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EXHIBIT 8.3
September 11, 2000
WORLDxCHANGE Communications
9999 Willow Creek Road
San Diego, California 92131
RE: MERGER OF WORLDxCHANGE
Ladies and Gentlemen:
You have requested our opinion regarding the material federal income
tax consequences of the proposed reorganization (the "Reorganization")
involving the exchange of stock of Communication TeleSystems International
d/b/a WORLDxCHANGE Communications, a California corporation ("CTI") for stock
of World Access, Inc., a Delaware corporation ("WAXS") in a statutory merger of
CTI with and into CTI Merger Co., a Georgia corporation ("Merger Sub") and a
wholly-owned subsidiary of WAXS, in a transaction intended to qualify as a
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code").(1)
In connection with this opinion, we have examined such documents and
matters of law and fact as we have considered appropriate, including (i) the
Agreement and Plan of Merger, dated as of February 11, 2000, as amended (the
"Agreement"); (ii) the Registration Statement on Form S-4 (No. 333-_____), as
amended, filed by WAXS with the Securities and Exchange Commission (the
"Registration Statement"); and (iii) the Officer Certificate from CTI to the
undersigned (the "Officer Certificate"), in the form attached hereto. In
connection with this opinion, we are assuming that the representations made by
CTI and WAXS in the Agreement and in the Officer Certificate are true and
correct as of the date of this opinion, and we are relying on each of such
representations. In addition, with your consent, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that original documents (including signatures) are authentic
and documents submitted to us as copies conform to the original documents, and
there has been (or will be by the Effective Time of the Reorganization, as
defined in the Agreement) due execution and delivery of all documents where due
execution and delivery are prerequisites to effectiveness thereof.
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(1) All references to Sections are to the Internal Revenue Code of 1986, as
amended.
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WORLDxCHANGE Communications, September 11, 2000 - Page 2
Opinion
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Based on the foregoing, and our review and analysis of the current
state of the law, it is our opinion that upon the effectiveness of the
Reorganization, the exchange of the stock of CTI for the stock of WAXS will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1) of the Code and that CTI, WAXS and Merger Sub will each be
a party to that reorganization within the meaning of Section 368(b) of the Code
and, as a result, the following tax consequences will apply:
(1) The exchange of the stock of CTI for the stock of WAXS will be
tax-free to the shareholders of CTI, except to the extent of (a) any cash
received in lieu of fractional shares, and (b) any cash received by a
shareholder of CTI who exercises such shareholder's dissenter's rights;
(2) The aggregate tax basis of WAXS stock received by CTI shareholders
in the merger, together with any tax basis attributable to fractional shares
deemed to be disposed of and any CTI stock held in escrow pursuant to the
Escrow Agreement (as defined in the Agreement), will be the same as the
aggregate tax basis of CTI stock surrendered in the Reorganization;
(3) The holding period of WAXS Stock received by each CTI shareholder
in the Reorganization will include the period for which the CTI stock
surrendered in exchange therefore was considered to be held;
(4) Cash payments received by shareholders of CTI stock in lieu of
fractional shares of WAXS stock will be treated as if such fractional share of
WAXS stock had been received in the Reorganization and then redeemed by WAXS. A
CTI shareholder receiving cash in lieu of a fractional share of WAXS stock will
recognize gain or loss upon such payment measured by the difference, if any,
between the amount of cash received and such shareholder's basis in such
fractional share,
(5) A CTI shareholder that exercises dissenters' rights with
respect to all of such holder's shares of CTI stock will recognize gain or loss
measured by the difference between the amount of cash received and the holder's
basis in such shares, provided that the payment is neither essentially
equivalent to a dividend within the meaning of Section 302 of the Code nor has
the effect of a distribution of a dividend within the meaning of Section
356(a)(2) of the Code (collectively, a "Dividend Equivalent Transaction"). A
sale of CTI stock pursuant to an exercise of dissenters' rights will not be a
Dividend Equivalent Transaction if, as a result of such exercise, the
stockholder exercising the dissenters' rights owns no shares of CTI stock or
WAXS stock (either actually or constructively within the meaning of Section 318
of the Code) immediately after the Reorganization. If a shareholder's sale of
CTI stock for cash pursuant to an exercise of dissenters' rights is a Dividend
Equivalent Transaction, then such shareholder may recognize ordinary income in
any amount equal to the entire amount of cash received.
Because of a lack of legislative, judicial or administrative
authority, the federal income tax treatment of the receipt of WAXS shares
issued in payment of accrued but undeclared and unpaid dividends ("Dividend
Related Shares") with respect to CTI preferred stock is not entirely clear, and
therefore, no opinion is being issued concerning that issue. If the receipt of
Dividend Related Shares were not tax-free, then a holder of CTI preferred stock
that received Dividend Related Shares could have taxable ordinary income in an
amount equal to the fair market value of the Dividend Related Shares to the
extent of such holder's pro rata share of CTI's earnings and profits. If the
fair market value of the Dividend Related Shares exceeds such earnings and
profits, then the excess first will be applied to reduce the holder's basis in
the preferred stock, but not below zero, and then any excess over such amount
will be treated as gain from the sale of such CTI stock.
This opinion is limited to the tax matters specifically covered herein,
and we have not been asked to address, nor have we addressed, any other tax
consequences of the Reorganization. The opinion herein is based on current
authorities and upon facts and assumptions as of the date of this opinion. It is
subject to change in the event of a change in the applicable law. This opinion
is expressed as of the date hereof and we disclaim any undertaking to advise you
of any subsequent changes in the matters stated, represented or assumed herein,
or of any subsequent changes in applicable law. There is no assurance that
legislative or administrative changes or court decisions may not be forthcoming
which would significantly modify the statements and opinions expressed herein.
Any such changes may or may not be retroactive with respect to transactions
prior to the date of such changes. This opinion represents only counsel's best
legal judgment, and has no binding effect or official status of any kind, so
that no assurance can be given that the positions set forth above will be
sustained by a court, if contested.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. This opinion is delivered to CTI for the benefit of CTI
and its shareholders. This opinion may not be made available to any other
person or entity without our prior written consent.
Respectfully Submitted,
/s/ O'Melveny & Myers LLP