Number(s) Issued Ownership of Formation
------ --------- ----- ----------- ------------- ---------- ------------
Servicios
Sumosierra
S.A. de C.V. 100% Mexico
Grupo Bunden
S.A. de C.V. 100% Mexico
Grupo Toledo-
Xxxxxxx X.X.
de C.V. 100% Mexico
A-4
SCHEDULE B
TO
PLEDGE AGREEMENT
PLEDGOR: STAR TELECOMMUNICATIONS, INC.
Address of Chief Executive Office:
000 Xxxx Xx Xx Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
PLEDGOR: PT-1 COMMUNICATIONS, INC.
Address of Chief Executive Office:
00-00 Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
PLEDGOR: PT-1 HOLDINGS I, INC.
Address of Chief Executive Office:
00-00 Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
PLEDGOR: PT-1 TECHNOLOGIES, INC.
Address of Chief Executive Office:
00-00 Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
PLEDGOR: PT-1 HOLDINGS II, INC.
Address of Chief Executive Office:
00-00 Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
B-1
PLEDGOR: INVESTMENT SERVICES, INC.
Address of Chief Executive Office:
000 Xxxx Xx Xx Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
PLEDGOR: LUCIUS ENTERPRISES, INC.
Address of Chief Executive Office:
000 Xxxx Xx Xx Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
B-2
SCHEDULE C
TO
PLEDGE AGREEMENT
Existing Future Rights and Proceeds: None.
X-0
XXXXXXX 0
XXXXXX XXXXXXXXX
This Pledge Amendment, dated _________, 199__, is delivered
pursuant to Section 7 of the Pledge Agreement referred to below. The
undersigned Pledgor hereby agrees that: (a) this Pledge Amendment may be
attached to that certain Pledge Agreement, dated as of May __, 1999, between
Star Telecommunications, Inc., a Delaware corporation ("Star") and certain
subsidiaries of Star (including Pledgor) and Foothill Capital Corporation, a
California corporation, as agent for the "Lenders" defined in that certain
Loan and Security Agreement, dated as of May ___, 1999 (as amended from time
to time, the "Loan Agreement") and (b) that the capital stock and other
equity securities listed on this Pledge Amendment shall be and become part of
the Pledged Collateral referred to in the Pledge Agreement and SCHEDULE A
thereto and shall secure all Secured Obligations. The terms defined in the
Pledge Agreement or Loan Agreement are used herein as therein defined.
[]
By:
-------------------------------
Name:
Title:
Former Name,
if any, in
which Pledgor's
Number of Certificate Certificate Percentage Jurisdiction
Issuer Interests Class Number(s) Issued Ownership of Formation
------ --------- ----- ----------- ------------- ---------- ------------
C-2
