STAR TELECOMMUNICATIONS INC
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>a2036119zex-10_3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>


<PAGE>

                                                                EXHIBIT 10.3
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                      AMENDMENT NO. 3 TO WORKOUT AGREEMENT
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THIS AMENDMENT NO. 3 TO WORKOUT AGREEMENT (this "AMENDMENT NO. 3") is entered
into as of this 25th day of January, 2001, between and among STAR
TELECOMMUNICATIONS, INC., a Delaware corporation ("DEBTOR"), PT-1
COMMUNICATIONS, INC. ("PT-1"), HELVEY COM, LLC ("HELVEY"), CEO CALIFORNIA
TELECOMMUNICATIONS, INC., CEO TELECOMMUNICATIONS, INC., LUCIUS ENTERPRISES,
INC., AS TELECOMMUNICATIONS, INC.; PT-1 LONG DISTANCE, INC., PT-1 HOLDINGS I,
INC., PHONETIME TECHNOLOGIES, INC., PT-1 HOLDINGS II, INC., NATIONWIDE
DISTRIBUTORS, INC., TECHNOLOGY LEASING, INC., INVESTMENT SERVICES, INC., and
PT-1 COMMUNICATIONS PUERTO RICO, INC. (together with Debtor, PT-1, and Helvey,
collectively referred to as the "DEBTOR ENTITIES" and each individual as a
"DEBTOR ENTITY") and MCI WORLDCOM NETWORK SERVICES, INC., a Delaware corporation
having a place of business located at 6929 North Lakewood Avenue, M.D. 5.2-510,
Tulsa, Oklahoma 74117 ("WORLDCOM").

WHEREAS, the parties entered into a Workout Agreement dated as of the 12th day
of April 2000, as amended by that certain Amendment No. 1 to Workout Agreement
dated as of June 30, 2000 and by that certain Amendment No. 2 to Workout
Agreement dated as of August 18, 2000 (the "WORKOUT AGREEMENT") providing for,
INTER ALIA, the restructuring of certain past due indebtedness of the Debtor
Entities to WorldCom; and

WHEREAS, the parties entered into other agreements incident and related to the
Workout Agreement which are included within the meaning of the term "WorldCom
Documents" as that term is defined in the Workout Agreement; and

WHEREAS, Debtor and WorldCom have entered into a Standby Term Loan Note dated as
of June 30, 2000 in the original principal amount of $30,000,000 as amended
through the date hereof (the "TERM NOTE"), and a Promissory Note dated April 12,
2000 in the original principal amount of $56,017,698.87 as amended through the
date hereof (the "PROMISSORY NOTE"), each given by Debtor for the purpose of,
INTER ALIA, providing or memorializing certain credit given to the Debtor
Entities to be used for payment of fees, charges and other amounts owed by the
Debtor Entities to WorldCom under the Service Agreements, as that term is
defined in the Workout Agreement; and

WHEREAS, Debtor and WorldCom have entered into that certain Amended and Restated
Demand Note of even date herewith, in the original principal amount of
$97,434,710.13 (the "AMENDED AND RESTATED NOTE") given by Debtor for the purpose
of, INTER ALIA, affirming and consolidating the Debtor's obligations under the
Term Note and the Promissory Note, and affirming the agreements and
understandings of the parties hereto under the WorldCom Documents (as that term
is defined in the Workout Agreement).


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<PAGE>

WHEREAS, the parties are entering into this Amendment No. 3 for the purpose of
amending the Workout Agreement to reflect certain further agreements and
understandings of the parties hereto, and for the purpose of memorializing their
agreement and understanding that the Workout Agreement and the security,
guarantees and collateral provided by the other WorldCom Documents shall be
applicable to the Amended and Restated Note without amendment or modification
(except as expressly stated in the Amended and Restated Note and this Amendment
No. 3).

NOW THEREFORE, the parties hereto, in consideration of the promises contained
herein and intending to be legally bound hereby, agree as follows:

1.       INCORPORATION  OF RECITALS.  The parties affirm and acknowledge that
         the recitals  herein set forth are true and correct and are
         incorporated into this Amendment No. 3 by reference.

2.       AMENDMENT OF THE WORKOUT AGREEMENT.

        (A)  AMENDMENT TO SECTION 14.  Section 14 of the Workout Agreement is
             hereby amended and restated as follows:

                   "14.    CONSENT BY WORLDCOM TO SALE OF ASSETS; RIGHTS OF
                           FIRST REFUSAL.

                   (a)     During the Investigation Period, as defined below,
                           the Debtor Entities shall not agree to or effect the
                           sale of, and shall not permit the sale of, any equity
                           interest in any one or more of the Debtor Entities,
                           except as set forth in Section 7(B)(ii) below, or any
                           material portion of the assets of any one or more of
                           the Debtor Entities without the prior, written
                           consent of WorldCom (other than in the ordinary
                           course of any such Debtor Entity's business,
                           consistent with past practices).

                   (b)     In the event that, during the Investigation Period,
                           any Debtor Entity shall initiate, receive or
                           negotiate any offer to sell any equity interest in,
                           or any of the assets of any one or more of the Debtor
                           Entities, the Debtor shall provide prompt written
                           notice to WorldCom of such offer (hereinafter
                           referred to as a "SALE NOTICE"). The Sale Notice
                           shall include the material terms of the offer, a
                           description of the equity interest or assets to which
                           such offer applies, copies of all agreements between
                           and among the parties to the transaction proposed by
                           such offer (including copies of any letters of
                           intent, written proposals, valuations, appraisals,
                           asset purchase or sale agreements or similar
                           documents, whether executed, proposed or in draft
                           form for negotiation) (collectively,


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<PAGE>

                           the "PROPOSED TRANSACTION DOCUMENTS"). The Debtor and
                           the Debtor Entities shall not enter into any binding
                           agreement or otherwise effect any sale or other
                           transaction as contemplated in the Sale Notice
                           (collectively referred to as a "SALE TRANSACTION")
                           unless and until WorldCom shall have consented to
                           such transaction as provided in this Agreement.

                   (c)     The Debtor and the Debtor Entities shall promptly
                           advise WorldCom of any actual or proposed amendments,
                           alterations, or other changes or supplements to the
                           terms of the Proposed Transaction Documents which may
                           occur from and after the date of the Sale Notice.
                           Upon the determination that a Sale Transaction has
                           been negotiated and may occur upon terms which the
                           Debtor or other Debtor Entities deems acceptable, and
                           prior to consummating such Sale Transaction, the
                           Debtor shall deliver to WorldCom a written notice to
                           such effect (a "CLOSING NOTICE") including a copy of
                           the definitive agreement to be executed with respect
                           to such Sale Transaction, a description of the equity
                           interest or assets subject to such Sale Transaction,
                           and any other Proposed Transaction Documents.

                   (d)     During the Investigation Period, the Debtor Entities
                           each agree that WorldCom shall have the irrevocable
                           right for a period equal to

                                    two (2) business days from and after the
                                    date of WorldCom's receipt of the Sale
                                    Notice, provided that, in the event that the
                                    Closing Notice is on materially different
                                    terms than the Sale Notice, then WorldCom
                                    shall have an additional two (2) business
                                    days from and after the date of WorldCom's
                                    receipt of the Closing Notice

                                  to acquire the equity interest or assets
                                  that are the subject of the Sale Transaction
                                  on the same terms and conditions as
                                  presented in the Closing Notice, or, in the
                                  event that a Closing Notice has not yet been
                                  delivered to WorldCom, upon the same terms
                                  and conditions as presented in the Sale
                                  Notice.

                   (e)     Notwithstanding any provision in the WorldCom
                           Documents to the contrary, WorldCom shall not be
                           deemed to have consented to any sale of stock or all
                           or substantially all of any one or more of the Debtor
                           Entities' assets during the Investigation Period
                           unless

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                           WorldCom shall have provided such consent pursuant to
                           a written instrument executed by WorldCom and dated
                           after the date hereof. WorldCom reserves any and all
                           rights it may have to the proceeds of any such sale.
                           The Debtor Entities agree that an aggregate amount of
                           such proceeds equal to the lesser of:

                                    (i)      the Obligations evidenced by the
                                             Notes, or

                                    (ii)     fifty percent (50%) of the net
                                             consideration received or
                                             receivable by Debtor or any Debtor
                                             Entity pursuant to any such Sale
                                             Transaction involving the sale of
                                             assets by any Debtor Entity
                                             (exclusive of the value of any
                                             assumption of debt of any one or
                                             more of the Debtor Entities by any
                                             party to such transaction),

                                    shall be paid directly to WorldCom at the
                                    closing of such transaction without
                                    disbursement of such amount to Debtor or any
                                    other Debtor Entity, provided that such
                                    payment shall reduce the outstanding balance
                                    of the Obligations on a dollar for dollar
                                    basis, upon receipt of cash proceeds by
                                    WorldCom.

                   (f)     The Debtor Entities covenant and agree that: (i) they
                           shall immediately advise any third-party to any
                           Proposed Sale Transaction of WorldCom's rights and
                           the restrictions imposed upon the Debtor Entities
                           pursuant to this Agreement; and (ii) WorldCom's
                           consent to any Sale Transaction and waiver of its
                           rights under this Section shall be a condition
                           precedent to consummation of any Sale Transaction. In
                           addition to, and not to the exclusion of, any other
                           rights or remedies which WorldCom may have under this
                           Agreement or any other WorldCom Documents, WorldCom
                           shall have the right to seek specific performance of
                           the obligations of Debtor and the Debtor Entities
                           pursuant to this Section.

        (B)   AMENDMENT TO SECTION 30. Section 30 of the Workout Agreement is
              hereby amended in the following manner:

             (i)      The following definition is added, in proper
                      alphabetical order, as follows:



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                           "AMENDED AND RESTATED NOTE" means that certain
                           Amended and Restated Demand Note in the original
                           principal amount of $97,434,710.13 dated January 25,
                           2001, executed and delivered by Debtor to WorldCom,
                           as the same may be amended, modified, or supplemented
                           from time to time, together with any extensions,
                           renewals or refinancings thereof, in whole or in
                           part.

            (ii)      The definition of the term "Note" as set forth in Section
                      30 of the Workout Agreement, shall be amended and
                      restated as follows:

                           "NOTE" means the Promissory Note in the principal
                           amount of $56,017,698.87 dated April 12, 2000,
                           executed and delivered by Debtor to WorldCom, as the
                           same may be amended, modified, or supplemented from
                           time to time, together with any extensions, renewals
                           or refinancings thereof, in whole or in part,
                           including (without limitation) the Amended and
                           Restated Note.

            (iii)     The definition of the term "Notes" as set forth in
                      Section 30 of the Workout Agreement, shall be amended
                      and restated as follows:

                           "NOTES" means the Note, the Term Note, the Amended
                           and Restated Note, and any other note evidencing the
                           obligations of any Debtor Entity to WorldCom, as the
                           same may be amended, modified, or supplemented from
                           time to time, together with any extensions, renewals
                           or refinancings thereof, in whole or in part.

             (iv)     The definition of the term "Term Note" as set forth in
                      Section 30 of the Workout Agreement, shall be amended and
                      restated as follows:

                           "TERM NOTE" means the Standby Term Loan Note in the
                           principal amount of $30,000,000.00 dated June 30,
                           2000, executed and delivered by Debtor to WorldCom,
                           as the same may be amended, modified, or supplemented
                           from time to time, together with any extensions,
                           renewals or refinancings thereof, in whole or in part
                           including (without limitation) the Amended and
                           Restated Note.

              (v)     The definition of the term "WorldCom Documents" as set
                      forth in Section 30 of the Workout Agreement, shall be
                      amended and restated as follows:

                           "WORLDCOM DOCUMENTS" means, as each such document may
                           be amended, revised, renewed, extended, substituted,
                           or replaced from time to time: this Agreement, the
                           Service Agreement, the Note, the Security Agreement,
                           the Pledge Agreement, the Term Note, the

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                           Amended and Restated Note all other guarantees
                           executed by any Person guaranteeing payment of any
                           portion of the Obligations; all security agreements
                           and pledge agreements granting any interest in any of
                           the Collateral, stock certificates and partnership
                           agreements constituting part of the Collateral;
                           mortgages, deeds of trust, financing statements,
                           collateral assignments, and other documents and
                           instruments granting WorldCom an interest in any
                           portion of the Collateral or related to the
                           perfection of WorldCom's interest in any portion of
                           the Collateral and/or the transfer to WorldCom of an
                           interest in any portion of the Collateral; all
                           collateral assignments or other agreements granting
                           to WorldCom a lien on any intercompany note,
                           including without limitation, all other documents,
                           instruments, agreements, or certificates executed or
                           delivered by Debtor or any other Obligor as security
                           for Debtor's obligations under this Agreement, the
                           Note, the Term Note, the Amended and Restated Note,
                           the Service Agreements, or otherwise.

3.       AMENDMENT OF THE PLEDGE AGREEMENTS. Section 4.04 of the Pledge
         Agreements by and between (a) STAR Telecommunications, Inc., and MCI
         WorldCom Network Services, Inc., dated as of April 12, 2000; and (b)
         PT-1 Communications, Inc., and MCI WorldCom Network Services, Inc.,
         dated as of April 12, 2000, shall be amended and restated as follows:

                  4.04. VOTING RIGHTS. It is expressly understood and agreed
                  that Pledgor shall retain all voting or management rights to
                  the Capital Stock Collateral unless an Event of Default shall
                  occur, at which time such voting rights shall transfer to or
                  be exercised as directed by Agent, at its sole discretion;
                  PROVIDED, however, that no voting or management rights 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
                  WorldCom Document.

4.       AGREEMENT REGARDING THIS AMENDMENT NO. 3. The parties hereto understand
         and agree that:

         (A)      The amendment of the term "WorldCom Documents" pursuant to
                  Section 2 hereof shall not limit the definition of that term
                  in any way nor shall such amendment be construed to mean or
                  imply that Section 30 of the Workout Agreement, or the
                  definition of the term "WorldCom Documents" or any other
                  definition contained within Section 30 of the Workout
                  Agreement, must later be amended or replaced to include any
                  agreement, contract, document or instrument not specifically
                  identified therein whether presently existing or entered into
                  or arising hereafter.


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<PAGE>


         (B)      The Amended and Restated Note and the Debtor's obligations
                  thereunder shall be considered a part of the "Obligations" as
                  that term is defined in Section 30 of the Workout Agreement.

5.       COOPERATION. The parties hereto acknowledge and agree that in
         furtherance of WorldCom's rights, and the obligations of Debtor and
         Debtor Entities under and pursuant to the WorldCom Documents, WorldCom
         shall be permitted to immediately commence a review and analysis of the
         Debtor and Debtor Entities for the purposes of:

         (a)      determining the "creditworthiness" of the Debtor Entities,
                  including, without limitation, the ability of the Debtor
                  Entities to pay their projected business debts and obligations
                  (including the Obligations) on a current basis, and, if
                  applicable, the ability of the Debtor Entities to pay WorldCom
                  for any accrued and unpaid invoices or other amounts due to
                  WorldCom;

         (b)      collecting the Obligations or enforcing the rights of WorldCom
                  under and pursuant to the WorldCom Documents;

         (c)      analyzing the collectibility and value of any outstanding
                  accounts or obligations of the Debtor Entities owed to
                  WorldCom;

         (d)      the liquidation, disposition or enforcement of any obligations
                  or accounts of the Debtor Entities owed to WorldCom;

         (e)      determining the value of any proposed Sale Transaction, and
                  whether WorldCom, its subsidiaries, affiliates or contacts in
                  the industry are interested in purchasing the object of any
                  such Sale Transaction; and

         (f)      the furtherance of WorldCom's rights pursuant to the WorldCom
                  Documents and for making any necessary judgments with respect
                  thereto.

         For purposes of conducting this review and analysis WorldCom shall be
         permitted to employ such professional advisors, accountants, attorneys,
         consultants and agents or other representatives (collectively,
         "CONSULTANTS") to assist WorldCom in the review and analysis
         contemplated hereunder. WorldCom shall from time to time notify Debtor
         Entities of the Consultants engaged by WorldCom. The Debtor Entities
         shall immediately provide WorldCom and all Consultants with the Debtor
         Entities' full cooperation and access to all of their books, records
         and personnel, including, without limitation, the work product or
         analyses of the Debtor Entities' professionals, including without
         limitation their accountants, to the extent necessary for WorldCom and
         Consultants to conduct the review and analysis as WorldCom deems
         necessary for the furtherance, enforcement and protection of its rights
         under the WorldCom Documents.


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<PAGE>

         The Debtor Entities acknowledge that Consultants are reviewing the
         books, records and personnel of the Debtor Entities on behalf of
         WorldCom, and that Consultants may be called as witnesses, and
         Consultants' analyses, reports and work product may be used in any
         collection or other proceeding brought by WorldCom against one or more
         of the Debtor Entities. The Debtor Entities waive any right they each
         may have to object to use of Consultants (or any of their respective
         employees, contractors or agents) as a witness or the use of
         Consultants' analyses, reports or work product in any such proceeding
         on the basis that such testimony, analyses, reports or work product are
         based upon information obtained from the Debtor Entities, or that any
         one or more of the Consultants have been or are currently engaged by
         one or more of the Debtor Entities. Furthermore, each of the Debtor
         Entities acknowledges that the Debtor Entities are not entitled to and
         shall have no right to receive any of Consultants' analyses, reports or
         work product, absent WorldCom's prior written consent thereto, and that
         such analyses, reports and work product are being delivered to WorldCom
         and its counsel in preparation for potential collection or other
         proceedings against the Debtor Entities. Notwithstanding the foregoing,
         the Debtor Entities may request that any such testimony, analyses,
         reports or work product, and any pleadings be filed under seal and
         neither Consultants nor WorldCom will object to any such motion. The
         parties hereto agree that WorldCom's review of the matters set forth in
         this Section 5 and the Consultants' access to the Debtor Entities shall
         continue only to, and shall be concluded by no later than, February 16,
         2001, as such period may be extended upon the mutual, express agreement
         of WorldCom and the Debtor Entities (the "Investigation Period").

6.       AGREEMENTS OF DEBTOR AND DEBTOR ENTITIES WITH RESPECT TO CERTAIN
         ACTIVITIES. The Debtor and the Debtor Entities shall as soon as is
         reasonably practicable following the execution of this Amendment No. 3
         take, and cause to be taken, all action necessary and desirable (in the
         determination of WorldCom) to effect the following:

         (A)      With respect to each Debtor Entity which is a corporation
                  (each referred to as a "DEBTOR CORPORATION"), establish a
                  special class of corporate director (the "SPECIAL DIRECTOR")
                  pursuant to the by-laws, articles of incorporation,
                  certificate of incorporation or other corporate charter or
                  governance documents of such Debtor Corporation, which will
                  have all rights and authority as each other member of the
                  board of directors of such corporation, except that the
                  Special Director shall not have the right to vote on any
                  matters that may be presented to the Board of Directors of
                  such corporation;

         (B)      With respect to each Debtor Entity which is a limited
                  liability company (each referred to as a "DEBTOR LLC"),
                  establish a special class of manager or member (the "SPECIAL
                  MANAGER") pursuant to the operating agreement, articles of
                  association, certificate of organization, or other formation
                  documents, charter or governance documents of such Debtor LLC,
                  which Special Manager will have all


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<PAGE>

                  rights and authority as each other manager or member of such
                  Debtor LLC, except that the Special Manager shall not have the
                  right to vote on any matters that may be presented to the
                  managers or members of such Debtor LLC or to receive any
                  interest in the assets, profits, losses or liabilities of such
                  Debtor LLC;

         (C)      Adopt all necessary amendments to the organizational
                  documents, governance documents, by-laws, or other similar
                  agreements or documents related to the operation and
                  governance of each Debtor Entity to provide that:

                           (i)      no meeting of the Board of Directors of any
                                    Debtor Corporation may be called for any
                                    purposes without providing Advance Written
                                    Notice, as defined below, of such meeting to
                                    the Special Director, unless otherwise
                                    waived prior to such meeting by such Special
                                    Director;

                           (ii)     no meeting of the managers or members of any
                                    Debtor LLC may be called for any purposes
                                    without providing Advance Written Notice of
                                    such meeting to the Special Manager, unless
                                    otherwise waived prior to such meeting by
                                    such Special Manager;

                           (iii)    no business may be conducted at any meeting
                                    of the Board of Directors of any Debtor
                                    Corporation unless the Special Director is
                                    present and is provided with all
                                    information, agendas, reports or other
                                    materials related to the matters to be
                                    discussed at such meeting at the same time
                                    and manner in which such information is
                                    provided to each other director of the
                                    Debtor Corporation;

                           (iv)     no business may be conducted at any meeting
                                    of the managers or the members of any Debtor
                                    LLC unless the Special Manager is present
                                    and is provided with all information,
                                    agendas, reports or other materials related
                                    to the matters to be discussed at such
                                    meeting at the same time and manner in which
                                    such information is provided to each other
                                    manager and/or member of the Debtor LLC;

                           (v)      the Board of Directors of any Debtor
                                    Corporation, and the managers and members of
                                    any Debtor LLC, may not act on any matters
                                    by written consent in lieu of a meeting,
                                    unless such written consent has been
                                    submitted to the Special Director at least
                                    forty-eight (48) hours prior to submission
                                    to such Board

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                                    of Directors and such Special Director does
                                    not object to the matters set forth therein;

                           (vi)     the managers of any Debtor LLC may not take
                                    any action without calling a meeting of the
                                    managers and/or members at which the Special
                                    Manager is present for the purpose of
                                    approving such action , unless such written
                                    consent has been submitted to the Special
                                    Manager at least forty-eight (48) hours
                                    prior to submission to such meeting of the
                                    managers and/or members and such Special
                                    Manager does not object to the matters set
                                    forth therein

                           (vii)    each direct (including the Special Director)
                                    of each Debtor Corporation) and each manager
                                    and member (including the Special Manager)
                                    of each Debtor LLC shall be permitted to
                                    attend any meeting of the Board of Directors
                                    or the managers or member of any Debtor
                                    Entity (as applicable) with such director's,
                                    manager's or member's legal counsel;

                           (viii)   appoint as the Special Manager of each
                                    Debtor LLC and Special Director of each
                                    Debtor Corporation an individual or entity
                                    designated by WorldCom; and

                           (ix)     "Advance Written Notice" shall mean (a) 48
                                    hours advance written notice to the Special
                                    Director or Special Manager, as the case may
                                    be, and his or her counsel, of any
                                    telephonic meeting; and (b) four (4) days
                                    advance written notice to the Special
                                    Director or Special Manager, as the case may
                                    be, and his or her counsel, of any
                                    non-telephonic meeting.

         (D)      Each Debtor Corporation and Debtor LLC shall take such other
                  actions as necessary in WorldCom's sole determination to
                  provide to each Special Director and each Special Manager all
                  legal protections of indemnification and other rights under
                  the law of the jurisdiction of formation of each Debtor
                  Corporation and each Debtor LLC with respect to such Special
                  Director's or Special Manager's performance and exercise of
                  his, her or its duties and rights in such capacity, including
                  without limitation the adoption of necessary or desirable
                  by-law provisions, amendments to articles of association,
                  formation or incorporation, and the purchase of insurance
                  coverages deemed necessary by the Special Manager or Special
                  Director.

         (E)      All transactions and relationships between or among any of the
                  Debtor Entities shall be conducted only pursuant to written
                  agreements and understandings in the


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<PAGE>

                  normal course of business. All intercompany service
                  arrangements, guaranties or other agreements with respect to
                  the purchase, sale lease, rental, or use of any asset, or the
                  provision of any service, shall be: (i) entered into only in
                  the normal course of business of the Debtor Entities; (ii)
                  documented or invoiced between the parties to such
                  arrangement; and (iii) shall not be subject to any rights of
                  set-off by the parties to such arrangement. To the extent that
                  intercompany service agreements do not currently exist, the
                  Debtor Entities shall execute such agreements promptly, and in
                  no event later than Friday, January 26, 2001, 2001, and shall
                  provide copies of such agreements to WorldCom and its
                  Consultants. The Debtor Entities agree that all matters
                  related to the Debtor Entities' performance of their
                  respective obligations under this Section, and all legal
                  details and proceedings in connection with such obligations
                  contemplated hereunder shall be satisfactory to WorldCom and
                  its legal counsel, and WorldCom shall have received all such
                  counterpart originals or certified or other copies of all
                  documents and proceedings in connection with the Debtor
                  Entities performance of their respective obligations
                  hereunder, in form and substance satisfactory to WorldCom and
                  its counsel, as WorldCom may from time to time request.

7.       ADDITIONAL COVENANTS AND AGREEMENTS.

         (A)      During the term of this Amendment No. 3, each of the Debtor
                  Entities represents, warrants, covenants and agrees that on or
                  before January 29, 2001, the Debtor Entities will provide
                  WorldCom with a written representation by each of Gotel
                  Investments Limited, Global Investment Trust, and Intertrust
                  (Guernsey) Limited that upon investigation, none of
                  Christopher Edgecomb, Jeffrey Sudikoff nor any of their
                  respective family members or affiliates is the "beneficial
                  owner" of any interest in or to Gotel Investments Limited,
                  Global Investment Trust, or Intertrust (Guernsey) Limited.

         (B)      Each of the Debtor Entities represents, warrants, covenants
                  and agrees that there shall not occur any "material change" of
                  any Debtor Entity during the Investigation Period. For
                  purposes of this covenant only, unless the prior, written
                  consent of WorldCom is received by the Debtor Entities, a
                  "material change" shall include, but not be limited to:

                           (i)      the grant or pledge by any one or more of
                                    the Debtor Entities at any time from and
                                    after the date of this Amendment No. 3 of
                                    any lien or other encumbrance on any of its
                                    assets,

                           (ii)     the acceptance by any one or more of the
                                    Debtor Entities of any equity investment,
                                    other than (a) the twenty five million
                                    dollar ($25,000,000) equity investment by
                                    Gotel Investments Limited that was announced
                                    by Star's press release dated


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<PAGE>

                                    January 17, 2001 and (b) the equity
                                    investment by IDT Investments, Inc. in
                                    Debtor, as outlined in that certain letter
                                    agreement between such parties dated January
                                    21, 2001, PROVIDED THAT, WorldCom consents
                                    to such transaction; and

                           (iii)    the sale of any one or more of the Debtor
                                    Entities' assets, other than in the ordinary
                                    course of business, other than the sale of
                                    the pre-paid/debit card assets of PT-1 to
                                    IDT Corporation ("IDT"), as outlined in that
                                    certain letter agreement between Debtor,
                                    PT-1 and IDT dated January 21, 2001,
                                    PROVIDED THAT, WorldCom consents to such
                                    transaction.

         (C)      During the Investigation Period, each of the Debtor Entities
                  will deliver to WorldCom immediately upon WorldCom's request a
                  certificate of the Chief Executive Officer (or Managers, as
                  the case may be) (an "OFFICER'S CERTIFICATE") certifying that
                  as of the date of WorldCom's request for such Officer's
                  Certificate that:

                           (i)      all of the representations and warranties of
                                    such Debtor Entity contained in the WorldCom
                                    Documents continue to be true and correct;

                           (ii)     such Debtor Entity is in compliance with all
                                    the applicable terms and provisions of the
                                    WorldCom Documents to be observed and
                                    performed by it, and no Event of Default, or
                                    any event which, upon notice or lapse of
                                    time, or both, would constitute an Event of
                                    Default, has occurred and is continuing,
                                    other than has been disclosed by such Debtor
                                    Entity in writing to WorldCom;

                           (iii)    such Debtor Entity has performed all
                                    obligations and taken all actions to be
                                    performed or taken by it under the WorldCom
                                    Documents on or prior to the date of the
                                    Officer's Certificate; and

                           (iv)     there has been no "material change" of the
                                    Debtor or other material change in the
                                    financial condition of such other Debtor
                                    Entity since January 25, 2001.

         (D)      The Debtor Entities shall deliver to WorldCom:

                           (i)      copies of resolutions duly adopted by the
                                    directors of each Debtor Corporation
                                    authorizing and effecting the actions to be


                                       12
<PAGE>

                                    taken, and the execution and delivery of all
                                    agreements, documents and/or instruments to
                                    be executed and/or delivered, by such Debtor
                                    Corporation pursuant to or in connection
                                    with this Amendment No. 3 and the taking of
                                    any actions necessary to consummate the
                                    transactions contemplated by such
                                    agreements, documents and/or instruments or
                                    this Amendment No. 3; and

                           (ii)     copies of resolutions, amendments or
                                    authorizations duly adopted and agreed to by
                                    the managers and members of each Debtor LLC
                                    authorizing and effecting the actions to be
                                    taken, and the execution and delivery of all
                                    agreements, documents and/or instruments to
                                    be executed and/or delivered, by such Debtor
                                    LLC pursuant to or in connection with this
                                    Amendment No. 3 and the taking of any
                                    actions necessary to consummate the
                                    transactions contemplated by the such
                                    agreements, documents and/or instruments or
                                    this Amendment No. 3.

8.       REPRESENTATIONS AND WARRANTIES. Each of the Debtor Entities hereby
         represents and warrants as follows:

         (i)      The Board of Directors of any Debtor Corporation, or in the
                  case of any Debtor LLC its managers or members, has not
                  approved any resolution (i) authorizing the filing of a
                  petition pursuant to the United States Bankruptcy Code, (ii)
                  consenting to the appointment of a receiver, or (iii)
                  authorizing the commencement of any insolvency or
                  reorganization proceeding.

         (ii)     None of its officers, managers or members has the authority to
                  (i) authorize the filing of a petition pursuant to the United
                  States Bankruptcy Code, (ii) consent to the appointment of a
                  receiver, or (iii) authorize the commencement of any
                  insolvency or reorganization proceeding.

         (iii)    After investigation, each of the Debtor Entities hereby
                  represent as follows:

                           (a)      none of Christopher Edgecomb, Jeffrey
                                    Sudikoff nor any of their respective family
                                    members or affiliates is the "beneficial
                                    owner" of any interest in or to Gotel
                                    Investments Limited, Global Investment
                                    Trust, or Intertrust (Guernsey) Limited;

                           (b)      Walter Stresemann is the sole decision maker
                                    and controlling person of Gotel Investments
                                    Limited; and


                                       13
<PAGE>

                           (c)      each of Jeffrey Sudikoff and Gotel
                                    Investments Limited were investors in Debtor
                                    and in InterPacket Networks, Inc.

                  For purposes of this Agreement, the term "beneficial owner"
                  shall have the meaning ascribed thereto under Rule 13d-3 (17
                  CFR 240.13d-3) promulgated pursuant to the Securities Exchange
                  Act of 1934, as in effect on the date hereof (the "EXCHANGE
                  ACT"), without giving effect to the rights to disclaim
                  beneficial ownership as permitted by Rule 13d-4 (17 CFR
                  240.13d-4) promulgated under the Exchange Act.

         (iv)     After investigation, none of the Debtor Entities is aware of
                  any relationship, contract, arrangement, or understanding,
                  between Jeffrey Sudikoff and any one or more of the Debtor
                  Entities which has not been previously disclosed to WCOM in
                  writing by each such Debtor Entity which is a party to such
                  relationship, contract, arrangement or understanding.

         (v)      Notwithstanding the amendment and restatement of the
                  Promissory Note and the Term Note, the Debtor Entities remain
                  in default of the WorldCom Documents.


9.       RELEASE OF WORLDCOM.

         (A)      Each of the Debtor Entities forever releases and discharges
                  WorldCom, its agents, consultants, employees, directors,
                  officers, attorneys, branches, parent, affiliates,
                  subsidiaries, successors and assigns and all persons, firms,
                  corporations, and organizations acting on WorldCom's behalf
                  (collectively referred to as the "WORLDCOM RELEASED ENTITIES")
                  of and from any and all losses, damages, claims, demands,
                  liabilities, obligations, actions and causes of action, of any
                  nature whatsoever in law or in equity, including, without
                  limitation, any claims or joinders for sole liability,
                  contribution or indemnity (collectively, the "CLAIMS"), which
                  one or more of the Debtor Entities may have or claim to have
                  against WorldCom or any one or more of the WorldCom Released
                  Entities, as of the date of this Amendment No. 3, whether
                  presently known or unknown, and of every nature and extent
                  whatsoever, on account of or in any way touching, concerning,
                  arising out of, founded upon or relating to (i) the WorldCom
                  Documents, (ii) the obligations of one or more the Debtor
                  Entities under the WorldCom Documents, (iii) this Amendment
                  No. 3, (iv) enforcement or negotiation of this Amendment No. 3
                  or any of the WorldCom Documents, and (v) the dealings of the
                  parties to this Amendment No. 3 with respect to the
                  obligations of the Debtor Entities to WorldCom under the
                  WorldCom Documents or one or more of them.


                                       14
<PAGE>

         (B)      Each of the Debtor Entities agrees to execute all appropriate
                  and necessary documents to enable WorldCom or any of the
                  WorldCom Entities, to plead the effect of the releases
                  contained in this Section in any lawsuit.

         (C)      The releases contained in this Amendment No. 3 shall be
                  binding upon each of the Debtor Entities and shall inure to
                  the benefit of WorldCom and the WorldCom Released Entities,
                  and any of their respective successors and assigns.

10.      RESERVATION OF RIGHTS. No delay, or inaction by WorldCom in exercising
         its rights and remedies under any of the WorldCom Documents, and no
         continuing performance by WorldCom thereunder (a) shall constitute (i)
         a modification or an alteration of the terms, conditions or covenants
         of any of the WorldCom Documents or (ii) a waiver release or limitation
         upon WorldCom's exercise of any of its rights and remedies thereunder,
         all of which are hereby expressly reserved, or (b) shall relieve or
         release any of the Debtor Entities in any way from any of its
         respective duties, obligations, covenants or agreements under the
         WorldCom Documents or from the consequences of any Event of Default
         described above or any other Event of Default thereunder.

11.      CUMULATIVE NATURE OF RELEASE. Nothing contained in this Amendment No. 3
         shall impair or be construed to impair the security of WorldCom or any
         of the WorldCom Released Entities under the WorldCom Documents, nor
         affect nor impair any rights or powers that WorldCom or any of the
         WorldCom Released Entities may have under the WorldCom Documents for
         the recovery of the indebtedness of the Debtor Entities to WorldCom in
         case of breach of the terms, provisions and releases contained in this
         Amendment No. 3 or breach or nonfulfillment of the terms, agreements
         and covenants set forth in the WorldCom Documents. All rights, powers
         and remedies of WorldCom or any of the WorldCom Released Entities under
         any other agreement or release now or at any time in the future in
         force between WorldCom and the Debtor with respect to the Obligations
         shall be cumulative and not alternative and shall be in addition to all
         rights, powers and remedies given to WorldCom or any of the WorldCom
         Released Entities by law.

12.      ACKNOWLEDGMENT AND AFFIRMATION. Each of the undersigned hereby
         unconditionally consents to all of the provisions of the Workout
         Agreement, as amended by this Amendment No. 3, and acknowledges receipt
         of a copy of this Amendment No. 3 and the Notes, including, without
         limitation, all amendments, supplements, modifications restatements,
         and extensions thereof which have been effected through the date
         hereof. Except as expressly amended by this Amendment No. 3 and the
         Amended and Restated Note (which has been executed and delivered by
         Debtor contemporaneously herewith), the Workout Agreement and the other
         WorldCom Documents, and each and every representation, warranty,
         covenant term and condition therein remains in full force and effect.
         On and after the effectiveness of this Amendment No. 3, all references
         to the Workout Agreement in the WorldCom Documents and in any
         agreements, documents


                                       15
<PAGE>

         and/or instruments executed and/or delivered in connection with the
         WorldCom Documents shall mean the Workout Agreement as amended
         (including as further amended by this Amendment No. 3) and as may be
         further amended from time to time hereafter.

13.      CONFIRMATION AND RATIFICATION. Each of the undersigned hereby confirms
         and ratifies their respective Security Agreements, Pledge Agreements,
         Guaranties, and any other WorldCom Documents to which it is a party, in
         their respective entirety and further agrees that the liabilities and
         obligations evidenced by the Notes, shall be considered as part of the
         Obligations, for all purposes, including without limitation, the
         guaranty of such Obligations under each of the Guarantys of PT-1 and
         Helvey, each dated as of April 12, 2000, as the same may be amended,
         modified or supplemented from time to time, and the security provided
         therefor under the respective Security Agreements and Pledge Agreements
         of the Debtor, PT-1 and Helvey, each dated as of April 12, 2000, as the
         same may be amended, modified or supplemented from time to time.

14.      SEVERABILITY. The provisions of this Amendment No. 3 are intended to be
         severable. If any provision of this Amendment No. 3 shall be held
         invalid or unenforceable in whole or in part in any jurisdiction, such
         provision shall, as to such jurisdiction, be ineffective to the extent
         of such invalidity or unenforceability without in any manner affecting
         the validity or enforceability of such provision in any other
         jurisdiction or the remaining provisions of this Amendment No. 3 in any
         jurisdiction.

15.      GOVERNING LAW, ETC. This Amendment No. 3 shall be governed by Oklahoma
         law, without giving effect to principles of conflicts of laws.

16.      CHOICE OF VENUE AND WAIVER OF JURY TRIAL. THE PARTIES AGREE THAT ALL
         DISPUTES OF EVERY KIND AND NATURE ARISING UNDER OR IN CONNECTION WITH
         THIS AMENDMENT NO. 3 MAY BE RESOLVED IN THE STATE OR FEDERAL COURTS
         LOCATED IN TULSA, OKLAHOMA. THE PARTIES EACH WAIVE THEIR RIGHTS TO A
         JURY TRIAL WITH RESPECT TO ANY SUCH DISPUTE AND CONSENT TO THOSE COURTS
         EXERCISING SUBJECT MATTER AND PERSONAL JURISDICTION WITH RESPECT TO ANY
         SUCH DISPUTE.

17.      EXECUTION OF RELEASE AND WAIVER. EACH OF THE PARTIES REPRESENTS AND
         WARRANTS TO THE OTHER THAT IT HAS CAREFULLY READ THE FOREGOING TERMS
         AND CONDITIONS OF THIS AMENDMENT NO. 3, THAT IT KNOWS AND UNDERSTANDS
         THE CONTENTS AND EFFECT OF THIS AMENDMENT NO. 3, THAT THE LEGAL EFFECT
         OF THIS AMENDMENT NO. 3, INCLUDING, WITHOUT LIMITATION, THE RELEASE AND
         WAIVER OF JURY TRIAL PROVISIONS CONTAINED IN THIS AMENDMENT NO. 3, HAVE
         BEEN FULLY EXPLAINED TO ITS SATISFACTION BY ITS COUNSEL, AND EXECUTION
         OF THIS AMENDMENT NO. 3 IS A VOLUNTARY ACT.


                                       16
<PAGE>

18.      INTERPRETATION. Terms not defined herein shall have the meaning as set
         forth in the Workout Agreement. Unless the context of this Amendment
         No. 3 clearly requires otherwise, references to the plural include the
         singular, the singular includes the plural, the part includes the
         whole, "including" is not limiting, and "or" has the inclusive meaning
         represented by the phrase "and/or." The words "hereof," "herein,"
         "hereby," "hereunder," and similar terms in this Amendment No. 3 refer
         to this Amendment No. 3 as a whole and not to any particular provision
         of this Amendment No. 3.

19.      TERM OF AMENDMENT. This Amendment No. 3 will terminate upon termination
         of the Workout Agreement.

20.      HEADINGS. The headings of the sections in this Amendment No. 3 are for
         purposes of reference only, and shall not limit or affect the meaning
         of such section.

21.      NO PARTNERSHIP OR JOINT VENTURE. It is understood by the parties that
         this Amendment No. 3 shall not in any way be construed as an agreement
         of partnership, general or limited, or of creating a joint venture
         between WorldCom and any other party to this Agreement, or any one or
         more of them, or of creating any relationship other than that of debtor
         and creditor.

22.      COUNTERPARTS. This Amendment No. 3 may be executed in one or more
         counterparts, each of which shall be deemed an original, but all of
         which shall constitute one and the same Amendment.

23.      JOINT PREPARATION. The preparation of this Amendment No. 3 has been a
         joint effort of the parties and the resulting document shall not,
         solely as a matter of judicial construction, be construed more severely
         against one of the parties than the other.

24.      THIRD PARTY BENEFICIARIES. The terms and conditions of this Amendment
         No. 3 are not intended to affect or benefit in any way any third
         parties other than the WorldCom Entities, all of which are explicitly
         intended to be third party beneficiaries under this Amendment No. 3.

25.      SUCCESSORS AND ASSIGNS. This Amendment No. 3 will be binding upon and
         inure to the benefit of the respective parties, and their respective
         successors and assigns, including any bankruptcy trustee, except that
         neither party may assign or transfer any of its rights or delegate any
         of its duties under this Amendment No. 3 without the prior written
         consent of the other party.

                     --------------------------------------
                         SIGNATURES APPEAR ON NEXT PAGE.



                                       17
<PAGE>


IN WITNESS WHEREOF, the parties hereto by their authorized representatives have
executed this Amendment No. 3 to Workout Agreement, as of the day and year first
above written.

STAR TELECOMMUNICATIONS, INC.              PT-1 COMMUNICATIONS, INC.

By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------



HELVEY COM, LLC                            CEO TELECOMMUNICATIONS, INC.

By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------




CEO CALIFORNIA TELECOMMUNICATIONS, INC.    LUCIUS ENTERPRISES, INC.

By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------


AS TELECOMMUNICATIONS, INC.                PT-1 LONG DISTANCE, INC.

By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------



PT-1 HOLDINGS I, INC.                      PT-1 HOLDINGS II, INC.

By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------

NATIONWIDE DISTRIBUTORS, INC.              INVESTMENT SERVICES, INC.
TECHNOLOGY LEASING, INC.

                                       18
<PAGE>

By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------



PT-1 COMMUNICATIONS PUERTO RICO, INC.      PHONETIME TECHNOLOGIES, INC.


By: /s/ Timothy F. Sylvester               By: /s/ Timothy F. Sylvester
    ---------------------------------          ---------------------------------
Name: Timothy F. Sylvester                 Name: Timothy F. Sylvester
      -------------------------------            -------------------------------
Title: Executive Vice President &          Title: Executive Vice President &
       General Counsel                            General Counsel
       ------------------------------             ------------------------------



MCI WORLDCOM NETWORK SERVICES, INC.

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------



                                       19

</TEXT>
</DOCUMENT>
