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EXHIBIT 10.31
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of December 31, 1998 (this "Agreement"), by
World Access, Inc., a Delaware corporation ("Pledgor"), in favor of NationsBank,
N.A., a national banking association, in its capacity as Administrative Agent
pursuant to the Credit Agreement described below ("Administrative Agent") and
each lender a party to the Credit Agreement from time to time (singly, a
"Secured Party" and collectively "Secured Parties").
BACKGROUND.
(1) Secured Parties, Administrative Agent, Telco Systems, Inc. and
World Access Holdings, Inc. (the "Company") have entered into the Credit
Agreement dated as of December 31, 1998 (as the same may be supplemented,
amended and modified from time to time, being the "Credit Agreement").
(2) It is the intention of the parties hereto that this Agreement and
the steps contemplated hereby will create a first priority security interest
securing the payment of the obligations set forth in Section 1.02 hereof.
(3) It is a condition precedent to the extension of credit under the
Credit Agreement that Pledgor shall have executed and delivered this Agreement.
AGREEMENT.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and in order to induce Secured Parties to make the
Advances under the Credit Agreement, Pledgor hereby agrees with Administrative
Agent, for its benefit and the ratable benefit of Secured Parties, as follows:
ARTICLE I. PLEDGE
1.01. Pledge. Pledgor hereby grants, pledges, assigns, hypothecates,
and transfers to Administrative Agent, for its benefit and the ratable benefit
of Secured Parties, a first and prior pledge and security interest in all
Capital Stock owned by Pledgor in all Persons and each other Person which is a
successor to such Persons (singly, an "Issuer" and collectively, "Issuers"), now
or hereafter owned beneficially or of record by Pledgor and any certificate or
instrument evidencing such interest, including, without limitation, the
interests listed on Schedule 1 hereto; and without affecting the obligation of
Pledgor or Issuer under any agreement prohibiting such action, in the event of
any consolidation or merger in which each Issuer is not the surviving entity, or
in the event of any sale, lease, transfer or other disposition of all or
substantially all of the assets of such Issuer, all Capital Stock, equity,
partnership, limited liability company ("LLC") or other interest of the
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successor entity formed by or resulting from such consolidation or merger, or of
the Person to which such sale, lease, transfer or other disposition shall have
been made, owned by Pledgor, and all proceeds and products of the foregoing
(collectively, "Collateral"), to secure the payment and performance of the
Obligations (as defined below).
1.02. Description of Obligations. The security interest granted by
Pledgor shall secure the payment and performance of any and all obligations now
or hereafter existing of the Company, Pledgor or any Subsidiary of the Pledgor,
and any other Obligor (other than Administrative Agent or Secured Parties) under
the Credit Agreement and the Loan Papers, including any extensions,
modifications, substitutions, amendments and renewals thereof, whether for
principal, interest, fees, premium, expenses, indemnification or otherwise (all
such obligations of the Company, Pledgor, each of its Subsidiaries, and each
other Obligor together with the "Obligations" as defined in the Credit Agreement
being the "Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by the Company, Pledgor, each of its Subsidiaries
or any other Obligor to Administrative Agent or any Secured Party under any Loan
Paper, but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Company, Pledgor, each of its Subsidiaries or any other Obligor (including all
such amounts which would become due but for the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding of the Company, Pledgor, any of its Subsidiaries, or any other
Obligor under any Debtor Relief Law).
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.01. Representations and Warranties Concerning Pledgor. Pledgor
represents and warrants to Administrative Agent and each Secured Party that (a)
the chief place of business and chief executive office of Pledgor and the office
where Pledgor keeps all of its records is located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇; and (b) no consent of any other Person and
no authorization, approval or other action by, and no notice to or filing with,
any Tribunal is required (i) for the pledge by Pledgor of the Collateral pledged
by it hereunder, for the grant by Pledgor of the security interest granted
hereby or for the execution, delivery or performance of this Agreement by
Pledgor, (ii) for the perfection or maintenance of the pledge, assignment and
security interest created hereby (including the first priority nature of such
pledge, assignment and security interest), or (iii) for the exercise by
Administrative Agent of the Rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement.
2.02. Representations and Warranties Concerning Collateral. Pledgor
represents and warrants to Administrative Agent and each Secured Party that (a)
Pledgor is the sole legal and beneficial owner of the Collateral pledged by it
free and clear of any Lien, security interest, option or other charge or
encumbrance except for the security interest created by this Agreement or as
otherwise permitted by the Credit Agreement; (b) no effective financing
statement or other similar document used to perfect and preserve a security
interest under the Laws of any jurisdiction covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed in favor of Administrative Agent relating to this Agreement and as
otherwise permitted by the Credit
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Agreement; (c) Schedule 1 is a complete and correct description of all interest
of Pledgor in each of its Subsidiaries, including each class of interest and
number of units or percentage of ownership owned by Pledgor; (d) the pledge,
assignment, and delivery of the Collateral hereunder, and filing of an
appropriate financing statement, create a valid first and prior perfected
security interest in the Collateral, securing the Obligations; (e) the Capital
Stock pledged hereunder is duly authorized, validly issued, fully paid, and
non-assessable and were not issued in violation of the Rights of any Person; (f)
no unpaid capital call or dispute exists with respect to any of the Collateral;
(g) none of the Collateral is evidenced by a certificate, instrument or other
writing that has not been delivered to Administrative Agent; (h) the interest of
Pledgor in each of its Subsidiaries is a 100% interest of all Capital Stock of
Pledgor's Subsidiaries specified on Schedule 1; (i) none of the Collateral is
subject to any buy-sell, voting trust, transfer restriction (other than transfer
restrictions arising under the Exchange Act), preferential right to purchase or
similar agreement or any option, warrant, put or call or similar agreement,
which consent has not been obtained; (j) Pledgor is organized pursuant to the
articles of incorporation, partnership agreement, LLC agreement, bylaws or other
articles of governance, and no other agreement amends the rights of Pledgor
under such documents; and (k) Pledgor's federal taxpayer identification number
is ▇▇-▇▇▇▇▇▇▇. The delivery at any time by Pledgor to Administrative Agent of
Collateral shall constitute a representation and warranty by Pledgor under this
Agreement that, with respect to such Collateral, Pledgor is the sole legal and
beneficial owner of the Collateral, and that the matters set forth in this
Section 2.02 are true and correct with respect to such Collateral.
2.03. Representations and Warranties Concerning Benefit. Pledgor
represents and warrants to Administrative Agent and each Secured Party that (a)
the value of the consideration received and to be received by Pledgor is
reasonably worth at least as much as the liability and obligation of Pledgor
hereunder, and such liability and obligation may reasonably be expected to
benefit Pledgor directly or indirectly; and (b) none of Administrative Agent,
Secured Party or any other Person has made any representation, warranty or
statement to Pledgor (other than as provided in the Loan Papers) in order to
induce Pledgor to execute this Agreement.
ARTICLE III. COVENANTS
3.01. Affirmative Covenants. Pledgor covenants and agrees (a) promptly
to deliver to Administrative Agent all instruments, certificates, documents, or
agreements evidencing any of the Collateral; (b) promptly to notify
Administrative Agent of any material change in any fact or circumstances
warranted or represented by Pledgor in this Agreement or in any other Loan
Paper; (c) promptly to notify Administrative Agent of any claim, action, or
proceeding affecting Pledgor's title to the Collateral, or any part thereof, or
the security interest therein granted hereunder, and, at the request of
Administrative Agent, appear in and defend, at Pledgor's expense, any such
action or proceeding; and (d) promptly to pay to Administrative Agent the amount
of all court costs and reasonable attorney's fees incurred by Administrative
Agent hereunder.
3.02. Negative Covenants. Pledgor covenants and agrees that it shall
not (a) create any other security interest or pledge in, mortgage or otherwise
encumber the Collateral or any part thereof, or permit the same to be or become
subject to any Lien, attachment, execution,
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sequestration, other legal or equitable process, or any encumbrance of any kind
or character, or grant any option, warrant, or other Rights in the Collateral in
favor of any Person other than Administrative Agent; (b) except as permitted
under the Credit Agreement, cause or permit any Issuer to authorize and issue
any additional Capital Stock, or take any other action that would otherwise
dilute any of the Collateral; (c) except as permitted in the Credit Agreement,
approve any amendment to the articles of incorporation, partnership agreement,
LLC agreement, bylaws, or other organizational or governance document of any
Issuer; (d) except as permitted in the Credit Agreement, permit the merger,
consolidation or dissolution of any Issuer; or (e) sell, lease, transfer or
otherwise dispose of any Collateral in any manner.
3.03. Right to Distributions. With respect to any certificates, bonds,
or other instruments or securities constituting a part of the Collateral,
Administrative Agent shall have authority during the continuance of an Event of
Default, without notice to Pledgor, either to have the same registered in
Administrative Agent's name or in the name of a nominee, and, with or without
such registration, to demand of the issuer thereof, and to receive and receipt
for, any and all Distributions (including any stock or similar dividend or
distribution) payable in respect thereof, whether they be ordinary or
extraordinary. Subject to the next sentence hereof, if Pledgor shall become
entitled to receive or shall receive any interest in or certificate (including,
without limitation, any interest in or certificate representing a Distribution
in connection with any reclassification, increase, or reduction of capital, or
issued in connection with any reorganization), or any option or Rights arising
from or relating to any of the Collateral, whether as an addition to, in
substitution of, as a conversion of, or in exchange for any of the Collateral,
or otherwise, Pledgor agrees to accept the same as Administrative Agent's agent
and to hold the same in trust on behalf of and for the benefit of Administrative
Agent, and to deliver the same immediately to Administrative Agent in the exact
form received, with appropriate undated stock, partnership interest, LLC
membership interest, or similar powers, duly executed in blank, to be held by
Administrative Agent, subject to the terms hereof, as Collateral. Unless an
Event of Default is in existence or would occur as a result thereof, Pledgor
shall be entitled to receive and utilize for its own purposes, all cash
Distributions (other than Distributions constituting a return of capital) paid
in respect of any of the Collateral. Administrative Agent shall be entitled to
all Distributions, and to any sums paid upon or in respect of any Collateral,
upon the liquidation, dissolution, or reorganization of the issuer thereof or
which constitute a return of capital which shall be paid to Administrative Agent
to be held by it as additional collateral security for the Obligations and
application to the Obligations at the discretion of Administrative Agent. All
Distributions paid or distributed in respect of the Collateral which are
received by Pledgor in violation of this Agreement shall, until paid or
delivered to Administrative Agent, be held by Pledgor in trust as additional
Collateral for the Obligations.
3.04. Records of Collateral. Pledgor at all times shall maintain
accurate books and records concerning the Collateral. Pledgor shall cause all
issuers of the Collateral to ▇▇▇▇ immediately all books and records of issue,
registration, and transfer relating to the Collateral, with an entry showing the
collateral assignment of the Collateral to Administrative Agent.
3.05. Information and Inspection. Subject to the terms and provisions
of Section 6.03 of the Credit Agreement, Pledgor shall, and shall cause each
Issuer to, (a) allow Administrative Agent
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to inspect and copy, or at the option of Administrative Agent, furnish copies
of, all records relating to the Collateral and the Obligations; and (b) furnish
Administrative Agent such information as it may request with respect to the
Collateral, any Distributions thereon, and any proceeds thereof, at the time and
in the form requested by Administrative Agent.
3.06. Indemnity and Expenses. (a) Pledgor shall indemnify
Administrative Agent and each Secured Party from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), expressly including such claims, losses or liabilities arising
out of mere negligence of Administrative Agent or any Secured Party, except
claims, losses or liabilities resulting from Administrative Agent's or any
Secured Party's gross negligence or willful misconduct.
(b) Pledgor will upon demand pay to Administrative Agent and each
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
Administrative Agent and each Secured Party may incur in connection with (i) the
sale of, collection from, or other realization upon, any of the Collateral, (ii)
the exercise or enforcement of any of the Rights of Administrative Agent or any
Secured Party hereunder or (iii) the failure by Pledgor to perform or observe
any of the provisions hereof.
(c) Any payment made or cost borne by Administrative Agent and each
Secured Party shall be a part of the Obligations, shall be payable upon demand,
and shall bear interest as provided in the Credit Agreement.
3.07. Additional Documents. Pledgor, at its expense, shall take all
action, and execute and deliver such further instruments, agreements, blank
stock, partnership interest, LLC membership interest, or similar powers, and
assignments as Administrative Agent shall deem necessary or appropriate to
obtain, maintain, and perfect the security interest hereunder, including the
security interest in after-acquired Collateral granted herein, and to enable
Administrative Agent to comply with all applicable federal or state Law, in
order to obtain or perfect Administrative Agent's interest in the Collateral, to
effect its Rights hereunder, or to obtain Distributions and other proceeds of
the Collateral as provided herein.
3.08. Additional Collateral. Upon acquisition by Pledgor of any
additional interest in any Issuer, Pledgor shall be deemed to grant hereunder,
and shall cause to be granted, Liens and security interests on such interest to
Administrative Agent, as security for the Obligations. Pledgor agrees to take,
and to cause to be taken, at its own cost and expense, such actions as
Administrative Agent shall deem necessary or appropriate to create, evidence,
and perfect such Liens and assure the first priority of such Liens.
ARTICLE IV. RIGHTS AND POWERS OF ADMINISTRATIVE AGENT
4.01. Remedies upon Default. Administrative Agent, during the
continuance of an Event of Default and without liability to Pledgor, may without
notice or demand: obtain from any Person information regarding Pledgor, any
issuer of the Collateral, or any of their businesses, which
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information any such Person also may furnish without liability to Pledgor or any
other Person; require Pledgor to give possession or control of any of the
Collateral to Administrative Agent; endorse as Pledgor's agent or
attorney-in-fact any instruments or documents representing proceeds of the
Collateral; unless earlier permitted hereunder, take control of funds generated
by the Collateral and any other proceeds, and exercise all other Rights which an
owner of such Collateral may exercise; at any time transfer any of the
Collateral or evidence thereof into its own name or that of its nominee; vote
any Collateral and exercise any Rights with respect thereto; and demand,
collect, convert, redeem, receipt for, settle, compromise, adjust, ▇▇▇ for,
foreclose, or realize upon the Collateral, in its own name for the benefit of
Secured Parties, or in the name of Pledgor, as Administrative Agent may
determine. Neither Administrative Agent nor any Secured Party shall be liable
for failure to collect any Distribution or other proceeds, or for any act or
omission on the part of Administrative Agent, its officers, agents, employees,
or other representatives, except willful misconduct and gross negligence. The
foregoing Rights of Administrative Agent shall be in addition to, and not a
limitation upon, any Right of Administrative Agent given by Law, elsewhere in
this Agreement or any other Loan Papers, or otherwise.
4.02. Right of Administrative Agent to Notify Issuers. At any time
during the continuance of an Event of Default and at such other times as
Administrative Agent is entitled to receive Distributions and other property
constituting Collateral pursuant to the terms of this Agreement, Administrative
Agent may notify issuers of the Collateral to make payments of the applicable
Distributions directly to Administrative Agent and Administrative Agent may take
control of all applicable proceeds of any Collateral. Until Administrative Agent
elects to exercise such Right, during the continuance of an Event of Default,
Pledgor, as agent of Administrative Agent, shall collect and segregate all
Distributions and other amounts paid or distributed with respect to the
Collateral.
4.03. Delivery of Receipts to Administrative Agent. Upon Administrative
Agent's demand during the continuance of an Event of Default, Pledgor shall
deposit, upon receipt and in the form received, with any necessary endorsement,
all payments received as proceeds of or otherwise in connection with the
Collateral, in a special bank account in a bank of Administrative Agent's choice
over which Administrative Agent alone shall have power of withdrawal. The funds
in such account shall secure the Obligations. Administrative Agent is
authorized, and is hereby appointed during the continuance of an Event of
Default, Pledgor's attorney-in-fact, to make any endorsement in Pledgor's name
and behalf. Pending such deposit, Pledgor shall not mingle any such payments
with any of Pledgor's other funds or property, but shall hold them separate and
upon an express trust for Administrative Agent. During the continuance of an
Event of Default, Administrative Agent may from time to time apply the whole or
any part of the funds in the special account against the Obligations.
4.04. Voting Rights. It is expressly understood and agreed that Pledgor
shall retain all voting or management rights to the Collateral unless an Event
of Default shall exist and be continuing, at which time such voting rights shall
transfer to or be exercised as directed by Administrative Agent, at its sole
discretion; provided, however, that no voting or management rights
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shall be exercised, vote cast, consent, waiver, or ratification given, or action
taken by Pledgor which would be inconsistent with or violate any provision of
this Agreement or any other Loan Paper.
4.05. Realization upon Collateral. During the continuance of an Event
of Default, Administrative Agent, without notice or demand, but subject to any
limitations or restrictions imposed by applicable Law, may exercise any Right of
a secured party under the Uniform Commercial Code of Texas or any other
applicable jurisdiction ("UCC"), this Agreement, any other Loan Papers, or
otherwise and also may (i) require Pledgor to, and Pledgor hereby agrees that it
will at its expense and upon request of Administrative Agent forthwith, assemble
all or part of the Collateral as directed by Administrative Agent and make it
available to Administrative Agent at a place to be designated by Administrative
Agent which is reasonably convenient to both parties or (ii) without notice,
except as specified below, sell the Collateral or any portion thereof in one or
more parcels at public or private sale, at any of Administrative Agent's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Administrative Agent may deem commercially reasonable. Unless the
Collateral is of a type customarily sold on a recognized market, Administrative
Agent shall give Pledgor reasonable written notice of the time and place of any
public sale thereof or of the time after which any private sale or other
intended disposition thereof is to be made. Pledgor agrees that ten days advance
written notice thereof shall constitute reasonable notice. Administrative Agent
shall not be obligated to make any sale of Collateral, regardless of notice of
sale having been given. Administrative Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Expenses of retaking, holding, preparing for sale, selling, or
the like shall include Administrative Agent's reasonable attorneys' fees and
legal expenses, and constitute a portion of the Obligations. During the
continuance of an Event of Default, Administrative Agent shall be entitled to
immediate possession of all books and records maintained by Pledgor with respect
to the Collateral, and shall have the authority to enter upon any premises upon
which any of the same may be situated and remove the same therefrom without
liability. Upon disposition of Collateral during an Event of Default, Pledgor
shall be entitled to any surplus with respect to the Collateral following
payment in full of the Obligations and termination hereof, and shall be liable
to Administrative Agent for any deficiency with respect thereto. All cash
proceeds received by Administrative Agent upon any sale of, collection of, or
other realization upon, all or any part of the Collateral shall be applied as
follows:
First: To the payment of all out-of-pocket expenses incurred in
connection with the sale of, collection of or other realization upon
Collateral, including reasonable attorneys' fees and disbursements;
Second: To the payment of the Obligations as provided in the Credit
Agreement and in such order and in such manner consistent with
applicable Laws as Administrative Agent in its discretion shall decide;
and
Third: To the extent of the balance (if any) of such proceeds, to the
payment to Pledgor or other Person legally entitled thereto.
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Non-cash proceeds of any disposition of Collateral available to satisfy
the Obligations shall be applied to the Obligations in such order and in such
manner consistent with applicable Law as Administrative Agent in its discretion
shall decide.
4.06. Securities and Other Laws; Contractual Restrictions;
Registration.
(a) Because of the Securities Act of 1933, as amended ("Securities
Act"), and other Laws, including, without limitation, state "blue sky" laws, or
contractual restrictions or agreements imposed upon certain Persons, there may
be legal restrictions or limitations affecting Administrative Agent in any
attempts to dispose of the Collateral and the enforcement of its Rights
hereunder. For these reasons, Administrative Agent is hereby authorized by
Pledgor, but not obligated, during the continuance of any Event of Default, to
sell or otherwise dispose of any of the Collateral at private sale, subject to
an investment letter, or in any other manner which will not require the
Collateral, or any part thereof, to be registered in accordance with the
Securities Act, or the rules and regulations promulgated thereunder, or any
other Law. Administrative Agent is also hereby authorized by Pledgor, but not
obligated, to take such actions, give such notices, obtain such consents, and do
such other things as Administrative Agent may deem required or appropriate under
the Securities Act or other securities Laws or other Laws or contractual
restrictions or agreements in the event of a sale or disposition of any
Collateral. Pledgor clearly understands that Administrative Agent may in its
discretion approach a restricted number of potential purchasers and that a sale
under such circumstances may yield a lower price for the Collateral than would
otherwise be obtainable if same were registered and sold in the open market. No
sale so made in good faith by Administrative Agent shall be deemed to be not
"commercially reasonable" because so made. Pledgor agrees that in the event
Administrative Agent shall, during the continuance of an Event of Default, sell
the Collateral or any portion thereof at any private sale or sales,
Administrative Agent shall have the Right to rely upon the advice and opinion of
appraisers and other Persons, which appraisers and other Persons are acceptable
to Administrative Agent, as to the best price reasonably obtainable upon such a
private sale thereof. In the absence of fraud, such reliance shall be evidence
that Administrative Agent handled such matter in a commercially reasonable
manner under applicable Law.
(b) If Administrative Agent shall determine to exercise its Right to
sell any or all of the Collateral, and if in the opinion of counsel for
Administrative Agent it is necessary, or if in the opinion of Administrative
Agent it is advisable, to have the Collateral or that portion thereof to be
sold, registered under the provisions of the Securities Act, Pledgor will, to
the fullest extent it has the capability to do so, cause the issuers of the
Collateral contemplated to be sold to execute and deliver, and cause the
directors and officers of each thereof to execute and deliver, all at Pledgor's
expense, all such instruments and documents, and to do or cause to be done all
such other acts and things, as may be necessary or, in the opinion of
Administrative Agent advisable to register the Collateral or that portion
thereof to be sold, under the provisions of the Securities Act and to cause the
registration statement relating thereto to become effective and to remain
effective for such period as Administrative Agent may deem appropriate to
facilitate the sale or other disposition of such Collateral from the date of the
first public offering of the Collateral or that portion thereof to be sold, and
to make all amendments thereto and/or to the related prospectus which, in the
opinion of Administrative Agent, are necessary or advisable, all in conformity
with the requirements of the
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Securities Act. Pledgor shall use its best efforts to cause each Issuer to
comply with the provisions of the securities or "blue sky" laws of any
jurisdiction which Administrative Agent shall designate and to cause each Issuer
to make available to its security holders, as soon as practicable, an earnings
statement which will satisfy the provisions of the Securities Act and applicable
"blue sky" laws.
4.07. Further Approvals Required.
(a) In connection with the exercise by Administrative Agent of its
Rights hereunder that effects the disposition of or use of any Collateral, it
may be necessary to obtain the prior consent, waiver or approval of Tribunals
and other Persons to a transfer or assignment of Collateral, including, without
limitation, the FCC.
(b) Pledgor hereby agrees, during the continuance of an Event of
Default, to execute, deliver, and file, and hereby appoints (to the extent
permitted under applicable Law) Administrative Agent as its attorney-in-fact,
during the continuance of an Event of Default, to execute, deliver, and file on
Pledgor's behalf and in Pledgor's name, all applications, certificates, filings,
instruments, and other documents (including without limitation any application
for an assignment or transfer of control or ownership) that may be necessary or
appropriate, in Administrative Agent's opinion, to obtain such consents, waivers
or approvals. Pledgor acknowledges that there is no adequate remedy at Law for
failure by it to comply with the provisions of this Section 4.07 and that such
failure would not be adequately compensable in damages, and therefore agrees
that this Section 4.07 may be specifically enforced.
4.08. Convertible Securities. During the continuance of an Event of
Default, Administrative Agent may present for conversion any Collateral which is
convertible into any other instrument, investment security, or cash.
Administrative Agent shall not have any duty, however, to present for conversion
any of the Collateral, unless it shall have received from Pledgor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible and such conversion does
not violate any provisions of any Loan Paper.
4.09. Issuer Liabilities. By taking a security interest in the
Collateral pursuant to this Agreement, neither Administrative Agent nor any
Secured Party assumes, accepts, or becomes liable with respect to any debts,
liabilities, or obligations of or owed to any issuer of any Collateral.
4.10. Power of Attorney. PLEDGOR HEREBY IRREVOCABLY GRANTS TO
ADMINISTRATIVE AGENT PLEDGOR'S PROXY (EXERCISABLE FROM AND AFTER THE OCCURRENCE
OF AN EVENT OF DEFAULT WHICH IS CONTINUING) TO VOTE ANY COLLATERAL AND, DURING
THE CONTINUANCE OF AN EVENT OF DEFAULT, APPOINTS ADMINISTRATIVE AGENT PLEDGOR'S
ATTORNEY-IN-FACT TO PERFORM ALL OBLIGATIONS OF PLEDGOR UNDER THIS AGREEMENT AND
TO EXERCISE ALL OF ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER. THE PROXY AND POWER
OF ATTORNEY HEREIN GRANTED, AND EACH STOCK, PARTNERSHIP INTEREST, OR LLC
MEMBERSHIP INTEREST POWER AND SIMILAR POWER NOW
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OR HEREAFTER GRANTED (INCLUDING ANY EVIDENCED BY A SEPARATE WRITING), ARE
COUPLED WITH AN INTEREST AND ARE IRREVOCABLE PRIOR TO FINAL PAYMENT IN FULL OF
THE OBLIGATIONS.
ARTICLE V. MISCELLANEOUS
5.01. Cumulative Rights. All Rights of Administrative Agent and Secured
Parties under the Loan Papers are cumulative of each other and of every other
Right which Administrative Agent and Secured Parties may otherwise have at Law
or in equity or under any other contract or other writing for the enforcement of
the security interest herein or the collection of the Obligations. The exercise
of one or more Rights shall not prejudice or impair the concurrent or subsequent
exercise of any other Right.
5.02. Administrative Agent's and Secured Parties' Duties. The powers
conferred on Administrative Agent hereunder are solely to protect Administrative
Agent's and Secured Parties' interest in the Collateral and shall not impose any
duty upon Administrative Agent or any Secured Party to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Administrative Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Administrative Agent has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve Rights against prior parties or any other Rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Administrative Agent accords its own property.
Except as provided in this Section 5.02, Administrative Agent shall not have any
duty or liability to protect or preserve any Collateral or to preserve Rights
pertaining thereto. Nothing contained in this Agreement shall be construed as
requiring or obligating Administrative Agent or any Secured Party, and neither
Administrative Agent nor any Secured Party shall be required or obligated, to
(a) present or file any claim or notice or take any action, with respect to any
Collateral or in connection therewith or (b) notify Pledgor of any decline in
the value of any Collateral.
5.03. Waiver. Should any part of the Obligations be payable in
installments, the acceptance by Administrative Agent or any Secured Party at any
time and from time to time of partial payment of the aggregate amount of all
installments then matured shall not be deemed as a waiver of any Event of
Default then existing. No waiver of any Event of Default shall be deemed to be a
waiver of any other subsequent Event of Default, nor shall any such waiver be
deemed to be a continuing waiver. No delay or omission by Administrative Agent
or any Secured Party in exercising any Right hereunder, or under any other Loan
Papers shall impair any such Right or be construed as a waiver thereof or any
acquiescence therein, nor shall any single or partial exercise of any such Right
preclude other or further exercise thereof or the exercise of any other Right of
Administrative Agent or any Secured Party hereunder or under such other
agreements.
5.04. Waivers by Pledgor. Pledgor waives notice of the creation,
advance, increase, existence, extension, or renewal of, or of any indulgence
with respect to, the Obligations; waives
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presentment, demand, notice of dishonor, and protest; waives notice of the
amount of the Obligations outstanding at any time, notice of any Default or
Event of Default, and all other notices respecting the Obligations; and agrees
that maturity of the Obligations and any part thereof may be accelerated,
extended, or renewed one or more times by Secured Parties, in its or their
discretion, without notice to Pledgor. Pledgor waives (a) any claim that, as to
any part of the Collateral, a public sale, should Administrative Agent elect so
to proceed, is, in and of itself, not a commercially reasonable method of sale
for such Collateral, (b) except as otherwise provided in this Agreement, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION
WITH ADMINISTRATIVE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT THAT PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO
THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE
ENFORCEMENT OF ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER, AND (C) ALL RIGHTS OF
REDEMPTION, APPRAISAL OR VALUATION.
5.05. Other Parties and Other Collateral. No renewal, increase, or
extension of or any other indulgence with respect to, the Obligations or any
part thereof, no release, exchange, or taking of any security, no release of any
Person (including Pledgor, any of Pledgor's Subsidiaries, maker, endorser,
guarantor, or surety) liable on the Obligations, no delay in enforcement of
payment, no delay or omission or lack of diligence or care in exercising any
Right or power with respect to the Obligations or any security therefor or
guaranty thereof or under this Agreement, and no other circumstance or event
which might constitute a defense available to or discharge of Pledgor, any of
Pledgor's Subsidiaries or any other Person, shall in any manner impair or affect
the Rights of Administrative Agent or any Secured Party hereunder, under any
other Loan Papers, at Law, or in equity. Neither Administrative Agent nor any
Secured Party need file suit or assert a claim for personal judgment against any
Person for any part of the Obligations or seek to realize upon any other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Pledgor waives any Right to the benefit of or
to require or control application of any other security or proceeds thereof, and
agrees that neither Administrative Agent nor any Secured Party shall have any
duty or obligation to Pledgor to apply any such other security or proceeds
thereof to the Obligations. Pledgor hereby waives all rights by which it might
be entitled to require suit on an accrued right of action in respect of any of
the Obligations or require suit against any of Pledgor's Subsidiaries, or
others, whether arising pursuant to Section 34.02 of the Texas Business and
Commerce Code, as amended, Section 17.001 of the Texas Civil Practice and
Remedies Code, as amended, or Rule 31 of the Texas Rules of Civil Procedure, as
amended, or otherwise.
5.06. Continuing Security Interest. This Agreement constitutes a
continuing security interest in the Collateral, and shall remain in full force
and effect until final payment and performance in full of the Obligations, and
termination of all commitments and the other Loan Papers.
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5.07. Rate Provision. It is not the intention of any party to any Loan
Paper to make an agreement violative of the Laws of any applicable jurisdiction
relating to usury. In no event shall Pledgor be obligated to pay any amount in
excess of the maximum amount of interest permitted under applicable Law. If from
any circumstances Administrative Agent or any Secured Party shall ever receive
anything of value deemed excess interest under applicable Law, an amount equal
to such excess shall be applied to the reduction of the outstanding balance of
the Obligations and any remainder shall be promptly refunded to the payor.
5.08. Parties Bound. This Agreement shall be binding on Pledgor and its
successors, assigns, and other legal representatives, and shall inure to the
benefit of Administrative Agent and Secured Parties, and their respective
successors and assigns; provided, however, that Pledgor may not assign its
Rights or obligations hereunder without the prior written consent of
Administrative Agent. The Rights, powers, and interests held by Administrative
Agent and Secured Parties hereunder may be transferred or assigned, in whole or
in part, in accordance with the Credit Agreement, without the consent of
Pledgor.
5.09. Notices and Deliveries.
(a) Manner of Delivery. All notices, communications and materials to be
given or delivered pursuant to this Agreement shall, except in those cases where
giving notice by telephone is expressly permitted, be given or delivered in
writing. All written notices, communications and materials shall be sent by
registered or certified mail, postage prepaid, return receipt requested, by
telecopier, or delivered by hand. In the event of a discrepancy between any
telephonic notice and any written confirmation thereof, such written
confirmation shall be deemed the effective notice except to the extent
Administrative Agent or Pledgor has acted in reliance on such telephonic notice.
(b) Addresses. All notices, communications and materials to be given or
delivered pursuant to this Agreement shall be given or delivered at the
following respective addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:
(i) if to Pledgor, to it at:
World Access, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
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With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
(ii) If to the Administrative Agent:
NationsBank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
3400 Renaissance Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
or at such other address or, telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address."
(c) Effectiveness. Each notice, communication and any material to be
given or delivered to Administrative Agent or Pledgor pursuant to this Agreement
shall be effective or deemed delivered or furnished (i) if sent by mail, on the
fifth Business Day after such notice, communication or material is deposited in
the mail, addressed as above provided, (ii) if sent by telecopier, when such
notice, communication or material is transmitted to the appropriate number
determined as above provided in this Section 5.09 and the appropriate receipt is
received or otherwise acknowledged, (iii) if sent by hand delivery or overnight
courier, when left at the address of the addressee addressed as above provided,
and (iv) if given by telephone, when communicated to the individual or any
member of the department specified as the individual or department to whose
attention notices, communications and materials are to be given or delivered
except that notices of a change of address, telecopier or telephone number or
individual or department to whose attention notices, communications and
materials are to be given or delivered shall not be effective until received.
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5.10. Modifications; Amendments; Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
5.11. Financing Statement. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering the
Collateral shall be sufficient as a financing statement. Pledgor hereby
authorizes Administrative Agent to file one or more financing or continuation
statements, and amendments thereto, relating to any Collateral, without the
signature of Pledgor where permitted by Law.
5.12. Definitions. Unless otherwise defined in this Agreement, terms
used herein shall have the meanings set forth in the Credit Agreement. Unless
the context indicates otherwise or the terms are otherwise defined herein,
definitions in the UCC apply to words and phrases in this Agreement. "Pledgor"
and "Issuer" include, without limitation, such Person, such Person's heirs,
successors and assigns, such Person as a debtor-in-possession, and any receiver,
trustee, liquidator, conservator, custodian, or similar party appointed for such
Person or all or substantially all of its assets under any Law.
5.13. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future Laws during the term
thereof, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part thereof, and the remaining provisions thereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance therefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible.
5.14. Counterparts. This Agreement and the other Loan Papers may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such agreement,
it shall not be necessary to produce or account for any counterpart other than
one signed by the party against which enforcement is sought.
5.15. Control.
(a) Notwithstanding anything herein to the contrary, this Agreement,
the other Loan Papers, and the transactions contemplated hereby and thereby (i)
prior to a foreclosure of the Liens granted under this Agreement and the other
Loan Papers, do not and will not constitute, create, or have the effect of
constituting or creating, directly or indirectly, actual or practical ownership
of Pledgor, any issuer of any Collateral or any Subsidiary of Pledgor by
Administrative Agent or Secured Parties, or control, affirmative or negative,
direct or indirect, by Administrative Agent or Secured Parties over the
management or any other aspect of the operation of Pledgor, any issuer of
Collateral or any Subsidiary of Pledgor which ownership and control remains
exclusively and at all
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times in Pledgor such Subsidiary of Pledgor or any issuer of Collateral, and
(ii) do not and will not constitute the transfer, assignment, or disposition in
any manner, voluntarily or involuntarily, directly or indirectly, of any license
or certificate at any time issued by the FCC or other applicable Tribunal to
Pledgor, any issuer of Collateral or any Subsidiary of Pledgor ("License"), or
the transfer of control of Pledgor, any issuer of Collateral or any Subsidiary
of Pledgor within the meaning of Section 310(d) of the Communications Act of
1934, as amended, or any other applicable laws.
(b) Notwithstanding any other provision of this Agreement, any
foreclosure on, sale, transfer or other disposition of, or the exercise of any
right to vote or consent with respect to, any of the Collateral, as provided
herein or any other action taken or proposed to be taken by Administrative Agent
hereunder which would affect the operational, voting, or other control of
Pledgor, any Subsidiary of Pledgor or any issuer of Collateral or any Subsidiary
of any issuer of Collateral, shall be in accordance with applicable Law.
(c) Subject to Section 5.15(e), if an Event of Default shall have
occurred and be continuing, Pledgor shall take any action which Administrative
Agent may reasonably require in order to transfer and assign to Administrative
Agent, or to such one or more third parties as Administrative Agent may
designate or to a combination of the foregoing, each License of the Pledgor,
each Subsidiary or any issuer of the Collateral. To enforce the provisions of
this Section 5.15, Administrative Agent is empowered, during the continuance of
an Event of Default, to require the appointment of a receiver from any court of
competent jurisdiction. Such receiver shall be instructed to seek from the FCC
or other applicable Tribunal an involuntary transfer of control of each such
License for the purpose of seeking a bona fide purchaser to whom control will
ultimately be transferred. Pledgor hereby agrees to authorize such an
involuntary transfer of control upon the request of the receiver so appointed
and, if Pledgor shall refuse to authorize the transfer, its approval may be
required by the court. Upon the occurrence and during the continuance of an
Event of Default, Pledgor shall further use its best efforts to assist in
obtaining approval of the FCC or other applicable Tribunal, if required, for any
action or transactions contemplated by this Agreement, including, without
limitation, the preparation, execution, and filing with the FCC or other
applicable Tribunal of the assignor's or transferor's portion of any application
or applications for consent to the assignment of any License or transfer of
control necessary or appropriate under the rules and regulations of the FCC or
other applicable Tribunal for approval of the transfer or assignment of any
portion of the Collateral, together with any License.
(d) Pledgor acknowledges that the assignment or transfer of each
License of Pledgor, each Subsidiary and issuer of the Collateral is integral to
Administrative Agent's and Secured Parties' realization of the value of the
collateral pledged by Pledgor, that there is no adequate remedy at law for
failure by Pledgor to comply with the provisions of this Section 5.15 and that
such failure would not be adequately compensable in damages, and therefore
agrees, without limiting the right of Administrative Agent to seek and obtain
specific performance of other obligations of Pledgor contained in this
Agreement, that the agreements contained in this Section 5.15 may be
specifically enforced.
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(e) Notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Paper, Administrative Agent shall not, without
first obtaining the approval of the FCC or any other applicable Tribunal, take
any action pursuant to this Agreement which would constitute or result in any
assignment of a License of Pledgor, each Subsidiary or issuer of the Collateral
or any change of control of Pledgor, any Subsidiary of Pledgor or any issuer of
any Collateral or any Subsidiary of any issuer of Collateral, if such assignment
or change in control would require, under then existing Law (including the
written rules and regulations promulgated by the FCC or other applicable
Tribunal), the prior approval of the FCC or such other Tribunal.
5.16. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (OTHER THAN THE
CONFLICT OF LAWS RULES THEREOF AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF TEXAS).
5.17. WAIVER OF JURY TRIAL. ADMINISTRATIVE AGENT AND PLEDGOR HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
5.18. Administrative Agent's Right to Use Agents. Administrative Agent
may exercise its Rights under this Agreement through an agent or other designee.
5.19. No Interference, Compensation or Expense. Administrative Agent
may exercise its Rights under this Agreement (a) without resistance or
interference by Pledgor and (b) without payment of any rent, license fee or
compensation of any kind to Pledgor.
5.20. Waiver of Subrogation. Pledgor shall not assert, enforce, or
otherwise exercise (a) any right of subrogation to any of the rights or Liens of
Administrative Agent or any Secured Party or any other Person against Pledgor,
any of Pledgor's Subsidiaries or any other Person on all or any part of the
Obligations or any collateral or other security, or (b) any right of recourse,
reimbursement, contribution, indemnification, or similar right against Pledgor,
any of Pledgor's Subsidiaries or any other Person on all or any part of the
Obligations or any collateral or any security, and Pledgor hereby agrees not to
exercise any and all of the foregoing rights, and any right to participate in,
any collateral or other security given to Administrative Agent or any Secured
Party or any other Person to secure payment of the Obligations, however any such
rights arise, whether hereunder or any other Loan Paper or by operation of Law
until the Obligations shall have been paid indefeasibly in full in cash and no
commitments of any Lender remain outstanding; and thereafter Pledgor will be
subrogated to the position of the Lenders to the extent of the payments made by
Pledgor. If any amount shall be paid to Pledgor in violation of the immediately
preceding sentence and the Obligations shall not have been paid indefeasibly in
full in cash or any commitment of any
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Lender shall remain outstanding, such amount shall be deemed to have been paid
to Pledgor for the benefit of, and held in trust for the benefit of, the
Lenders, and shall forthwith be paid to the Administrative Agent to be credited
and applied upon the Obligations, whether matured or unmatured, in accordance
with the terms of the Credit Agreement. The provisions of this Section 5.20
shall survive the termination of this Agreement, and any satisfaction and
discharge of Pledgor and each other Person by virtue of any payment, court
order, or Law.
5.21. Loan Paper. This Agreement is a Loan Paper executed pursuant to
the Credit Agreement and shall (unless otherwise expressly indicated herein) be
construed, administered and applied in accordance with the terms and provisions
thereof.
5.22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
5.23. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN PAPERS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of
the date first set forth above.
WORLD ACCESS, INC.
By:
------------------------
Its:
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