SURETYSHIP AGREEMENT
THIS SURETYSHIP AGREEMENT (this "Agreement"), is entered into
as of June 9, 1999, among FOOTHILL CAPITAL CORPORATION, a California
corporation, as agent for the Lender Group (in such capacity, together with
its successors, if any, in such capacity, "Agent"), STAR TELECOMMUNICATIONS,
INC., a Delaware corporation, and certain of its Subsidiaries identified on
the signature pages hereof (hereinafter, each a "Debtor," and individually
and collectively, jointly and severally, the "Debtors") , with reference to
the following facts:
(A) Debtors have entered into that certain Loan and Security
Agreement, dated as of even date herewith (the "Loan Agreement"),
with the financial institutions that are identified therein as the
"Lenders", and Foothill Capital Corporation, a California
corporation, as agent for the Lenders (individually and
collectively, the "Lender Group");
(B) In order to induce the Lender Group to enter into the Loan
Agreement, and in consideration thereof, and in consideration of
any loan or other financial accommodations now or hereinafter
extended by the Lender Group to any of the Debtors, whether
pursuant to the Loan Agreement, the other Loan Documents, or
otherwise, the Debtors have agreed to enter into this Agreement;
and
(C) Any and all initially capitalized terms used herein and not
defined herein shall have the meaning ascribed thereto in the Loan
Agreement as otherwise as amended, restated, supplemented,
renewed, extended or modified from time to time.
NOW THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Agent on behalf of the Lender Group and each
Debtor hereby agrees as follows:
1. SURETYSHIP WAIVERS AND CONSENTS.
1.1 Each of the Debtors comprising Borrower is, and at all times shall
be, jointly and severally liable for each and every one of the Obligations of
the Debtors comprising Borrower under the Loan Agreement and under each of the
other Loan Documents and each of the Debtors comprising the Guarantors is, and
at all times shall be, jointly and severally liable for each and every one of
the Obligations of the Debtors comprising the Guarantors under the Loan
Agreement and under each of the other Loan Documents, in each case, regardless
of which of the Debtors requested, received, used, or directly enjoyed the
benefit of, the extensions of credit thereunder. Unless and to the extent
otherwise expressly set forth to the contrary in any of the Loan Documents, all
of the Collateral shall secure all of the Obligations. Each Debtor's Obligations
under the Loan Agreement are independent Obligations and are absolute and
unconditional. Each Debtor, to the extent permitted by law, hereby waives any
defense to such Obligations that may arise by reason of the disability or other
defense or cessation of liability of any other Debtor for any reason other than
payment in full. Each Debtor also waives any defense to such Obligations that
it may have as a result of the Lender Group's election of or
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failure to exercise any right, power, or remedy, including the failure to
proceed first against another Debtor or any security it holds from such other
Debtor. Without limiting the generality of the foregoing, each Debtor
expressly waives all demands and notices whatsoever (except for any demands
or notices, if any, that such Debtor expressly is entitled to receive
pursuant to the terms of any Loan Document), and agrees that the Lender Group
may, without notice (except for such notice, if any, as such Debtor expressly
is entitled to receive pursuant to the terms of any Loan Document) and
without releasing the liability of such Debtor, extend for the benefit of any
other Debtor the time for making any payment, waive or extend the performance
of any agreement or make any settlement of any agreement for the benefit of
any other Debtor, and may proceed against each Debtor, directly and
independently of any other Debtor, as the Lender Group may elect in
accordance with the Loan Agreement.
1.2 Each Debtor acknowledges that the Obligations undertaken herein or
in the other Loan Documents, and the grants of security interests and liens by
such Debtor to secure Obligations of the other Debtors, could be construed to
consist, at least in part, of the guaranty of Obligations of the other Debtors
and, in full recognition of that fact, each Debtor consents and agrees as
hereinafter set forth in the balance of this Section 1. The consents, waivers,
and agreements of the Debtors that are contained in the balance of this Section
1 are intended to deal with the suretyship aspects of the transactions evidenced
by the Loan Documents (to the extent that a Debtor may be deemed a guarantor or
surety for the Obligations of another Debtor) and thus are intended to be
effective and applicable only to the extent that any Debtor has agreed to answer
for the Obligation of another Debtor or has granted a lien or security interest
in Collateral to secure the Obligation of another Debtor; conversely, the
consents, waivers, and agreements of the Debtors that are contained in the
balance of this Section 1 shall not be applicable to the direct Obligation of a
Debtor with respect to credit extended directly to such Debtor, and shall not be
applicable to security interests or liens on Collateral of a Debtor given to
directly secure direct Obligations of such Debtor where no aspect of guaranty or
suretyship is involved. Each Debtor consents and agrees that the Lender Group
may, at any time and from time to time, without notice or demand, whether before
or after any actual or purported termination, repudiation or revocation of the
Loan Agreement by any one or more of the Debtors, and without affecting the
enforceability or continuing effectiveness hereof as to such Debtor, in
accordance with the terms of the Loan Documents:
(a) with respect to any other Debtor, supplement, restate, modify,
amend, increase, decrease, extend, renew, accelerate or otherwise change the
time for payment or the terms of the Obligations of such other Debtor or any
part thereof, including any increase or decrease of the rate(s) of interest
thereon with the agreement of such other Debtor;
(b) supplement, restate, modify, amend, increase, decrease or waive,
or enter into or give any agreement, approval or consent with respect to, the
Obligations or any part thereof, or any of the Loan Documents or any security or
guarantees granted or entered into by any Person(s) other than such Debtor, or
any condition, covenant, default, remedy, right, representation or term thereof
or thereunder;
(c) accept new or additional instruments, documents or agreements in
exchange for or relative to any of the Loan Documents or the Obligations or any
part thereof;
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(d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees for the
Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail to perfect,
subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Agent, on behalf of the Lender Group, in its sole and absolute
discretion may determine;
(g) release any other Person (including, without limitation, any other
Debtor) from any personal liability with respect to the Obligations or any part
thereof;
(h) with respect to any Person other than such Debtor (including,
without limitation, any other Debtor), settle, release on terms satisfactory to
the Lender Group or by operation of applicable laws or otherwise liquidate or
enforce any Obligations and any security therefor or guaranty thereof in any
manner, consent to the transfer of any security and bid and purchase at any
sale; or
(i) consent to the merger, change or any other restructuring or
termination of the corporate or partnership existence of any other Debtor or any
other Person, and correspondingly agree, in accordance with all applicable
provisions of the Loan Documents, to the restructure of the Obligations, and any
such merger, change, restructuring or termination shall not affect the liability
of any Debtor or the continuing effectiveness hereof, or the enforceability
hereof with respect to all or any part of the Obligations.
1.3 Upon the occurrence and during the continuance of any Event of
Default, Agent on behalf of the Lender Group may enforce the Loan Documents
independently as to each Debtor and independently of any other remedy or
security Agent on behalf of the Lender Group at any time may have or hold in
connection with the Obligations, and it shall not be necessary for the Lender
Group to marshal assets in favor of any Debtor or any other Person or to proceed
upon or against or exhaust any security or remedy before proceeding to enforce
the Loan Agreement. Each Debtor expressly waives any right to require the
Lender Group to marshal assets in favor of any Debtor or any other Person or to
proceed against any other Debtor, any other Person, or any collateral provided
by any Person, and agrees that the Lender Group may proceed against any Debtor,
any other Person, or any collateral in such order as it shall determine in its
sole and absolute discretion.
1.4 Agent on behalf of the Lender Group may file a separate action or
actions against any Debtor, whether such action is brought or prosecuted with
respect to any security or against any other Person, or whether any other Person
is joined in any such action or actions. Each Debtor agrees, for itself, that
the Lender Group and any other Debtor, or any Affiliate of any other Debtor
(other than such Debtor itself), may deal with each other in connection with the
Obligations or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the continuing efficacy as to such Debtor of the Loan
Documents.
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1.5 The rights of the Lender Group created or granted herein with
respect to any Debtor and the enforceability of the Loan Documents as to any
Debtor at all times shall remain effective to cover the full amount of all the
Obligations even though the Obligations, including any part thereof or any other
security or guaranty therefor, may be or hereafter may become invalid or
otherwise unenforceable as against any other Debtor and whether or not any other
Debtor shall have any personal liability with respect thereto.
1.6 To the maximum extent permitted by applicable law, each Debtor,
for itself, expressly waives any and all defenses now or hereafter arising or
that otherwise might be asserted by reason of
(a) any disability or other defense of any other Debtor with respect
to the Obligations, or with respect to the enforceability of the security
interest in or lien on any collateral securing any of the Obligations held by
Agent for the benefit of the Lender Group (including, without limitation, the
Collateral),
(b) the unenforceability or invalidity of any security or guaranty for
the Obligations or the lack of perfection or continuing perfection or failure of
priority of any security for the Obligations,
(c) the cessation for any cause whatsoever of the liability of any
other Debtor (other than by reason of the full payment and performance of all
Obligations),
(d) any failure of the Lender Group to marshal assets in favor of any
Debtor or any other Person,
(e) any failure of the Lender Group to give notice of sale or other
disposition of collateral to any other Debtor or any other Person other than
such waiving Debtor, or any defect in any notice that may be given to any other
Debtor or any other Person other than such waiving Debtor, in connection with
any sale or disposition of any collateral securing the Obligations or any of
them (including, without limitation, the Collateral),
(f) any failure of the Lender Group to comply with applicable law in
connection with the sale or other disposition of any collateral or other
security for any Obligation that is owned by another Debtor or by any other
Person other than such waiving Debtor, including any failure of the Lender Group
to conduct a commercially reasonable sale or other disposition of any such
collateral or other security for any Obligation,
(g) any act or omission of the Lender Group or others that directly or
indirectly results in or aids the discharge or release of any other Debtor, or
the Obligations of any other Debtor, or any security or guaranty therefor, by
operation of law or otherwise,
(h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation,
(i) any failure of the Lender Group to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person other than such
waiving Debtor,
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(j) the election by the Lender Group of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code,
(k) any extension of credit or the grant of any lien under Section 364
of the Bankruptcy Code,
(l) any use of cash collateral under Section 363 of the Bankruptcy
Code,
(m) any agreement or stipulation with respect to the provision of
adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien held by Agent in favor of the Lender
Group for any reason, or
(o) any action taken by the Lender Group that is authorized by this
section or any other provision of any Loan Document. Until such time, if
any, as all of the Obligations (other than Contingent Surviving Obligations)
have been paid and performed in full and no portion of any commitment of the
Lender Group to any Debtor under any Loan Document remains in effect, no
Debtor shall have any right of subrogation, contribution, reimbursement or
indemnity, and each Debtor expressly postpones, until the irrevocable
termination of all Commitments and the indefeasible payment in full in cash
of all Obligations, any right to enforce any remedy that the Lender Group now
has or hereafter may have against any other Person and postpones its rights,
if any, until the irrevocable termination of all Commitments and the
indefeasible payment in full in cash of all Obligations, to the benefit of,
or any right to participate in, any collateral now or hereafter held by the
Lender Group. Except to the extent expressly provided for in any Loan
Document, each Debtor expressly waives, to the maximum extent permitted by
applicable law, all rights or entitlements to presentments, demands for
payment or performance, notices of nonpayment or non-performance, protests,
notices of protest, notices of dishonor and all other notices or demands of
any kind or nature whatsoever with respect to the Obligations, and all
notices of acceptance of the Loan Documents or of the existence, creation or
incurring of new or additional Obligations.
1.7 In the event that all or any part of the Obligations at
any time should be or become secured by any one or more deeds of trust or
mortgages or other instruments creating or granting liens on any interests in
real property, each Debtor authorizes Agent on behalf of the Lender Group,
upon the occurrence of and during the continuance of any Event of Default, at
its sole option, without notice or demand except as is or may be expressly
required by the terms of any Loan Document or by the provisions of any
applicable law, to foreclose any or all of such deeds of trust or mortgages
or other instruments by judicial or non-judicial sale, without affecting or
diminishing, except to the extent of the effect of the application of the
proceeds realized therefrom, and except to the extent mandated by any
non-waivable provision of applicable law, the Obligations of any Debtor
(other than the Obligations of a grantor of a foreclosed deed of trust,
mortgage, or other instrument, to the extent, if any, that applicable law
affects or diminishes the Obligations of such grantor), the enforceability of
the Loan Agreement or any other Loan Document, or the validity or
enforceability of any remaining security interests or liens of, or for the
benefit of, the Lender Group on any collateral.
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1.8 To the fullest extent permitted by applicable law, each
Debtor expressly waives any defenses to the enforcement of the Loan
Agreement, or to the enforcement of any other Loan Document, or to any rights
of the Lender Group created or granted hereby or thereby, or to the recovery
by the Lender Group against any Debtor or any other Person liable therefor of
any deficiency after a judicial or nonjudicial foreclosure or sale of any
collateral, whether real or personal, from time to time securing any of the
Obligations, even though such a foreclosure or sale may impair the
subrogation rights of one or more of the Debtors and may preclude one or more
of the Debtors from obtaining reimbursement or contribution from the other
Debtors. To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses or benefits that may be derived from California
Code of Civil Procedure Sections 580a, 580b, 580d or 726, or comparable
provisions of the laws of any other jurisdiction, and all other suretyship
defenses it otherwise might or would have under California law or other
applicable law. To the fullest extent permitted by applicable law, each
Debtor, for itself, expressly waives any right to receive notice of any
judicial or nonjudicial foreclosure or sale of any real property or interest
therein of another Debtor that is subject to any such deeds of trust or
mortgages or other instruments, and any Debtor's failure to receive any such
notice shall not impair or affect such Debtor's obligations or the
enforceability of the Loan Documents or any rights of the Lender Group
created or granted hereby or thereby.
1.9 Each Debtor hereby agrees to keep each other Debtor fully
apprised at all times as to the status of its business, affairs, finances,
and financial condition, and its ability to perform its Obligations under the
Loan Documents, and in particular as to any adverse developments with respect
thereto. Each Debtor hereby agrees to undertake to keep itself apprised at
all times as to the status of the business, affairs, finances, and financial
condition of each other Debtor, and of the ability of each other Debtor to
perform its Obligations under the Loan Documents, and in particular as to any
adverse developments with respect to any thereof. Each Debtor hereby agrees,
in light of the foregoing mutual covenants to inform each other, and to keep
themselves and each other informed as to such matters, that the Lender Group
shall have no duty to inform any Debtor of any information pertaining to the
business, affairs, finances, or financial condition of any other Debtor, or
pertaining to the ability of any other Debtor to perform its Obligations
under the Loan Documents, even if such information is adverse, and even if
such information might influence the decision of one or more of the Debtors
to continue to be jointly and severally liable for, or to provide Collateral
for, Obligations of one or more of the other Debtors. To the fullest extent
permitted by applicable law, each Debtor hereby expressly waives any duty of
the Lender Group to inform any Debtor of any such information.
1.10 The Debtors and each of them warrant and agree that each
of the waivers and consents set forth herein are made after consultation with
legal counsel and with full knowledge of their significance and consequences,
with the understanding that events giving rise to any defense or right waived
may diminish, destroy, or otherwise adversely affect rights that the Debtors
otherwise may have against the other Debtors, the Lender Group, or others, or
against Collateral, and that, under the circumstances, the waivers and
consents herein given are reasonable and not contrary to public policy or
law. If any of the waivers or consents herein are determined to be contrary
to any applicable law or public policy, such waivers and consents shall be
effective to the maximum extent permitted by law.
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1.11 Anything to the contrary in this Agreement
notwithstanding, nothing in this Agreement shall constitute a waiver or
relinquishment by any Debtor (a) of any right to notice from Agent on behalf
of the Lender Group expressly provided for in favor of such Debtor in any
Loan Document, or (b) of any duty or obligation of the Lender Group expressly
provided for in favor of such Debtor in any Loan Document.
2. MISCELLANEOUS.
2.1 Section headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire agreement.
2.2 Agreement to be bound by Loan Agreement. By its execution
and delivery of this Agreement or any joinder hereto, any Debtor that is not
a party to the Loan Agreement or any joinder thereto nevertheless shall be
deemed to have agreed to be bound by each provision in the Loan Agreement
relating to the Debtors or their assets with the same force and effect as
though such Debtor were party to the Loan Agreement or any joinder thereto,
MUTATIS MUTANDIS.
2.3 Additional Debtors. The initial Debtors hereunder shall
be such of the Debtors as are signatories hereto as of the date hereof. From
time to time subsequent to the date hereof, additional Debtors, as required
by the Loan Agreement or the other Loan Documents, may become parties hereto,
as additional Debtors (each, an "Additional Debtor"), by executing and
delivering a counterpart of this Agreement. Upon delivery of any such
counterpart to Agent, notice of which is hereby waived by any other Debtor,
each such Additional Debtor shall be a Debtor and shall be as fully a party
hereto as if such Additional Debtor were an original signatory hereof. Each
Debtor expressly agrees that its obligations arising hereunder shall not be
affected or diminished by the addition or release of any other Debtor, nor by
any election of Agent not to cause any Person to become an Additional Debtor
hereunder. This Agreement shall be fully effective as to any Debtor that is
or becomes a party hereto regardless of whether any other Person becomes or
fails to become or ceases to be a Debtor hereunder.
[signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in Los Angeles, California.
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
