<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with the +
+ Securities and Exchange Commission. These securities may not be sold nor may +
+ offers to buy be accepted prior to the time the registration statement +
+ becomes effective. This prospectus shall not constitute an offer to sell or +
+ the solicitation of an offer to buy nor shall there be any sale of these +
+ securities in any State in which such offer, solicitation or sale would be +
+ unlawful prior to registration or qualification under the securities laws of +
+ any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
As filed with the Securities and Exchange Commission on January 9, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
WORLDCORP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 4522 94-3040585
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
13873 Park Center Road
Suite 490
Herndon, Virginia 20171
(703) 834-9200
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
T. Coleman Andrews, III
President and CEO
13873 Park Center Road
Suite 490
Herndon, Virginia 20171
(703) 834-9200
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
The Commission is requested to send copies of
all communications to:
David M. Carter
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
----------
Approximate date of commencement of proposed sale of the securities to the
public:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
----------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================
Title of each class Proposed maximum Proposed maximum Amount of
of securities to Amount to be offering price aggregate registration
be registered registered per unit offering price fee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10.00% Senior
Subordinated Notes, due $10,000,000 100% $10,000,000 $3,031.00
September 30, 2000......
===================================================================================================
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 9, 1997
O F F E R T O E X C H A N G E
ALL OUTSTANDING
10.00% SENIOR SUBORDINATED NOTES
DUE SEPTEMBER 30, 2000
($10,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10.00% SENIOR SUBORDINATED NOTES
DUE SEPTEMBER 30, 2000
OF
WORLDCORP, INC.
----------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., HERNDON, VIRGINIA TIME,
ON , 1997, UNLESS EXTENDED
----------
WorldCorp, Inc., a Delaware corporation (the "Company" or "WorldCorp"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 10.00% Senior Subordinated Notes due
September 30, 2000 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, for each $1,000 principal amount of the outstanding 10.00% Senior
Subordinated Notes due September 30, 2000 (the "Old Notes") of the Company, of
which $10,000,000 principal amount is outstanding. The New Notes and the Old
Notes are collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1997, unless the Exchange Offer is
extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date, unless previously accepted for payment. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions
which may be waived by the Company and to the terms and provisions of the
Purchase Agreement (as defined herein). See "The Exchange Offer." Old Notes
may be tendered only in denominations of $1,000 and integral multiples thereof.
The New Notes will be obligations of the Company entitled to the benefits of
the Indenture (as defined herein). The form and terms of the New Notes are the
same in all material respects as the form and terms of the Old Notes except that
(i) the New Notes have been registered under the Securities Act and will not
contain terms restricting the transfer thereof and (ii) the New Notes will be
subject to the requirements of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and therefore will be issued under an Indenture (as
defined herein) that provides for various rights and benefits of the holders of
the New Notes to be exercisable, received and coordinated through a Trustee (as
defined herein) in the manner required by the Trust Indenture Act. See "The
Exchange Offer."
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that should be considered by prospective investors.
The New Notes will bear interest from September 30, 1996. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from September 30, 1996 to the date of the issuance of the New Notes. Interest
on the New Notes is payable semi-annually on September 30 and March 31 in each
year, commencing March 31, 1997, and at maturity and shall be computed on the
basis of a 360-day year or twelve 30-day months. Interest shall accrue from
September 30, 1996 at a rate of 10.00% per annum. The New Notes shall be
subordinated to all Senior Indebtedness (as defined herein) of the Company.
---------- (Continued on Next Page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is January ___, 1997.
<PAGE>
(Continued from Cover Page)
The Notes may be declared due prior to their expressed maturity date,
voluntary prepayments may be made thereon and certain prepayments are required
to be made thereon, all in the events, on the terms and in the manner provided
in the Indenture. Such prepayments include (i) certain required sinking fund
payments on September 30, 1998 and September 30, 1999, (ii) certain required
prepayments upon the occurrence of certain events specified in the Indenture,
and (ii) certain optional prepayments. The principal of the Notes may not be
prepaid prior to the expressed maturity date except as provided in the
Indenture.
The Old Notes are, and the New Notes will be, subordinated in right of payment
to all existing and future Senior Indebtedness (as defined herein) of the
Company.
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, the Company believes the New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangements with any person to participate in the distribution of such New
Notes. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus and any amendment or supplement to
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
The Company will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The New Notes are a new issue of securities for which there is currently no
trading market. If the New Notes are traded after their initial issuance, they
may trade at a discount from their principal amount, depending upon prevailing
interest rates, the market for similar securities and other factors, including
general economic conditions and the financial condition and performance of, and
prospects for, the Company. There can be no assurance as to the development or
liquidity of any market for the Old Notes and the New Notes. The Company does
not intend to apply for listing of the New Notes on any securities exchange or
for quotation through the National Association of Securities Dealers Automated
Quotation System.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices: Seven World Trade Center,
13th Floor, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, such material can also be obtained from the Commission's Web site at
http://www.sec.gov. Such information may also be inspected and copied at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, (ii) the Company's Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, 1996, June 30, 1996 and September 30, 1996,
respectively, and (iii) the Company's Current Reports on Form 8-K filed on
August 5, 1996, November 22, 1996, and December 17, 1996, respectively, all
filed pursuant to Section 13 or 15(d) of the Exchange Act. All documents filed
by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in any Prospectus Supplement
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference into this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to Investor
Relations, WorldCorp, Inc., 13873 Park Center Road, Suite 490, Herndon, Virginia
20171 (telephone: (703) 834-9200).
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM INVESTOR RELATIONS, WORLDCORP, INC. IN ORDER TO
ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1997.
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 2
PROSPECTUS SUMMARY....................................................... 4
RISK FACTORS............................................................. 13
USE OF PROCEEDS.......................................................... 24
THE EXCHANGE OFFER....................................................... 25
DESCRIPTION OF NEW NOTES................................................. 30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................. 38
PLAN OF DISTRIBUTION..................................................... 41
VALIDITY OF NEW NOTES.................................................... 41
EXPERTS.................................................................. 41
3
<PAGE>
PROSPECTUS SUMMARY
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995:
WorldCorp desires to take advantage of the new "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. WorldCorp wishes to caution
readers that this Exchange Offer contains forward looking statements that are
subject to risks and uncertainties, including, but not limited to, the impact of
competitive products, product demand and market acceptance risks, reliance on
key strategic alliances, fluctuations in operating results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission, including risk factors disclosed in the Company's Form 10-K
for the fiscal year ended December 31, 1995 and those discussed in "Risk
Factors." See "Risk Factors." These risks could cause the Company's actual
results for 1996 and beyond to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company.
The Company
WorldCorp was organized in March 1987 to serve as the holding company for
World Airways, Inc., a Delaware corporation ("World Airways"), which was
organized in March 1948 and is the predecessor to WorldCorp. WorldCorp owns
significant positions in companies that operate in two distinct business areas:
air transportation (through World Airways) and electronic commerce, consumer
telecommunications and on-line services (through InteliData Technologies
Corporation ("InteliData"), a newly-formed Delaware corporation and successor by
merger to US Order, Inc., a Delaware corporation ("US Order") and Colonial Data
Technologies Corporation, a Delaware corporation ("Colonial Data")). WorldCorp
owns its stock in InteliData through WorldCorp Investments, Inc., a Delaware
corporation and wholly owned subsidiary of WorldCorp ("WorldCorp Investments"
and, together with WorldCorp, "WorldCorp").
In February 1994, pursuant to an October 1993 agreement, WorldCorp sold 24.9%
of its ownership in World Airways to MHS Berhad ("MHS"), a Malaysian aviation
company. Effective December 31, 1994, WorldCorp increased its ownership in World
Airways to 80.1% through the purchase of 5% of World Airways common stock held
by MHS. In October 1995, World Airways completed an initial public offering in
which 2,000,000 shares of its common stock were issued and sold by World Airways
and 900,000 shares were sold by WorldCorp. As of November 7, 1996, WorldCorp and
MHS owned approximately 61.2% and 17.6%, respectively, of the outstanding common
stock of World Airways. In June 1995, US Order completed an initial public
offering whereby 3,062,500 shares of its common stock were issued and sold by US
Order, and 1,365,000 shares were sold by WorldCorp. On November 7, 1996, US
Order and Colonial Data were each merged (the "Mergers") with and into
InteliData. As a result of the Mergers, as of November 7, 1996, WorldCorp owned
approximately 28.9% of the outstanding common stock of InteliData.
The principal executive offices of WorldCorp are located at Washington Dulles
International Airport in The Hallmark Building, 13873 Park Center Road, Herndon,
Virginia 20171. WorldCorp's telephone number is (703) 834-9200.
World Airways
World Airways earns revenue primarily in three distinct markets within the air
transportation industry: passenger and cargo services to major international
air carriers; passenger and cargo services, on a fixed and ad hoc basis, to the
U.S. Government; and international tour operators in leisure passenger markets.
In May 1996, World Airways commenced scheduled charter operations between the
United States and Germany, Switzerland, Ireland, and the United Kingdom. For
its scheduled service operations, World Airways commenced service between Tel
Aviv and New York in July 1995 and commenced service between the U.S. and
4
<PAGE>
South Africa in June 1996. However, World Airways was unable to operate these
markets profitably. Based on disappointing results from its scheduled charter
operations and scheduled service operations and a decision to refocus World
Airways' strategic direction on its core business, World Airways announced in
July 1996 its decision to exit its scheduled charter operations and scheduled
service operations by October 1996. World Airways will focus on operating
aircraft under contracts with international carriers, the U.S. government, and
international tour operators.
World Airways is a contract air carrier that generally charges customers based
on a block hour basis rather than a per seat or per pound basis. A "block hour"
is defined as the elapsed time computed from the moment the aircraft moves at
its point of origin to the time it comes to rest at its destination.
Fluctuations in flight revenues are not necessarily indicative of true growth
because of shifts in the mix between full service contracts and basic contracts.
Under the terms of full service contracts, World Airways is responsible for all
costs associated with operating these contracts and receives a higher rate per
hour. Under the terms of basic contracts, World Airways provides only certain
services associated with the contract including aircraft, crews, insurance, and
maintenance ("Basic Contracts"). World Airways typically charges a lower rate
per hour for Basic Contracts since the customer is responsible for other
operating costs. For this reason, it is important to measure pure growth
through block hours flown rather than actual revenues earned. Typically, U.S.
military contracts are full service contracts where the rate paid is set
annually and consists of all flying costs, including fuel and ground handling of
the aircraft and cargo. World Airways currently operates nine wide-body MD-11
and six DC10-30 aircraft in long-range international markets. Airline
operations accounted for 100% of WorldCorp's operating revenue and operating
income in 1986 through 1991. In 1992 through 1995, revenue from other business
areas represented less than 1% of WorldCorp's total operating revenues.
InteliData
On November 7, 1996, the mergers of US Order and Colonial Data with and into
InteliData were consummated (the "Mergers"). As a result, InteliData has
succeeded to the businesses of US Order and Colonial Data.
InteliData intends to concentrate on three markets: (1) electronic commerce;
(2) consumer telecommunications devices; and (3) on-line services. In the
electronic commerce business, InteliData markets its bill payment and home
banking products to financial institutions. Home banking allows consumers to
pay bills, check account balances and receive other bank information from their
homes. InteliData currently receives its home banking revenue largely from the
sale of products and services to Visa member banks. InteliData has entered into
an agreement with Visa Interactive, Inc. ("Visa Interactive") in the home
banking market. In the consumer telecommunications device business, InteliData
offers a revolutionary smart telephone and an integrated line of caller
identification products through both telephone companies and retailers. Smart
telephones are telephones with a central processing unit, an integrated display
screen and memory which allow consumers to send and receive text information.
InteliData designs, develops, manufactures and markets the smart telephones,
which is available under the Intelifone/TM/ brand name in over 2,000 retail
stores nationwide and under the Telesmart 4000 brand name through telephone
companies. The InteliData smart telephone is the first telephone available at a
mass market price that combines the power of an on-line service, a personal
organizer and caller identification deluxe technology in one package. InteliData
currently offers a line of Caller ID adjunct units and telephones with
integrated Caller ID, small business telecommunications systems with the
Landmark(R) trademark and high-end consumer telecommunications equipment. In the
on-line services business, InteliData delivers information services to users of
smart telephones, digital PCS telephones, alphanumeric pagers and personal
digital assistants. InteliData also repairs and refurbishes telecommunications
products for commercial customers and provides other services that support the
development and implementation of intelligent network services.
Recent Events
On August 29, 1996, WorldCorp entered into a credit agreement (the "First
Union Credit Agreement") with First Union National Bank of Virginia ("First
Union"), pursuant to which WorldCorp borrowed $25.0 million
5
<PAGE>
at an interest rate equal to the London Interbank Offered Rate plus 2.50%. All
borrowings under the First Union Credit Agreement initially were collateralized
by $15.0 million in cash, all of the common stock of InteliData and World
Airways beneficially owned by WorldCorp and a first priority security interest
in the Company's assets. Using the proceeds from the First Union loan, on
September 30, 1996, WorldCorp redeemed all of the remaining outstanding
principal amount of approximately $25.0 million of its 13 7/8% Subordinated
Notes due August 15, 1997 (the "13 7/8% Notes"). In October 1996, the cash
collateralization was reduced to $7.0 million as a result of a $10.0 million
repayment of the monies borrowed under the First Union Credit Agreement. On
December 31, 1996, the Company successfully renegotiated the terms of the First
Union Credit Agreement (the "Renegotiated First Union Credit Agreement").
Pursuant to the Renegotiated First Union Credit Agreement, all borrowings are
now collateralized by $1.0 million in cash, all of the common stock of
InteliData and World Airways beneficially owned by WorldCorp and a first
priority security interest in the Company's assets. In addition, certain
financial covenants have been released.
On September 30, 1996, WorldCorp sold the $10,000,000 in original aggregate
principal amount of its Old Notes pursuant to a purchase agreement, dated as of
September 30, 1996, among WorldCorp and the purchasers named therein (the
"Purchase Agreement"). The initial purchasers of the Notes also received
warrants, dated September 30, 1996 and expiring September 30, 2000, to acquire
120,000 shares of the common stock of WorldCorp, $.001 par value per share (the
"Common Stock"), additional warrants, issuable to such purchasers on October 1,
1997 and expiring on September 30, 2001, to acquire 40,000 shares of Common
Stock and additional warrants, issuable to such purchasers on October 1, 1998
and expiring on September 30, 2002, to acquire 40,000 shares of Common Stock,
which additional warrants will be issued only if certain market conditions are
met (collectively, the "Warrants"). The Warrants have an exercise price of
$6.00 per share, subject to adjustments as set forth therein. Proceeds from the
sale of the Notes were used to repay $10.0 million aggregate principal amount
outstanding under the First Union loan. As of December 1, 1996, the outstanding
principal balance under the First Union Credit Agreement was $15.0 million, and
there was $10.0 million in aggregate principal amount outstanding under the
Notes.
The Purchase Agreement and the First Union Credit Agreement generally restrict
stock repurchases by WorldCorp and its subsidiaries, except under certain
limited circumstances. Pursuant to the First Union Credit Agreement, WorldCorp
may retire or otherwise acquire up to $10.0 million worth of WorldCorp Common
Stock. In addition, WorldCorp was permitted to exchange with the WorldCorp
Employee Savings and Stock Ownership Plan, in a non-cash transaction, Common
Stock held by the trust for common stock of World Airways, provided, WorldCorp
retained a 50.1% ownership of World Airways. Pursuant to the Purchase
Agreement, WorldCorp is permitted to purchase, redeem, retire or otherwise
acquire for value (i) at any time, Common Stock for up to $25.0 million in cash
and up to 650,000 shares of Common Stock using shares of common stock of World
Airways of which WorldCorp is the beneficial owner, and (ii) up to $5.0 million
worth of additional shares of Common Stock for every $15.0 million increase in
Asset Value (as defined herein) at such time compared to such Asset Value as of
September 12, 1996. As of September 30, 1996, the Asset Value was $185.7
million. WorldCorp currently intends, if favorable market conditions exist, to
use available cash and borrowing capacity to make stock repurchases subject to
the limitations imposed by the Purchase Agreement and the First Union Credit
Agreement.
Summary of the Terms of the Exchange Offer
The Exchange Offer relates to the exchange of up to $10,000,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
New Notes. The New Notes will be obligations of the Company entitled to the
benefits of the Indenture. The form and terms of the New Notes are the same as
the form and terms of the Old Notes except that (i) the New Notes have been
registered under the Securities Act and will not contain terms restricting the
transfer thereof and (ii) the New Notes will be subject to the requirements of
the Trust Indenture Act and therefore will be issued under an Indenture (as
defined herein) that provides for various rights and benefits of the holders of
the New Notes to be exercisable, received and coordinated through the Trustee
(as defined herein) in the manner required by the Trust Indenture Act. The Old
Notes and the New Notes are herein collectively referred to as the "Notes." See
"Description of New Notes."
6
<PAGE>
The Exchange Offer.. $1,000 principal amount of New Notes will be issued in
exchange for each $1,000 principal amount of Old Notes
validly tendered pursuant to the Exchange Offer. As of the
date hereof, $10,000,000 in aggregate principal amount of
Old Notes are outstanding. The Company will issue the New
Notes to tendering holders of Old Notes promptly after the
Expiration Date.
Resale.............. The Company believes that the New Notes issued pursuant to
the Exchange Offer generally will be freely transferable
by the holders thereof without registration or any
prospectus delivery requirement under the Securities Act,
except that a "dealer" or any "affiliate" of the Company,
as such terms are defined under the Securities Act, that
exchanges Old Notes held for its own account (a
"Restricted Holder") may be required to deliver copies of
this Prospectus in connection with any resale of the New
Notes issued in exchange for such Old Notes. See "The
Exchange Offer -- General" and "Plan of Distribution."
Expiration Date..... 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and time to
which the Exchange Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
Accrued Interest on
the New Notes and
the Old Notes....... The New Notes will bear interest from September 30,
1996. Holders of Old Notes whose Old Notes are accepted
for exchange will be deemed to have waived the right to
receive any payment in respect of interest on such Old
Notes accrued from September 30, 1996 to the date of the
issuance of the New Notes. Consequently, holders who
exchange their Old Notes for New Notes will receive the
same interest payment on March 31, 1997 (the first
interest payment date with respect to the Old Notes and
the New Notes) that they would have received had they not
accepted the Exchange Offer. See "The Exchange Offer --
Interest on the New Notes."
Termination of the
Exchange Offer...... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the Exchange
Offer could be materially impaired due to any legal or
governmental action, any new law, statute, rule or
regulation or any interpretation of the staff of the
Commission of any existing law, statute, rule or
regulation or if the Company deems it advisable to
terminate the Exchange Offer. Holders of Old Notes will
have certain rights against the Company under the Purchase
Agreement should the Company fail to consummate the
Exchange Offer. See "The Exchange Offer -- Termination."
No federal or state regulatory requirements must be
complied with or approvals obtained in connection with the
Exchange Offer, other than applicable requirements under
federal and state securities laws.
Procedures for
Tendering Old
Notes............... Each holder of Old Notes wishing to accept the Exchange
Offer must
7
<PAGE>
complete, sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes to be exchanged and
any other required documentation, to Norwest Bank
Minnesota, National Association, as Exchange Agent, at the
address set forth herein and therein or effect a tender of
Old Notes pursuant to the procedures for book-entry
transfer as provided for herein. See "The Exchange Offer
-- Procedures for Tendering."
Special Procedures
for Beneficial
Holders............. Any beneficial holder whose Old Notes are registered in
the name of his broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender in the
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender on
his behalf. If such beneficial holder wishes to tender on
his own behalf, such beneficial holder must, prior to
completing and executing the Letter of Transmittal and
delivering his Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in
such holder's name or obtain a properly completed bond
power from the registered holder. The transfer of record
ownership may take considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures.......... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or who
cannot complete the procedure for book-entry transfer on a
timely basis) and a properly completed Letter of
Transmittal or any other documents required by the Letter
of Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights... Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the business day prior
to the Expiration Date, unless previously accepted for
exchange. See "The Exchange Offer -- Withdrawal of
Tenders."
Acceptance of Old
Notes and Delivery
of New Notes........ Subject to certain conditions (as summarized above in
"Termination of the Exchange Offer" and described more
fully in "The Exchange Offer -- Termination"), the Company
will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See
"The Exchange Offer -- General."
Certain Federal
Income Tax
Consequences........ The exchange pursuant to the Exchange Offer will generally
not be a taxable event for federal income tax purposes.
See "Certain Federal Income Tax Consequences."
8
<PAGE>
Exchange Agent...... Norwest Bank Minnesota, National Association, the Trustee
under the Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer.
See "The Exchange Offer -- Exchange Agent."
Use of Proceeds..... There will be no cash proceeds payable to the Company from
the issuance of the New Notes pursuant to the Exchange
Offer. Net proceeds received by the Company from the sale
of the Old Notes were applied to repay a portion of the
amount outstanding under the First Union Credit Agreement.
Summary Description of New Notes
Securities Offered.. $10,000,000 aggregate principal amount of 10.00% Senior
Subordinated Notes due September 30, 2000 (the "New
Notes").
Maturity Date....... September 30, 2000.
Interest............ Payable semi-annually in cash on March 31, and September
30, commencing on March 31, 1997.
Optional Prepayment. The Notes may be prepaid at the election of the Company,
in whole or from time to time in part (in units of at
least $250,000), at par together with accrued interest to
the date of prepayment.
Mandatory Prepay-
ment................ If the Asset Value at the end of any fiscal quarter is
less than $70.0 million, then the Company shall prepay 50%
of each of the then outstanding Notes within 60 days. If
the Asset Value at the end of any fiscal quarter is less
than $50.0 million, then the Company shall prepay all of
the then outstanding Notes within 60 days.
If the Company sells any shares of common stock of
InteliData, 20% of the net proceeds (i.e., gross proceeds
less direct costs associated with such sales) received by
the Company upon such sale will be used to prepay the then
outstanding Notes, pro rata, within 30 days.
Sinking Fund
Payments............ The Company shall prepay pursuant to a sinking fund and
there shall become due and payable 20% of the outstanding
principal amount of the then outstanding Notes, or such
lesser amount as would constitute payment in full of the
then outstanding Notes on such date, on September 30, 1998
and September 30, 1999. No premium shall be payable in
connection with any such sinking fund payment.
Ranking............. The Old Notes are, and the New Notes will be, unsecured,
general obligations of the Company subordinated in right
of payment to all existing and future Senior Indebtedness
of the Company. The New Notes will rank senior in right of
payment to all existing and future Subordinated
Indebtedness of the Company and on parity with the Old
Notes. Senior Indebtedness shall not exceed $50.0 million.
At December 1, 1996 the Company (excluding its
subsidiaries) had $15.0 million of Senior Indebtedness
outstanding. See "Risk Factors -- Ranking of the Notes"
and "Description of New Notes -- Ranking."
9
<PAGE>
Certain Covenants... The Purchase Agreement pursuant to which the Old Notes
were issued and the indenture pursuant to which the New
Notes will be issued (the "Indenture") contains covenants
for the benefit of the holders of the Notes (the
"Holders"), including covenants limiting the incurrence of
additional Senior Indebtedness, the payment of dividends
and other distributions and the terms of additional
Subordinated Indebtedness. See "Description of New Notes
-- Certain Covenants."
Registration Rights. The Company is obligated to file a registration statement
with the Commission with respect to the registration of
the New Notes under the Securities Act and to use its best
efforts to have such registration statement declared
effective, which registration will be effected through the
Exchange Offer. Holders who do not participate in the
Exchange Offer may thereafter hold a less liquid security.
See "Description of New Notes -- Registration Rights."
Risk Factors
For a discussion of certain factors that should be considered by
prospective investors, see "Risk Factors"
10
<PAGE>
Selected Financial Data
The following table sets forth selected consolidated statement of operations
data, operating data and balance sheet data for the Company for the periods
indicated. The historical financial information for, and as of the end of, each
of the years ended December 31, 1991, 1992, 1993, 1994 and 1995 are derived from
the audited consolidated financial statements of the Company for such years.
The selected consolidated statement of operations data for the nine months ended
September 30, 1995 and 1996 and the selected consolidated balance sheet data as
of September 30, 1996 are derived from the unaudited consolidated financial
statements of the Company, which include all adjustments (which were of a normal
and recurring nature), which management considers necessary for a fair
presentation of the data for such periods and at such dates. The results for
the nine months ended September 30, 1996 are not necessarily indicative of
results to be expected for the full year. This information should be read in
conjunction with, and is qualified by reference to, the consolidated financial
statements of the Company and the notes thereto incorporated by reference in
this Prospectus. The unaudited pro forma condensed consolidated balance sheet
data has been prepared as if the Mergers were consummated as of September 30,
1996. The unaudited pro forma condensed consolidated statements of operations
data for the nine months ended September 30, 1996 give effect to the Mergers as
if each was completed as of January 1, 1996. As a result, WorldCorp's pro forma
statement of operations data includes InteliData's results for the period under
the equity method of accounting. Such statements of operations data do not
include the combined effect of the $20.8 million nonrecurring charge for the
Company's share of InteliData's charge for in-process research and development
or the gain on issuance of stock by InteliData of approximately $45.0 million
which will be recorded by the Company as a result of this transaction in the
fourth quarter. However, such statements do reflect adjustments for the
elimination of historical transactions between WorldCorp, US Order and Colonial
Data, amortization of goodwill and related income tax effects.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------- --------------- -------------- -------------- -------------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Operating revenues............................. $268,826 $180,416 $179,932 $182,147 $246,572
Operating expenses............................. 255,397 217,271 203,177/(1)/ 200,959/(2)/ 240,279
-------- --------- --------- -------- --------
Operating income (loss)........................ 13,429 (36,855)/(3)/ (23,245) (18,812) 6,293
Earnings (loss) from continuing
operations before income taxes,
minority interest, extraordinary item
and change in accounting principle.......... 7,311/(4)/ (44,692) (33,698) 10,496/(5)/ 65,685/(6)/
Earnings (loss) from continuing operations
before extraordinary item and change
in accounting principle...................... 6,830 (42,891) (30,945) 8,308 65,122
Extraordinary gain (loss)
on acquisition of debt, net................... 3,535 (3,253) -- -- --
Change in accounting principle................. -- (1,973) -- -- --
Loss from discontinued operations.............. -- -- -- -- (4,914)
Net earnings (loss)............................ $ 10,365 $(48,117) $(30,945) $ 8,308 $ 60,208
======== ========= ======== ======== ========
Primary earnings (loss) per common
equivalent share:
Continuing operations...................... $ 0.70 $ ( 3.39) $ (2.12) $ 0.54 $ 3.81
Net earnings (loss)........................ 0.70 ( 3.39) (2.12) 0.54 3.52
Fully diluted earnings (loss) per common
equivalent share:
Continuing operations...................... $ 0.64 * * $ 0.53 $ 3.03
Net earnings (loss)........................ 0.64 * * 0.53 2.82
Dividends per common share..................... -- -- -- -- --
Operating Data:
Ratio of earnings to fixed charges/(8)/........ 1.27x -- -- 1.33x 2.78x
Deficiency in earnings to cover fixed
charges...................................... -- $ 44,692 $ 33,698 -- --
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------
Historical Historical Pro forma
1995 1996 1996
------------- ----------- -------------
<S> <C> <C> <C>
Results of Operations:
Operating revenues.................................. $188,609 $230,771 $227,833
Operating expenses.................................. 181,212 231,731 215,187
-------- -------- --------
Operating income (loss)............................. 7,397 (960) 12,646
Earnings (loss) from continuing
operations before income taxes,
minority interest, extraordinary
item and change in accounting principle........... 49,075/(7)/ (6,392) 4,844
Earnings (loss) from continuing operations
before extraordinary item and change
in accounting principle........................... 47,493 (6,358) (1,374)
Extraordinary gain (loss) on acquisition
of debt, net...................................... -- -- --
Change in accounting principle...................... -- -- --
Loss from discontinued operations................... (2,017) (19,271) (19,271)
Net earnings (loss)................................. $ 45,476 $(25,629) $(20,645)
======== ======== ========
Primary earnings (loss) per common
equivalent share:
Continuing operations........................... $ 2.79 $ (0.39) $ (0.08)
Net earnings (loss)............................. $ 2.67 $ (1.56) $ (1.25)
Fully diluted earnings (loss) per common
equivalent share:
Continuing operations........................... $ 2.20 * *
Net earnings (loss)............................. 2.11 * *
Dividends per common share.......................... -- -- --
Operating Data:
Ratio of earnings to fixed charges/(8)/............. 2.79x -- 1.22x
Deficiency in earnings to cover fixed
charges........................................... -- $ 6,392 --
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
September 30,
December 31, --------------------------
--------------------------------------------------------- Historical Pro forma
1991 1992 1993 1994 1995 1996 1996
--------- --------- ---------- --------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and short-term investments........... $ 29,147 $ 14,769 $ 17,584 $ 8,828 $ 78,661/(9)/ $ 58,669/(9)/ $ 36,853
Working capital (deficit)................. (4,011) (9,193) (24,850) (34,926) 39,622 (15,343) (33,398)
Total assets.............................. 138,966 93,346 98,119 98,536 202,089 198,636 205,300
Long-term obligations including current
maturities.............................. 94,167 104,192 129,049 119,032 122,167 115,571 115,475
Common stockholders' accumulated deficit.. (30,363) (76,362) (101,073) (88,193) (23,297) (47,198) (22,827)
- -------------------
</TABLE>
* Fully diluted earnings per share are anti-dilutive.
(1) Includes $2.3 million of termination fees related to the early return of
three DC10-30 aircraft.
(2) Includes a $4.2 million reversal of excess accrued maintenance reserves
associated with the expiration of three DC10 aircraft leases in 1994.
(3) Includes a $31.4 million loss on the sale of Key Airlines, Incorporated,
partially offset by $4.1 million related to settlement of contract claims
with the U.S. Government related to Operation Desert Shield/Desert Storm.
(4) Includes a $5.5 million gain as a result of settling litigation with the
State of California Franchise Tax Board.
(5) Includes a $27.0 million gain on the sale of 24.9% of World Airways common
stock and a $14.5 million gain on the sale of US Order's bill payment
operations.
(6) Includes the $51.3 million gain realized on US Order's offering in June 1995
and other stock transactions and the $16.0 million gain realized on World
Airways' offering in October 1995.
(7) Includes the $51.3 million gain realized on US Order's public offering in
June 1995 and other stock transactions.
(8) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) before income taxes, minority interest,
extraordinary items and cumulative effect of change in accounting principle,
fixed charges, and equity in loss of non-consolidated subsidiary. Fixed
charges consist of interest expense, including amortization of debt issuance
costs and one-third of rent expense which is deemed to be representative of
interest expense.
(9) Includes restricted cash of $15.8 million and $0.6 million at September 30,
1996 and December 31, 1995, respectively. In addition, included in cash and
short-term investments as of September 30, 1996 and December 31, 1995, is
$28.6 million and $50.4 million, respectively, of cash held by World Airways
and InteliData, which is not available to satisfy WorldCorp's obligations.
12
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully by
prospective investors in evaluating an investment in the Notes. Set forth below
are certain risk factors with respect to WorldCorp, World Airways, InteliData
and InteliData's predecessor companies, US Order and Colonial Data.
Risk Factors with Respect to WorldCorp:
Holding Company Structure and Liquidity
WorldCorp conducts its operations through its direct and indirect
subsidiaries and has no operations of its own. WorldCorp is highly leveraged
and therefore requires substantial funds to cover debt service each year. As a
result of WorldCorp's cash requirements, it will be required to issue new debt
or equity or to sell additional shares of World Airways' or InteliData's common
stock from time to time. In addition, the payment of dividends and certain
loans and advances to WorldCorp by such subsidiaries are subject to certain
statutory or contractual restrictions, are contingent upon the earnings of such
subsidiaries and are subject to various business considerations. Neither World
Airways nor InteliData is expected to pay dividends in the foreseeable future.
Under the terms of the First Union Credit Agreement, however, WorldCorp has
pledged all of its shares of World Airways and InteliData as collateral for the
loan and has granted First Union a first priority security interest in the
Company's assets,, and as of September 30, 1996, $15.0 million of its cash was
collateralized under the First Union Credit Agreement. In October 1996, the
cash restriction was reduced to $7.0 million as a result of a $10.0 million
repayment of the First Union Credit Agreement. On December 31, 1996, the
Company successfully renegotiated the terms of the First Union Credit Agreement
(the "Renegotiated First Union Credit Agreement"). Pursuant to the Renegotiated
First Union Credit Agreement, all borrowings are now collateralized by $1.0
million in cash, all of the common stock of InteliData and World Airways
beneficially owned by WorldCorp and a first priority security interest in the
Company's assets. In addition, certain financial covenants have been released.
WorldCorp also has announced its intention to purchase up to 2.5 million shares
of its publicly-traded Common Stock pursuant to open market transactions. As of
December 1, 1996, WorldCorp had purchased 1.1 million shares of its Common Stock
for an aggregate cost of approximately $6.8 million pursuant to such purchases.
There can be no assurances, however, that WorldCorp will purchase any additional
shares.
Absence of Public Market for Notes
There is no existing market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell their Notes or the price at which holders of the
Notes may be able to sell their Notes. Future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, WorldCorp's operating results and the market for similar securities.
Ranking of the Notes
The Old Notes are, and the New Notes will be, unsecured, general
obligations of the Company, subordinated in right of payment to all existing and
future Senior Indebtedness of the Company, including indebtedness under the
First Union Credit Agreement. Amounts outstanding under the First Union Credit
Agreement are collateralized by a first priority security interest in the
Company's assets and a pledge of all of the Company's shares of World Airways
and InteliData. Under the terms of the Indenture, Senior Indebtedness shall not
exceed $50.0 million. At December 1, 1996, the Company had $15.0 million of
Senior Indebtedness outstanding. In the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company would be available to
pay obligations on the Notes only after all Senior Indebtedness has been repaid
in full. In addition, under the terms of the New Notes, the Company is required
to use 20% of the net proceeds from sales of the common stock of InteliData it
beneficially owns to repay the Notes. Consequently, sufficient assets may not
exist to pay amounts due on the Notes. In addition, the subordination
provisions of the Indenture provide that no cash payments may be made with
respect to the Notes during the continuance of a payment default under any
Senior Indebtedness of the Company. See "Description of New Notes -- Ranking."
13
<PAGE>
Proposed Restructuring of World Airways
The managements of WorldCorp and World Airways are currently exploring
ways to maximize value for the stockholders of each company. WorldCorp is
evaluating the feasibility of a disposition of its interest in World Airways to
a third party or parties. There can be no assurances, however, that any such
transactions will ultimately be consummated.
Mandatory Prepayment
Pursuant to the Indenture, WorldCorp is obligated under certain
conditions to make certain mandatory prepayments of the Notes. If the Asset
Value at the end of any fiscal quarter is less than $70.0 million, then
WorldCorp must prepay 50% of each of the then outstanding Notes within 60 days.
If the Asset Value at the end of any fiscal quarter is less than $50.0 million,
then WorldCorp must prepay all of the then outstanding Notes within 60 days. If
WorldCorp sells any shares of common stock of InteliData, 20% of the net
proceeds (i.e., gross proceeds less direct costs associated with such sales)
received by WorldCorp upon such sale will be used to prepay the then outstanding
Notes within 30 days. There can be no assurance that WorldCorp will not be
required to make such mandatory prepayments and if so, such prepayments could
have an adverse effect on WorldCorp's financial conditions and results of
operations.
Risk Factors with Respect to World Airways:
Customers
World Airways' business relies heavily on its contracts with Malaysian
Airline System Berhad ("Malaysian Airlines"), P.T. Garuda Indonesia ("Garuda")
and the U.S. Air Force's Air Mobility Command (the "U.S. Air Force"). These
customers provided approximately 39%, 10%, and 20%, respectively, of World
Airways' revenues and 46%, 10%, and 13%, respectively, of the total block hours
during 1995. For the first nine months of 1996, these customers provided
approximately 30%, 14% and 21%, respectively, of World Airways' revenues and
38%, 16%, and 14%, respectively, of total block hours. In addition to these
customers, World Airways recently entered into an agreement with Philippine
Airlines, Inc. ("Philippine Airlines") to provide four MD-11 aircraft under
year-round wet lease contracts. As a result, World Airways expects that the
agreement with Philippine Airlines will have a substantial impact on its
revenues and block hours for 1997. The loss of any of these contracts or a
substantial reduction in business from any of these key customers, if not
replaced, would have a material adverse effect on World Airways' financial
condition and results of operations.
World Airways has provided service to Malaysian Airlines since 1981,
providing wet lease services for Malaysian Airlines' scheduled passenger and
cargo operations as well as transporting passengers for the annual Hadj
pilgrimage. In 1996, World Airways provided three aircraft for Hadj operations.
World Airways recently entered into a new 32-month agreement for year-round
operations (including the Hadj) with Malaysian Airlines whereby World Airways
will provide two aircraft with cockpit crews, maintenance and insurance to
Malaysian Airlines' newly-formed charter division through May 1999.
As a means of improving aircraft utilization, World Airways entered
into a series of multi-year contracts, with expiration dates running from 1997
through 2000, to provide basic services to Malaysian Airlines. The contracts
provide for World Airways' operation of five MD-11 aircraft in passenger and
cargo configurations. Beginning in July 1996, and as mutually agreed between
the parties, World Airways redeployed two aircraft operating under the contract
into other operations. The parties are currently in discussions regarding the
future redeployment of these aircraft into Malaysian Airlines' operations to
meet the contracts' original obligations. For 1995 and the first nine months of
1996, 29% and 24%, respectively, of the World Airways' revenues and 37% and 32%,
respectively, of the World Airways' block hours flown resulted from these new
multi-year contracts with Malaysian Airlines.
World Airways has provided international air transportation to the
U.S. Air Force since 1956. As compensation for pledges of aircraft to the Civil
Reserve Air Fleet ("CRAF") for use in times of national emergency,
14
<PAGE>
the U.S. Air Force awards contracts to CRAF participants for peacetime
transportation of personnel and cargo. The U.S. Air Force awards contracts to
air carriers acting alone or through teaming arrangements in proportion to the
number and type of aircraft that the carriers make available to CRAF. As a
result of World Airways' increasingly effective use of teaming arrangements,
World Airways' fixed awards have grown in recent years and World Airways has one
of the largest U.S. Air Force fixed award under the CRAF program for the U.S.
Government's 1996-97 fiscal year. The current annual contract commenced on
October 1, 1996 and expires on September 30, 1997. These contracts provide for
a fixed level of scheduled business from the U.S. Air Force with opportunities
for additional short-term expansion business on an ad hoc basis as needs arise.
World Airways' fixed award for the current contract is $52.8 million compared to
the $55.4 million fixed award for the prior contract. Due to the utilization of
a significant number of World Airways' aircraft under multi-year contracts and
other contractual commitments, it is unlikely that World Airways will be able to
accept all of the available expansion business. Although overall Defense
Department spending is being reduced, the level of U.S. Air Force contract
awards has remained relatively constant in recent years. World Airways,
however, cannot determine how future cuts in military spending may affect future
operations with the U.S. Air Force.
World Airways has provided wet lease services to Garuda since 1973
(operating under an annual Hadj contract since 1988). World Airways operated
seven aircraft in the 1996 Garuda Hadj.
As mentioned above, World Airways recently entered into an agreement
with Philippine Airlines to provide four MD-11 aircraft under year-round wet
lease contracts. The first two aircraft began flying for Philippine Airlines in
June and July 1996, with the remaining two aircraft commencing operations in
October 1996. Under the agreement, each aircraft will operate for an 18-month
term. In addition, Philippine Airlines has an option, beginning late in 1996,
for World Airways to operate a DC10-30 cargo aircraft.
Competition
The air transportation industry is highly competitive and susceptible
to price discounting. Certain of the passenger and cargo air carriers against
which World Airways competes possess substantially greater financial resources
and more extensive facilities and equipment than those which are now, or will in
the foreseeable future become, available to World Airways.
World Airways' ability to provide service in certain foreign markets
in the future may depend in part on the willingness of the U.S. Department of
Transportation to allocate limited traffic rights to World Airways rather than
to competing U.S. airlines, including major scheduled passenger carriers capable
of carrying greater passenger traffic, and the approval of the applicable
foreign regulators. There can be no assurance that World Airways will be able to
obtain the traffic rights it seeks in expanding its business.
The allocation of military air transportation contracts by the U.S.
Air Force is based upon the number and type of aircraft a carrier, alone or
through a teaming arrangement, makes available for use in times of national
emergencies. The formation of competing teaming arrangements that have larger
partners than those sponsored by World Airways, an increase by other air
carriers in their commitment of aircraft to the emergency program, or the
withdrawal of World Airways' current partners, could adversely affect the size
of the U.S. Air Force contracts, if any, which are awarded to World Airways in
future years.
World Airways believes that the most important bases for competition
in the air cargo business are the payload and cubic capacities of the aircraft,
and the price, flexibility, quality and reliability of the cargo transportation
service. Competitors in the cargo market include all-cargo carriers, such as
Atlas Air, Inc. and Polar Air Cargo, and scheduled and non-scheduled passenger
carriers which have substantial belly capacity.
Cyclical Nature of Air Carrier Business
World Airways operates in a challenging business environment. The air
transportation industry is highly sensitive to general economic conditions.
Since a substantial portion of passenger airline travel (both business and
15
<PAGE>
personal) is discretionary, the industry tends to experience severe adverse
financial results during general economic downturns. The airline industry may
also be adversely affected by unexpected global political developments. The
financial results of air cargo carriers are also adversely affected by general
economic downturns due to the reduced demand for air cargo transportation. In
1993 and 1994, the combination of a generally weak global economy and the
depressed state of the air transportation industry adversely affected World
Airways' operating performance. Although World Airways has experienced a growth
in demand, such that World Airways has increased block hours from continuing
operations flown by 15% in the first nine months of 1996 over the comparable
1995 period and by 41% in 1995 over 1994, there can be no assurance that this
growth will continue.
Seasonality
Historically, World Airways' business has been significantly affected
by seasonal factors. During the first quarter, World Airways typically
experiences lower levels of utilization and yields as demand for passenger and
cargo services is lower relative to other times of the year. World Airways
experiences higher levels of utilization in the second quarter, principally due
to peak demand for commercial passenger services associated with the annual Hadj
pilgrimage. During 1996, World Airways' flight operations associated with the
Hadj pilgrimage occurred from March 22 to June 1. Because the Hadj occurs
approximately 10 to 12 days earlier each year, revenues resulting from future
Hadj contracts are beginning to shift from the second quarter to the first
quarter over the next several years. Historically, fourth quarter utilization
depended primarily on the demand for air cargo services in connection with the
shipment of merchandise in advance of the U.S. holiday season.
As discussed above, World Airways exited its scheduled service
operations in October 1996 to focus on its core business: operating aircraft
under contracts with international carriers, the U.S. Government, and
international tour operators. World Airways believes that its contracts with
Malaysian Airlines, Philippine Airlines and the U.S. Air Force should lessen the
effect of these seasonal factors.
Operating Losses
While World Airways was profitable each year from 1987 through 1992
and in 1995, it sustained operating losses in 1993 and 1994 of $7.3 million and
$5.2 million, respectively, and net losses of $9.0 million in each of these two
years. During the first nine months of 1996, World Airways reported a net loss
of $18.8 million, which resulted from operating losses incurred in World
Airways' scheduled service operations and the related estimated loss on
disposal. Earnings from continuing operations were $13.7 million for the first
nine months ended September 30, 1996. While World Airways expects its
continuing operations to remain profitable, there can be no assurance that World
Airways will be able to maintain this profitability for the remainder of 1996
and future years.
Discontinued Operations
Based on disappointing results from its scheduled service operations
and a decision to refocus World Airways' strategic direction on its core
business, World Airways announced in July 1996 its decision to exit its
scheduled service operations by October 1996. Consistent with this decision,
World Airways ceased all scheduled operations as of October 27, 1996. As a
result, World Airways' scheduled service operations were reflected as
discontinued operations as of June 30, 1996, and prior period results were
restated to reflect scheduled service operations as discontinued operations.
Loss from discontinued operations (net of income tax effect) approximated $11.7
million for the first and second quarters of 1996. In addition, an estimated
loss on disposal of $21.0 million (net of income tax effect), which was recorded
as of June 30, 1996, included the following: estimated operating losses during
the phase-out period; lease costs on unutilized aircraft; passenger reprotection
expenses; and the writeoff of certain leasehold improvements. World Airways
incurred approximately $13.2 million of the costs during the quarter ended
September 30, 1996 and believes that its remaining accrual for estimated losses
on disposal will be adequate to meet the remaining costs to be incurred during
the phase-out period. As of November 8, 1996, World Airways believes that it
has met substantially all of its cash obligations of the phase-out period. As a
result of this decision, World Airways will reduce its fixed overhead costs,
primarily through the elimination of costs related to discontinued operations.
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Liquidity and Capital Resources
World Airways' cash and cash equivalents at September 30, 1996 and
December 31, 1995 were $11.1 million and $25.3 million, respectively. At
September 30, 1996, World Airways' current assets were $43.3 million and current
liabilities were $74.7 million. World Airways believes that the combination of
the financings consummated to date and income from continuing operations will be
sufficient to allow World Airways to meet its cash requirements related to the
phase-out of its discontinued operations and the operating and capital
requirements for its continuing operations for at least the next 12 months.
Maintenance
World Airways outsources major airframe maintenance and power plant
work to several suppliers. World Airways has a 10-year contract ending in
August 2003 with United Technologies Corporation's Pratt & Whitney Group for all
off-wing maintenance on the PW 4462 engines that power its MD-11 aircraft.
Under this contract, the manufacturer agreed to provide such maintenance
services at a cost not to exceed a specified rate per hour during the term of
the contract. The specified rate per hour is subject to annual escalation, and
increases substantially in 1998. Accordingly, while World Airways believes the
terms of this agreement will result in lower engine maintenance costs than it
otherwise would incur during the first five years of the agreement, these costs
will increase substantially during the last seven years of the agreement.
World Airways' maintenance costs associated with the MD-11 aircraft
and PW 4462 engines have been significantly reduced due in part to manufacturer
guarantees and warranties, which guarantees and warranties began to expire in
1995 and will fully expire by 1998. Therefore, World Airways expects that
maintenance expenses will increase as these guarantees and warranties expire.
Aviation Fuel
The air transportation industry in general is affected by the price
and availability of aviation fuel. Both the cost and availability of aviation
fuel are subject to many economic and political factors and events occurring
throughout the world and remain subject to the various unpredictable economic
and market factors that affect the supply of all petroleum products.
Fluctuations in the price of fuel have not had a significant impact on World
Airways' operations in recent years, because, in general, World Airways'
contracts with its customers limit World Airways' exposure to increases in fuel
prices. However, a substantial increase in the price or the unavailability of
aviation fuel could have a material adverse effect on the air transportation
industry in general and on the financial condition and results of operations of
World Airways in particular.
Legal and Administrative Proceedings
World Airways and WorldCorp (the "World Defendants") are defendants in
litigation brought by the Committee of Unsecured Creditors of Washington
Bancorporation (the "Committee") in August 1992, captioned Washington
Bancorporation v. Boster, et. al., Adv. Proc. 92-0133 (Bankr. D.D.C.) (the
"Boster Litigation"). The complaint asserts that the World Defendants received
preferential transfers or fraudulent conveyances from Washington Bancorporation
when the World Defendants received payment at maturity on May 4, 1990 of
Washington Bancorporation commercial paper purchased on May 3, 1990. Washington
Bancorporation filed for relief under the Federal Bankruptcy Code on August 1,
1990. The Committee seeks recovery of approximately $4.8 million from World
Airways and approximately $2.0 million from WorldCorp, which are alleged to be
the amounts paid to each of World Airways and WorldCorp by Washington
Bancorporation. On the motion of the World Defendants, among others, the Boster
Litigation was removed from the Bankruptcy Court to the District Court for the
District of Columbia on May 10, 1993. The World Defendants filed a motion to
dismiss the Boster Litigation as it pertains to them on June 9, 1993, and intend
to vigorously contest liability. On September 20, 1995, the District Court for
the District of Columbia granted the motion to dismiss filed by the World
Defendants with respect to three of the four counts alleged in the litigation,
but declined to grant a motion to dismiss the remaining claim regarding
fraudulent transfers. The District Court's ruling is subject to appeal in
certain cases. The World Defendants filed a summary motion with respect
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to the remaining claim on October 19, 1995, which remains pending. On November
6, 1996, the plaintiff in the Boster Litigation filed a "Motion for Stay of
Litigation Pending Settlement Become Effective" (the "Stay Motion"). The Stay
Motion recites that a settlement agreement has been reached involving the
plaintiff, the Federal Deposit Insurance Corporation, and an individual
resolving other litigation involving Washington Bancorp (the "FDIC Settlement").
If the FDIC Settlement becomes final, the Plaintiff has agreed to dismiss with
prejudice the Boster Litigation against all defendants, including the World
Defendants, with each party to bear its own costs. In that event, the World
Defendants would not have any further liability in the Boster Litigation. The
final resolution of the FDIC Settlement depends upon certain contingencies,
including a request for certain treatment from the Internal Revenue Service.
The FDIC Settlement provides that if all of the conditions to that settlement
are not satisfied by June 30, 1997, either party may elect to terminate that
settlement. The Stay Motion requests an indefinite stay of the Boster
Litigation pending the resolution of the FDIC Settlement. In any event, World
Airways believes it has substantial defenses to this action, although no
assurance can be given of the eventual outcome of this litigation. Depending
upon the timing of the resolution of this claim, if the Committee were
successful in recovering the full amount claimed, the resolution could have a
material adverse effect on the World Airways' financial condition and results of
operations.
In connection with the discontinuance of World Airways' scheduled
service operations, World Airways may be subject to claims by third parties.
One claim has been filed in connection with World Airways discontinuance of
scheduled service to South Africa, seeking approximately $13.8 million in
compensatory and punitive damages. World Airways believes it has substantial
defenses to this action, although no assurance can be given of the eventual
outcome of this litigation. Depending upon the timing of the resolution of this
claim, if the plaintiff were successful in recovering the full amount claimed,
the resolution could have a material adverse effect on the World Airways'
financial condition and results of operations. Although only one claim has been
filed against World Airways, there can be no assurance that additional claims
will not be filed in the future.
In addition, World Airways is party to routine litigation and
administrative proceedings incidental to its business, none of which is believed
by World Airways to be likely to have a material adverse effect on the financial
condition of World Airways.
Proposed Restructuring of World Airways and World Airways Common Stock
Repurchases
The managements of WorldCorp and World Airways are currently exploring
ways to maximize their value for the stockholders of each company, including
actively exploring the feasibility of WorldCorp disposing of a substantial
portion of its ownership position in World Airways. There can be no assurances,
however, that any transaction will ultimately be consummated. In addition,
World Airways has announced its intention to purchase up to one million shares
of its publicly-traded Common Stock pursuant to open market transactions. As of
December 1, 1996, World Airways had purchased shares of its Common Stock for an
aggregate cost of $7.4 million pursuant to such purchases. There can be no
assurances, however, that World Airways will purchase any additional shares.
Employees
World Airways' flight attendants continue to challenge the use of
foreign flight attendant crews on World Airways' flights for Malaysian Airlines
and Garuda Indonesia which has historically been World Airways' operating
procedure. World Airways is contractually obligated to permit its Southeast
Asian customers to deploy their own flight attendants. While World Airways
intends to contest this matter vigorously in an upcoming arbitration, an
unfavorable ruling for World Airways could have a material adverse effect on
World Airways.
Risk Factors with Respect to InteliData:
Uncertainty as to Future Financial Results
US Order and Colonial Data believe that the Mergers will offer
opportunities for long-term efficiencies in operations that should positively
affect future operating results of the combined companies. However, the
combined companies will be more complex and diverse than either US Order or
Colonial Data individually, and the combination and continued operation of their
distinct business operations will present difficult challenges for each
company's
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management due to the increased time and resources required in the management
effort. While managements of both US Order and Colonial Data, and their
respective Boards of Directors, believe that the combination can be effected in
a manner that will realize the potential value of the two companies, neither
management group has experience in combinations of this size. Accordingly,
there can be no assurance that the process of effecting the business combination
can be effectively managed to realize the operational efficiencies anticipated
to result from the Mergers.
In order to maintain and increase profitability, the combined
companies will need to successfully integrate and streamline overlapping
functions following the Mergers. US Order and Colonial Data have different
systems and procedures in many operational areas that must be rationalized and
integrated. There can be no assurances that integration will be accomplished
smoothly or successfully. The difficulties of such integration may be increased
by the necessity of coordinating geographically separated organizations. The
integration of certain operations following the Mergers will require the
dedication of management resources that may temporarily distract attention from
the day-to-day business of the combined companies. Failure to effectively
accomplish the integration of the two companies' operations could have an
adverse effect on InteliData's results of operation and financial condition.
History of Operating Losses
The Mergers were accounted for using the purchase method of accounting
with US Order being deemed the acquiror for financial reporting purposes.
Because US Order as the acquiror has a financial history of operating losses,
InteliData will have a financial history of operating losses. For income tax
purposes, use of US Order's net operating loss carryforwards in future years may
be limited as a result of the change in control that resulted from the Mergers.
In the future, there can be no assurance that InteliData will be able to achieve
profitability and, if achieved, sustain such profitability.
Market Acceptance of Smart Telephones
InteliData's future growth and profitability also will depend upon the
consumer's acceptance of smart telephone technologies and a significant
expansion in the consumer market for telephone-based interactive applications
technologies. Even if these markets experience substantial growth, there can be
no assurance that InteliData's products or services will be successful or
benefit from such growth. InteliData's smart telephone is designed to support
Analog Display Services Interface-based intelligent network services such as
integrated Caller ID and Call Waiting with call disposition features, as well as
new applications such as home banking and national directory assistance. After
the Mergers, much of InteliData's success in the smart telephone market depends
on InteliData's ability to meet design specifications and delivery requirements
for its products and services. There can be no assurance of the timing of the
introduction of, necessary regulatory approvals for, or market acceptance of,
these services and applications. InteliData faces competition in these markets
from other emerging interactive applications delivered through personal
computers, cable television and Integrated Service Digital Network.
Fluctuations in Operating Results
Historically, US Order and Colonial Data have experienced fluctuations
in quarterly operating results, and InteliData may experience fluctuations in
quarterly operating results due to a variety of factors, some of which are
beyond InteliData's control. These include the size and timing of customer
orders or the royalty payments from Visa InterActive, if any, changes in
InteliData's pricing policies or those of its competitors, new product
introductions or enhancements by competitors, delays in the introduction of new
products or product enhancements by InteliData or by its competitors, customer
order deferrals in anticipation of upgrades and new products, market acceptance
of new products, the timing and nature of sales, marketing, and research and
development expenses by InteliData and its competitors, the timing of payments
affecting Caller ID or other intelligent network services by a telco,
disruptions in sources of supply, the effects of regulation on Caller ID and
other intelligent network services, the timing and extent of promotional
activities by a telco, changes in service charges by a telco, other changes in
operating expenses, personnel changes and general economic conditions. No
assurance can be given that such quarterly variations will not occur in the
future and, accordingly, the results of any one quarter may not be indicative of
the operating results for future quarters.
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Technological Considerations
US Order's and Colonial Data's business activities are concentrated in
fields characterized by rapid and significant technological advances. There can
be no assurance that InteliData will remain competitive technologically or that
InteliData's products, processes or services will continue to be reflective of
such advances. Failure to introduce new products or product enhancements that
achieve market acceptance on a timely basis could materially and adversely
affect InteliData's business, operating results and financial condition. There
can be no assurance that InteliData will not encounter unanticipated technical,
marketing or other problems or delays relating to new products, features or
services which US Order and Colonial Data have recently introduced or which
InteliData may introduce in the future. Moreover, there can be no assurance
that InteliData's new products, features or services will be successful, that
the introduction of new products, features or services by InteliData's
competitors will not materially and adversely affect the sales of InteliData's
existing products or that InteliData will be able to adapt to future changes in
the telecommunications industry. Most of US Order's and Colonial Data's
competitors and potential competitors have significantly greater financial,
technological and research and development resources than InteliData has.
Dependence on Foreign Production
Colonial Data's Caller ID units and certain other products, including
the smart phone jointly developed by US Order and Colonial Data, the Telesmart
4000/Intelifone 2000, are manufactured by a company with facilities in Hong
Kong, Taiwan, and the People's Republic of China. These facilities are
supplemented, in part, by other manufacturers in Asia for certain integrated
telephone and small business system products and by limited manufacturing
facilities in Connecticut and Canada. The availability or cost of these Caller
ID Units and smart telephones may be adversely affected by political, economic
or labor conditions in Hong Kong, Taiwan or the People's Republic of China,
including the 1997 return of Hong Kong to China, and by fluctuations in currency
exchange rates. In addition, a change in the tariff structure or other trade
policies of the United States or countries from which InteliData will import
products could adversely affect InteliData's foreign manufacturing strategies.
Dependence on Key Employees
InteliData will be highly dependent on certain key executive officers
and technical employees to fully integrate the operations and business of US
Order and Colonial Data as well as to implement the business plans of InteliData
on an ongoing basis. The loss of any such key employees could have an adverse
impact on the future operations of InteliData.
Regulation
In the United States, Caller ID and other intelligent network services
are subject to federal and state regulation. Caller ID and other intelligent
network services may in the future be subject to further regulation by the
federal government, state public utility commissions and other regulatory
authorities, as well as court challenges, including possible challenges due to
protests from special interest groups that object to such services on the basis
of privacy concerns. An order issued by the Federal Communications Commission
("FCC") effective December 1, 1995, requires all United States telephone service
providers with Signaling System 7 switching architecture to transmit to each
other without charge Caller ID number information on interstate calls within the
United States (except for public pay phones and party lines). The FCC's order
also requires that telcos that offer Caller ID service must provide to their
telephone subscribers without charge a per-call blocking mechanism to block the
transmission of their Caller ID information on interstate calls and must inform
subscribers that their telephone numbers may be identified to a called party and
how to use this blocking capability.
In addition, the Telecommunications Act of 1996 and regulations or
orders promulgated thereunder may result in or accelerate changes in various
aspects of the telecommunications industry, including the competitive
environment, the delivery and pricing of various telecommunications services and
possible consolidation. Although InteliData is unable to predict what effect,
if any, the Telecommunications Act of 1996 or other regulatory developments may
have upon the telecommunications industry or InteliData's business, any such
effects could have a material adverse impact on the future operations of
InteliData.
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In Canada, the Canadian Radio-television and Telecommunications
Commission regulates Caller ID and intelligent network services. InteliData
believes that Canadian regulation of telecommunications devices for intelligent
network services is not more burdensome than regulation in the United States.
Volatility of Stock Price
The market price of both the US Order common stock and the Colonial
Data common stock experienced significant volatility. There can be no assurance
that the InteliData common stock will not also experience significant
volatility. The stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology and
developmental stage companies and that has often been unrelated to the operating
performance of such companies. Factors such as announcements of the
introduction of new products or services by InteliData or its competitors,
announcements of joint development efforts or corporate partnerships in the
interactive applications industry, market conditions in the banking,
telecommunications and other emerging growth company sectors and rumors relating
to InteliData or its competitors may have a significant impact on the market
price of InteliData common stock.
Risk Factors with Respect to US Order:
Minimal Revenue; History of Losses
US Order did not introduce its first commercial product until 1991 and
accordingly has a limited operating history. To date, US Order has generated
limited revenue from the sale of its products and services, has incurred
significant losses and has experienced a substantial negative cash flow. US
Order expects to incur operating losses during 1996. There can be no assurance
that US Order will be able to achieve profitability and, if achieved, sustain
such profitability, nor can there be any assurance as to when such profitability
might be achieved. US Order is subject to all of the risks inherent in the
establishment of a new business enterprise.
Developing Marketplace
Home banking and smart telephones are developing markets. Consumer
preferences in interactive technologies are difficult to predict. US Order's
future growth and profitability will depend, in part, upon consumer acceptance
of electronic home banking and smart telephone technologies and a significant
expansion in the consumer market for telephone-based interactive applications
technologies. Even if these markets experience substantial growth, there can be
no assurance that US Order's products and services will be commercially
successful or benefit from such growth.
Early Stage Products and Services
The continued development of the marketplace for US Order's products
and services will depend in part upon US Order's ability to create and develop
additional applications for US Order's technologies. Many of US Order's
products and services, including its smart telephones, are in the early stages
of development or marketing, and are subject to the risks inherent in the
development and marketing of new products and services.
Restrictions from the Visa Agreement
As a condition of Visa's acquisition of US Order's bill payment
operations and technology (the "Visa Bill-Pay System"), US Order has agreed to
work exclusively with Visa in certain areas and to refrain from certain
activities that are in competition with Visa and its affiliates. These
covenants may increase US Order's reliance upon Visa. US Order's dependence on
Visa, and the terms of the agreement between the parties, may have a material
adverse effect on US Order.
Dependence on Strategic Alliances
US Order's business strategy has been to sell its products and
services through strategic alliances, primarily through a strategic alliance
with Visa InterActive in addition to the alliance with Colonial Data. US
Order's primary
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success will depend both on the ultimate success of its strategic partners as
well as on the ability of its partners to successfully market US Order's
products, services and interactive applications. There can be no assurance that
these alliance partners will view their alliance with US Order as significant
for their own businesses, that they will be successful in achieving their own
business objectives, or that they will not reassess their commitment to US Order
at any time in the future.
Competition
The market for interactive products and services is highly competitive
and subject to rapid innovation and technological change, shifting consumer
preferences and frequent new product introductions. US Order's home banking
products and services compete with services offered by a number of competitors
and competition may intensify as a result of new market entrants. Banks have
developed home banking products for their own customers and, in the future, may
offer these services to other banks. Non-banks also may develop home banking
products to offer to banks. Computer software and data processing companies
also offer home banking services. Visa competes with other organizations,
including MasterCard International, Inc., which offers its Masterbanking home
banking service through CheckFree Corporation. Many competitors exist for US
Order's various banking products including other manufacturers of touch-tone
response systems, other financial software companies and financial services
software and service companies. US Order believes that its primary competition
for its customer support services will come from financial institutions and
third parties that choose to offer customer support services either directly
through Visa's customer support messaging standard ("CSMS") product or on their
own. US Order expects that competition in all of these areas will increase in
the near future.
The market for US Order's smart telephone products and services is
highly competitive and subject to rapid technological change. At present, US
Order's principal competitors in the market for smart telephones are or will be
Philips Home Services, Inc. ("Philips"), Northern Telecom Ltd. ("Northern
Telecom") and CIDCO Incorporated ("CIDCO"). US Order expects competition to
increase in the future from existing and new competitors and expects new
competitors to include electronics manufacturers. US Order's competitors,
including Philips and Northern Telecom, have already introduced smart telephones
that include technological features incorporated in US Order's Telesmart
4000/Intelifone 2000 smart phone product. US Order expects that as the market
for smart telephones grows, it will face competition from traditional personal
computer on-line service providers, as well as from personal computer software
companies.
Reliance on Visa Royalty Payments
US Order sold the Visa Bill-Pay System to Visa on August 1, 1994, for
approximately $15 million in cash, the assumption of certain liabilities and
rights to a 72-month royalty period commencing January 1, 1995 and ending
December 31, 2000 (the "Royalty Period"). Visa subsequently transferred these
assets to Visa InterActive, its wholly owned subsidiary. The royalty obligation
is based on the number of customers who use the Visa Bill-Pay System during the
Royalty Period. The agreement with Visa expressly provides that the royalty
will apply only if the means by which a customer makes an electronic bill
payment involves the use of a "significant portion" of the Visa Bill-Pay System.
Royalties to US Order are calculated and paid by Visa InterActive
quarterly during the Royalty Period. Because the amount of the royalties to US
Order is dependent upon the number of customers that use the Visa Bill-Pay
System on a monthly basis during the Royalty Period, US Order cannot provide any
assurances of the amount of royalties, if any, that will be payable by Visa
InterActive to US Order. The royalty payment will be reduced for each quarter
through December 31, 1997, by an offset amount (the "Visa Offset") which is
initially set at $73,315. If the royalty payment that would otherwise be due in
respect of a quarter is smaller than the offset amount for that quarter, no
royalty payment will be made to US Order, and the difference between $73,315 and
the royalty otherwise due will increase the size of the Visa Offset for the next
quarter. The aggregate amount of the Visa Offset for the Royalty Period is
$879,780. US Order did not receive any royalty revenue from Visa in 1995 or
1996 due to the Visa Offset and does not expect to receive any royalty revenue
after application of the Visa Offset until sometime in 1997.
In addition, under the terms of its agreement with Visa, Visa
InterActive is not obligated to pay royalties to
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US Order for active bank customers who utilize home banking and bill payment
technology independently developed by Visa InterActive. If Visa InterActive
independently develops or acquires its own home banking and bill payment
technology which does not use or build upon US Order's technology, this could
have a material adverse effect on the amount of royalties payable by Visa
InterActive to US Order. As a condition of Visa's acquisition of the Visa Bill-
Pay System, US Order has agreed to work exclusively with Visa in certain areas
and to refrain from certain activities that are in competition with Visa and its
affiliates. These covenants may increase US Order's reliance upon Visa.
Risk Factors with Respect to Colonial Data:
Reliance on Caller ID Revenues
During the year ended December 31, 1995 and the nine months ended
September 30, 1996, substantially all of Colonial Data's revenues were derived
from sales and leases of its Caller ID products. The sale or lease of these
products is directly linked to the implementation and promotion of Caller ID
service by telcos. The timing of such implementation may be affected by
government regulation, by changes in the telecommunications industry resulting
from changes in the regulatory and competitive environment, by switch and
software upgrades and by other factors. There can be no assurance that telcos
will continue to introduce and promote this service successfully or that it will
gain widespread market acceptance. Delays in the introduction of Caller ID
service in local markets or failure of this service to gain widespread market
acceptance would materially and adversely affect Colonial Data's business,
operating results and financial condition.
Competition
The market for Colonial Data's products is highly competitive and
subject to rapid technological change. At present, Colonial Data's principal
competitors are CIDCO, Lucent Technologies, Inc., formerly part of AT&T Corp.
("Lucent"), Northern Telecom and US Electronics, Inc. ("US Electronics")
products. Colonial Data's Caller ID products also compete with Caller ID
telephones offered by Panasonic Co., Sony Corp. and Thomson Consumer
Electronics, Inc.
The smart telephone marketed by Colonial Data through its alliance
with US Order is subject to competition from smart telephones marketed or
developed by Philips, Northern Telecom and CIDCO as well as other emerging
platforms for interactive applications delivered through personal computers and
cable television. Colonial Data expects competition to increase in the future
from existing and new competitors, possibly including telcos or other current
customers, from network switch-based services and from the increased application
of cellular technology. Colonial Data's primary current and potential
competitors in the market for products that support intelligent network services
have substantially greater financial, marketing and technical resources than
Colonial Data. Competition could materially and adversely affect Colonial
Data's results of operations through price reductions and loss of market share.
Colonial Data competes with a large number of competitors for its
repair services and other services supporting the development and implementation
of intelligent network services. Several of Colonial Data's competitors in the
market for such services have substantially greater financial, marketing and
technological resources than Colonial Data. There can be no assurance that
Colonial Data will be able to continue to compete successfully against its
existing competitors or that it will be able to compete successfully against new
competitors.
Concentration of Distribution of Products and Services
Colonial Data sells its products and services to telcos, individual
telephone subscribers, other equipment manufacturers on a private label basis
and retail chains. In addition, Colonial Data leases its products to individual
telco subscribers. Sales and leases to individual telco subscribers are largely
dependent on direct fulfillment distribution arrangements with certain Regional
Bell Operating Companies ("RBOCs") and other telcos. Since Colonial Data views
the telcos with which it maintains direct fulfillment relationships as its
customers, it considers its customer base to be highly concentrated. In 1995,
Colonial Data's three largest customers (including telcos with which Colonial
Data maintains direct fulfillment relationships) accounted for 59%, of which the
top two accounted for 48%, of its revenues. In the six months ended June 30,
1996, the three largest customers accounted for 51%, of which the top two
accounted
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for 38%, of Colonial Data's revenues. Colonial Data's current telco fulfillment
arrangements are not exclusive and may be terminated by either party. The loss
of any one or more of Colonial Data's major customers or the termination of its
distribution arrangements with any telco or the failure to be selected for
significant orders or programs by a telco could materially and adversely affect
Colonial Data's business, operating results, and financial condition. In
addition, consolidation in the telecommunications industry could result in the
loss of such customers or business.
Management of Growth
During recent periods, Colonial Data has experienced a rapid rate of
growth. Colonial Data has responded to the growth in its business by
significantly increasing its service, support and administrative facilities and
staff. However, there can be no assurance that Colonial Data will be able on a
timely basis to anticipate its future requirements for personnel, facilities or
systems or to maintain the levels of customer service that it has provided in
the past. The inability of Colonial Data to anticipate and meet these
requirements, or a decline in the quality of Colonial Data's customer service or
delays in the delivery of Colonial Data's products could materially and
adversely affect Colonial Data's business.
Limited Proprietary Protection
Colonial Data possesses limited patent or registered intellectual
property rights with respect to its technology. Colonial Data depends in part
upon its proprietary technology and know-how to differentiate its products from
those of its competitors. Colonial Data has relied on US Order for the design
of a new smart telephone. Colonial Data also works independently and from time
to time with third parties with respect to the design and engineering of its own
products. Colonial Data also relies on a combination of contractual rights and
trade secret laws to protect its proprietary technology. There can be no
assurance, however, that Colonial Data will be able to protect its technology or
successfully develop new technology or gain access to such technology or that
third parties will not be able to develop similar technology independently or
that competitors will not obtain unauthorized access to Colonial Data's
proprietary technology, that third parties will not misuse the technology to
which Colonial Data has granted access, or that Colonial Data's contractual or
legal remedies will be sufficient to protect Colonial Data's interests in its
proprietary technology.
A portion of the messaging technology used in Colonial Data's Caller
ID products is licensed on an exclusive basis from Lucent. However, Lucent has
reserved for itself and its subsidiaries the right to use that technology for
all purposes relating to its and its subsidiaries' businesses. Certain of
Lucent's Caller ID patents are licensed by Lucent to Colonial Data and others,
including Colonial Data's competitors. If the Lucent license were terminated
and Colonial Data were unable to negotiate a new patent license agreement with
Lucent, Colonial Data would no longer be authorized to manufacture or sell
Caller ID products in the United States other than to the RBOCs and to Lucent,
and Colonial Data's business would be materially and adversely affected.
Limited Sources of Supply
The key components used in Colonial Data's products are currently
being purchased from multiple sources, except for its application specific
integrated circuit ("ASIC") chips, which are purchased from a single source.
The only supply contract to which Colonial Data is a party is with the maker of
its ASIC chips. Colonial Data has no other supply contracts for its components.
Although Colonial Data believes it could develop other sources for each of the
components for its products, the process could take several months, and the
inability or refusal of any such source to continue to supply components could
have a material adverse effect on Colonial Data pending the development of an
alternative source.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of
the New Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Company will receive in exchange Old Notes
in like principal amount, the terms of which are the same in all material
respects as the form and terms of to the
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New Notes except that (i) the New Notes have been registered under the
Securities Act and will not contain terms restricting the transfer thereof and
(ii) the New Notes will be subject to the requirements of the Trust Indenture
Act and therefore will be issued under an Indenture that provides for various
rights and benefits of the holders of the New Notes to be exercisable, received
and coordinated through a Trustee in the manner required by the Trust Indenture
Act. The Old Notes surrendered in exchange for the New Notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the New Notes
will not result in any increase in the indebtedness of the Company.
The net proceeds received by the Company from the offering of the Old
Notes was approximately $10.0 million and was used to repay a portion of the
amount outstanding under the First Union Credit Agreement.
THE EXCHANGE OFFER
General
In connection with the sale of the Old Notes, the purchasers thereof
became entitled to the benefits of certain registration rights as set forth in
the Purchase Agreement. Pursuant to the Purchase Agreement, the Company agreed,
to file, at its cost, a registration statement with the Commission with respect
to registration of the New Notes under the Securities Act and to use its best
efforts to have such registration statement declared effective, which
registration will be effected through the Exchange Offer. Upon such
registration statement being declared effective, the Company has agreed to offer
the New Notes in return for surrender of the Old Notes. For each Old Note
surrendered to the Company under the Exchange Offer, the Holder will receive a
New Note of equal principal amount. Interest on each New Note will accrue from
September 30, 1996. In the event that applicable interpretations of the staff
of the Commission do not permit the Company to effect the Exchange Offer or
under certain other circumstances, the Company has agreed to file, at its cost,
a shelf registration statement with the Commission with respect to resales of
the Old Notes under the Securities Act, and to use its reasonable best efforts
to cause to become effective a shelf registration statement with respect to
resales of the Old Notes. The Company shall, in the event of such a shelf
registration, provide to each holder copies of the prospectus, notify each
holder when the shelf registration statement for the Old Notes has become
effective and take certain other actions as are required to permit resales of
the Old Notes.
In the event the Exchange Offer is consummated, the Company will not
be required under the Purchase Agreement to file a shelf registration statement
to register any outstanding Old Notes. The Exchange Offer shall be deemed to
have been consummated upon the earlier to occur of (i) the Company having
exchanged New Notes for all outstanding Old Notes pursuant to the Exchange Offer
and (ii) the Company having exchanged, pursuant to the Exchange Offer, New Notes
for all Old Notes that have been tendered and not withdrawn on the Expiration
Date. In such event, holders of Old Notes seeking liquidity in their investment
would have to rely on exemptions to registration requirements under the
securities laws, including the Securities Act. See "Description of New Notes --
Registration Rights" and "Risk Factors."
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Old Notes properly tendered prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer in denominations of $1,000 and integral
multiples thereof.
Based on no-action letters issued by the staff of the Commission to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Notes. Any holder of Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes could not rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-
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dealer that receives New Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
This Prospectus, together with the accompanying letter of transmittal
(the "Letter of Transmittal"), is being sent to all registered holders of Old
Notes as of , 1997 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old
Notes when, as and if the Company has given oral or written notice thereof to
Norwest Bank Minnesota, National Association (the "Exchange Agent"). See "--
Exchange Agent." The Exchange Agent will act as agent for the tendering holders
of Old Notes for the purpose of receiving New Notes from the Company and
delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender pursuant to the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean , 1997, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Old Notes not previously accepted, if any of the conditions set
forth herein under "Termination" shall have occurred and shall not have been
waived by the Company (if permitted to be waived by the Company), by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the exchanging holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to the Dow Jones News Service.
Interest on the New Notes
The New Notes will bear interest from September 30, 1996, payable
semiannually on March 31 and September 30, of each year commencing on March 31,
1997, at the rate of 10.00% per annum. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued from September 30, 1996
until the date of the issuance of the New Notes. Consequently, holders who
exchange their Old Notes for New Notes will receive the same interest payment on
March 31, 1997 (the
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first interest payment date with respect to the Old Notes and the New Notes)
that they would have received had they not accepted the Exchange Offer.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date.
The tender by a holder of Old Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its
address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for such holders.
The method of delivery of Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
a reliable overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery. No Letter of Transmittal or Old
Notes should be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder.
Any beneficial holder whose Old Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial holder
wishes to tender on his own behalf, such beneficial holder must, prior to
completing and executing the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
such holder's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old
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Notes the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost by the Exchange Agent to the tendering holder of such Old
Notes unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
(a) purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
Exchange Offer.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the Old
Notes, the certificate number or numbers of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within five business days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the Old Notes
to be tendered in prior form for transfer and any other documents
required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer and all other documents
required by the Letter of Transmittal are received by the Exchange
Agent within five business days after the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which
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any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described above
under "Procedures for Tendering" at any time prior to the Expiration Date.
Termination
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer, that, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer, (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute rule or regulation is interpreted by
the staff of the Commission in a manner, that, in the Company's judgment, might
materially impair the Company's ability to proceed with the Exchange Offer, or
(iii) the Company reasonably deems it advisable to terminate the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn, or (iv) amend the offer. If such waiver constitutes a
material change in the Exchange Offer, the Company will disclose such change by
means of a supplement to this Prospectus that will be distributed to each
registered holder of Old Notes, and the Company will extend the Exchange Offer
for a period of five to 10 business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders if the Old Notes,
if the Exchange Offer would otherwise expire during such period. See
"Description of New Notes -- Registration Rights."
Exchange Agent
Norwest Bank Minnesota, National Association, the Trustee under the
Indenture, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
By Mail: Norwest Bank Minnesota, National Association
P.O. Box 1517
Minneapolis, Minnesota 55480-1517
Attention: Corporate Trust Operations
By Overnight Courier: Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Operations
Facsimile Transmission: (612) 667-4927
Confirm by Telephone: (612) 667-9764
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By Hand: Norwest Bank Minnesota, National Association
Northstar East, 12th Floor
608 2nd Avenue
Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Operations
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and employees of the Company and its affiliates in person, by telegraph
or telephone.
The Company will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services
estimated to be approximately $1,000 and will reimburse the Exchange Agent for
its reasonable out-of-pocket expenses in connection therewith. The Company may
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, Letters of Transmittal and related documents to the beneficial
owners of the Old Notes and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Accounting Treatment
The expenses of the Exchange Offer will be amortized by the Company
over the term of the New Notes under generally accepted accounting principles.
DESCRIPTION OF NEW NOTES
The New Notes will be, issued under an Indenture, dated as of
September 30, 1996 (the "Indenture"), among the Company, as Issuer, and Norwest
Bank Minnesota, National Association, as Trustee (the "Trustee"). The Indenture
is governed by the Trust Indenture Act.
The following summary of certain provisions of the Indenture and the
New Notes does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Indenture and the New
Notes including the definitions of certain terms therein and those terms made a
part thereof by the Trust Indenture Act. Whenever particular Sections or
defined terms of the Indenture not otherwise defined herein are referred to,
such Sections or defined terms are incorporated herein by reference. References
in this section to the "Notes" shall be references to the Old Notes and the New
Notes.
The Indenture authorizes a maximum principal amount of $10,000,000 of
New Notes at any one time outstanding. The New Notes will be issued solely in
exchange for an equal principal amount of Old Notes pursuant
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<PAGE>
to the Exchange Offer. See "-- Registration Rights." The form and terms of the
New Notes are the same in all material respects as the form and terms of the Old
Notes except that (i) the New Notes have been registered under the Securities
Act and will not contain terms restricting the transfer thereof and (ii) the New
Notes will be subject to the requirements of the Trust Indenture Act, and
therefore will be issued under an Indenture that provides for various rights and
benefits of the holders of the New Notes to be exercisable, received and
coordinated through a trustee in the manner required by the Trust Indenture Act.
General
The Old Notes are, and the New Notes will be, unsecured senior
subordinated obligations of the Company and will mature on September 30, 2000.
The New Notes will bear interest at the rate of 10.00% from September 30, 1996
or from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semiannually on March 31 and September 30 of each year,
commencing March 31, 1997.
Principal of and interest on the New Notes will be payable at the
corporate trust office of the Trustee in Minneapolis, Minnesota, and the New
Notes may be presented for registration of transfer or exchange, at the office
or agency of the Company maintained for that purpose in Herndon, Virginia;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Holders as such address appears in the
Security Register.
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
Ranking
The indebtedness evidenced by the Old Notes is, and the New Notes will
be, unsecured, general obligations of the Company, subordinated in right of
payment, as set forth in the Purchase Agreement and the Indenture, respectively,
to the prior payment of all present and future Senior Indebtedness of the
Company, whether outstanding on the date of issuance or thereafter incurred.
All Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes and all Indebtedness of the Company that is Subordinated
Indebtedness will rank junior to the Notes in accordance with the provisions of
the Purchase Agreement and the Indenture. The Old Notes and the New Notes will
rank in parity with each other.
In the event that the Company defaults in the payment of any principal
of (or premium, if any) or interest on any Senior Indebtedness when the same
becomes due and payable, whether at maturity or at a date fixed for repayment or
by declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of Senior Indebtedness or any trustee
therefor or representative thereof, unless and until such default shall have
been cured or waived or shall have ceased to exist, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) shall be made
or agreed to be made on account of the principal of or interest on any of the
Notes, or in respect of any prepayment, retirement, purchase or other
acquisition of any of the Notes. In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its property,
(ii) any proceeding for the liquidation, dissolution or other
winding up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
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(iii) any assignment by the Company for the benefit of creditors,
or
(iv) any other marshalling of the assets of the Company,
all Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made to any holder of any of the Notes on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions of the Purchasing Agreement
and the Indenture with respect to the indebtedness evidenced by the Notes, to
the payment of all Senior Indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for such subordination provisions) be
payable or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness in accordance with the priorities
then existing among such holders until all Senior Indebtedness (including any
interest thereof accruing after the commencement of any such proceedings) shall
have been paid in full. In the event of any such proceeding, after payment in
full of all sums owing with respect to Senior Indebtedness, the Holders of the
Notes shall be entitled to be paid from the remaining assets of the Company the
amounts at the time due and owing on account of unpaid principal of and interest
on the Notes and such other obligations before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Company ranking junior to the
Notes and such other obligations.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the Holders of Notes shall be subrogated to all
rights of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the indebtedness
evidenced by the Notes shall have been paid in full, and such payments or
distributions received by such Holders, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or distributed to the
holders of Senior Indebtedness, shall, as between the Company and its creditors
other than the holders of Senior Indebtedness, on the one hand, and such
Holders, on the other hand, be deemed to be a payment by the Company on account
of Senior Indebtedness, and not on account of the Notes.
No provision contained in the Purchase Agreement, the Indenture or the
Notes will affect the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, and interest on the Notes. The
subordination provisions of the Purchase Agreement, the Indenture and the Notes
do not prevent the occurrence of any Event of Default under the Purchase
Agreement, the Indenture or the Notes or limit the rights of the Trustee or any
Holder to pursue any other rights or remedies with respect to the Notes.
By reason of the subordination provisions contained in the Purchase
Agreement and the Indenture, in the event of bankruptcy, liquidation, insolvency
or other similar proceedings, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Holders of the Notes, and
creditors of the Company who are not holders of Senior Indebtedness may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Holders of the Notes.
Certain Covenants
The Indenture contains covenants including, among others, those set forth
below.
Subordination
The Company shall cause all future Subordinated Indebtedness to be
subordinated to the Notes in the same manner, on the same terms and to the same
extent as the Notes are subordinated to Senior Indebtedness pursuant to the
Purchase Agreement and the Indenture, and the Company shall include such terms
in any agreement, note or instrument evidencing such future Subordinated
Indebtedness.
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Stock Repurchase
Each subsidiary of the Company shall be permitted to, directly or
indirectly, repurchase, redeem, retire or otherwise acquire for value any of its
shares of capital stock of any class or any warrants, rights, options to
purchase or acquire any shares of its capital stock.
Limitations on Senior Indebtedness
The Company agrees that Senior Indebtedness shall not exceed $50.0 million.
Limitation on Dividends, Distributions and Certain Transactions
The Company shall not declare or pay any dividend or make any distribution
on or in respect of any of its capital stock or to its stockholders (other than
dividends or distributions payable solely in its capital stock) or purchase,
redeem or otherwise acquire or retire for value any capital stock or any
warrants, rights or options (including any securities convertible into or
exercisable or exchangeable for such capital stock, but not including the Notes
or the warrants) of the Company or any subsidiary of the Company, provided,
however, that unless a default or an Event of Default (as defined herein) has
occurred and is continuing, such provisions shall not prevent (i) the retirement
of any shares of the Company's capital stock by exchange for, or out of the
proceeds of, the substantially concurrent sale of other shares of its capital
stock, (ii) the purchase, redemption, retirement or other acquisition for value,
at any time, of the Common Stock using $25.0 million in cash and up to 650,000
shares of Common Stock using shares of common stock of World Airways of which
the Company is the beneficial owner or (iii) any prepayment of the Notes
pursuant to the terms thereof; provided, further, that such provisions shall not
prevent the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment complied with the
provisions of this limitation on dividends. The Company shall also be able to
repurchase, redeem, retire or otherwise acquire for value up to $5.0 million of
additional shares of Common Stock for every $15.0 million increase in Asset
Value at such time compared to such Asset Value as of September 12, 1996.
"Asset Value" is defined in the Indenture to mean (A) the market value of the
common stock of World Airways beneficially owned by the Company, the common
stock of InteliData beneficially owned by the Company, the common stock of any
other Subsidiary of the Company beneficially owned by the Company which is
listed on an exchange or quoted on the Nasdaq National Market, and the Common
Stock, in each case measured based on the monthly closing prices of each of the
common stocks as listed on the New York Stock Exchange or the Nasdaq National
Market, as the case may be, plus (B) the value of all other tangible assets of
the Company calculated in accordance with GAAP consistently applied, measured
based on the value of such assets as of the applicable date of calculation. As
of September 12, 1996, the Asset Value was $165.7 million.
Optional Prepayment
The Notes may be repaid at the election of the Company, in whole or from
time to time in part (in units of at least $250,000), at par together with
accrued interest to the date of prepayment.
Mandatory Prepayment
If the Asset Value at the end of any fiscal quarter of the Company is less
than $70.0 million, then the Company shall prepay 50% of each of the then
outstanding Notes within 60 days of the end of such fiscal quarter. If the
Asset Value at the end of any fiscal quarter of the Company is less than $50.0
million, then the Company shall prepay all of the then outstanding Notes within
60 days of the end of such fiscal quarter. As of September 30, 1996, the Asset
Value was $185.7 million.
If the Company sells any shares of common stock of InteliData, 20% of the
net proceeds (i.e., gross proceeds less direct costs associated with such sales)
received by the Company upon such sale will be used to prepay the then
outstanding Notes, pro rata, within 30 days.
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Sinking Fund Payments
The Company shall prepay pursuant to a sinking fund, and there shall become
due and payable 20% of the outstanding principal amount of each of the then
outstanding Notes, or such lesser amount as would constitute payment in full of
the then outstanding Notes on such date, on September 30, 1998 and September 30,
1999. No premium shall be payable in connection with any such sinking fund
payment.
The Company (i) may deliver outstanding New Notes (other than any
previously called for prepayment or any sinking fund payment) and (ii) may apply
as a credit New Notes that have been prepaid at the election of the Company
pursuant to the terms of such New Notes, in satisfaction of all or any part of
any sinking fund payment with respect to the New Notes required to be made;
provided that such New Notes have not been previously so credited. Such New
Notes shall be received and credited for such purpose by the Trustee for
prepayment through operation of the sinking fund and the amount of such sinking
fund payment shall be reduced accordingly.
Consolidation
The Company shall not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to any person, and the Company shall not permit any person to consolidate with
or merge into the Company, unless (i) in case the Company shall consolidate with
or merge into another person or convey, transfer or lease its properties and
assets substantially as an entirety to any person, the person formed by such
consolidation or into which the Company is merged or the person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws of the United
States of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, the due and punctual payment of the principal of and interest on
all the Notes and the performance or observance of every covenant of the
Indenture on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and (iii) the Company has
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, conveyance, transfer or lease and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture, complies with the Indenture and that all conditions
precedent therein provided for relating to such transaction have been complied
with.
Commission Reports
Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will file with the Commission and provide the Trustee and Holders of the
Notes with such annual reports and such information, documents and other reports
as may be required by the Trust Indenture Act, such information, documents and
other reports to be so filed and provided at the times specified for the filing
of such information, documents and reports under the Trust Indenture Act.
Events of Default
The following events will be defined as "Events of Default" in the
Indenture:
(i) default shall occur in the payment of interest on any New Note when the
same shall have become due and such default shall continue for more than 10
calendar days; or (ii) default shall occur in the making of any required
prepayment on any of the New Notes as provided in Section 1102 of the Indenture
or sinking fund payment as provided in Section 1201 of the Indenture or in the
making of any other payment of the principal of any New Notes at their stated
maturity; or (iii) default shall be made in the payment of the principal of or
interest or premium on Indebtedness of the Company and its subsidiaries
aggregating in excess of $5.0 million, as and when the same shall become due and
payable by the lapse of time, by declaration of acceleration, by call for
redemption or otherwise, and such default shall continue beyond the period of
grace, if any, allowed with respect thereto unless such default is being
contested in good
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faith by appropriate actions or proceedings; or (iv) default shall occur in the
observance or performance of any other covenant of the Indenture which is not
remedied within 30 calendar days after the Company has received written notice
thereof; or (v) any representation or warranty made by the Company in the
Indenture, or made by the Company in any statement or certificate furnished by
the Company in connection with the consummation of the issuance and delivery of
the New Notes or furnished by the Company pursuant thereto, is untrue in any
material respect as of the date of the issuance or making thereof; or (vi) any
judgment, writ or warrant of attachment or any similar process in an aggregate
amount in excess of $5.0 million shall be entered or filed against the Company
or any subsidiary of the Company or against any property or assets of either and
remain unpaid, unvacated, unbonded or unstayed (through appeal or otherwise) for
a period of 60 days after the date of entry or filing thereof; or (vii) the
Company or any subsidiary of the Company shall: (A) generally not pay its debts
as they become due or admit in writing its inability to pay its debts generally
as they become due; (B) file a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Federal Bankruptcy Code, or any
similar applicable bankruptcy or insolvency law, as now or in the future amended
(herein collectively called "Bankruptcy Laws"), or an answer or other pleading
admitting or failing to deny the material allegations of such a petition or
seeking, consenting to or acquiescing in relief provided for under the
Bankruptcy Laws; (C) make an assignment of all or a substantial part of its
property for the benefit of its creditors; (D) seek or consent to or acquiesce
in the appointment of a receiver, liquidator, custodian or trustee of it or for
all or a substantial part of its property; (E) be subject to the entry of a
court order, which shall not be vacated, set aside or stayed within 45 days from
the date of entry, appointing a receiver, liquidator, custodian or trustee of it
or for all or a substantial part of its property; (F) be subject to the
institution against it of bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings pursuant to the Bankruptcy Laws or any other
proceedings for judicial modification or alteration of the rights of creditors,
which proceedings are not dismissed within 60 days after such institution or
which otherwise result in the Company or such subsidiary being finally
adjudicated a bankrupt or insolvent; or (G) be subject to the assumption of
custody or sequestration by a court of competent jurisdiction of all or a
substantial part of its property, which custody or sequestration shall not be
suspended or terminated within 60 days from its inception.
When any Event of Default described in clause (i) or (ii) above has
occurred and is continuing, any Holder of any New Note may, and when any Event
of Default described in clauses (iii) through (vi) above, both inclusive, has
occurred and is continuing, the Holder or Holders of a majority in aggregate
principal amount of the New Notes at the time outstanding may, by notice in
writing, declare the entire principal and all interest accrued on all New Notes
to be due and payable. When any Event of Default described in paragraph (vii)
has occurred and is continuing, all of the New Notes, and all interest accrued
thereon, shall automatically become due and payable. Upon the New Notes
becoming due and payable as a result of any Event of Default, the Company will
pay to the Holders of the New Notes the entire principal of, and interest
accrued on, the New Notes. The Company has further agreed to pay to the Holder
or Holders of the New Notes all costs and expenses incurred by them in the
collection or enforcement of any New Notes upon any such default hereunder or
thereon, including reasonable attorneys' fees.
If the principal of and accrued interest on all or any outstanding New
Notes have been declared immediately due and payable by reason of any Event of
Default, the Holders of a majority in aggregate principal amount of the New
Notes then outstanding may within 90 days of the New Notes becoming due and
payable, by written instrument filed with the Company, rescind and annul such
declaration and the consequences thereof, provided that at the time such
declaration is annulled and rescinded: (i) no judgment or decree has been
entered for the payment of any monies due pursuant to the New Notes or the
Indenture; (ii) all arrears of interest upon all the New Notes and all other
sums payable under the New Notes and under the Indenture shall have been duly
paid; and (iii) each and every default and Event of Default shall have been made
good, cured or waived pursuant to Section 513 of the Indenture.
The Holders of at least a majority in principal amount of the then
outstanding New Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the New
Notes, provided that: (i) such direction shall not be in conflict with any rule
of law or with the Indenture, expose the Trustee to personal liability or be
unduly prejudicial to holders not joining therein, and (ii) the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction. The Holders of not less than a majority in principal amount of
the then outstanding New Notes may on behalf of the Holders of all the New Notes
waive any past default hereunder with
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respect to such Securities and its consequences, except a default:
(A) in the payment of the principal of or interest on any New Note, or
(B) in respect of a covenant or provision which under Article Nine of
the Indenture cannot be modified or amended without the consent of the
Holder of each outstanding New Note affected.
No Holder of any New Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless: (i) such
Holder has previously given written notice to the Trustee of a continuing Event
of Default with respect to the New Notes; (ii) the holders of not less than 25%
in principal amount of the then outstanding New Notes shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder; (iii) such Holder or Holders have
offered to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request; (iv) the Trustee for
60 days after its receipt of such notice, request and offer of indemnity has
failed to institute any such proceeding; and (v) no direction inconsistent with
such written request has been given to the Trustee during such 60-day period by
the Holders of a majority in principal amount of the then outstanding New Notes;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of the Indenture to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any other
of such Holders or to enforce any right under the Indenture, except in the
manner herein provided and for the equal and ratable benefit of all of such
Holders.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the New Notes), its property or its creditors, the Trustee shall be
entitled and empowered, by intervention in such proceeding or otherwise, to take
any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to file and prove a claim for the
whole amount of principal and interest owing and unpaid in respect of the New
Notes and to file such other papers or documents as may be necessary or
advisable in order to have claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements, and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial proceeding,
and to collect and receive any moneys or other property payable or deliverable
on any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is authorized pursuant to the Indenture by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607 of the Indenture. The Indenture also
requires certain officers of the Company to certify, within 30 days after the
end of each fiscal quarter, that Senior Indebtedness did not exceed $50.0
million and that no mandatory prepayment of the Notes is required.
No provision of the Indenture authorizes the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the New Notes
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and may be a member of the creditors'
committee.
The Indenture will require certain officers of the Company to certify,
within 120 days after the end of each fiscal year, that a review of the
activities of the Company during such year and of the Company's performance
under the Indenture has been made under such officer's supervision and whether
such officer knows of any defaults by the Company under the Indenture throughout
such year or, if there has been such a default, specifying each such default and
the nature and status thereof. The Company will also be obligated to notify the
Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture.
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Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding New Notes; provided that no such
modification or amendment may, without the consent of each Holder of the New
Notes affected thereby, (i) change the stated maturity of the principal of, or
any installment of principal of or interest on, any New Note, or reduce the
principal amount thereof or the rate of interest thereon upon the prepayment
thereof, or change the method of determination of interest thereon, or change
any provisions with respect to prepayments pursuant to Article Eleven of the
Indenture or sinking fund payments pursuant to Article Twelve of the Indenture,
or change any place of payment where, or the coin or currency in which, any Note
or the interest thereon is payable or impair the right to institute suit for the
enforcement of any such payment or the provisions of this Indenture with respect
to the subordination of the Securities, in a manner adverse to the Holders of
the New Notes, or (ii) reduce the percentage in principal amount of the then
outstanding New Note, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences) provided for in the Indenture, or
(iii) modify any of the provisions of Section 902, Section 513 or Section 1008
of the Indenture, except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding New Note affected thereby.
Regarding the Trustee
Norwest Bank Minnesota, National Association is the Trustee under the
Indenture and is also the Exchange Agent in the Exchange Offer.
Denomination
Old Notes initially sold to institutional "accredited investors" were
issued only in fully registered definitive form without coupons, in
denominations of $1,000 of principal amount and integral multiples of $1,000 in
excess thereof. New Notes may be issued only in fully registered definitive
form without coupons, in denominations of $1,000 and integral multiplies
thereof.
Governing Law
The Indenture provides that it and the New Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
Registration Rights
The Company is a party to the Purchase Agreement with the initial
purchasers of the Old Notes, pursuant to which the Company has agreed, for the
benefit of the holders of the Old Notes to file, at its cost, a registration
statement with the Commission with respect to registration of the Old Notes
under the Securities Act and to use its best efforts, to have such registration
statement declared effective, which registration will be effected through the
Exchange Offer. In the event that applicable interpretations of the staff of
the Commission do not permit the Company to effect the Exchange Offer or under
certain other circumstances, the Company has agreed to file, at its cost, a
shelf registration statement with the Commission under the Securities Act and to
use its reasonable best efforts to cause such shelf registration statement to
become effective with respect to resales of the Old Notes. The Company shall,
in the event of such a shelf registration, provide to each holder copies of a
prospectus, notify each holder when the shelf registration statement for the Old
Notes has become effective and take certain other actions as are required to
permit resales of the Old Notes.
In the event the Exchange Offer is consummated, the Company will not be
required under the Purchase Agreement to file a shelf registration statement to
register any outstanding Old Notes. The Exchange Offer shall be
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deemed to have been consummated upon the earlier to occur of (i) the Company
having exchanged New Notes for all outstanding Old Notes pursuant to the
Exchange Offer or (ii) the Company having exchanged, pursuant to the Exchange
Offer, New Notes for all Old Notes that have been tendered and not withdrawn on
the Expiration Date. In such event, holders of Old Notes seeking liquidity in
their investment would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act.
Interest on each New Note will accrue from September 30, 1996 or from the
most recent interest payment date to which interest was paid on the Old Note
surrendered in exchange therefor or on the New Note, as the case may be. The
New Notes will bear interest at the original interest rate borne by the Old
Notes.
The summary herein of certain provisions of the Purchase Agreement and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Purchase Agreement and
the Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the ownership and disposition of the Notes. This summary deals
only with Notes held as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), by
holders ("Holders") that for United States federal income tax purposes are (i)
citizens or residents of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. Thus, the following does not address any tax consequences that apply
specifically to nonresident aliens or foreign entities. Moreover, it does not
discuss all of the tax consequences that may be relevant to a Holder in light of
his particular circumstances or to Holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities,
individual retirement and certain tax deferred accounts, and persons who engage
in a straddle or a hedge relating to a Note. The following also assumes that a
Holder will not make an election to treat all interest on a Note as original
issue discount pursuant to pertinent Treasury Regulations. This summary is
based on existing laws, existing and proposed regulations, and applicable
judicial and administrative determinations, all of which are subject to change
at any time, and any such changes may be retroactively applied in a manner that
could adversely affect Holders.
Exchange Offer
For United States federal income tax purposes, the Exchange will be
disregarded and each New Note will be treated as a continuation of the
corresponding Old Note. Accordingly, Holders will not recognize gain or loss
upon the Exchange.
Interest on the Notes
Interest on a Note generally will be taxable to a Holder as ordinary
interest income at the time it accrues or is received in accordance with the
Holder's method of accounting for federal income tax purposes. In addition,
special rules governing the treatment of original issue discount will apply to
the Notes, as described below, and consequently Holders of Notes will be taxed
on additional income as such discount accrues.
Original Issue Discount
The Old Notes were issued, and the New Notes (as a continuation of the Old
Notes) will be treated as issued, with original issue discount ("OID") within
the meaning of Section 1273 of the Code because a portion of the issue price of
the Old Notes and Warrants must be allocated to Warrants, causing the issue
price of an Old Note to be less than its principal amount. The Company has
determined that, for each $1,000 principal amount of the Old Notes, $34.65 of
the total issue price is allocable to Warrants, and $965.35 is allocable to the
Old Notes. That allocation will be binding on each Holder, unless the Holder
explicitly discloses that his allocation of issue price between an Old Note
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and Warrants is different from that allocation. Unless otherwise provided by
the Internal Revenue Service, such disclosure must be made on a statement
attached to the Holder's timely filed federal income tax return for the taxable
year in which the Holder acquired the Old Note.
The amount of OID on a Note is the excess of the "stated redemption price
at maturity" over the "issue price" of the Note. The stated redemption price at
maturity of a Note is the total of all payments provided by the Note excluding
payments of qualified stated interest. The semiannual interest payments on the
Notes are qualified stated interest payments. Thus, the stated redemption price
at maturity is the stated principal amount, and the amount of OID is $34.65 per
$1,000 of principal amount. Holders of the Notes (including Holders who are
cash basis taxpayers) will include OID in income currently as interest as it
accrues over the life of the Notes under a formula based upon the semiannual
compounding of interest at a rate that provides for a constant yield to
maturity, which (based on the Company's allocation of issue price to the Old
Notes) is 11.253%. Under this formula, Holders of the Notes generally will have
to include in gross income greater amounts of OID in each successive accrual
period. As further described below, accrued OID generally must be included in
income by subsequent as well as original Holders of the Notes.
In general, the amount of OID that a Holder of a Note must include in
income for a taxable year is the sum of the "daily portions" of OID on the Note
for all days during the taxable year that such Holder owns the Note. Such daily
portions are determined by allocating to each day in the accrual period a
ratable portion of the OID allocable to that accrual period. An accrual period
is each successive period that ends on March 31 or September 30. In the case of
an initial Holder of an Old Note, the amount of OID on a Note allocable to each
accrual period is determined by multiplying the "adjusted issue price" of the
Note by its yield to maturity (based on compounding at the close of each accrual
period). The adjusted issue price of a Note at the beginning of any accrual
period will be the sum of its issue price and the amount of OID allocable to all
prior accrual periods, reduced by the amount of any payments (other than
payments of qualified stated interest) made with respect to such Note in all
prior accrual periods. A subsequent Holder also will be required to include in
gross income daily portions of OID with respect to the Note. However, if such a
subsequent Holder acquires the Note for an amount greater than the Note's
adjusted issue price (i.e., at an acquisition premium), the subsequent Holder's
daily portions of OID with respect to the Note will be reduced by an allocable
portion of the amount by which the price paid by such Holder (up to the stated
principal amount) exceeds the Note's adjusted issue price.
The Company is to provide annual information statements to certain
noncorporate Holders and to the Internal Revenue Service stating the amount of
OID determined to have accrued on the Notes. A Holder that acquires a Note at
an acquisition premium must independently determine the amount of OID includible
in income with respect to such Note.
Sale or Retirement of Notes
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Note, a Holder will recognize gain or loss equal
to the difference between the amount realized on such sale, retirement or other
disposition and the Holder's adjusted tax basis in the Note or part thereof.
Any recognized gain or loss will be capital gain or loss, except to the extent
of any accrued market discount (see "Market Discount" below), and such capital
gain or loss will be long-term if the holding period for the Note is more than
one year at the time of sale, retirement or other disposition. For these
purposes, the amount realized does not include any amount received for accrued
interest on a Note, which will be taxable as interest income. A Holder's
adjusted tax basis in a Note acquired by purchase will equal the cost of such
Note to the Holder, increased by the amount of any accrued OID and market
discount included in taxable income by the Holder with respect to such Note and
reduced by any amortized Section 171 premium (see "Amortizable Premium" below)
and any prior payments (other than payments of qualified stated interest) on the
Note to the Holder. The redemption of only part of a Note will require the
allocation of the entire note's adjusted tax basis and adjusted issue price
between the redeemed part and the part retained by the Holder in order to
determine gain or loss and future accruals of OID.
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Market Discount
A secondary market purchaser of a Note at a discount from the adjusted
issue price of the Note acquires such Note with "market discount." However,
market discount with respect to a Note will be considered to be zero if such
market discount is minimal, i.e., less than the product of (A) 0.25% of the
adjusted issue price of such Note multiplied by (B) the weighted average
maturity of the Note after the date of purchase. Under Section 1276 of the
Code, the purchaser of a Note with more than a minimal amount of market discount
generally will be required to treat any gain on the sale, exchange, redemption
or other disposition of all or part of the Note as ordinary income to the extent
of accrued (but not previously taxable) market discount. Market discount
generally will accrue ratably during the period from the date of purchase to the
maturity date of the Note, unless the Holder irrevocably elects to accrue such
market discount on the basis of a constant interest rate.
Under Section 1277 of the Code, a Holder who has acquired a Note at a
market discount generally will be required to defer any interest deductions
attributable to any indebtedness incurred or continued to purchase or carry the
Note, to the extent such deductions exceed interest and OID income on the Note.
Any such deferred interest expense generally will be allowable as a deduction
not later than the year in which the related market discount is recognized. As
an alternative to the inclusion of market discount in income upon disposition of
a Note, a Holder may make an election to include market discount in income as it
accrues on all market discount instruments acquired by the Holder during or
after the taxable year for which the election is made. In that case, the
preceding deferral rule for interest expense will not apply.
Amortizable Premium
A secondary market purchaser of a Note at a premium over the stated
principal amount of the Note (plus accrued interest) generally may elect to
amortize such premium ("Section 171 premium") from the purchase date to the
maturity date, under a constant yield method that reflects semiannual
compounding. Amortized Section 171 premium generally will be treated as an
offset to interest income on a Note and not as a separate deduction.
Section 171 premium does not include any acquisition premium attributable
to the portion of a purchase price for a Note that exceeds the adjusted issue
price but not the stated principal amount of such Note. As described above
under "Original Issue Discount," such an acquisition premium reduces the amount
of OID includible in the income of the Holder.
Backup Withholding
A Holder may be subject to "backup withholding" under certain
circumstances. Backup withholding applies to a Holder if the Holder, among
other things, (i) fails to furnish his social security number or other taxpayer
identification number ("TIN") to the payor responsible for backup withholding
(for example, the Holder's securities broker), (ii) furnishes such payor an
incorrect TIN, (iii) fails to provide such payor with a certified statement,
signed under penalties of perjury, that the TIN provided to the payor is correct
and that the Holder is not subject to backup withholding, or (iv) fails to
report properly interest and dividends on his tax return. Backup withholding,
however, does not apply to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. The backup withholding rate is 31%
of "reportable payments," which generally will include interest payments and
principal payments on the Notes.
The federal income tax discussion set forth above may not be applicable to
a Holder, depending upon a Holder's particular situation, and therefore each
Holder should consult his tax advisor with respect to the tax consequences of
the ownership and disposition of the Notes, including the tax consequences under
state, local, foreign and other tax laws and the possible effects of changes in
federal or other tax law.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale for a period of 90 days from the date of this
Prospectus, or shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for New Notes and resold by such
broker-dealers.
The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days from the date of this Prospectus, or such
shorter period as will terminate when all Old Notes acquired by broker-dealers
for their own accounts as a result of market-making activities or other trading
activities have been exchanged for New Notes and resold by such broker-dealers,
the Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal.
VALIDITY OF NEW NOTES
The validity of the New Notes will be passed upon for the Company by
Hunton & Williams, Richmond, Virginia. In rendering its opinion on the validity
of the New Notes, Hunton & Williams will express no opinion as to Federal or
state laws relating to fraudulent transfers.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995
and 1994, and the related consolidated statements of operations, changes in
common stockholders' deficit and cash flows for each of the years in the three-
year period ended December 31, 1995, and the related financial statement
schedules, included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, incorporated by reference herein, have been
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated herein by reference, and
upon the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Colonial Data as of December
31, 1995 and 1994, and for each of the fiscal years in the three-year period
ended December 31, 1995, incorporated by reference herein and in the
Registration Statement, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
41
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
WorldCorp, Inc., a Delaware corporation (the "Company"), is empowered
by Section 145 of the Delaware General Corporation Law, subject to the
procedures and limitations stated therein, to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in the defense of any threatened,
pending or completed action, suit or proceeding in which such person is made a
party by reason of his or her being or having been a director or officer of
WorldCorp. The statute provides that such indemnification is not exclusive of
other rights or indemnification to which a person may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
The Certificate of Incorporation and Bylaws of WorldCorp provide that WorldCorp
shall indemnify its directors and officers to the full extent permitted by the
Delaware General Corporation Law.
WorldCorp is also empowered by Section 102(b) of the Delaware General
Corporation Law to include a provision in its Certificate of Incorporation that
limits a director's liability to WorldCorp or its stockholders for monetary
damages for breaches of his or her fiduciary duty except for (i) a breach of the
director's duty of loyalty to WorldCorp or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) improper dividend payments, stock repurchases or
redemptions; and (iv) any transaction from which the director derived an
improper personal benefit. Article 10 of WorldCorp's Certificate of
Incorporation includes such a provision.
Policies of insurance are maintained by the Company under which
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been directors or officers of the Company.
The Company has entered into indemnification agreements with its
officers and directors that indemnify such officers and directors to the full
extent permitted by law against all expenses, judgments, fines or settlement
amounts incurred or paid by them in any action or proceeding, including any
action by or in the right of the Company on account of their service as a
director or officer of the Company.
Item 21. Exhibits and Financial Statement Schedules.
4.1 Article 10 of the Company's Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-
4, as amended, (Commission File No. 33-012735) filed on March 19, 1987, and
Article VIII of the Company's Bylaws, incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-4, as amended,
(Commission File No. 33-012735) filed on March 19, 1987.
4.2 Indenture dated as of September 30, 1996 between the Company and Norwest
Bank Minnesota, National Association, as Trustee.
4.3 Purchase Agreement dated as of September 30, 1996 among the Company and the
purchasers named therein.
5.1 Opinion of Hunton & Williams.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
II-1
<PAGE>
23.3 Consent of Hunton & Williams (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of the Registration
Statement).
25.1 Statement of Eligibility of Norwest Bank Minnesota, National Association,
Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether or not
such indemnification is against public policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Herndon,
Commonwealth of Virginia on January 9, 1997.
WORLDCORP, INC.
By: /s/ T. Coleman Andrews, III
---------------------------
T. Coleman Andrews, III
President and Chief Executive Officer
II-3
<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on January 9, 1997. Each of the directors and/or officers
of WorldCorp, Inc. whose signature appears below hereby appoints T. Coleman
Andrews, III, William F. Gorog and Andrew M. Paalborg as his attorney-in-fact to
sign in his name and behalf, in any and all capacities stated below and to file
with the Securities and Exchange Commission, any and all amendments, including
post-effective amendments to this registration statement, making such changes in
the registration statement as appropriate, and generally to do all such things
in their behalf in their capacities as officers and directors to enable
WorldCorp, Inc. to comply with the provisions of the Securities Act of 1933, and
all requirements of the Securities and Exchange Commission.
Signature Title
--------- -----
/s/ T. Coleman Andrews, III Chief Executive Officer, President
- ----------------------------------- and Director
T. Coleman Andrews, III
/s/ William F. Gorog Director and Chairman of the Board
- ----------------------------------- (Principal Executive Office)
William F. Gorog
/s/ Mark S. Lynch Vice President and Chief Financial
- ----------------------------------- Officer (Principal Financial
Mark S. Lynch Officer and Principal Accounting
Officer)
/s/ Gideon Argov Director
- -----------------------------------
Gideon Argov
/s/ John C. Backus, Jr. Director
- -----------------------------------
John C. Backus, Jr.
/s/ James E. Colburn Director
- -----------------------------------
James E. Colburn
/s/ Patrick F. Graham Director
- -----------------------------------
Patrick F. Graham
/s/ Geoffrey S. Rehnert Director
- -----------------------------------
Geoffrey S. Rehnert
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Article 10 of the Company's Certificate of Incorporation, incorporated
by reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-4, as amended, (Commission File No. 33-012735) filed on March 19,
1987, and Article VIII of the Company's Bylaws, incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on Form
S-4, as amended, (Commission File No. 33-012735) filed on March 19,
1987.
4.2 Indenture dated as of September 30, 1996 between the Company and Norwest
Bank Minnesota, National Association, as Trustee.
4.3 Purchase Agreement dated as of September 30, 1996 among the Company and
the purchasers named therein.
5.1 Opinion of Hunton & Williams.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Hunton & Williams (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of the Registration
Statement).
25.1 Statement of Eligibility of Norwest Bank Minnesota, National
Association, Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
<PAGE>
Exhibit 4.2
================================================================================
WORLDCORP, INC.
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee
------------------------------
INDENTURE
Dated as of September 30, 1996
------------------------------
$10,000,000
10.00% Senior Subordinated Notes
due September 30, 2000
================================================================================
<PAGE>
Reconciliation and tie between
the Trust Indenture Act of 1939 and Indenture,
dated as of September 30, 1996
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
--------------- -----------------
<S> <C>
(S) 310(a)(1).............................................................609
(a)(2)...........................................................609
(a)(3)................................................Not Applicable
(a)(4)................................................Not Applicable
(a)(5)......................................................608, 610
(b).........................................................608, 610
(c)...................................................Not Applicable
(S) 311(a)................................................................613
(b)..............................................................613
(S) 312(a)........................................................701, 702(a)
(b)...........................................................702(b)
(c)..............................................................703
(S) 313(a)................................................................703
(b)..............................................................703
(c)..............................................................703
(d)..............................................................703
(S) 314(a)..........................................................704, 1007
(b)...................................................Not Applicable
(c)(1)...........................................................102
(c)(2)...........................................................102
(c)(3)................................................Not Applicable
(d)...................................................Not Applicable
(e)..............................................................102
(f)...................................................Not Applicable
(S) 315(a)................................................................601
(b)..............................................................602
(c)..............................................................601
(d)..............................................................601
(e)..............................................................514
(S) 316(a)................................................................101
(a)(1)(A)........................................................512
(a)(1)(B)........................................................513
(a)(2)................................................Not Applicable
(b)..............................................................508
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(S) 317(a)(1).............................................................503
(a)(2)...........................................................504
(b).............................................................1003
(S) 318(a)................................................................107
(c)..............................................................107
</TABLE>
- ---------------------
* This table shall not, for any purpose, be deemed to be a part of the
Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions................................................. 1
Section 102. Compliance Certificates and Opinions........................ 8
Section 103. Form of Documents Delivered to Trustee...................... 8
Section 104. Acts of Holders............................................. 9
Section 105. Notices, Etc., to Trustee and Company...................... 10
Section 106. Notice to Holders; Waiver.................................. 11
Section 107. Conflict with Trust Indenture Act.......................... 11
Section 108. Effect of Headings and Table of Contents................... 12
Section 109. Successors and Assigns..................................... 12
Section 110. Separability Clause........................................ 12
Section 111. Benefits of Indenture...................................... 12
Section 112. Governing Law.............................................. 12
Section 113. Legal Holidays............................................. 12
Section 114. No Security Interest Created............................... 13
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally............................................ 13
Section 202. Form of Trustee's Certificate of Authentication........... 13
Section 203. Form of Face of Security................................... 14
Section 204. Form of Reverse of Security................................ 15
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms............................................ 19
Section 302. Denominations.............................................. 19
Section 303. Execution, Authentication, Delivery and Dating............. 19
Section 304. Temporary Securities....................................... 20
Section 305. Registration, Registration of Transfer and Exchange........ 21
Section 306. Mutilated, Destroyed, Lost and Stolen Securities........... 22
Section 307. Payment of Interest; Interest Rights Preserved............. 23
Section 308. Persons Deemed Owners...................................... 24
Section 309. Cancellation............................................... 24
Section 310. Computation of Interest.................................... 24
<PAGE>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.................... 25
Section 402. Application of Trust Money................................. 25
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.......................................... 25
Section 502. Acceleration of Maturity; Rescission and
Annulment.................................................. 27
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee..................................... 28
Section 504. Trustee May File Proofs of Claim........................... 29
Section 505. Trustee May Enforce Claims Without Possession
of Securities.............................................. 30
Section 506. Application of Money Collected............................. 30
Section 507. Limitation on Suits........................................ 30
Section 508. Unconditional Right of Holders to Receive
Principal and Interest..................................... 31
Section 509. Restoration of Rights and Remedies......................... 31
Section 510. Rights and Remedies Cumulative............................. 32
Section 511. Delay or Omission Not Waiver............................... 32
Section 512. Control by Holders......................................... 32
Section 513. Waiver of Past Defaults.................................... 32
Section 514. Undertaking for Costs...................................... 33
Section 515. Waiver of Stay or Extension or Usury Laws.................. 33
ARTICLE SIX
THE TRUSTEE
Section 601. Certain Duties and Responsibilities........................ 34
Section 602. Notice of Defaults......................................... 35
Section 603. Certain Rights of Trustee.................................. 35
Section 604. Not Responsible for Recitals or Issuance of
Securities................................................. 36
Section 605. May Hold Securities........................................ 36
Section 606. Money Held in Trust........................................ 37
Section 607. Compensation and Reimbursement............................. 37
Section 608. Disqualification; Conflicting Interests.................... 37
Section 609. Corporate Trustee Required; Eligibility.................... 38
Section 610. Resignation and Removal; Appointment of
Successor.................................................. 38
Section 611. Acceptance of Appointment by Successor..................... 39
Section 612. Merger, Conversion, Consolidation or
Succession to Business..................................... 40
Section 613. Preferential Collection of Claims Against
Company.................................................... 40
Section 614. Appointment of Authenticating Agent........................ 40
<PAGE>
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses
of Holders................................................. 42
Section 702. Preservation of Information; Communications to
Holders.................................................... 42
Section 703. Reports by Trustee......................................... 43
Section 704. Reports by Company......................................... 43
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, Etc., Only on Certain Terms....... 43
Section 802. Successor Substituted...................................... 44
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent of Holders......... 45
Section 902. Supplemental Indentures With Consent of Holders............ 46
Section 903. Execution of Supplemental Indentures....................... 47
Section 904. Effect of Supplemental Indentures.......................... 47
Section 905. Conformity with Trust Indenture Act........................ 47
Section 906. Reference in Securities to Supplemental Indentures......... 47
Section 907. Notice of Supplemental Indentures ......................... 47
Section 908. Subordination Unimpaired................................... 48
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal and Interest.......................... 48
Section 1002. Company Existence; Maintenance of Office or
Agency..................................................... 48
Section 1003. Money for Securities Payments to Be Held in
Trust...................................................... 48
Section 1004. Limitation on Dividends and Other Distributions............ 50
Section 1005. Stock Repurchases.......................................... 50
Section 1006. Senior Indebtedness........................................ 50
Section 1007. Subordination.............................................. 50
Section 1008. Statement as to Compliance................................. 51
iii
<PAGE>
ARTICLE ELEVEN
PREPAYMENT OF SECURITIES
Section 1101. Optional Prepayment........................................ 51
Section 1102. Mandatory Prepayment....................................... 51
Section 1103. Applicability of Article................................... 52
Section 1104. Election to Prepay; Notice to Trustee...................... 52
Section 1105. Selection by Trustee of Securities to be Prepaid........... 52
Section 1106. Notice of Prepayment....................................... 52
Section 1107. Deposit of Prepayment Price................................ 53
Section 1108. Securities Payable on Prepayment Date...................... 53
Section 1109. Securities Prepaid in Part................................. 54
ARTICLE TWELVE
SINKING FUND
Section 1201. Sinking Fund............................................... 54
Section 1202. Satisfaction of Sinking Fund Payments with Securities...... 54
Section 1203. Prepayment of Securities for Sinking Fund.................. 55
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. Securities Subordinate to Senior Indebtedness.............. 55
Section 1302. Trustee and Holders of Securities May Rely on
Certificate of Liquidating Agent; Trustee May
Require Further Evidence as to Ownership of Senior
Indebtedness; Trustee Not Fiduciary to Holders of
Senior Indebtedness........................................ 58
Section 1303. Payment Permitted If No Default............................ 58
Section 1304. Trustee Not Charged with Knowledge of
Prohibition................................................ 59
Section 1305. Trustee to Effectuate Subordination........................ 59
Section 1306. Rights of Trustee as Holder of Senior
Indebtedness............................................... 59
Section 1307. Article Applicable to Paying Agents........................ 60
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 1401. Immunity of Incorporators, Stockholders, Officers and
Directors.................................................. 60
iv
<PAGE>
INDENTURE, dated as of September 30, 1996, between WORLDCORP, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 13873 Park Center
Road, Suite 490, Herndon, Virginia 20171, and Norwest Bank Minnesota, National
Association, a national banking association duly organized and existing under
the laws of the United States of America, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its 10.00% Senior
Subordinated Notes due September 30, 2000 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
1
<PAGE>
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Value" shall mean (A) the market value of the common stock of World
Airways beneficially owned by the Company, the common stock of InteliData
beneficially owned by the Company, the common stock of any other Subsidiary of
the Company beneficially owned by the Company which is listed on an exchange or
quoted on the Nasdaq National Market, and the Common Stock, in each case
measured based on the monthly closing prices of each of the common stocks as
listed on the New York Stock Exchange or the Nasdaq National Market, as the case
may be, plus (B) the value of all other tangible assets of the Company
calculated in accordance with GAAP consistently applied, measured based on the
value of such assets as of the applicable date of calculation.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities.
"Authorized Newspaper" means a newspaper of general circulation in the
relevant area, printed in the English language and customarily published on each
Business Day therein.
"Bankruptcy Laws" has the meaning specified in Section 501(7).
2
<PAGE>
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board or any director or directors and/or
officer or officers of the Company to whom that board or committee shall have
duly delegated its authority.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means any stock of any class of the Company that has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, a Vice Chairman
of the Board, its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at Northwest
Bank of Minnesota, National Association, Corporate Trust Operations, P.O. Box
1517, Minneapolis, Minnesota 55480-1517.
"Corporation" includes corporations, associations, companies and business
trusts.
"Defaulted Interest" has the meaning specified in Section 307.
"Event of Default" has the meaning specified in Section 501.
3
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" shall mean the generally accepted accounting principles at the time
promulgated by the United States Financial Accounting Standards Board.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person shall mean and include all obligations of such
Person which in accordance with GAAP shall be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(i) obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any lien or other charge to property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) guaranties, (v) capitalized rentals under
any capitalized lease and (vi) any recourse obligations arising upon a sale of
assets. Any Indebtedness extended or renewed, other than at the option of the
obligor pursuant to the terms thereof, will be deemed to have been incurred at
the time of such extension or renewal.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"InteliData" means InteliData Technologies Corporation, a Delaware
corporation and successor by merger to US Order, Inc., a Delaware corporation
and formerly a subsidiary of the Company.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for prepayment or otherwise.
"Officers' Certificate" means a certificate signed by at least two officers
of the Company, one signature being that of the Chairman of the Board, a Vice
Chairman of the Board, the President or a Vice President, and the other
signature being that of the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee.
4
<PAGE>
"Old Notes" means the outstanding 10.00% Senior Subordinated Notes due
September 30, 2000 issued by the Company, with an original aggregate principal
amount of $10,000,000.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or prepayment money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
to be prepaid, notice of such prepayment has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities that have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
5
<PAGE>
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities, means the
place or places where the principal of and interest on the Securities are
payable as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Prepayment Date", when used with respect to any Security to be prepaid,
means the date fixed for such prepayment by or pursuant to this Indenture.
"Purchase Agreement" means the Purchase Agreement, dated as of September
30, 1996, by and among the Company and the purchasers named therein.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the date specified for that purpose as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee customarily performing corporate trust functions.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Senior Indebtedness" means at any date, (i) all Indebtedness of the
Company for money borrowed from any institutional lender secured by any lien or
other charge to the property or assets owned by the Company, whether created
prior to, or after the date of the issuance of the Securities, including
principal and interest on such Indebtedness and all other amounts due on or in
connection with such Indebtedness including all charges, fees and expenses and
(ii) all interest on any Indebtedness referred to in clause (i) accruing during
the pendency of any bankruptcy or insolvency proceeding, whether or not allowed
thereunder. Notwithstanding the foregoing, Senior Indebtedness shall not
include (a) Indebtedness which is pursuant to its terms or any agreement
6
<PAGE>
relating thereto or by operation of law subordinated or junior in right of
payment or otherwise to any other Indebtedness of the Company, and (b) any
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of the Federal Bankruptcy Code, is without recourse to the
Company and (c) the Old Notes.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal or such installment of
principal or interest on such Security is due and payable.
"Subordinated Indebtedness" means any Indebtedness other than the
Securities and the Old Notes that is not Senior Indebtedness. Subordinated
Indebtedness shall include, without limitation, (a) the Company's 7% Convertible
Subordinated Debentures due 2004 and (b) any Indebtedness of the Company to any
Subsidiary of the Company.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities
shall mean the Trustee with respect to Securities.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
"Warrants" means the warrants, dated September 30, 1996 and expiring
September 30, 2000, to acquire 120,000 shares of Common Stock issued to the
original purchasers of the Securities and including additional warrants,
issuable to such purchasers on October 1, 1997 and expiring on September 30,
2001, to acquire 40,000 shares of Common Stock and additional
7
<PAGE>
warrants, issuable to such purchasers on October 1, 1998 and expiring on
September 30, 2002, to acquire 40,000 shares of Common Stock, which additional
warrants will be issued only if certain market conditions set forth in the
Purchase Agreement are met.
"World Airways" means World Airways, Inc., a Delaware corporation and
majority owned subsidiary of the Company.
Section 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters
8
<PAGE>
and one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion are based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security Register.
9
<PAGE>
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(e) The Company may, in the circumstances permitted by the Trust Indenture
Act, fix any day as the record date for the purpose of determining the Holders
of Securities entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder of Securities made by any
Person in respect of any such action, or, in the case of any such vote, prior to
such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation or vote, as
the case may be. With regard to any record date for action to be taken by the
Holders of the Securities, only the Holders of Securities on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(f) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount. Any notice given or action
taken by a Holder or its agents with regard to different parts of such principal
amount pursuant to this paragraph shall have the same effect as if given or
taken by separate Holders of each such different part.
Section 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument,
10
<PAGE>
Attention: Secretary, or at any other address previously furnished in
writing to the Trustee by the Company.
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, registered or certified with postage prepaid, if
mailed; when answered back if telexed; upon electronically confirmed receipt, if
telecopied; and the next Business Day after timely delivery to the courier, if
sent by nationally recognized overnight air courier guaranteeing next day
delivery.
Section 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice to a Holder which is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not such Holder receives such notice. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver. All
such notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, registered or certified with postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by nationally
recognized overnight air courier guaranteeing next day delivery.
In case, by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause, it shall be impracticable to give
notice of any event to Holders by mail when such notice is required to be given
pursuant to any provision of this Indenture, then such notification as shall be
made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with the duties
imposed by any of Sections 310 through 317, inclusive, of the Trust Indenture
Act through the operation of Section 318(c) thereof, such imposed duties shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
11
<PAGE>
provision shall be deemed to apply to this Indenture as so modified or shall be
deemed to be so excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 112. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to its
conflict of laws principles or rules, provided, however, that the rights,
duties, standard of care and immunities of the Trustee in connection with the
administration of its trust hereunder shall be governed by the laws of the State
of New York.
Section 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Prepayment Date, sinking fund
payment date or Stated Maturity of any Security shall not be a Business Day at
any Place of Payment, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Prepayment Date,
sinking fund payment date or at the Stated Maturity, provided that no interest
shall accrue for the period
12
<PAGE>
from and after such Interest Payment Date, Prepayment Date, sinking fund payment
date or Stated Maturity, as the case may be.
Section 114. No Security Interest Created.
----------------------------
Except as provided in Section 607 herein, nothing in this Indenture or in
the Securities, express or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect in any jurisdiction where property of the
Company or its Subsidiaries is or may be located.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any organizational document, any applicable law or with
the rules of any securities exchange on which the Securities are listed or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved or may
be produced in any other manner permitted by the rules of any securities
exchange upon which the Securities may be listed all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
Section 202. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities therein referred to in the within-mentioned
Indenture.
Norwest Bank Minnesota, National
Association, as Trustee
By
---------------------------
Authorized Officer
13
<PAGE>
Section 203. Form of Face of Security.
------------------------
WORLDCORP, INC.
10.00% SENIOR SUBORDINATED NOTE
Due September 30, 2000
_______________
Registered Note No. R-___ September 30, 1996
$____________
WorldCorp, Inc., a Delaware corporation (herein called the "Company," which
term includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ____________________ or registered
assigns, on the thirtieth day of September, 2000, the principal amount of
______________________________ Dollars ($__________) and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 10.00%
per annum from the date hereof or from and including the most recent Interest
Payment Date to which interest has been paid or duly provided for until
maturity, payable on March 31 and September 30 in each year, commencing on March
31, 1997, and at maturity, and to pay interest on overdue principal and (to the
extent legally enforceable) on any overdue installment of interest at the rate
of 12.00% per annum after maturity or the date due thereof, until paid. Any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture. Notice of a Special Record Date shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date. Payment of
the principal of and interest on the Securities shall be made by wire transfer
of immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address.
This Note was issued on January __, 1997, in substitution of a note issued
on September 30, 1996, with original issue discount ("OID") for federal income
tax purposes. For each $1,000
14
<PAGE>
principal amount of this Note, the issue price is $965.35 and the amount
of OID is $34.65. The yield to maturity of this Note is 11.253%, compounded
semi-annually.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Security may be declared due prior to its expressed maturity date,
voluntary prepayments may be made hereon and certain prepayments are required to
be made hereon, all in the events, on the terms and in the manner provided in
the Indenture. Such prepayments include (i) certain required prepayments on
September 30, 1998 and September 30, 1999 and upon the occurrence of certain
events specified in the Indenture, and (ii) certain optional prepayments. The
principal of this Security may not be prepaid prior to the expressed maturity
date except as provided in the Indenture.
WORLDCORP, INC.
By:
--------------------------------------
Name:
Title:
Section 204. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its 10.00% Senior Subordinated Notes due September 30,
2000 (herein called the "Securities"), limited in aggregate principal amount to
$10,000,000, issued and to be issued under an Indenture, dated as of September
30, 1996 (herein called the "Indenture"), between the Company and Norwest Bank
Minnesota, National Association, as Trustee (herein called the "Trustee," which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee, the holders of Senior Indebtedness and the Holders
of the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
15
<PAGE>
In the event of prepayment of this Security in part only, a new Security or
Securities for the unpaid portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, in all respects,
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness, and this Security is issued subject to the provisions of
the Indenture with respect thereto. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided, and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. The Company shall
not make any payment of principal or interest, as applicable, on the Securities
while the Company is in default with respect to any Senior Indebtedness, except
as provided in the Indenture.
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
Outstanding, and, under certain limited circumstances, by the Company and the
Trustee without the consent of the Holders. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and interest on this
Security are payable, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or
16
<PAGE>
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in fully registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange except as provided in the Indenture, and the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, except as provided in this Security, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
[ASSIGNMENT FORM]
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
17
<PAGE>
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------
Date: _____________________ Your Signature:_______________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:________________________________
18
<PAGE>
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
---------------
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is limited to $10,000,000, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306,
1109 or 1203.
The Securities shall be known and designated as the "10.00% Senior
Subordinated Notes due September 30, 2000" of the Company. Their Stated
Maturity shall be September 30, 2000 and they shall bear interest at the rate of
10.00% per annum, from the date of original issuance of Securities pursuant to
this Indenture or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, as the case may be, payable semi-annually on
March 31 and September 30, commencing March 31, 1997, until the principal
thereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will be paid
to the Person in whose name the Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest, which shall be March 15 or September 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
The principal of and interest by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address.
The Securities shall be prepayable as provided in Article Eleven.
The Securities shall be subject to sinking fund payments as provided
in Article Twelve.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Thirteen and shall be senior in right of
payment to Subordinated Indebtedness as provided in Article Ten.
Section 302. Denominations.
-------------
The Securities shall be issuable in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
19
<PAGE>
Section 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, any Vice Chairman, its President and Chief Executive
Officer or one of its Vice Presidents, under its corporate seal reproduced
thereon and attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall either at one time or from time to time pursuant
to such instructions as may be described therein authenticate and deliver such
Securities as in this Indenture provided and not otherwise. Such Company Order
shall specify the amount of Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated, and shall certify that
all conditions precedent to the issuance of such Securities contained in this
Indenture have been complied with. The aggregate principal amount of Securities
Outstanding at any time may not exceed the amount set forth in Section 301,
except as provided in Section 306.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
20
<PAGE>
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company in a Place of Payment, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Securities, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities.
Section 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at one of its offices or agencies
maintained pursuant to Section 1002 a register (the register maintained in such
office being herein sometimes referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities. The
Person responsible for the maintenance of the Security Register is referred to
herein as the "Security Registrar." The Trustee is hereby initially appointed
Security Registrar for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency in a Place of Payment, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Securities, of any authorized denominations and
of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities, of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental
21
<PAGE>
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 304, 1109, 1203
or not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of the mailing of a notice of prepayment of Securities to
be prepaid under Section 1105 or Section 1203 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for prepayment in whole or in part, except the
unpaid portion of any Security being prepaid in part.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, together with
such other security or indemnity as may be reasonably required by the Trustee to
save it harmless, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a new Security and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security, subject to satisfaction of
the foregoing conditions.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
22
<PAGE>
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest. Payment of
interest on the Securities shall be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder on such Date, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Securities at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Securities
23
<PAGE>
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
---------------------
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
Section 309. Cancellation.
------------
All Securities surrendered for payment, prepayment, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly canceled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section, except as expressly permitted
by this Indenture. All canceled Securities held by the Trustee shall be
disposed of in accordance with its customary procedures and a certificate of
disposition shall be delivered to the Company, unless, by a Company Order, the
Company shall direct the canceled Securities be returned to it.
Section 310. Computation of Interest.
-----------------------
24
<PAGE>
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
----------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except that the Company's obligations under Sections 607 and 402 hereof
shall survive), and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when (1) all Securities theretofore authenticated and delivered (other than (A)
Securities that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 306 and (B) Securities for whose payment money
has theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for cancellation;
(2) the Company has paid or caused to be paid all other sums payable hereunder
by the Company; and (3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Section 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or Article
Thirteen or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
25
<PAGE>
(1) Default shall occur in the payment of interest on any Security
when the same shall have become due and such default shall continue for more
than 10 calendar days; or
(2) Default shall occur in the making of any required prepayment on
any of the Securities as provided in Section 1102 or sinking fund payment as
provided in Section 1201 or in the making of any other payment of the principal
of any Securities at the Stated Maturity; or
(3) Default shall be made in the payment of the principal of or
interest or premium on Indebtedness of the Company and its Subsidiaries
aggregating in excess of $5.0 million, as and when the same shall become due and
payable by the lapse of time, by declaration of acceleration, by call for
redemption or otherwise, and such default shall continue beyond the period of
grace, if any, allowed with respect thereto unless such default is being
contested in good faith by appropriate actions or proceedings; or
(4) Default shall occur in the observance or performance of any other
covenant of this Indenture which is not remedied within 30 calendar days after
the Company has received written notice thereof; or
(5) Any representation or warranty made by the Company herein, or made
by the Company in any statement or certificate furnished by the Company in
connection with the consummation of the issuance and delivery of the Securities
or furnished by the Company pursuant hereto, is untrue in any material respect
as of the date of the issuance or making thereof; or
(6) Any judgment, writ or warrant of attachment or any similar process
in an aggregate amount in excess of $5.0 million shall be entered or filed
against the Company or any Subsidiary or against any property or assets of
either and remain unpaid, unvacated, unbonded or unstayed (through appeal or
otherwise) for a period of 60 days after the date of entry or filing thereof; or
(7) The Company or any Subsidiary shall:
(A) generally not pay its debts as they become due or admit in
writing its inability to pay its debts generally as they become due;
(B) file a petition in bankruptcy or for reorganization or for the
adoption of an arrangement under the Federal Bankruptcy Code, or any
similar applicable bankruptcy or insolvency law, as now or in the
future amended (herein collectively called "Bankruptcy Laws"), or an
answer or other pleading admitting or failing to deny the material
allegations of such a petition or seeking, consenting to or
acquiescing in relief provided for under the Bankruptcy Laws;
(C) make an assignment of all or a substantial part of its
property for the benefit of its creditors;
26
<PAGE>
(D) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property;
(E) be subject to the entry of a court order, which shall not be
vacated, set aside or stayed within 45 days from the date of entry,
appointing a receiver, liquidator, custodian or trustee of it or for
all or a substantial part of its property;
(F) be subject to the institution against it of bankruptcy,
reorganization, arrangement or insolvency proceedings, or other
proceedings pursuant to the Bankruptcy Laws or any other proceedings
for judicial modification or alteration of the rights of creditors,
which proceedings are not dismissed within 60 days after such
institution or which otherwise result in the Company or such
Subsidiary being finally adjudicated a bankrupt or insolvent; or
(G) be subject to the assumption of custody or sequestration by a
court of competent jurisdiction of all or a substantial part of its
property, which custody or sequestration shall not be suspended or
terminated within 60 days from its inception.
Section 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
When any Event of Default described in paragraph (1) or (2) of Section
501 has occurred and is continuing, any holder of any Security may, and when any
Event of Default described in paragraphs (3) through (6), both inclusive, of
said Section 501 has occurred and is continuing, the Holder or Holders of a
majority in aggregate principal amount of the Securities at the time outstanding
may, by notice in writing, declare the entire principal and all interest accrued
on all Securities, to be, and all Securities shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraph (7) of Section 501 has occurred and is continuing, all of
the Securities, and all interest accrued thereon, shall automatically become
forthwith due and payable, without any presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived. Upon the Securities becoming
due and payable as a result of any Event of Default as aforesaid, the Company
will forthwith pay to the Holders of the Securities the entire principal of, and
interest accrued on, the Securities. No course of dealing on the part of any
holder of Securities, nor any delay or failure on the part of any holder of
Securities to exercise any of its rights, shall operate as a waiver of such
rights or otherwise prejudice such holder's rights, powers and remedies. The
Company further agrees to pay to the Holder or Holders of the Securities all
costs and expenses incurred by them in the collection or enforcement of any
Securities upon any default hereunder or thereon, including reasonable
compensation to such Holder's or Holders' attorneys for all services rendered in
connection therewith.
27
<PAGE>
The provisions of this Section 502 are subject to the condition that if the
principal of and accrued interest on all or any outstanding Securities have been
declared immediately due and payable by reason of the occurrence of any Event of
Default, the Holders of a majority in aggregate principal amount of the
Securities then outstanding may within 90 days of the Securities becoming due
and payable, by written instrument filed with the Company, rescind and annul
such declaration and the consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(1) no judgment or decree has been entered for the payment of any
monies due pursuant to the Securities or this Indenture;
(2) all arrears of interest upon all the Securities and all other sums
payable under the Securities and under this Indenture (except any principal or
interest on the Securities that has become due and payable solely by reason of
such declaration under this Section 502) shall have been duly paid;
(3) each and every default and Event of Default shall have been made
good, cured or waived pursuant to Section 513;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Event of Default or impair any right consequent thereto.
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if,
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 10 calendar days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof, or
(3) default is made in the payment of any mandatory prepayment
required pursuant to Section 1102 when due, or
(4) default is made in the payment of any sinking fund payment
required pursuant to Section 1201 when due,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and, to the extent that payment of such interest shall
be legally enforceable, interest on any overdue principal
28
<PAGE>
and on any overdue interest, at the rate or rates prescribed therefor in such
Securities and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may, but shall not
be obligated to, institute a judicial proceeding for the collection of the sums
so due and unpaid, may prosecute such proceeding to judgment or final decree,
and may enforce the same against the Company or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon such Securities, wherever situated.
If any event referred to in Section 503(1) through (4) with respect to
Securities or any other Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders of Securities by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to file and prove a claim for the
whole amount of principal and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary or
advisable in order to have claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements, and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial proceeding,
and to collect and receive any moneys or other property payable or deliverable
on any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to
29
<PAGE>
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and may be
a member of the creditors' committee.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
Section 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest,
upon presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such
Securities for principal and interest, respectively; and
THIRD: The balance, if any, to the Company or to whomsoever may be
lawfully entitled to receive the same as a court of competent jurisdiction
may direct.
Section 507. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities;
30
<PAGE>
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 508. Unconditional Right of Holders to Receive Principal and Interest.
----------------------------------------------------------------
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and (subject to Section 307) interest on such
Security on the Stated Maturity or Maturities expressed in such Security.
Section 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
31
<PAGE>
Section 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
Section 512. Control by Holders.
------------------
The Holders of at least a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities,
provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Indenture, expose the Trustee to personal liability or be
unduly prejudicial to Holders not joining therein, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
-----------------------
By Act delivered to the Company and the Trustee, the Holders of not less
than a majority in principal amount of the Outstanding Securities may on behalf
of the Holders of all the Securities waive any past default hereunder with
respect to such Securities and its consequences, except a default:
(1) in the payment of the principal of or interest on any
Security, or
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(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Persons entitled to waive any past default hereunder.
If a record date is fixed, the Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to waive any
default hereunder, whether or not such Holders remain Holders after such record
date; provided, that unless such consent of the holders of a majority in
principal amount of the Outstanding Securities shall have been obtained prior to
the date which is 90 days after such record date, any such waiver previously
given shall automatically and without further action by any Holder be canceled
and of no further effect.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Trustee, by any Holder, or
group of Holders, holding in the aggregate more than 10% in principal amount of
the Outstanding Securities, or by any Holder for the enforcement of the payment
of the principal of or interest on any Security on or after the Stated Maturity
expressed in such Security (or, in the case of prepayment on or after the
Prepayment Date).
Section 515. Waiver of Stay or Extension or Usury Laws.
-----------------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
33
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ARTICLE SIX
THE TRUSTEE
Section 601. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision of
this Indenture are specifically required to be furnished to the Trustee,
the Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture; and
34
<PAGE>
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 602. Notice of Defaults.
------------------
Within 90 days after the occurrence of any default hereunder with respect
to Securities, the Trustee shall transmit by mail to all Holders of Securities,
as their names and addresses appear in the Security Register, notice of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
payment of the principal or interest or in the payment of any prepayments
required hereunder or in the payment of any sinking fund payment on any
Security, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee of the board of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of the
Securities. For the purpose of this Section, the term "default" means any event
-------
which is, or after notice or lapse of time or both would become, an Event of
Default.
Section 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein
35
<PAGE>
specifically prescribed) may, in the absence of bad faith on its part, rely
upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 604. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee or any Authenticating Agent assumes no responsibility for their
correctness. The Trustee or any Authenticating Agent shall not be accountable
for the use or application by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company
36
<PAGE>
with the same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
Section 607. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the Holders of particular Securities.
Section 608. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of Section 310 of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
37
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Section 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of Federal, State, Territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
by giving written notice thereof to the Company. If the instrument of acceptance
by a successor Trustee required by Section 611 shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities.
(c) The Trustee may be removed at any time with respect to the
Securities by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
38
<PAGE>
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to any or all Securities, or (ii) subject to Section 514,
any Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to any or
all Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities, the Company, by a Board Resolution, shall promptly
appoint a successor Trustee or Trustees with respect to the Securities and shall
comply with the applicable requirements of Section 611. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities shall be appointed
by Act of the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 611, become the successor
Trustee with respect to the Securities and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by Section 611, any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities and each appointment of a
successor Trustee with respect to the Securities to all Holders of Securities in
the manner provided in Section 106. Each notice of appointment shall include the
name of the successor Trustee with respect to the Securities and the address of
its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder, subject nevertheless to its
lien, if any, provided for in Section 607.
39
<PAGE>
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of Section 311 of the Trust Indenture Act regarding the collection of
such claims against the Company (or any such other obligor). A Trustee that has
resigned or been removed shall be subject to and comply with said Section 311 to
the extent required thereby.
Section 614. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents with respect to
the Securities (which may be an Affiliate of the Company) which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon registration of transfer or exchange or partial prepayment thereof or
pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business and in good standing under the laws of the United States of
America, any State or the District of Columbia,
40
<PAGE>
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of no less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for the Securities may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee for any
Securities may at any time terminate the agency of an Authenticating Agent for
such Securities by giving written notice thereof to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be acceptable to the
Company and shall mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders of Securities with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment thereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
Except with respect to an Authenticating Agent appointed at the request of
the Company, the Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, pursuant to the
provisions of Section 607.
If an appointment with respect to the Securities is made pursuant to this
Section, the Securities may have endorsed thereon, in addition to the Trustee's
certificate of authentication, an alternative certificate of authentication in
the following form:
41
<PAGE>
This is one of the Securities described therein referred to in the within-
mentioned Indenture.
Norwest Bank Minnesota, National Association, as
Trustee
By
---------------------------------
As Authenticating Agent
By
---------------------------------
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as such Trustee may reasonably require, of the
names and addresses of the Holders of the Securities as of such date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee is Security Registrar, no
such list shall be required.
Section 702. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
42
<PAGE>
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
Section 703. Reports by Trustee.
------------------
(a) Within 60 days after January 15 of each year, the Trustee shall
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the Trust Indenture Act if and to
the extent and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
Section 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission. Delivery
of such reports to the Trustee is for informational purposes only and the
Trustee's receipt of such reports shall not constitute constructive notice of
any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
43
<PAGE>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
(a) The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust,
shall be organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee the due and punctual payment of the principal of
and interest on all the Securities and the performance or observance of
every covenant of this Indenture on the part of the Company to be performed
or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
(b) For purposes of this Section, any Indebtedness that becomes an
obligation of the Company or any Subsidiary as a result of such transaction
shall be treated as having been incurred by the Company or such Subsidiary at
the time of such transaction.
Section 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor Person formed by such
44
<PAGE>
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities. In the case of a lease, the predecessor Person shall not be released
from its obligations to pay the principal of and interest on the Securities. All
Securities issued by the successor Person shall in all respects have the same
legal priority as the Securities theretofore or thereafter authenticated, issued
and delivered in accordance with the terms of this Indenture.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of the Securities or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of the Securities; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities and to add
to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate
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the administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611(b); or
(6) to add or change or eliminate any provisions of this Indenture as
shall be necessary or desirable in accordance with any amendments to the
Trust Indenture Act; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action pursuant
to this clause (7) shall not adversely affect the interests of the Holders
of Securities in any material respect.
Section 902. Supplemental Indentures With Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders of Securities; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon upon the prepayment thereof,
or change the method of determination of interest thereon, or change any
provisions with respect to prepayments pursuant to Article Eleven or
sinking fund payments pursuant to Article Twelve, or change any Place of
Payment where, or the coin or currency in which, any Security or impair the
right to institute suit for the enforcement of any such payment or the
provisions of this Indenture with respect to the subordination of the
Securities, in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 513 or
Section 1008, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of
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the Holder of each Outstanding Security affected thereby; provided,
however, that this clause shall not be deemed to require the consent of any
Holder with respect to changes in the references to "the Trustee" and
concomitant changes in this Section and Section 1008, or the deletion of
this proviso, in accordance with the requirements of Sections 611(b) and
901(7).
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
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Section 907. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice to all Holders of such fact, setting forth in general terms
the substance of such supplemental indenture, in the manner provided in Section
106. Any failure of the Company to give such notice, or any defect therein,
shall not in any way impair or affect the validity of any such supplemental
indenture.
Section 908. Subordination Unimpaired.
------------------------
No supplemental indenture executed pursuant to this Article shall directly
or indirectly modify the provisions of Article Thirteen in any manner that might
alter the subordination of the Securities.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal and Interest.
---------------------------------
The Company shall pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and this Indenture. An
installment of principal or interest shall be considered paid on the date it is
due if the Holders of the Securities receive the money sufficient to pay the
installment. The Company shall pay interest on overdue principal at the rate of
12.00% per annum; it shall pay interest, including post-petition interest in the
event of a proceeding under the Bankruptcy Laws, on overdue installments of
interest at the same rate to the extent lawful.
Section 1002. Company Existence; Maintenance of Office or Agency.
--------------------------------------------------
Subject to this Section 1002, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each Subsidiary in accordance with the
respective organizational documents of each Subsidiary and the rights (statutory
and other), licenses and franchises of the Company and each Subsidiary;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate existence of any Subsidiary, if
the Board of Directors shall determine in good faith (i) such preservation or
existence is not material to the conduct of business of the Company and (ii) the
loss of such right, license or franchise or the dissolution of such Subsidiary
does not have and is not likely to have a material adverse impact on the
Holders.
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Section 1003. Money for Securities Payments to Be Held in Trust.
-------------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of any of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee in writing of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, prior to each due date of any of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee in
writing of its action or failure so to act.
The Company will cause each Paying Agent for the Securities other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest on the Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided;
(2) give the Trustee written notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal or interest on the Securities; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the
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Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the Wall Street Journal or New York Times and an
Authorized Newspaper in the Borough of Manhattan in New York, New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 1004. Limitation on Dividends and Other Distributions.
-----------------------------------------------
The Company shall not declare or pay any dividend or make any distribution
on or in respect of any of its capital stock or to its stockholders (other than
dividends or distributions payable solely in its capital stock) or purchase,
redeem or otherwise acquire or retire for value any capital stock or any
warrants, rights or options (including any securities convertible into or
exercisable or exchangeable for such capital stock, but not including the
Securities or the Warrants) of the Company or any Subsidiary, provided, however,
that unless a default or an Event of Default has occurred and is continuing,
such provisions shall not prevent (i) the retirement of any shares of the
Company's capital stock by exchange for, or out of the proceeds of, the
substantially concurrent sale of other shares of its capital stock, (ii) the
purchase, redemption, retirement or other acquisition for value, at any time, of
the Common Stock using $25.0 million in cash and up to 650,000 shares of Common
Stock using shares of common stock of World Airways, $.001 par value per share,
of which the Company is the owner or (iii) any prepayment of the Securities
pursuant to the terms thereof; provided, further, that such provisions shall not
prevent the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment complied with the
provisions of this limitation on dividends. The Company shall also be able to
repurchase, redeem, retire or otherwise acquire for value up to $5.0 million of
additional shares of Common Stock for every $15.0 million increase in Asset
Value at such time compared to the Asset Value as of September 12, 1996.
Section 1005. Stock Repurchases.
-----------------
Each Subsidiary shall be permitted to, directly or indirectly, repurchase,
redeem, retire or otherwise acquire for value any of its shares of capital stock
of any class or any warrants, rights, options to purchase or acquire any shares
of its capital stock.
Section 1006. Senior Indebtedness.
-------------------
The Company agrees that Senior Indebtedness shall not exceed $50.0 million.
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Section 1007. Subordination.
-------------
The Company shall cause all future Subordinated Indebtedness to be
subordinated to the Securities in the same manner, on the same terms and to the
same extent as the Securities are subordinated to Senior Indebtedness pursuant
to Article Thirteen hereof, and the Company shall include such terms in any
agreement, note or instrument evidencing such future Subordinated Indebtedness.
Section 1008. Statement as to Compliance.
--------------------------
(a) The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, a written statement, which need not comply with Section
102, signed by the President or a Vice President and by the Treasurer, an
Assistant Treasurer, the Controller or an Assistant Controller of the Company,
stating as to each signer thereof, that
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision, and
(2) whether the officer knows of any defaults by the Company under
this Indenture throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
him and the nature and status thereof.
(b) The Company will deliver to the Trustee, within 30 days after the end
of each fiscal quarter of the Company, a written statement, which need not
comply with Section 102, signed by the President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Controller or an Assistant Controller and
the Company, stating, as to each signer thereof, that the Company is in
compliance with Section 1006 and that no prepayment of the Notes is required
under Section 1102 hereof.
ARTICLE ELEVEN
PREPAYMENT OF SECURITIES
Section 1101. Optional Prepayment.
-------------------
The Securities may be prepaid at the election of the Company, in whole or
from time to time in part (in units of at least $250,000) at par, together with
accrued interest, to the Prepayment Date.
Section 1102. Mandatory Prepayment.
--------------------
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If the Asset Value at the end of any fiscal quarter of the Company is less
than $70.0 million, then the Company shall prepay 50% of each of the Outstanding
Securities within 60 days of the end of such fiscal quarter. If the Asset Value
at the end of any fiscal quarter of the Company is less than $50.0 million, then
the Company shall prepay all of the Outstanding Securities within 60 days of the
end of such fiscal quarter.
If the Company sells any shares of common stock of InteliData Technologies
Corporation, as successor to US Order, Inc., 20% of the net proceeds (i.e.,
gross proceeds less direct costs associated with such sales) or 20% of the net
proceeds of each installment if such sale is by installment received by the
Company upon such sale will be used to prepay the Outstanding Securities
(rounded down to the lowest penny which is divisible pro rata into the
Outstanding Securities) within 30 days or 30 days from an installment payment if
such sale is by installment. Upon written request by the Trustee, the Company
shall provide the Trustee with reasonable documentation of such sale within five
business days of the Company's receipt of such request.
Section 1103. Applicability of Article.
------------------------
Prepayment of Securities as permitted by any provision of this Indenture
shall be made in accordance with such provision and this Article.
Section 1104. Election to Prepay; Notice to Trustee.
-------------------------------------
The election of the Company to prepay any Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any prepayment at the
election of the Company of less than all the Securities, the Company shall, at
least 60 days prior to the Prepayment Date fixed by the Company (unless a
shorter period shall be satisfactory to the Trustee), notify the Trustee of such
Prepayment Date and of the principal amount of Securities to be prepaid. In
case of any prepayment at the election of the Company of all of the Securities,
the Company shall, at least 45 days prior to the Prepayment Date fixed by the
Company (unless a shorter period shall be satisfactory to the Trustee), notify
the Trustee of such Prepayment Date.
Section 1105. Selection by Trustee of Securities to be Prepaid.
------------------------------------------------
If less than all the Securities are to be prepaid pursuant to Section 1101,
the Securities to be prepaid shall be prepaid from the Outstanding Securities
not previously called for prepayment pursuant to Section 1101, pro rata, and the
Trustee may provide for the selection for prepayment of portions (equal to
$1,000 or any integral multiple thereof) of the principal amount of Securities
of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and the Security Registrar in
writing of the principal amount of the Securities to be prepaid.
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<PAGE>
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the prepayment of Securities shall relate, in the
case of any Securities prepaid or to be prepaid only in part, to the portion of
the principal amount of such Securities which has been or is to be prepaid.
Section 1106. Notice of Prepayment.
--------------------
Notice of prepayment shall be given by first-class mail, postage prepaid,
mailed not less than 10 business days prior to the Prepayment Date, to the
Trustee and to each Holder of Securities, at his address appearing in the
Security Register.
All notices of prepayment shall state:
(a) the Prepayment Date,
(b) if less than all the Outstanding Securities are to be
prepaid, the principal amounts of the Securities to be prepaid,
(c) that on the Prepayment Date the principal amount of the
Securities to be prepaid will become due and payable upon each such
Security to be prepaid and that (unless the Company shall default in
payment of such principal amounts) interest thereon will cease to accrue on
and after said date,
(d) the place or places where such Securities are to be
surrendered for payment of the principal amounts to be prepaid, and
(e) that the prepayment is for a sinking fund payment, if such is
the case.
Notice of prepayment of Securities to be prepaid at the election of the
Company shall be given by the Company or, at the Company's request received by
the Trustee at least 45 days prior to the Prepayment Date, by the Trustee in the
name and at the expense of the Company.
Section 1107. Deposit of Prepayment Price.
---------------------------
At or prior to 9:00 a.m. (New York City time) on any Prepayment Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in same day funds sufficient to pay
the principal amounts to be prepaid, and (except if the Prepayment Date shall be
an Interest Payment Date) accrued interest on, all the Securities or portions
thereof which are to be prepaid on that date.
Section 1108. Securities Payable on Prepayment Date.
-------------------------------------
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Notice of prepayment having been given as aforesaid, the Securities so to
be prepaid shall, on the Prepayment Date, become due and payable in the
principal amounts to be prepaid therein specified, and from and after such date
(unless the Company shall default in the payment of the principal amounts to be
prepaid and accrued interest) such Securities shall cease to bear interest.
Upon surrender of any such Security for prepayment in accordance with said
notice, such Security shall be paid by the Company in the principal amounts to
be prepaid, together with accrued interest to the Prepayment Date; provided,
however, that installments of interest whose Maturity is on or prior to the
Prepayment Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Security called for prepayment shall not be so paid upon surrender
thereof for prepayment, the principal shall, until paid, bear interest from the
Prepayment Date at the rate borne by the Security.
Section 1109. Securities Prepaid in Part.
--------------------------
Any Security which is to be prepaid only in part shall be surrendered at an
office or agency of the Company maintained for that purpose pursuant to Section
1002 (with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unpaid portion of
the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUND
Section 1201. Sinking Fund.
------------
The Company shall prepay pursuant to a sinking fund and there shall become
due and payable 20% of the outstanding principal amount of the Outstanding
Securities, or such lesser amount as would constitute payment in full of the
Outstanding Securities on such date, on September 30, 1998 and September 30,
1999. No premium shall be payable in connection with any such sinking fund
payment.
Section 1202. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company (1) may deliver Outstanding Securities (other than any
previously called for prepayment or any sinking fund payment) and (2) may apply
as a credit Securities that have been
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<PAGE>
prepaid at the election of the Company (but not pursuant to Section 1102)
pursuant to the terms of such Securities in satisfaction of all or any part of
any sinking fund payment with respect to the Securities required to be made;
provided that such Securities have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee for
prepayment through operation of the sinking fund and the amount of such sinking
fund payment shall be reduced accordingly.
Section 1203. Prepayment of Securities for Sinking Fund.
------------------------------------------
Not less than 60 days prior to each sinking fund payment date for the
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment pursuant to
Section 1201, the portion thereof, if any, that is to be satisfied by payment of
cash and the portion thereof, if any, that is to be satisfied by delivering and
crediting Securities pursuant to Section 1202 and the basis for such credit and
will also deliver to the Trustee any Securities to be so delivered that have not
theretofore been delivered to the Trustee. Not less than 30 days before each
such sinking fund payment date, the Trustee shall cause notice of the prepayment
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 1106. Such notice having been duly given, the
prepayment of such Securities shall be made upon the terms and in the manner
stated in Sections 1107, 1108 and 1109.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees that anything in this Agreement or the
Securities to the contrary notwithstanding, the indebtedness evidenced by the
Securities is subordinate and junior in right of payment to all Senior
Indebtedness to the extent provided herein, and each holder of Securities, by
his acceptance thereof, likewise covenants and agrees to the subordination
herein provided and shall be bound by the provisions hereof. Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of these subordination provisions irrespective of any amendment,
modification or waiver of any term of the Senior Indebtedness or extension or
renewal of the Senior Indebtedness, as long as such indebtedness,
notwithstanding any such amendment, modification or waiver, continues to meet
the definition of Senior Indebtedness.
In the event that the Company shall default in the payment of any principal
of (or premium, if any) or interest on any Senior Indebtedness when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration of acceleration or otherwise, then, upon written notice of
such default to the Company by the holders of Senior Indebtedness or any trustee
therefor or representative thereof, unless and until such default shall
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<PAGE>
have been cured or waived or shall have ceased to exist, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) shall be made
or agreed to be made on account of the principal of or interest on any of the
Securities, or in respect of any prepayment, retirement, purchase or other
acquisition of any of the Securities.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its property,
(b) any proceeding for the liquidation, dissolution or other winding
up of the Company, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings,
(c) any assignment by the Company for the benefit of creditors, or
(d) any other marshalling of the assets of the Company,
all Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made to any holder of any of the Securities on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of the Securities shall be paid or delivered directly to the holders of
Senior Indebtedness in accordance with the priorities then existing among such
holders until all Senior Indebtedness (including any interest thereof accruing
after the commencement of any such proceedings) shall have been paid in full.
In the event of any such proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the holders of the Securities, together
with the holders of any obligations of the Company ranking on a parity with the
Securities, shall be entitled to be paid from the remaining assets of the
Company the amounts at the time due and owing on account of unpaid principal of
and interest on the Securities and such other obligations before any payment or
other distribution, whether in cash, property or otherwise, shall be made on
account of any capital stock or any obligations of the Company ranking junior to
the Securities and such other obligations.
In the event that, notwithstanding the foregoing, any payment or
distribution of any character, whether in cash, securities or other property
(other than securities of the Company or
56
<PAGE>
any other corporation provided for by a plan of reorganization or readjustment
the payment of which is subordinate, at least to the extent provided in these
subordination provisions with respect to the indebtedness evidenced by the
Securities, to the payment of all Senior Indebtedness at the time outstanding
and to any securities issued in respect thereof under any such plan of
reorganization or readjustment), or any Security shall be received by any Holder
in contravention of any of the terms hereof, such payment or distribution or
security shall be received in trust for the benefit of, and shall be paid over
or delivered and transferred to, the holders of the Senior Indebtedness at the
time outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all such Senior Indebtedness in full. In
the event of the failure of any Holder to endorse or assign any such payment,
distribution or security, each holder of Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the same.
No present or future holder of any Senior Indebtedness shall be prejudiced
in the right to enforce subordination of the indebtedness evidenced by the
Securities by any act or failure to act on the part of the Company. Nothing
contained herein shall impair, as between the Company and the Holders of
Securities, the obligation of the Company to pay to such Holders the principal
of and interest on such Securities or prevent any Holder or the Trustee from
exercising all rights, powers and remedies otherwise permitted by applicable law
or hereunder upon a default or Event of Default hereunder, all subject to the
rights of the holders of the Senior Indebtedness to receive cash, securities or
other property otherwise payable or deliverable to the Holders.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the Holders of Securities shall be subrogated
to all rights of any holders of Senior Indebtedness to receive any further
payments or distributions applicable to the Senior Indebtedness until the
indebtedness evidenced by the Securities shall have been paid in full, and such
payments or distributions received by such holders, by reason of such
subrogation, of cash, securities or other property which otherwise would be paid
or distributed to the holders of Senior Indebtedness, shall, as between the
Company and its creditors other than the holders of Senior Indebtedness, on the
one hand, and such holders, on the other hand, be deemed to be a payment by the
Company on account of Senior Indebtedness, and not on account of the Securities.
The provisions of this Section 1301 shall not impair any right, interests,
remedies or powers of any secured creditor of the Company in respect of any
security interest the creation of which is not prohibited by the provisions of
this Agreement.
The securing of any obligations of the Company, otherwise ranking on a
parity with the Securities or ranking junior to the Securities, shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.
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Section 1302. Trustee and Holders of Securities May Rely on Certificate of
------------------------------------------------------------
Liquidating Agent; Trustee May Require Further Evidence as to
-------------------------------------------------------------
Ownership of Senior Indebtedness; Trustee Not Fiduciary to
----------------------------------------------------------
Holders of Senior Indebtedness.
------------------------------
Upon any payment or distribution of assets of the Company referred to in
this Article Thirteen, the Trustee and the Holders shall be entitled to rely
upon an order or decree made by any court of competent jurisdiction in which a
dissolution or winding up or liquidation or reorganization or arrangement
proceedings are pending or upon a certificate of the trustee in bankruptcy,
receiver, assignee for the benefit of creditors or other Person making such
payment or distribution, delivered to the Trustee or to the Holders, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Thirteen. In the absence of any such bankruptcy trustee, receiver, assignee or
other Person, the Trustee shall be entitled to rely upon a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a trustee
or representative on behalf of such holder) as evidence that such Person is a
holder of such Senior Indebtedness (or is such a trustee or representative). In
the event that the Trustee determines, in good faith, that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payments or distributions pursuant to this
Article Thirteen, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, as to the extent to which such Person is entitled to
participate in such payment or distribution, and as to other facts pertinent to
the rights of such Person under this Article Thirteen, and if such evidence is
not furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. With
respect to the holders of Senior Indebtedness, the Trustee undertakes to perform
or to observe only such of its covenants and obligations as are specifically set
forth in this Article Thirteen, and no implied covenants or obligations with
respect to the holders of Senior Indebtedness shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness and, subject to the provisions of Section
601, the Trustee shall not be liable to any holder of Senior Indebtedness if it
shall in good faith pay over or deliver to Holders of Securities, the Company or
any other Person moneys or assets to which any holder of Senior Indebtedness
shall be entitled by virtue of this Article Thirteen or otherwise.
Section 1303. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article Thirteen or elsewhere in this Indenture,
or in any of the Securities, shall prevent (a) the Company at any time, except
during the pendency of any dissolution, winding up, liquidation or
reorganization proceedings referred to in, or under the conditions described in,
Section 1301, from making payments of the principal of or interest on the
Securities or (b) the application by the Trustee or any Paying Agent of any
moneys deposited
58
<PAGE>
with it hereunder to payments of the principal of or interest on the Securities,
if the Trustee, such Paying Agent or Exchange Agent, as the case may be, did not
have the written notice provided for in Section 1304 by the times referred to
therein of any event prohibiting the making of such deposit or exchange, and the
Trustee, any Paying Agent or Exchange Agent shall not be affected by any notice
to the contrary received by it on or after such times.
Section 1304. Trustee Not Charged with Knowledge of Prohibition.
-------------------------------------------------
Anything in this Article Thirteen or elsewhere in this Indenture contained
to the contrary notwithstanding, the Trustee shall not at any time be charged
with knowledge of the existence of any facts that would prohibit the making of
any payment of money to or by the Trustee and shall be entitled conclusively to
assume that no such facts exist and that no event specified in Section 1301 has
happened, until the Trustee shall have received an Officers' Certificate to that
effect or notice in writing to that effect signed by or on behalf of the holder
or holders, or their representatives, of Senior Indebtedness who shall have been
certified by the Company or otherwise established to the reasonable satisfaction
of the Trustee to be such holder or holders or representatives or from any
trustee under any indenture pursuant to which such Senior Indebtedness shall be
outstanding; provided, however, that, if prior to the third Business Day
preceding the date upon which by the terms hereof any money becomes payable for
any purpose (including, without limitation, the payment of either the principal
of or interest on any Security), or in the event of the execution of an
instrument pursuant to Section 401 acknowledging satisfaction and discharge of
this Indenture, then if prior to the second Business Day preceding the date of
such execution, the Trustee or any Paying Agent shall not have received with
respect to such money the Officers' Certificate or notice provided for in this
Section 1304, then, anything herein contained to the contrary notwithstanding,
the Trustee or such Paying Agent shall have full power and authority to receive
such money and apply the same to the purpose for which they were received and
shall not be affected by the notice to the contrary which may be received by it
on or after such date. The Company shall give prompt written notice to the
Trustee and to the Paying Agent of any facts that would prohibit the payment of
money to or by the Trustee or any Paying Agent.
Section 1305. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of Securities by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination as between such Holder and holders of Senior
Indebtedness as provided in this Article and appoints the Trustee its attorney-
in-fact for any and all such purposes.
Section 1306. Rights of Trustee as Holder of Senior Indebtedness.
--------------------------------------------------
The Trustee shall be entitled to all the rights set forth in this Article
with respect to any Senior Indebtedness that may at the time be held by it, to
the same extent as any other holder of
59
<PAGE>
Senior Indebtedness; provided, however, that nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder; and provided, further,
that nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
Section 1307. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if the Paying Agent were named
in this Article in addition to or in place of the Trustee; provided, however,
that Sections 1304 and 1306 shall not apply to the Company or any Affiliate of
the Company if the Company or such Affiliate acts as Paying Agent.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 1401. Immunity of Incorporators, Stockholders, Officers and Directors.
---------------------------------------------------------------
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Security, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors, as such, of the Company or
any successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by this Indenture or in any of the
Securities or implied therefrom; and that any and all such personal liability of
every name and nature, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, officer or director, as such, because of the creation
of the indebtedness hereby authorized, or under or by reason of the obligations,
covenants
60
<PAGE>
or agreements contained in this Indenture or in any of the Securities or implied
therefrom are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such
Securities.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
[SEAL] WORLDCORP, INC.
By:
------------------------------------------
T. Coleman Andrews, III
President and Chief Executive Officer
Attest:
- ---------------------------
Andrew M. Paalborg
Secretary
[SEAL] NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By:
------------------------------------------
Name:
Title:
Attest:
- ---------------------------
62
<PAGE>
Commonwealth of Virginia
SS:
City of Herndon
On the ____ day of January, 1997 before me personally came T. Coleman
Andrews, III, to me known, who, being by me duly sworn, did depose and say that
he is President and Chief Executive Office, of WORLDCORP, INC., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
[SEAL]
------------------------------
Notary Public
State of
---------------
SS:
County of
--------------
On the _________ day of January, 1997, before me personally came
________________, to me known, who, being by me duly sworn, did depose and say
that he is ___________________________ of Norwest Bank Minnesota, National
Association, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporation's seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
[SEAL]
------------------------------
Notary Public
63
<PAGE>
Exhibit 4.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WORLDCORP, INC.
PURCHASE AGREEMENT
Dated as of September 30, 1996
$10,000,000 10.00% Senior Subordinated Notes
Due September 30, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
Section Page
1. DESCRIPTION OF NOTES, WARRANTS AND COMMITMENT......................... 1
1.1. Description of Notes and Warrants............................... 1
1.2. Commitment; Closing Date........................................ 2
1.3. Other Purchasers................................................ 3
1.4. Subordination................................................... 3
2. PREPAYMENT OF NOTES................................................... 3
2.1. Required Prepayments............................................ 3
2.2. Optional Prepayments at Par..................................... 3
2.3. Notice of Prepayments........................................... 4
2.4. Surrender of Notes on Transfer or Exchange...................... 4
2.5. Allocation of Prepayments....................................... 4
2.6. Direct Payment.................................................. 4
2.7. Effect of Prepayment on Warrants................................ 5
3. REPRESENTATIONS....................................................... 5
3.1. Representations of the Company.................................. 5
3.2. Representations of the Purchasers............................... 10
4. CLOSING CONDITIONS.................................................... 11
4.1. Representations and Warranties.................................. 11
4.2. Legal Opinions.................................................. 11
4.3. Events of Default............................................... 11
4.4. Sale of Notes................................................... 11
4.5. Satisfactory Proceedings........................................ 11
4.6. Waiver of Conditions............................................ 12
4.7. Secretary's Certificate......................................... 12
5. COMPANY COVENANTS..................................................... 12
5.1. Payment of the Notes............................................ 12
5.2. Company Existence; Maintenance of Office or Agency.............. 12
5.3. SEC Reports..................................................... 12
5.4. Waiver of Stay, Extension or Usury Laws......................... 13
5.5. Notice of Default............................................... 13
5.6. Compliance Certificates......................................... 13
5.7. Limitation on Dividends and Other Distributions................. 13
5.8. Stock Repurchases............................................... 14
5.9. Registration Rights............................................. 14
5.10. Senior Indebtedness............................................. 16
-i-
<PAGE>
Section Heading Page
- ------- ------- ----
5.11. Asset Value..................................................... 16
5.12. Sale of USOCDT Merger Corporation Common Stock.................. 16
6. EVENTS OF DEFAULT AND REMEDIES THEREFOR................................ 17
6.1. Events of Default............................................... 17
6.2. Acceleration of Maturities...................................... 18
6.3. Rescission of Acceleration...................................... 19
6.4. Notice of Default............................................... 19
7. AMENDMENTS, WAIVERS AND CONSENTS....................................... 19
7.1. Consent Required................................................ 19
7.2. Effect of Amendment or Waiver................................... 20
7.3. Solicitation of Noteholders..................................... 20
8. SUBORDINATION OF SECURITIES............................................ 20
8.1. Notes Subordinate to Senior Indebtedness........................ 20
9. INTERPRETATION OF AGREEMENT; DEFINITIONS............................... 23
9.1. Definitions..................................................... 23
9.2. Accounting Principles........................................... 25
9.3. Directly or Indirectly.......................................... 25
10. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.............. 26
10.1. Registered Notes................................................ 26
10.2. Exchange of Notes............................................... 26
10.3. Loss, Theft, etc. of Notes...................................... 26
11. MISCELLANEOUS.......................................................... 27
11.1. Expenses, Stamp Tax Indemnity................................... 27
11.2. Powers and Rights Not Waived; Remedies Cumulative............... 27
11.3. Notices......................................................... 27
11.4. Successors and Assigns.......................................... 27
11.5. Survival of Covenants and Representations....................... 27
11.6. Integration..................................................... 28
11.7. Governing Law................................................... 28
11.8. Headings........................................................ 28
11.9. Counterparts.................................................... 28
11.10. Agent's Fee..................................................... 28
Signature Page.............................................................. 29
-ii-
<PAGE>
ATTACHMENTS TO PURCHASE AGREEMENT:
Schedule I Principal Amount of Notes to be Purchased
Annex I List of Subsidiaries and Jurisdictions in Which the Company and its
Subsidiaries are Qualified as Foreign Corporations
Exhibit A Form of 10.00% Senior Subordinated Note, due September 30, 2000
Exhibit B Form of Warrants
Exhibit C Description of Closing Opinion of Counsel for the Company
-iii-
<PAGE>
WORLDCORP, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 22071
PURCHASE AGREEMENT
Dated as of
September 30, 1996
To each of the Purchasers
listed on Schedule I Hereto
----------
Ladies and Gentlemen:
The undersigned, WORLDCORP, INC., a Delaware corporation (the "Company"),
agrees with each of you as follows:
SECTION 1. DESCRIPTION OF NOTES, WARRANTS AND COMMITMENT.
1.1. Description of Notes and Warrants.
---------------------------------
(a) The Company will authorize the issuance and sale of $10,000,000
aggregate principal amount of its 10.00% Senior Subordinated Notes due September
30, 2000 (the "Notes"), to be dated the date of issue, to bear interest from
such date at the rate of 10.00% per annum, to mature September 30, 2000 and to
be substantially in the form attached hereto as Exhibit A. Interest on the
---------
Notes shall be payable semi-annually on September 30 and March 31 in each year
(commencing March 31, 1997) and at maturity and shall be computed on the basis
of a 360-day year of twelve 30-day months. The Notes are subject to prepayment
or redemption at par (with all accrued but unpaid interest thereon) at any time
prior to maturity at the option of the Company, set forth in Section 2 of this
Agreement. The term "Notes" as used herein shall include the Notes delivered
pursuant to this Agreement and each Note issued upon transfer thereof or in
exchange therefor. You, together with the other purchasers named in Schedule I,
----------
are hereinafter sometimes referred to as the "Purchasers."
(b) In connection with the Company's issuance of the Notes, the
Company will issue warrants to purchase twelve (12) shares of the Company's
common stock, par value $.001 per share (the "Company Common Stock"), per each
$1,000 in principal amount of the
<PAGE>
Notes (hereinafter referred to individually as an "Initial Warrant" and
collectively as the "Initial Warrants."
(c) The exercise price for the Initial Warrants shall be $6.00 per
share.
(d) Subject to the provisions of Section 2.7, if the Company Common
Stock does not close on the New York Stock Exchange ("NYSE") at a bid price of
$12.00 per share or greater for any five consecutive trading day period
occurring between September 30, 1996 and September 30, 1997, the Company will
issue to each Purchaser on October 1, 1997, four (4) additional warrants to
purchase the Company Common Stock at a price of $6.00 per share (individually, a
"1997 Warrant," and collectively, the "1997 Warrants"). The 1997 Warrants shall
be identical in all respects with the Initial Warrants, except that the 1997
Warrants shall expire on September 30, 2001.
(e) Subject to the provisions of Section 2.7, if the Company Common
Stock does not close on the NYSE at a bid price of $12.00 per share or greater
for any five consecutive trading day period occurring between September 30, 1997
and September 30, 1998, the company will issue to each Purchaser on October 1,
1998, four (4) additional warrants to purchase the Company Common Stock at a
price of $6.00 per share (individually, a "1998 Warrant," and collectively, the
"1998 Warrants"). The 1998 Warrants shall be identical in all respects with the
Initial Warrants, except that the 1998 Warrants shall expire on September 30,
2002 (the 1997 Warrants and the 1998 Warrants are hereinafter referred to
collectively as the "Additional Warrants," and the Initial Warrants and the
Additional Warrants are hereinafter referred to collectively as the "Warrants").
(f) The form of the Warrants is attached hereto as Exhibit B. The
---------
Warrants shall be deemed a separate security from the Notes.
1.2. Commitment; Closing Date. Subject to the terms and conditions hereof
------------------------
and on the basis of the representations and warranties hereinafter set forth,
the Company agrees to issue and sell to you, and you agree to purchase from the
Company, on the Closing Date, Notes in the principal amount set forth opposite
your name in Schedule I at a price of 100% of the principal amount thereof and
----------
the Warrants set forth opposite your name in Schedule I.
----------
Delivery of the Notes and the Warrants will be made at the offices of
Hunton & Williams, McLean, Virginia at 10:00 a.m. Virginia time, on the Closing
Date or at such place or later time as may be mutually agreed upon by the
Company and the Purchasers. Delivery of the Notes and the Warrants to you on
the Closing Date shall be against payment of the purchase price thereof in
Federal Funds or other immediately available funds in U.S. dollars transmitted
to First Union National Bank of Virginia, ABA No. 056007604, for deposit in
WorldCorp's Account No. 2070388012683. The Notes will be delivered to you on
the Closing Date in the form of a single registered Note for the full amount of
your purchase (unless different denominations are specified by you). The Notes
and the Warrants will be
-2-
<PAGE>
registered in your name or in the name of your nominee, all as you may specify
in Schedule I or otherwise at any time prior to the Closing Date. If on the
----------
Closing Date, the Company shall fail to tender the Notes and the Warrants to
you, you shall be relieved of all remaining obligations under this Agreement.
Nothing in the preceding sentence shall relieve the Company of any liability
occasioned by such failure to deliver the Notes or the Warrants.
1.3. Other Purchasers. Your obligation and the obligations of the Company
----------------
hereunder are subject to the execution and delivery of this Agreement by the
other Purchasers. The obligations of each Purchaser shall be several and not
joint and no Purchaser shall be liable or responsible for the act of any other
Purchaser.
1.4. Subordination. The Notes will be subordinate to all Senior
-------------
Indebtedness and Senior to all Subordinated Indebtedness. The Company shall
cause all future Subordinated Indebtedness to be subordinated to the Notes in
the same manner, on the same terms and to the same extent as the Notes are
subordinated to Senior Indebtedness pursuant to Section 8.1 hereof, and the
Company shall include such terms in any agreement, note or instrument evidencing
such future Subordinated Indebtedness.
SECTION 2. PREPAYMENT OF NOTES.
2.1. Required Prepayments.
--------------------
(a) In addition to payment of all outstanding principal of the Notes
at maturity and regardless of the amount of Notes that may be outstanding from
time to time, the Company agrees that it will prepay and apply pursuant to
Section 2.6 hereof and there shall become due and payable 20% of the outstanding
principal amount of the Notes, or such lesser amount as would constitute payment
in full on the Notes on such date, on September 30, 1998 and September 30, 1999.
The entire remaining unpaid principal amount of the Notes shall become due and
payable on September 30, 2000.
(b) No premium shall be payable in connection with any prepayment
made when due pursuant to this Section 2.1.
2.2. Optional Prepayments at Par.
---------------------------
(a) Upon notice as provided in Section 2.3, the Company may prepay the
outstanding Notes (in units of at least $250,000), in whole or in part pursuant
to Section 2.6 hereof, at any time prior to September 30, 2000, by payment of
the principal amount of the Notes to be prepaid at par, plus accrued interest
thereon to the date of such prepayment. Except as provided in Section 2.1
hereof and this Section 2.2, the Notes shall not be prepayable in whole or in
part prior to their maturity.
-3-
<PAGE>
(b) No premium shall be payable in connection with any prepayment
made when due pursuant to this Section 2.2.
2.3. Notice of Prepayments.
---------------------
(a) The Company shall give written notice of any prepayment of the
Notes pursuant to Section 2.2 hereof to each holder thereof, not less than 30
days nor more than 60 days before the date fixed for such optional prepayment,
specifying (i) such date, (ii) the principal amount of the holder's Notes to be
prepaid on such date, (iii) the accrued interest payable to the holder in
connection with the prepayment, and (iv) in the case of a prepayment in full,
the place where the Notes are to be surrendered for cancellation. Notice of
such prepayment having been so given, the aggregate principal amount of the
Notes specified in such notice, together with the accrued and unpaid interest
thereon, shall become due and payable on the prepayment date specified in such
notice.
(b) The Company shall also give notice to each holder of the Notes by
telecopy, telegram, telex or other same-day written communication at least three
business days before the date fixed for such prepayment (confirmed in a writing
delivered at least two business days prior to the payment date).
2.4. Surrender of Notes on Transfer or Exchange. Upon any partial
------------------------------------------
transfer or partial exchange of a Note pursuant to Section 10.2 , such Note
shall be surrendered to the Company pursuant to Section 10.2 hereof in exchange
for one or more new Notes equal to the principal amount remaining unpaid on the
surrendered Note. In case the entire principal amount of any Note is prepaid or
exchanged, such Note shall be surrendered to the Company for cancellation and
shall not be reissued, and no Note shall be issued in lieu of such Note.
2.5. Allocation of Prepayments. All partial prepayments of the Notes
-------------------------
pursuant to Sections 2.1 and 2.2 shall be allocated to all outstanding Notes
ratably in accordance with the unpaid principal amounts thereof. Any prepayment
of less than all of the Notes pursuant to Section 2.2 shall be deemed to be
applied first to the amount of principal scheduled to remain unpaid on September
30, 2000 and then to the required prepayments of principal in inverse
chronological order.
2.6. Direct Payment. Notwithstanding any other provision contained in the
--------------
Notes or this Agreement, the Company will pay all sums becoming due on each Note
held by you or any subsequent Institutional Holder by wire transfer of
immediately available funds to such account as you have designated in Schedule I
----------
hereto, or as you or such subsequent Institutional Holder may otherwise
designate by notice to the Company, in each case without presentment and without
notations being made thereon, except that any such Note so paid or prepaid in
full shall be surrendered to the Company for cancellation. Any wire transfer
shall identify such payment in the manner set forth in the attached Schedule I
----------
and shall identify the payment as principal and/or interest. You and any
subsequent Institutional Holder of a Note agree that,
-4-
<PAGE>
before selling or otherwise transferring any such Note, you or it will make a
notation thereon of the aggregate amount of all payments of principal
theretofore made and of the date to which interest has been paid and, upon
written request of the Company, will provide a copy of such notations to the
Company.
2.7. Effect of Prepayment on Warrants. If the Company redeems in full the
--------------------------------
aggregate principal amount of all outstanding Notes prior to October 1, 1997,
then the Company shall have no further obligation to issue the Additional
Warrants. If the Company redeems in full the aggregate principal amount of all
outstanding Notes after October 1, 1997, and prior to October 1, 1998, then the
Company shall have no further obligation to issue the 1998 Warrants.
SECTION 3. REPRESENTATIONS.
3.1. Representations of the Company. As an inducement to, and as part of
------------------------------
the consideration for, your purchase of the Notes and the Warrants pursuant to
this Agreement, the Company represents and warrants to you as follows:
(a) Corporate Organization and Authority. The Company is a
------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to own
and operate its properties, to carry on its business as now conducted, to enter
into this Agreement and to issue and sell the Notes and the Warrants as
contemplated in this Agreement.
(b) Qualification to Do Business. The Company is duly licensed or
----------------------------
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the nature of its business or the character
of its properties makes such qualification or licensing necessary, except for
such jurisdictions where the failure to be so qualified or licensed will not
have a materially adverse effect on the business, properties, operations or
condition (financial or other) of the Company. A list of those jurisdictions
wherein the Company is qualified to do business is set forth in the attached
Annex I.
- -------
(c) Subsidiaries. The Company has no Subsidiaries except those listed
------------
in Annex I, which correctly sets forth the percentage of the outstanding capital
-------
stock or equivalent interest of each Subsidiary which is owned, of record or
beneficially, by the Company and/or one or more Subsidiaries. Each Subsidiary
has been duly organized and is validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization and is duly licensed
or qualified in each other jurisdiction where the nature of its business or the
character of its properties makes such qualification or licensing necessary,
except for such jurisdictions where the failure to be so qualified or licensed
will not have a materially adverse effect on the business, properties,
operations or condition (financial or other) of such Subsidiary. A list of
those jurisdictions wherein each Subsidiary is qualified to do business is set
forth in the attached Annex I. Each Subsidiary has full corporate power and
-------
-5-
<PAGE>
authority and all necessary licenses, permits and other authorizations to own
and operate its properties and to carry on its business as now conducted, except
for such licenses, permits and other authorizations the failure of which to
obtain will not have a materially adverse effect on the business, properties,
operations or condition (financial or other) of such Subsidiary. The Company
has good and marketable title to all of the shares it purports to own of the
capital stock of each Subsidiary, free and clear in each case of any lien or
encumbrance, and all such shares have been duly issued and are fully paid and
nonassessable.
(d) Financial Statements. The consolidated balance sheets of the
--------------------
Company and its Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the three years ended December 31, 1995, 1994 and 1993, as reported on
the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
copies of which have heretofore been delivered to you, were prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as otherwise noted therein) and present fairly the financial position
and results of operations and cash flows of the Company and its Subsidiaries for
and as of the end of each of such years. The unaudited consolidated balance
sheet of the Company and its Subsidiaries as of June 30, 1996, and the unaudited
statements of income, changes in stockholders' equity and cash flows for the
accounting period ended on said date as reported on the Company's Quarterly
Report on Form 10-Q for the six months ended June 30, 1996, copies of which have
heretofore been delivered to you, have been prepared in accordance with GAAP
consistently applied, are correct and complete and present fairly the financial
position of the Company and its Subsidiaries as of said date and the results of
their operations and cash flows for said period, subject to customary year-end
adjustments. The financial statements referenced herein are collectively
referred to as the "Financial Statements."
(e) No Contingent Liabilities or Adverse Changes. Neither the Company
--------------------------------------------
nor any of its Subsidiaries has any contingent liabilities or liabilities for
taxes, long-term leases, or forward or long-term commitments that are material
to the Company or any of its Subsidiaries other than as described in the
Financial Statements. Since June 30, 1996, there have been no materially
adverse changes in the business, properties, operations or condition (financial
or other) of the Company or any of its Subsidiaries.
(f) No Pending Litigation or Proceedings. Except as disclosed in the
------------------------------------
Company's publicly filed reports with the SEC, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or its Subsidiaries, at law or in equity or before or by
any Federal, state, municipal or other court, governmental department,
commission, board, bureau, agency, official or instrumentality or arbitration
board or tribunal, domestic or foreign, which might result, either individually
or collectively, in any materially adverse change in the business, properties,
operations or financial condition of the Company or any of its Subsidiaries or
which are likely to have a materially adverse effect on the consummation of the
transactions contemplated hereby.
-6-
<PAGE>
(g) Compliance with Law. Neither the Company nor any of its
-------------------
Subsidiaries are: (i) in default with respect to any order, writ, injunction or
decree of any court, governmental authority or agency or arbitration board or
tribunal to which it is a named party, or (ii) in violation of any law, rule,
regulation, ordinance or order relating to its or their respective businesses;
except for any such defaults or violations which would not individually or in
the aggregate have a materially adverse effect on the business, properties,
operations or financial condition of the Company or any of its Subsidiaries.
(h) Title to Properties. The Company and each of its Subsidiaries
-------------------
have good title to all property it purports to own, including that reflected in
the consolidated balance sheets included in the Financial Statements or
subsequently acquired by the Company or any Subsidiary (except as sold or
otherwise disposed of in the ordinary course of business), in each case free
from all liens, charges, and encumbrances of any kind, except those securing
Indebtedness for borrowed money of the Company or a Subsidiary provided that any
such liens, charges and encumbrances do not, individually or in the aggregate,
materially impair the use or value of the property in the operation of the
business of the Company and its Subsidiaries.
(i) Leases. The Company and each Subsidiary enjoy peaceful and
------
undisturbed possession under all leases under which the Company or such
Subsidiary is a lessee or is operating. In the absence of a default under such
leases, none of such leases contains any provision which might materially and
adversely affect the operation or use of the property so leased. All of such
leases are valid and subsisting and none of them is in default.
(j) Franchises, Licenses, Patents, Trademarks and Other Rights. The
----------------------------------------------------------
Company and each Subsidiary have all franchises, licenses, permits and other
authorizations necessary to carry on their businesses as now being conducted and
as proposed to be conducted, to own and operate their properties and, in the
case of the Company, to enter into this Agreement and to issue and sell the
Notes and the Warrants as contemplated in this Agreement, except for such
permits and licenses the failure of which to obtain will not have a materially
adverse effect on the business, properties, operations or financial condition of
the Company or any of its Subsidiaries. Neither the Company nor any Subsidiary
is in default under any of such franchises, permits, licenses or other
authorizations. The Company and each Subsidiary own or possess all patents,
trademarks, service marks, trade names, copyrights, licenses and rights with
respect to the foregoing necessary for the present conduct of their businesses,
without any known conflict with the rights of others.
(k) Status of Notes and Sale of Notes and Warrants.
----------------------------------------------
(i) The execution and delivery of this Agreement by the Company,
the sale of the Notes and the Warrants by the Company and compliance by the
Company with all of the provisions of this Agreement, the Notes and the
Warrants:
-7-
<PAGE>
(1) are within the corporate powers of the Company;
(2) will not violate any provisions of any law or any order
of any court or governmental authority or agency and will not
conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute (with or without the giving of notice
or lapse of time, or both) a default under the Articles of
Incorporation or Bylaws of the Company or any indenture or other
agreement or instrument to which the Company or any Subsidiary is a
party or by which it may be bound or result in the imposition of any
liens or encumbrances on any property of the Company or any
Subsidiary; and
(3) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Articles of Incorporation or Bylaws of
the Company or otherwise).
(ii) This Agreement, the Notes and the Warrants have been duly
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting creditor's rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or
at law).
(iii) Upon issuance of the Notes and the Warrants, the Notes and
the Warrants are not, or will not be, of the same class as securities
listed on a national securities exchange registered under Section 6 of the
Exchange Act of 1934, as amended, or quoted in a United States automated
inter-dealer quotation system, within the meaning of Rule 144A.
(l) No Defaults. No event has occurred and no condition exists which,
-----------
upon the issuance of the Notes, would constitute a Default or an Event of
Default under this Agreement. Neither the Company nor any Subsidiary is in
default, and no event has occurred which with notice or passage of time or both
would constitute a default, under any charter instrument, bylaw, loan agreement,
indenture or other material agreement or instrument to which the Company or any
Subsidiary is a party or by which it or its property may be bound.
(m) Governmental Consent. Neither the nature of the Company nor any
--------------------
of its Subsidiaries, their respective businesses or properties, nor any
relationship between the Company or any of its Subsidiaries and any other
Person, nor any circumstances in connection with the offer, issue, sale or
delivery of the Notes and the Warrants is such as to require a consent, approval
or authorization of, or filing, registration or qualification with, any
governmental authority or agency in connection with the execution and delivery
of this
-8-
<PAGE>
Agreement or the offer, issue, sale or delivery of the Notes and the Warrants or
compliance with the terms hereof or thereof other than filings with the SEC
contemplated by Section 5.9.
(n) Taxes. The Company and its Subsidiaries have filed all United
-----
States Federal income tax returns and all other material returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries, except as to any taxes the Company or any of its Subsidiaries is
contesting in good faith. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of taxes and other charges are, in
the opinion of the Company, adequate.
(o) Investment Company Act. The Company is not an "investment
----------------------
company" or an "affiliated person" thereof or an "affiliated person" of any such
"affiliated person," as such terms are defined in the Investment Company Act of
1940, as amended.
(p) Private Offering. Neither the Company nor, to the knowledge of
----------------
the Company, Gulfstream Financial Advisors, Inc. (the only Person authorized or
employed by the Company as agent, broker, dealer or otherwise in connection with
the offering of the Notes and the Warrants or any similar security of the
Company) nor any other Person has offered any of the Notes and the Warrants or
any similar security of the Company for sale to, or solicited offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto with,
any prospective purchaser other than the Purchasers, as set forth in a letter
from Gulfstream Financial Advisors, Inc., dated the date hereof, a copy of which
has been delivered to your special counsel, each of whom was offered all or a
portion of the Notes and the Warrants at private sale to be held in accordance
with the representations set forth in Section 3.2(a) hereof. Neither the
Company nor, to the knowledge of the Company, Gulfstream Financial Advisors,
Inc. (the only Person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering of the Notes and the
Warrants or any similar security of the Company) nor any other Person has
offered or will offer the Notes and the Warrants or any part thereof or any
similar securities for issue or sale to, or has solicited or will solicit any
offer to acquire any of the same from, anyone so as to bring the issuance and
sale of the Notes and the Warrants within the provisions of Section 5 of the
Securities Act.
(q) Effect of Other Instruments. Neither the Company nor any
---------------------------
Subsidiary is bound by any agreement or instrument or subject to any charter or
other corporate restriction which materially and adversely affects the business,
properties, operations or financial condition of the Company or any Subsidiary
or the Company's ability to perform its obligations under this Agreement, the
Notes and the Warrants.
(r) Use of Proceeds. The Company will apply the proceeds from the
---------------
sale of the Notes to retire Indebtedness and for working capital purposes.
-9-
<PAGE>
(s) Condition of Property. All of the facilities used in the conduct
---------------------
of the business of the Company and the Subsidiaries are in sound operating
condition and repair except for facilities being repaired in the ordinary course
of business.
(t) Books and Records. The Company and each Subsidiary maintain
-----------------
books, records and accounts all in reasonable detail which accurately and fairly
reflect the ownership of, transactions with respect to and dispositions of their
respective assets, and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary (x) to permit preparation of financial
statements in accordance with GAAP and (y) to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(u) Full Disclosure. The Private Placement Memorandum (the "Private
---------------
Placement Memorandum") previously furnished to you generally describes the
business conducted and proposed to be conducted by the Company and its
Subsidiaries and the principal properties of the Company and its Subsidiaries.
Neither the Private Placement Memorandum, including any exhibits and appendices
thereto, the financial statements referred to in paragraph (d) of this Section
3.1, nor this Agreement, nor any other statement or document furnished by the
Company to you in connection with the negotiation of the sale of the Notes
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading.
There is no fact peculiar to the Company or its Subsidiaries known by the
Company which the Company has not disclosed to you in writing which has a
materially adverse effect on or, so far as the Company can now reasonably
foresee, might have a materially adverse effect on the business, property,
operations or financial condition of the Company and its Subsidiaries or the
ability of the Company to perform its undertakings under and in respect of this
Agreement, the Notes and the Warrants.
(v) Indebtedness. Except for a $25.0 million secured loan to the
------------
Company from First Union National Bank of Virginia, the Company and the
Subsidiaries have no Indebtedness for borrowed money outstanding as of the
Closing Date other than as set forth in the Financial Statements.
3.2. Representations of the Purchasers.
---------------------------------
(a) Each of you acknowledges that you are an "accredited investor" as
defined in Rule 501(a) of the Securities Act as promulgated by the SEC. Each of
you represents, and in entering into this Agreement the Company understands,
that you are acquiring the Notes and the Warrants for the purpose of investment
and not with a view to the resale or distribution thereof, and that you have no
present intention of selling, negotiating or otherwise disposing of the Notes
and the Warrants; provided that the disposition of your property shall at all
times be and remain within your control. You acknowledge that the
-10-
<PAGE>
Notes, the Warrants and the Company Common Stock to be issued upon exercise of
the Warrants have not been registered under the Securities Act and you
understand that the Notes, the Warrants and the Company Common Stock to be
issued upon exercise of the Warrants must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available.
(b) You further represent that either no part of the funds to be used
by you to purchase the Notes are derived from the assets of an employee benefit
plan that is subject to the Employee Retirement Income Security Act of 1974
("ERISA") or Section 4975 of the Code, except with respect to those plans that
have been identified to the Company by you. The Company has represented to you
that the Company is not a "party-in-interest" under ERISA or a "disqualified
person" under the Code, with respect to any such employee benefit plan
identified to the Company by you. As used in this Section, the term "plan"
shall have the meaning assigned to it in Code section 4975.
(c) No provision set forth in this Section 3.2 shall be construed to
relieve the Company of its obligations pursuant to Section 5.9.
SECTION 4. CLOSING CONDITIONS.
Your obligation to purchase the Notes and the Warrants on the Closing Date
shall be subject to the performance by the Company of its agreements hereunder
which by the terms hereof are to be performed at or prior to the time of
delivery of the Notes and the Warrants and to the following further conditions
precedent:
4.1. Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in this Agreement or otherwise made in connection
herewith shall be true and correct on the Closing Date and you shall receive
from the Company a closing certificate dated the Closing Date, and executed by
the President, a Vice President or the Chief Financial Officer of the Company to
such effect.
4.2. Legal Opinions. You shall receive from Hunton & Williams, counsel of
--------------
the Company, their opinion, addressed to you and dated the Closing Date, in form
and substance satisfactory to you, and covering the matters set forth in Exhibit
C hereto.
4.3. Events of Default. No event shall have occurred and be continuing on
-----------------
such Closing Date which would constitute a Default or an Event of Default, and
the Company shall have delivered to you on such Closing Date a certificate
signed by the President, a Vice President or the Chief Financial Officer of the
Company to such effect.
4.4. Sale of Notes. The Company shall have consummated the sale of the
-------------
entire principal amount of the Notes scheduled to be sold on the Closing Date to
the Purchasers pursuant to this Agreement.
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<PAGE>
4.5. Satisfactory Proceedings. All proceedings taken in connection with
------------------------
the transactions contemplated by this Agreement, and all documents necessary to
the consummation thereof, shall be satisfactory in form and substance to you and
Solomon & Moskowitz, P.C., your special counsel, and you and your special
counsel shall have received a copy (executed or certified as may be appropriate)
of all legal documents or proceedings taken in connection with the consummation
of said transactions.
4.6. Waiver of Conditions. If, on the Closing Date, the Company fails to
--------------------
tender to you the Notes and the Warrants to be issued to you on such date or if
the conditions specified in this Section 4 have not been fulfilled, you may
thereupon elect to be relieved of all further obligations under this Agreement.
Without limiting the foregoing, if the conditions specified in this Section 4
have not been fulfilled, you may waive compliance by the Company with any such
condition to such extent as you may in your sole discretion determine. Nothing
in this Section 4.6 shall operate to relieve the Company of any of its
obligations hereunder or to waive any of your rights against the Company.
4.7. Secretary's Certificate. The Company shall have delivered to the
-----------------------
Purchasers the Secretary's Certificate substantially in the form of Exhibit 4.7
-----------
attached hereto.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
5.1. Payment of the Notes. The Company shall pay the principal of and
--------------------
interest on the Notes on the dates and in the manner provided in the Notes and
this Agreement. An installment of principal or interest shall be considered
paid on the date it is due if the holders of the Notes receive the money
sufficient to pay the installment. The Company shall pay interest on overdue
principal at the rate of 12.00% per annum; it shall pay interest, including
post-petition interest in the event of a proceeding under the Bankruptcy Laws,
on overdue installments of interest at the same rate to the extent lawful.
5.2. Company Existence; Maintenance of Office or Agency. Subject to this
--------------------------------------------------
Section 5, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate existence of each Subsidiary in accordance with the respective
organizational documents of each Subsidiary and the rights (statutory and
other), licenses and franchises of the Company and each Subsidiary; provided,
however, that the Company shall not be required to preserve any such right,
licenses or franchise, or the corporate existence of any Subsidiary, if the
Board of Directors shall determine in good faith (i) such preservation or
existence is not material to the conduct of business of the Company and (ii) the
loss of such right, license or franchise or the dissolution of such Subsidiary
does not have and is not likely to have a material adverse impact on the
Purchasers.
-12-
<PAGE>
5.3. SEC Reports. The Company shall send to each holder of a Note, within
-----------
30 days after it files them with the SEC, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. So long as the Notes remain outstanding, the Company shall cause
its annual reports to stockholders (containing audited financial statements) and
any other financial reports furnished by it to stockholders to be mailed
concurrently to the holders of Notes at their addresses set forth herein.
5.4. Waiver of Stay, Extension or Usury Laws. The Company covenants (to
---------------------------------------
the extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or that may affect the covenants or the performance of
this Agreement; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted, but will suffer and permit the execution of every such power as though
no such law had been enacted.
5.5. Notice of Default. The Company will, so long as any of the Notes are
-----------------
outstanding, deliver to the Purchasers, forthwith upon becoming aware of (i) any
Default or Event of Default, an officers' certificate specifying such Default or
Event of Default.
5.6. Compliance Certificates.
-----------------------
(a) The Company will deliver to the Purchasers, within 120 days after
the end of each fiscal year, a written statement signed by the President or a
Vice President and by the Treasurer, an Assistant Treasurer, the Controller or
an Assistant Controller of the Company, stating, as to each signer thereof,
that:
(i) a review of the activities of the Company during such year
and of performance under this Agreement has been made under his supervision
and
(ii) whether the officer knows of any Defaults by the Company
under this Agreement throughout such year or, if there has been a default
in the fulfillment of any such obligation, specifying each such Default
known to him and the nature and status thereof.
(b) The Company will deliver to the Purchasers, within 30 days after
the end of each fiscal quarter, a written statement signed by the President or a
Vice President and by the Treasurer, an Assistant Treasurer, the Controller or
an Assistant Controller of the Company, stating, as to each signer thereof, that
the Company is in compliance with the
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<PAGE>
covenants of Section 5.10 hereof and that no prepayment of the Notes is required
under Sections 5.11 or 5.12 hereof.
5.7. Limitation on Dividends and Other Distributions. The Company shall
-----------------------------------------------
not declare or pay any dividend or make any distribution on or in respect of any
of its capital stock or to its stockholders (other than dividends or
distributions payable solely in its capital stock) or purchase, redeem or
otherwise acquire or retire for value any capital stock or any warrants, rights
or options (including any securities convertible into or exercisable or
exchangeable for such capital stock, but not including the Notes or the
Warrants) of the Company or any Subsidiary, provided, however, that if a Default
or an Event of Default has not occurred and is continuing, such provisions shall
not prevent (i) the retirement of any shares of the Company's capital stock by
exchange for, or out of the proceeds of, the substantially concurrent sale of
other shares of its capital stock, (ii) the purchase, redemption, retirement or
other acquisition for value, at any time, of the Company Common Stock using
$25.0 million in cash and up to 650,000 shares of Company Common Stock using
shares of common stock of World Airways, $.001 par value per share, of which the
Company is the owner or (iii) any prepayment of the Notes pursuant to the terms
thereof; provided, further, that such provisions shall not prevent the payment
of any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment complied with the provisions of this limitation
on dividends. The Company shall also be able to repurchase, redeem, retire or
otherwise acquire for value up to $5.0 million of additional shares of Company
Common Stock for every $15.0 million increase in Asset Value at such time
compared to such value as of September 12, 1996.
5.8. Stock Repurchases. Each Subsidiary shall be permitted to, directly
-----------------
or indirectly, repurchase, redeem, retire or otherwise acquire for value any of
its shares of capital stock of any class or any warrants, rights, options to
purchase or acquire any shares of its capital stock.
5.9. Registration Rights.
-------------------
(a) Not later than 45 days after the Closing Date, the Company agrees
to file a registration statement to register with the SEC the Notes and to use
its best efforts to have such registration statement declared effective as soon
as practicable after the filing thereof, but in no event later than 45 days
following the filing thereof. WorldCorp agrees only to pay the cost of its
legal counsel and related filing fees in connection with such registration.
(b) The Company will file a "shelf" registration statement on an
appropriate form pursuant to Rule 415 under the Securities Act and/or any
similar rule that may be adopted by the Securities and Exchange Commission (the
"Commission") with respect to the (i) the Initial Warrants and the shares of
Common Stock issuable upon exercise of the Initial Warrants, (ii) the 1997
Warrants, if any, and the shares of Common Stock issuable upon exercise of the
1997 Warrants, and (iii) the 1998 Warrants, if any, and the shares of Common
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<PAGE>
Stock issuable upon exercise of the 1998 Warrants, in each case as soon as
practicable after, but in no event later than 45 days following, the issuance of
the relevant Warrants, respectively (each such shelf registration statement, a
"Shelf Registration" and collectively, the "Shelf Registrations"). The Company
agrees to use its best efforts to have the Shelf Registration declared effective
as soon as practicable after the filing thereof, but in no event later than 45
days following the filing thereof, and shall keep such Shelf Registration
continuously effective for a period of at least 48 months from the date on which
such Shelf Registration is declared effective; provided, however, that
notwithstanding the foregoing, the Company shall not be required to continue to
keep a Shelf Registration effective with respect to the Initial Warrants, the
1997 Warrants or the 1998 Warrants or the shares of Common Stock issuable upon
the exercise of the Initial Warrants, the 1997 Warrants or the 1998 Warrants,
once such Warrants or the shares of Common Stock issuable under such Warrants,
as the case may be, may be sold by the holders thereof pursuant to Rule 144(k)
of the Securities Act (or any successor rule) in a single transaction. If the
Company commences a registered public offering of its Common Stock, the Company
may notify the holders of the Warrants ("Warrant Holders") not to sell any
shares of Common Stock pursuant to any Shelf Registration for a period of up to
90 days, and after receiving such notice, the Warrant Holders shall not sell any
Shares pursuant to such Shelf Registration during such period, in which event
the Company shall extend the period during which Shelf Registration shall be
maintained effective pursuant to this Warrant by the number of days during such
period, from and including the date of the giving of such notice. The Company
agrees, if necessary, to supplement or make amendments to a Shelf Registration
if required by the registration form used by the Company for such Shelf
Registration or the instructions applicable to each such registration form or by
the Securities, and the Company agrees to furnish to the Warrant Holders copies
of any such supplement or amendment prior to its being used and/or filed with
the Commission. The Company will make available to its security holders, as soon
as reasonably practicable, a statement of operations covering a period of 12
months, commencing on the effective date of each Shelf Registration, which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder. In no event shall any Shelf Registration
include securities other than the Warrants and the shares of Common Stock
underlying the Warrants, unless Warrant Holders holding, in the aggregate, a
majority of the outstanding Warrants being registered thereunder consent to such
inclusion.
(c) In connection with each Shelf Registration, the Company shall pay
the costs of registration, including registration and filing fees, blue sky fees
and expenses, printing expenses, annual audit fees and expenses, and fees and
disbursements of counsel and accountants for the Company in connection
therewith, whether such Shelf Registration becomes effective. The Warrant
Holders shall bear (i) the legal fees and expenses of any counsel retained by
the Warrant Holders, (ii) underwriting discounts and commissions, if any and
(iii) the accountants' fees and expenses of any accountant retained by the
Warrant Holders in connection with the offering of their securities.
(d) Each Warrant Holder shall furnish to the Company all information
regarding the Warrant Holder as is reasonably requested by the Company in
connection with
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<PAGE>
the preparation of the Shelf Registrations. Each Warrant Holder who owns
Warrants or shares of Common Stock included in a Shelf Registration will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed such Shelf Registration and each person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities to which the Company or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Shelf
Registration, the prospectus included in the Shelf Registration at the time it
became effective, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Warrant
Holder specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action.
(e) The Company shall indemnify and hold harmless each Warrant Holder
who owns Warrants or shares of Common Stock included in a Shelf Registration,
and each officer and director of such Warrant Holder, and each person, if any,
who controls any such Warrant Holder within the meaning of the Securities Act,
against any losses, claims, damages, or liabilities to which such Warrant Holder
or any such officer, director or controlling person may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Shelf Registration, the prospectus included in such Shelf Registration at
the time it became effective, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company shall have no obligation under this paragraph to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished to the Company by the Warrant Holder specifically for use therein; and
will reimburse any legal or other expenses reasonably incurred by such Warrant
Holder or any such officer, director or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
5.10. Senior Indebtedness. The Company agrees that Senior Indebtedness
-------------------
shall not exceed $50.0 million.
5.11. Asset Value. If the Asset Value is less than $70.0 million at the
-----------
end of any fiscal quarter, then the Company shall prepay 50% of the then
outstanding Notes in accordance with Section 2 hereof within 60 days. If the
Asset Value at the end of any fiscal
-16-
<PAGE>
quarter is less than $50.0 million, then the Company shall redeem all of the
then outstanding Notes in accordance with Section 2 hereof within 60 days.
5.12. Sale of USOCDT Merger Corporation Common Stock. If the Company sells
----------------------------------------------
any shares of common stock of USOCDT Merger Corporation, as successor to US
Order, Inc., 20% of the net proceeds (i.e., gross proceeds less direct costs
----
associated with such sales) received by the Company upon such sale will be used
to prepay the Notes in accordance with Section 2 hereof within 30 days.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
6.1. Events of Default. Any one or more of the following shall constitute
-----------------
an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more than 10
calendar days; or
(b) Default shall occur in the making of any required prepayment on
any of the Notes as provided in Section 2.1 or in the making of any other
payment of the principal of any Note at the maturity date; or
(c) Default shall be made in the payment of the principal of or
interest or premium on Indebtedness of the Company and its Subsidiaries
aggregating in excess of $5.0 million, as and when the same shall become due and
payable by the lapse of time, by declaration of acceleration, by call for
redemption or otherwise, and such default shall continue beyond the period of
grace, if any, allowed with respect thereto unless such default is being
contested in good faith by appropriate actions or proceedings; or
(d) Default shall occur in the observance or performance of any other
covenant of this Agreement which is not remedied within 30 calendar days after
the Company has received written notice thereof; or
(e) Any representation or warranty made by the Company herein, or made
by the Company in any statement or certificate furnished by the Company in
connection with the consummation of the issuance and delivery of the Notes or
furnished by the Company pursuant hereto, is untrue in any material respect as
of the date of the issuance or making thereof; or
(f) Any judgment, writ or warrant of attachment or any similar process
in an aggregate amount in excess of $5.0 million shall be entered or filed
against the Company or any Subsidiary or against any property or assets of
either and remain unpaid, unvacated, unbonded or unstayed (through appeal or
otherwise) for a period of 60 days after the date of entry or filing thereof; or
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<PAGE>
(g) The Company or any Subsidiary shall:
(i) generally not pay its debts as they become due or admit
in writing its inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Federal Bankruptcy Code, or
any similar applicable bankruptcy or insolvency law, as now or in the
future amended (herein collectively called "Bankruptcy Laws"), or an answer
or other pleading admitting or failing to deny the material allegations of
such a petition or seeking, consenting to or acquiescing in relief provided
for under the Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its
property for the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property;
(v) be subject to the entry of a court order, which shall not
be vacated, set aside or stayed within 45 days from the date of entry,
appointing a receiver, liquidator, custodian or trustee of it or for all or
a substantial part of its property;
(vi) be subject to the institution against it of bankruptcy,
reorganization, arrangement or insolvency proceedings, or other proceedings
pursuant to the Bankruptcy Laws or any other proceedings for judicial
modification or alteration of the rights of creditors, which proceedings
are not dismissed within 60 days after such institution or which otherwise
result in the Company or such Subsidiary being finally adjudicated a
bankrupt or insolvent; or
(vii) be subject to the assumption of custody or sequestration
by a court of competent jurisdiction of all or a substantial part of its
property, which custody or sequestration shall not be suspended or
terminated within 60 days from its inception.
6.2. Acceleration of Maturities. When any Event of Default described in
--------------------------
paragraph (a) or (b) of Section 6.1 has occurred and is continuing, any holder
of any Note may, and when any Event of Default described in paragraphs (c)
through (f), both inclusive, of said Section 6.1 has occurred and is continuing,
the holder or holders of a majority in aggregate principal amount of the Notes
at the time outstanding may, by notice in writing, declare the entire principal,
together with the premium set forth below, and all interest accrued on all
Notes, to be, and all Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived. When any Event of Default described in
paragraph (g) of Section 6.1 has occurred and is continuing, all of the Notes,
and all interest accrued thereon, shall
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<PAGE>
automatically become forthwith due and payable, without any presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived. Upon
the Notes becoming due and payable as a result of any Event of Default as
aforesaid, the Company will forthwith pay to the holders of the Notes the entire
principal of, and interest accrued on, the Notes. No course of dealing on the
part of any holder of Notes, nor any delay or failure on the part of any holder
of Notes to exercise any of its rights, shall operate as a waiver of such rights
or otherwise prejudice such holder's rights, powers and remedies. The Company
further agrees to pay to the holder or holders of the Notes all costs and
expenses incurred by them in the collection or enforcement of any Notes upon any
default hereunder or thereon, including reasonable compensation to such holder's
or holders' attorneys for all services rendered in connection therewith.
6.3. Rescission of Acceleration. The provisions of Section 6.2 are
--------------------------
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default, the holders of a majority in
aggregate principal amount of the Notes then outstanding may within 90 days of
the Notes becoming due and payable, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal or
interest on the Notes which has become due and payable solely by reason of such
declaration under Section 6.2) shall have been duly paid;
(c) each and every Default and Event of Default shall have been made
good, cured or waived pursuant to Section 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Event of Default or impair any right consequent thereto.
6.4. Notice of Default. With respect to Events of Default or claimed
-----------------
defaults, the Company will give the following notices:
(a) The Company promptly, but in any event within four business days,
will furnish to each holder of a Note written notice of the occurrence of a
Default or an Event of Default. Such notice shall specify the nature of such
Default or Event of Default, the period of existence thereof and what action the
Company has taken or is taking or proposes to take with respect thereto.
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<PAGE>
(b) If the holder of any Note or of any other evidence of
indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default, the Company will forthwith give
written notice thereof to each holder of the then outstanding Notes, describing
the notice or action and the nature of the claimed default.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
7.1. Consent Required. Any term, covenant, agreement or condition of this
----------------
Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 51% in aggregate principal amount of Notes
then outstanding; provided that without the written consent of the holders of
all of the Notes then outstanding, no such waiver, modification, alteration or
amendment shall be effective (i) which will change the time of payment
(including any prepayment required by Section 2.1) of the principal of or the
interest on any Note or change the principal amount of payments (including the
prepayments required by Section 2.1 hereof) or change the rate of interest
thereon, or (ii) which will change any of the provisions with respect to
optional prepayments, or (iii) which will change the percentage of holders of
the Notes required to consent to any amendment, alteration or modification.
For the purpose of determining whether holders of the requisite principal
amount of Notes have made or concurred in any waiver, consent, approval, notice
or other communication under this Agreement, Notes held in the name of, or owned
beneficially by, the Company, any Subsidiary or any Affiliate of any thereof,
shall not be deemed outstanding.
7.2. Effect of Amendment or Waiver. Any such amendment or waiver shall
-----------------------------
apply equally to all of the holders of the Notes and shall be binding upon them,
upon each future holder of any Note and upon the Company, whether or not such
Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
7.3. Solicitation of Noteholders. The Company will not solicit, request
---------------------------
or negotiate for or with respect to any proposed waiver or amendment of any of
the provisions of this Agreement or the Notes unless each holder of the Notes
(irrespective of the amount of Notes then owned by it) shall be informed thereof
by the Company and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to enable it to
make an informed decision with respect thereto. Executed or true and correct
copies of any waiver or consent effected pursuant to the provisions of this
Section 7 shall be delivered by the Company to each holder of outstanding Notes
forthwith following the date on which the same shall have been executed and
delivered by the holder or holders of the requisite percentage of outstanding
Notes. The Company will not, and will not permit any Subsidiary or Affiliate
to, directly or indirectly, pay or cause to be paid any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, to any holder of
the Notes as consideration for or as inducement to the entering into by any
holder of the
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<PAGE>
Notes of any waiver or amendment of any of the terms and provisions of the
Agreements unless such remuneration is concurrently paid, on the same terms,
ratably to the holders of all the Notes then outstanding.
SECTION 8. SUBORDINATION OF SECURITIES.
8.1. Notes Subordinate to Senior Indebtedness. The Company covenants and
----------------------------------------
agrees that anything in this Agreement or the Notes to the contrary
notwithstanding, the indebtedness evidenced by the Notes is subordinate and
junior in right of payment to all Senior Indebtedness to the extent provided
herein, and each holder of Notes, by his acceptance thereof, likewise covenants
and agrees to the subordination herein provided and shall be bound by the
provisions hereof. Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of these subordination provisions irrespective of
any amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness.
In the event that the Company shall default in the payment of any principal
of (or premium, if any) or interest on any Senior Indebtedness when the same
becomes due and payable, whether at maturity or at a date fixed for repayment or
by declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of Senior Indebtedness or any trustee
therefor or representative thereof, unless and until such default shall have
been cured or waived or shall have ceased to exist, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) shall be made
or agreed to be made on account of the principal of or interest on any of the
Notes, or in respect of any redemption, retirement, purchase or other
acquisition of any of the Notes.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its property,
(b) any proceeding for the liquidation, dissolution or other winding
up of the Company, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings,
(c) any assignment by the Company for the benefit of creditors, or
(d) any other marshalling of the assets of the Company,
all Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made to any holder of any of the Notes on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
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securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Notes, to the payment of all Senior Indebtedness
at the time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment), which would otherwise (but for
these subordination provisions) be payable or deliverable in respect of the
Notes shall be paid or delivered directly to the holders of Senior Indebtedness
in accordance with the priorities then existing among such holders until all
Senior Indebtedness (including any interest thereof accruing after the
commencement of any such proceedings) shall have been paid in full. In the
event of any such proceeding, after payment in full of all sums owing with
respect to Senior Indebtedness, the holders of the Notes, together with the
holders of any obligations of the Company ranking on a parity with the Notes,
shall be entitled to be paid from the remaining assets of the Company the
amounts at the time due and owing on account of unpaid principal of (and
premium, if any) and interest on the Notes and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, shall be
made on account of any capital stock or any obligations of the Company ranking
junior to the Notes and such other obligations.
In the event that, notwithstanding the foregoing, any payment or
distribution of any character, whether in cash, securities or other property
(other than securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in these subordination provisions with respect to
the indebtedness evidenced by the Notes, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), or any security
shall be received by any holder in contravention of any of the terms hereof,
such payment or distribution or security shall be received in trust for the
benefit of, and shall be paid over or delivered and transferred to, the holders
of the Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full. In the event of the failure of any holder to
endorse or assign any such payment, distribution or security, each holder of
Senior Indebtedness is hereby irrevocably authorized to endorse or assign the
same.
No present or future holder of any Senior Indebtedness shall be prejudiced
in the right to enforce subordination of the indebtedness evidenced by the Notes
by any act or failure to act on the part of the Company. Nothing contained
herein shall impair, as between the Company and the holders of Notes, the
obligation of the Company to pay to such holders the principal of and interest
on such Notes or prevent the holder from exercising all rights, powers and
remedies otherwise permitted by applicable law or hereunder upon a Default or
Event of Default hereunder, all subject to the rights of the holders of the
Senior Indebtedness to receive cash, securities or other property otherwise
payable or deliverable to the holders.
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<PAGE>
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the holders of Notes shall be subrogated to all
rights of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the indebtedness
evidenced by the Notes shall have been paid in full, and such payments or
distributions received by such holders, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or distributed to the
holders of Senior Indebtedness, shall, as between the Company and its creditors
other than the holders of Senior Indebtedness, on the one hand, and such
holders, on the other hand, be deemed to be a payment by the Company on account
of Senior Indebtedness, and not on account of the Notes.
The provisions of this Section shall not impair any right, interests,
remedies or powers of any secured creditor of the Company in respect of any
security interest the creation of which is not prohibited by the provisions of
this Agreement.
The securing of any obligations of the Company, otherwise ranking on a
parity with the Notes or ranking junior to the Notes, shall not be deemed to
prevent such obligations from constituting, respectively, obligations ranking on
a parity with the Notes or ranking junior to the Notes.
SECTION 9. INTERPRETATION OF AGREEMENT; DEFINITIONS.
9.1. Definitions. Unless the context otherwise requires, the terms
-----------
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 10% or more of any class of the voting stock of the
Company or (iii) 10% or more of the voting stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting stock, by contract or otherwise.
"Agreement" shall mean this purchase agreement.
"Asset Value" shall mean (A) the market value of the common stock of its
Subsidiaries or the Company Common Stock measured based on the monthly closing
prices of each of the common stocks as listed on the New York Stock Exchange or
the Nasdaq National Market, as the case may be, plus (B) all other tangible
assets of the Company calculated in accordance
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<PAGE>
with generally accepted accounting principles consistently applied, measured
based on the value of such assets as of the applicable date.
"Closing Date" shall mean September 30, 1996.
"Company Common Stock" shall have the meaning assigned thereto in Section
1.1(b).
"Default" shall mean any event or condition, the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default as defined in Section 6.1.
"ERISA" shall have the meaning assigned thereto in Section 3.2(b).
"Event of Default" shall have the meaning assigned thereto in Section 6.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
as it may be further amended from time to time.
"Financial Statements" shall have the meaning assigned thereto in Section
3.1(d).
"GAAP" shall mean the generally accepted accounting principles at the time
promulgated by the United States Financial Accounting Standards Board.
"Indebtedness" of any Person shall mean and include all obligations of such
Person which in accordance with GAAP shall be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(i) obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations secured
by any lien or other charge to property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) guaranties, (v) capitalized rentals under
any capitalized lease and (vi) any recourse obligations arising upon a sale of
assets. Any Indebtedness extended or renewed, other than at the option of the
obligor pursuant to the terms thereof, will be deemed to have been incurred at
the time of such extension or renewal.
"Institutional Holder" shall mean any bank, trust company, insurance
company, pension fund, investment company, institution of the Farm Credit
System, or other financial institution, including, without limiting the
foregoing, any "qualified institutional buyer" within the meaning of Rule 144A
which is or becomes a holder of any Note.
"Notes" shall have the meaning assigned thereto in Section 1.1(a).
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<PAGE>
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, estate or unincorporated organization, and a
government or agency or political subdivision thereof.
"Private Placement Memorandum" shall have the meaning assigned thereto in
Section 3.1(v).
"Rule 144A" shall mean Rule 144A promulgated pursuant to the Securities
Act, as it may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and as
it may be further amended from time to time.
"Senior Indebtedness" shall mean at any date, (i) all Indebtedness of the
Company for money borrowed from any institutional lender secured by any lien or
other charge to the property or assets owned by the Company, whether created
prior to, or after the date of the issuance of the Notes, including principal
and interest on such Indebtedness and all other amounts due on or in connection
with such Indebtedness including all charges, fees and expenses and (ii) all
interest on any Indebtedness referred to in clause (i) accruing during the
pendency of any bankruptcy or insolvency proceeding, whether or not allowed
thereunder. Notwithstanding the foregoing, Senior Indebtedness shall not
include (a) Indebtedness which is pursuant to its terms or any agreement
relating thereto or by operation of law subordinated or junior in right of
payment or otherwise to any other Indebtedness of the Company and (b) any
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of the Bankruptcy Code, is without recourse to the Company.
"Shelf Registration" shall have the meaning assigned thereto in Section
5.9(b).
"Subordinated Indebtedness" shall mean any Indebtedness other than the
Notes that is not Senior Indebtedness. Subordinated Indebtedness shall include,
without limitation, (a) the Company's 7% Convertible Subordinated Debentures due
2004 and (b) any Indebtedness of the Company to any Subsidiary of the Company.
"Subsidiary" shall mean any corporation of which more than 50% (by number
of votes) of the voting stock shall be owned or controlled by the Company or by
one or more Subsidiaries of the Company.
"Warrant Holders" shall have the meaning assigned thereto in Section
5.9(b).
"Warrants" shall have the meaning assigned thereto in Section 1.1(b).
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<PAGE>
Terms which are defined in other Sections of this Agreement shall have the
meanings specified therein.
9.2. Accounting Principles. Where the character or amount of any asset
---------------------
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
9.3. Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 10. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.
10.1. Registered Notes. The Company shall cause to be kept at its
----------------
principal office a register for the registration and transfer of the Notes
(hereinafter called the "Note Register"). The names and addresses of the
holders of the Notes, the transfer of Notes and the names and addresses of the
transferees of the Notes shall be registered in the Note Register.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement and the Company shall not be affected by any notice to the contrary,
until due presentment of such Note for registration of transfer so provided in
this Section 10. Payment of or on account of the principal and interest on any
registered Note shall be made to or upon the written order of such registered
holder.
10.2. Exchange of Notes. At any time, and from time to time, upon
-----------------
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section 11.3, the Company
shall execute and deliver in exchange therefor, without expense to the holder,
except as set forth below, one or more new Notes for the same aggregate
principal amount as the then unpaid principal amount of the Note so surrendered,
in authorized denominations, dated as of the date to which interest has been
paid on the Note so surrendered (or, if no interest has been paid, the date of
such surrendered Note), registered in the name of such Person or Persons, or
order, as may be designated by such holder in writing, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. Every Note surrendered
for transfer of registration shall be duly endorsed, or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
its attorney duly authorized in writing. The Company may require the payment of
a sum sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer. The Notes are issuable only in fully registered form and
in the face amount of at least $250,000 (or the remaining outstanding balance if
less than $250,000).
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<PAGE>
10.3. Loss, Theft, etc. of Notes. Upon receipt of evidence satisfactory
--------------------------
to the Company of the loss, theft, mutilation or destruction of any Note, and in
the case of any such loss, theft or destruction upon delivery of a bond of
indemnity in such form and amount as shall be reasonably satisfactory to the
Company, or in the event of such mutilation upon surrender and cancellation of
the Note, the Company will make and deliver, without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If any Purchaser or any other Institutional Holder is the owner
of any such lost, stolen or destroyed Note, then the affidavit of an authorized
officer of such owner, setting forth the fact of loss, theft or destruction and
of its ownership of the Note at the time of such loss, theft or destruction
shall be accepted as satisfactory evidence thereof and no further indemnity
shall be required as a condition to the execution and delivery of a new Note
other than the written agreement of such owner to indemnify the Company.
SECTION 11. MISCELLANEOUS.
11.1. Expenses, Stamp Tax Indemnity. Whether or not the transactions
-----------------------------
herein contemplated shall be consummated, the Company agrees to pay directly the
reasonable charges and disbursements (not to exceed $25,000 in the aggregate) of
Gulfstream Financial Advisors, Inc. (the "Placement Agent"), your special
counsel, duplicating and printing costs and charges for shipping the Notes and
the Warrants, adequately insured to the Purchaser at the Purchaser's home office
or at such other place as the Purchaser may designate, and all similar expenses
relating to any amendment, waivers or consents pursuant to the provisions
hereof. The Company also agrees that it will pay and save the Purchaser
harmless from and against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement, the Notes or the
Warrants (but not in connection with a transfer of any Note or Warrant), whether
or not any Notes are then outstanding. The Company agrees to protect and
indemnify the Purchaser against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement.
11.2. Powers and Rights Not Waived; Remedies Cumulative. No delay or
-------------------------------------------------
failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to and are not exclusive of any rights or remedies
any such holder would otherwise have, and no waiver or consent, given or
extended pursuant to Section 7 hereof, shall extend to or affect any obligation
or right not expressly waived or consented to.
11.3. Notices. Except as otherwise expressly provided herein, all notices
-------
provided for hereunder shall be in writing and mailed by registered or certified
mail (return receipt requested) or delivered by overnight courier for which a
signed receipt is obtained, addressed (i) if to you, to your address appearing
on Schedule I to this Agreement or such other address
----------
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<PAGE>
as you or the subsequent holder of any Note may designate to the Company in
writing, and (ii) if to the Company, to WorldCorp, Inc., The Hallmark Building,
13873 Park Center Road, Herndon, Virginia 22071, Attention: Mr. Andrew M.
Paalborg, or to such other address as the Company may in writing designate to
the holders of the Notes.
11.4. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns and shall inure to your benefit and to
the benefit of your successors and assigns, including each successive holder or
holders of any Notes.
11.5. Survival of Covenants and Representations. All covenants,
-----------------------------------------
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with a
Closing Date, shall survive the closing and the delivery of this Agreement, the
Notes and the Warrants.
11.6. Integration. This Agreement embodies the entire agreement and
-----------
understanding between you and the Company, and supersedes all prior agreements
and understandings relating to the subject matter hereof.
11.7. Governing Law. This Agreement and the Notes and the Warrants
-------------
issued and sold hereunder shall be governed by and construed in accordance with
the internal laws of the State of Delaware without regard to its conflict of
laws principles or rules.
11.8. Headings. The descriptive headings of the various Sections or
--------
parts of this Agreement are for convenience only and do not constitute a part of
this Agreement and shall not affect the meaning or construction of any of the
provisions hereof.
11.9. Counterparts. This Agreement may be executed simultaneously in one
------------
or more counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
11.10. Agent's Fee. The Company agrees to pay, and agrees the Purchasers
-----------
shall have no obligation to pay, any fees and expenses due and owing to any
person, firm or corporation for services of such person, firm or corporation as
agent, broker or dealer for the Company with respect to the offer and sale of
the Notes and the Warrants.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed and delivered by their respective officer or officers
thereunto duly authorized.
WORLDCORP, INC.
By: _________________________
Name:
Title:
PURCHASER
By: _________________________
Name:
Title:
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<PAGE>
Schedule I
----------
Principal Amount of Notes to be Purchased
-----------------------------------------
Principal Number and
Purchaser Amount of Notes Type of Warrants
- --------- --------------- ----------------
All payments on or in respect of the Notes
are to be by bank wire transfer of
immediately available funds to:
with sufficient information to identify the
source and application of funds
(identifying each payment as WorldCorp,
Inc., 10.00% Senior Subordinated Notes due
September 30, 2000, principal, interest and
premium, if any).
All notices and communication should be
addressed to:
With copies to:
Name in which Notes are to be issued: _________________________________________
Name in which Warrants are to be issued: ______________________________________
Tax Identification No.: _______________________________________________________
<PAGE>
ANNEX I
List of Subsidiaries and Jurisdictions
in Which the Company and its Subsidiaries
are Qualified as Foreign Corporations
<TABLE>
<CAPTION>
State of
% Incorporation Foreign
Organization Ownership or Organization Qualifications
- ------------ --------- --------------- --------------
<S> <C> <C> <C>
WorldCorp Investments, Inc. 100% Delaware Virginia
US Order, Inc. 56.6%* Delaware Virginia
World Airways, Inc. 59.3% Delaware Virginia
</TABLE>
*Prior to proposed merger with Colonial Data Technologies Corp., which merger is
anticipated to be effective in November 1996.
<PAGE>
Exhibit A
---------
WORLDCORP, INC.
10.00% SENIOR SUBORDINATED NOTE
Due September 30, 2000
---------------
THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED. THIS NOTE MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER SAID ACT
OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. EACH SUBSEQUENT
PURCHASER REPRESENTS TO THE COMPANY THAT THE PURCHASE OF THIS NOTE BY SUCH
PURCHASER IS NOT A "NON-EXEMPT PROHIBITED TRANSACTION" AS DEFINED IN SECTION 406
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED.
---------------
Registered Note No. R-___ September 30, 1996
$____________
WorldCorp, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to ____________________ or registered assigns,
on the thirtieth day of September, 2000, the principal amount of
______________________________ Dollars ($__________) and to pay interest
(computed on the basis of a 360-day year of 12 30-day months) on the principal
amount from time to time remaining unpaid hereon at the rate of 10.00% per annum
from the date hereof until maturity, payable on March 31 and September 30 in
each year, commencing on March 31, 1997, and at maturity, and to pay interest on
overdue principal and (to the extent legally enforceable) on any overdue
installment of interest at the rate of 12.00% per annum after maturity or the
date due thereof, until paid. Payments of the principal and interest on this
Note shall be made in lawful money of the United States of America in the manner
and at the place provided in Section 2.6 of the Agreement (as hereinafter
defined).
This Note is issued under and pursuant to the terms and provisions of the
Purchase Agreement, dated as of September 30, 1996, entered into between the
Company and the Purchasers listed on Schedule I thereto (the "Agreement"), and
----------
this Note and any holder hereof are entitled to all of the benefits provided for
by such Agreement or referred to therein. The provisions of the Agreement are
hereby incorporated in this Note to the same extent as if set forth at length
herein.
As provided in the Agreement, upon surrender of this Note for registration
of transfer, duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder
<PAGE>
hereof or his attorney duly authorized in writing, a new Note for a like unpaid
principal amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental charges, if any,
that may be imposed in connection therewith. The Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
This Note may be declared due prior to its expressed maturity date,
voluntary prepayments may be made hereon and certain prepayments are required to
be made hereon, all in the events, on the terms and in the manner provided in
the Agreement. Such prepayments include (i) certain required prepayments on
September 30, 1998 and September 30, 1999 and upon the occurrence of certain
events specified in the Agreement, and (ii) certain optional prepayments. The
principal of this Note may not be prepaid prior to the expressed maturity date
except as provided in the Agreement.
The indebtedness evidenced by this Note is, to the extent provided in the
Agreement, subordinate and subject in right of payment to the prior payment in
full of all Senior Indebtedness as defined in the Agreement, and this Note is
issued subject to such provisions and each holder of this Note, by accepting the
same, agrees to and shall be bound by such provisions, and authorizes the
Company in the holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Agreement. The
Company shall not make any payment of principal or interest, as applicable, on
the Notes while the Company is in default with respect to any Senior
Indebtedness, except as provided in the Agreement.
This Note and the Agreement are governed by and construed in accordance
with the laws of the State of Delaware.
WORLDCORP, INC.
By: _____________________
Name:
Title:
-2-
<PAGE>
Exhibit 5.1
File No.: 50078.000007
January 8, 1997
Board of Directors
WorldCorp, Inc.
The Hallmark Building
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
WorldCorp, Inc.
Registration Statement on Form S-4
----------------------------------
Ladies & Gentlemen:
We are acting as counsel for WorldCorp, Inc. (the "Company") in connection
with its Registration Statement on Form S-4 (the "Registration Statement"), as
filed with the Securities and Exchange Commission, with respect to $10,000,000
principal amount of 10.00% Senior Subordinated Notes due September 30, 2000
(collectively, the "New Securities") of the Company pursuant to the exchange
offer (the "Exchange Offer") of $10,000,000 in previously issued 10.00% Senior
Subordinated Notes due September 30, 2000 (collectively, the "Old Securities")
for the New Securities. In connection with the filing of the Registration
Statement, you have requested our opinion concerning certain corporate matters.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary.
We do not purport to express an opinion on any laws other than those of the
federal laws of the United States of America, the general corporate laws of the
state of Delaware and the general corporate laws of the state of New York.
Based upon the foregoing and the further qualifications stated below, we are
of the opinion that:
1. The Company has been duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware.
<PAGE>
Board of Directors
January 8, 1996
Page 2
2. Upon the effectiveness of the Registration Statement under the Securities
Act of 1933, as amended, and when the New Securities have been duly executed,
authenticated and delivered, in accordance with the Indenture, dated as of
September 30, 1996, between the Company and Norwest Bank Minnesota, National
Association, related to the New Securities and issued and delivered as
contemplated in the Registration Statement, the New Securities will constitute
valid, authorized and issued, and legally binding obligations of the Company,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (whether considered at law or
in equity).
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Form S-4 and to the statement made in reference
to this firm under the caption "Validity of New Notes" in the Registration
Statement. In giving this consent, we do not admit that we are within the
category of persons whose consent is required by section 7 of the Securities Act
of 1933 or the rules and regulations promulgated thereunder by the Securities
and Exchange Commission.
Very truly yours,
/s/ Hunton & Williams
Hunton & Williams
<PAGE>
Exhibit 12.1
------------
WORLDCORP, INC., & SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------
Year ended December 31, Historical Historical Pro Forma
-----------------------------------------------
1991 1992 1993 1994 1995 1995 1996 1996
------ ------- ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
interest expense,
including amortization of debt
issuance costs 13,536 11,540 11,449 12,655 13,111 9,821 9,118 9,118
Portion of rent expense
representative of interest /(1)/ 13,847 13,399 19,034 18,691 23,860 17,648 23,899 23,899
------ ------- ------- ------ ------- ------ ------- ------
Total fixed charges 27,383 24,939 30,483 31,346 36,971 27,469 33,017 33,017
====== ======= ======= ====== ======= ====== ======= ======
Earnings (loss):
Earnings (loss) from continuing
operations before income taxes,
minority interest, extraordinary
item, and change in accounting
principle 7,311 (44,692) (33,698) 10,496 65,685 49,075 (6,392) 4,844
Equity in loss of non-consolidated subsidiary -- -- -- -- -- -- -- 2,507
Fixed charges 27,383 24,939 30,483 31,346 36,971 27,469 33,017 33,017
------ ------- ------- ------ ------- ------ ------- ------
Earnings (loss) adjusted
for fixed charges 34,694 (19,753) (3,215) 41,842 102,656 76,544 26,625 40,368
====== ======== ======== ====== ======= ====== ======= ======
Ratio of earnings to fixed charges 1.27 x -- -- 1.33 x 2.78 x 2.79 x -- 1.22 x
Deficiency in earnings
to cover fixed charges -- $44,692 $33,698 -- -- -- $ 6,392 --
</TABLE>
/(1)/ One-third of rent expense is deemed to be representative of interest.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
WorldCorp,Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-4 of WorldCorp, Inc. of our report dated March 18, 1996, relating to the
consolidated balance sheets of WorldCorp, Inc. and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of operations,
changes in common stockholders' deficit and cash flows for each of the years in
the three-year period ended December 31, 1995, and the related financial
statement schedules, which report appears in the December 31, 1995 annual report
on Form 10-K of WorldCorp, Inc., incorporated by reference herein, and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Washington, D.C.
January 8, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Form S-4 filing of
WorldCorp, Inc. of our report dated January 26, 1996, appearing in the Annual
Report on Form 10-K of Colonial Data Technologies Corp. for the year ended
December 31, 1995 incorporated by reference in WorldCorp, Inc.'s Form 8-K dated
December 13, 1996 which is incorporated by reference in this Form S-4 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
January 8, 1997
<PAGE>
Exhibit 25.1
=======================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
___CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
_____________________________
Worldcorp, Inc.
(Exact name of obligor as specified in its charter)
Delaware 94-3040585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13873 Park Center Road
Suite 490
Herndon Virginia 20171
(Address of principal executive offices) (Zip code)
_____________________________
10.00% Senior Subordinated Notes
Due September 30, 2000
(Title of the indenture securities)
<PAGE>
Item 1. General Information. Furnish the following information as to the
--------------------
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
--------------------------
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-15 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
-----------------
Statement of Eligibility. Norwest Bank incorporates
by reference into this Form T-1 the exhibits
attached hereto.
Exhibit 1. a. A copy of Articles of Association of the trustee now
in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872,
by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of the
Currency dated January 2, 1934, approving the
consolidation of the Northwestern National Bank of
Minneapolis and the Minnesota Loan and Trust Company
of Minneapolis.*
c. A copy of the certificate of the Acting Comptroller
of the Currency dated January 12, 1943, as to change
of corporate title of Northwestern National Bank and
Trust Company of Minneapolis to Northwestern
National Bank of Minneapolis.*
<PAGE>
d. A copy of the certificate of the Comptroller of the Currency
dated May 1, 1983, authorizing Norwest Bank Minneapolis,
National Association, to act as fiduciary.*
Exhibit 3. A copy of the authorization of the trustee to exercise corporate
trust powers issued January 2, 1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.**
Exhibit 8. A copy of the certificate dated May 10, 1983 of name change from
Northwestern National Bank Minneapolis to Norwest Bank Minneapolis,
National Association.*
Exhibit 9. A copy of the certificate dated January 11, 1988, of name change
from Norwest Bank Minneapolis, National Association to Norwest Bank
Minnesota, National Association.*
* Incorporated by reference to the exhibit of the same number filed with the
registration statement number 33-66026.
** Incorporated by reference to the exhibit of the same number filed with the
registration statement number 333-16583
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 22nd day of November, 1996.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
-----------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
EXHIBIT 6
November 22, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321 (b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal or State authorities authorized to make such
examination may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Curtis D. Schwegman
Assistant Vice President
<PAGE>
Exhibit 99.1
WorldCorp, Inc.
LETTER OF TRANSMITTAL
10.00% Senior Subordinated Notes due 2000
To: Norwest Bank Minnesota, National
Association, The Exchange Agent
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE
WITHDRAWN.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
-----------------------
Delivery of this instrument to an address other than as set forth above
or transmission of instructions via facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated , 1997
(the "Prospectus") of WORLDCORP, INC. (the "Company") and this Letter of
Transmittal (the "Letter of Transmittal"), which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 10.00% Senior Subordinated Notes due 2000 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 10.00% Senior Subordinated Notes due
2000 (the "Old Notes"), of which $10,000,000 principal amount is outstanding,
upon the terms and conditions set forth in the Prospectus. Other capitalized
terms used but not defined herein have the meaning given to them in the
Prospectus.
For each Old Note accepted for exchange, the holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Old Notes surrendered in
exchange therefor or, if no interest has been paid on the Old Notes, from the
date of original issue of the Old Notes. Holders of Old Notes accepted for
exchange will be deemed to have waived the right to receive any other payments
or accrued interest on the Old Notes. The Company reserves the right, at any
time or from time to time, to extend the Exchange Offer at its discretion, in
which event the term "Expiration Date" shall mean the latest time and date to
which the Exchange Offer is extended. The Company shall notify holders of the
Old Notes
<PAGE>
of any extension by means of a press release or other public announcement prior
to 9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders; or (ii) tender of Old Notes is to be made according to the
guaranteed delivery procedures set forth in the prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures."
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
The instructions included with this Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 10 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION OF 10.00% SENIOR SUBORDINATED NOTES DUE 2000 (OLD NOTES)
- --------------------------------------------------------------------------------
Principal
Principal Amount
Name(s) and Address(es) of Amount Tendered
Registered Holder(s) Certificate Represented (If less
(Please fill in, if blank) Number(s) by Certificate(s) than all)*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Unless otherwise indicated in the column labeled "Principal Amount Tendered,"
any tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Principal
Amount Represented by Certificate(s)." If the space provided above is
inadequate, list the certificate numbers and principal amounts on a separate
signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All
other tenders must be integral multiples of $1,000.
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange, or New Notes issued in exchange for Old
Notes accepted for exchange, are to be issued in the name of someone other than
the undersigned.
Issue certificate(s) to:
Name:.........................................................................
(Please Print)
Address:......................................................................
..............................................................................
(Include Zip Code)
..............................................................................
(Tax Identification or Social Security No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange, or New Notes issued in exchange for Old
Notes accepted for exchange, are to be sent to someone other than the
undersigned, or if to the undersigned at an address other than that shown above.
Mail to:
Name:...........................................................................
(Please Print)
Address:........................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s):___________________________________________
Window Ticket Number (if any):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery:________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number: ______________________________
Transaction Code Number: ________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:______________________________________________________________________
Address:___________________________________________________________________
- --------------------------------------------------------------------------------
3
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old
Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance
with this Letter of Transmittal, the undersigned sells, assigns and
transfers to, or upon the order of, the Company all right, title and
interest in and to the Old Notes tendered hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts
as the agent of the Company and as Trustee under the Indenture for the
New Notes) with respect to the tendered Old Notes with full power of
substitution to (i) deliver certificates for such Old Notes to the
Company and deliver all accompanying evidence of transfer and
authenticity to, or upon the order of, the Company and (ii) present such
Old Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of
such Old Notes, all in accordance with the terms and subject to the
conditions of the Exchange Offer.The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, sell, assign and
transfer the Old Notes tendered hereby and that the Company will acquire
good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse
claim, when the same are acquired by the Company. The undersigned hereby
further represents that any New Notes acquired in exchange for Old Notes
tendered hereby will have been acquired in the ordinary course of
business of the Holder receiving such New Notes, whether or not such
person is the Holder, that neither the Holder nor any such other person
has an arrangement or understanding with any person to participate in
the distribution of such New Notes and that neither the Holder nor any
such other person is an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company or any of its subsidiaries.
The undersigned also acknowledges that this Exchange Offer is
being made in reliance on an interpretation by the staff of the
Securities and Exchange Commission (the "SEC") that the New Notes issued
in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangements with any person to participate in the distribution of such
New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in,
a distribution of New Notes. If the undersigned is a broker-dealer that
will receive New Notes for its own account in exchange for Old Notes
that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the assignment, transfer and purchase
of the Old Notes tendered hereby. All authority conferred or agreed to
be conferred by this Letter of Transmittal shall survive the death,
incapacity or dissolution of the undersigned and every obligation of the
undersigned under this Letter of Transmittal shall be binding upon the
undersigned's heirs, personal representatives, successors and assigns,
trustees in bankruptcy or other legal representatives of the
undersigned. This tender may be withdrawn only in accordance with the
procedures set forth in "The Exchange Offer -- Withdrawal of Tenders"
section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed
to have accepted validly tendered Old Notes when, as and if the Company
has given oral or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant
to the Exchange Offer for any reason, certificates for any such
unaccepted Old Notes will be returned,without expense, to the
undersigned at the address shown below or at a different address as may
be indicated under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned understands that tenders of Old Notes pursuant
to the procedures described under the caption "The Exchange Offer --
Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and
the Company upon the terms and subject to the conditions of the Exchange
Offer.
4
<PAGE>
Unless otherwise indicated under "Special Payment Instructions,"
please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and return any Old
Notes not tendered or not exchanged in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the New Notes
issued in exchange for the Old Notes accepted for exchange and any
certificates for Old Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s). In the event that
both "Special Payment Instructions" and "Special Delivery Instructions"
are completed, please issue the certificates representing the New Notes
issued in exchange for the Old Notes accepted for exchange and return
any Old Notes not tendered or not exchanged in the name(s) of, and send
said certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special
Payment Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the Old Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i)
whose Old Notes are not immediately available, or (ii) who cannot
deliver their Old Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent, or cannot complete the
procedure for book-entry transfer, prior to the Expiration Date, may
tender their Old Notes according to the guaranteed delivery procedures
set forth in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
5
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X .......................................................... ................
Date
X........................................................... ................
Signature(s) of Registered Holder(s) Or Authorized Signatory Date
Area Code and Telephone Number:................................................
The above lines must be signed by the registered Holder(s) of Old Notes as their
name(s) appear(s) on the Old Notes or by person(s) authorized to become
registered Holder(s) by a properly completed bond power from the registered
Holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Old Notes to which this Letter of Transmittal relates are held of record by
two or more joint Holders, then all such Holders must sign this Letter of
Transmittal. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person must (i) set forth his or her full title
below, and (ii) unless waived by the Company, submit evidence satisfactory to
the Company of such person's authority to act. See Instruction 4 regarding the
completion of this Letter of Transmittal printed below.
Name(s):......................................................................
..............................................................................
(Please Print)
Capacity:.....................................................................
Address:......................................................................
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
Certain signatures must be Guaranteed by an Eligible Institution.
...............................................................................
(Authorized Signature)
...............................................................................
(Title)
...............................................................................
(Name of Firm)
Dated: ................ 1997
- -------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of This Letter and Notes; Guaranteed Delivery Procedures. This
-----------------------------------------------------------------
Letter is to be completed by noteholders if certificates are to be forwarded
herewith. Certificates for all physically tendered Old Notes, as well as a
properly completed and duly executed Letter (or manually signed facsimile
hereof) and any other documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes tendered hereby must be in denominations
of principal amount of maturity of $1,000 and any integral multiple thereof.
Noteholders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer
- -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such
procedures, (i) such tender must be made through an Eligible Institution (as
defined in Instruction 4 below), (ii) prior to the Expiration Date, the Exchange
Agent must receive from such Eligible Institution a properly completed and duly
executed Letter (or facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of Old
Notes and the amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that within five New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes and any other documents
required by the Letter will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer and all other documents required by this
Letter, are received by the Exchange Agent within five NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit the delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section in the Prospectus.
2. Tender by Holder. Only a holder of Old Notes may tender such Old Notes
----------------
in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter on his or her behalf or must, prior to
completing and executing this Letter and delivering his or her Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond power from the registered
holder.
3. Partial Tenders. Tenders of Old Notes will be accepted only in integral
---------------
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering holder should fill in the principal amount tendered
in the fourth column of the box entitled "Description of 10.00% Senior
Subordinated Notes due 2000 (Old Notes)" above. The entire principal amount of
Old Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, then Old Notes for the principal amount of Old Notes not tendered
and a certificate or certificates representing New Notes issued in exchange for
any Old Notes accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.
4. Signatures on This Letter; Powers of Attorney and Endorsements; Guarantee
-------------------------------------------------------------------------
of Signatures. If this Letter is signed by the registered holder of the Old
- -------------
Notes tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
7
<PAGE>
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate powers of attorney are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate powers of attorney are required. Signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter must be guaranteed by an Eligible Institution
unless the Old Notes are tendered (i) by a registered holder of Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
5. Special Payment and Delivery Instructions. Tendering holders should
-----------------------------------------
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated. If no such instructions are given, such
Old Notes not exchanged will be returned to the name and address of the person
signing this Letter.
6. Tax Identification Number. Federal income tax law requires that a holder
-------------------------
whose offered Old Notes are accepted for exchange must, if not previously
provided, provide the Company (as payer) with his, her or its correct Taxpayer
Identification Number ("TIN"), which, in the case of an exchanging holder who is
an individual, is his or her social security number. If the Company is not
provided with the correct TIN, such holder may be subject to a $50 penalty
imposed by the Internal Revenue Service (the "IRS"). Exempt holders (including,
among others, corporations and certain foreign individuals) are not subject to
these requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9."
To prevent backup withholding at a 31% rate on interest and other payments on
New Notes, each exchanging holder should provide his, her or its correct TIN by
completing the Substitute Form W-9 enclosed herewith, certifying that the TIN
provided is correct (or that such holder is awaiting a TIN) and that (i) the
holder is exempt from backup withholding, (ii) the holder has not been notified
by the IRS that he, she or it is subject to backup withholding as a result of a
failure to report all interest or dividends, or (iii) the IRS has notified the
holder that he, she or it is no longer subject to backup withholding. In order
for a foreign individual to qualify as an exempt recipient, such holder must
submit a statement signed under penalty of perjury attesting to such exempt
status. Such statements may be obtained from the Exchange Agent.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
--------------
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
8
<PAGE>
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
8. Waiver of Conditions. The Company reserves the absolute right to amend,
--------------------
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
9. No Conditional Transfers. No alternative, conditional, irregular or
------------------------
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
10. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering holder
----------------------------------------------
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
11. Requests for Assistance or Additional Copies. Questions and requests
--------------------------------------------
for assistance or for additional copies of the Prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address specified in the Prospectus.
- --------------------------------------------------------------------------------
(DO NOT WRITE IN THE SPACE BELOW)
Certificate Old Notes Old Notes
Surrendered Tendered Accepted
----------- -------- --------
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------
==================== ==================== ====================
Delivery Prepared by Checked By Date
-------------- --------------- ---------------
- --------------------------------------------------------------------------------
9
<PAGE>
Substitute Form W-9
Payer's Name: WorldCorp, Inc.
SUBSTITUTE
Form W-9
Department of the Treasury
Internal Revenue Service
Payor's Request for
Taxpayer Identification
Number For All
Accounts
- -------------------------------------------------------------------------------
Part 1 -- Enter your taxpayer identification
number ("TIN") on the appropriate line. For ----------------------------
most individuals, this is your Social Security Social Security Number
Number. If you do not have a number, see
"Obtaining a Number" in the enclosed Guidelines.
Note: If the account is in more than one name,
see the chart on page 1 of the enclosed
Guidelines as to which number to give the payor. OR
If you do not have a TIN, but are awaiting one, --------------------------
write "Applied For" in the box at right for the Employer identification
TIN and sign and date below. number
- -------------------------------------------------------------------------------
Part 2 -- Certification -- Under penalties of perjury, I certify that: (1) the
number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me); (2) I am not subject to backup
withholding under the provisions of Section 3406(a)(1)(c) of the Internal
Revenue Code because (a) I am exempt from backup withholding, (b) I have not
been notified by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding; and (3) any other information provided on this form is true and
correct.
- -------------------------------------------------------------------------------
Part 3 -- Certification Instructions -- You must cross out Part (2) above if
you have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out Part (2). (Also see enclosed Guidelines.)
SIGNATURE __________________________ DATE ________, 1997 Awaiting TIN [_]
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
Instructions for completing Substitute Form W-9
1. Write your social security number or employer identification number in
the blank in Part 1 of the Substitute Form W-9.
2. Cross out Item 2 in Part 2 if you have been notified by the Internal
Revenue Service that you are subject to backup withholding.
3. If you have requested a taxpayer identification number, but have not
received it yet, check the box in Part 3 and write "Applied For" in the
space provided for your taxpayer identification number.
4. Sign and date the form in the appropriate place.
10
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GIVE THE GIVE THE
FOR THIS TYPE SOCIAL SECURITY FOR THIS TYPE EMPLOYER IDENTIFICATION
OF ACCOUNT: NUMBER OF- OF ACCOUNT: NUMBER OF-
================================================================================================================================
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, The legal entity (do not
estate or pension furnish the identifying
trust number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.) (5)
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals (1)
3. Husband and wife (joint The actual owner of the 10. Corporate account The corporation
account) account or, if joint
funds, either person (1)
4. Custodian account of a The minor (2) 11. Religious, charitable, The organization
minor (Uniform Gift to or educational
Minors Act) organization account
5. Adult and minor (joint The adult or, if the minor 12. Partnership account The partnership
account) is the only contributor, held in the name of
the minor (1) the business
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee for incompetent person (3) other tax-exempt
a designated ward, minor organization
or incompetent person
7. a. The usual revocable The grantor-trustee(1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also
trustee)
b. So-called trust account The actual owner (1) 15. Account with the The public entity
that is not a legal and Department of Agriculture
valid trust under State in the name of public
law entity (such as a State or
local government, school
district, or prison) that
received agricultural
program payments
8. Sole proprietorship The owner (4)
account
================================================================================================================================
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
11
<PAGE>
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
TIN Applied For
If you return the Substitute Form W-9 with the box in Part 3 checked and
wrote "Applied For" in the space provided for your taxpayer identification
number, you must provide the Company with a TIN within 60 days or the Company
may backup withhold, until you furnish it with your TIN.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice.-Section 6109 requires most recipients of dividend,
interest, or other payments to give tax-payer identification numbers to payers
who must report for payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1994, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding.- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.- Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
12
<PAGE>
EXHIBIT 99.2
------------
NOTICE OF GUARANTEED DELIVERY
for
10.00% Senior Subordinated Notes Due 2000
of
WORLDCORP, INC.
As set forth in the Prospectus dated , 1997 (the
"Prospectus"), of WORLDCORP, INC. (the "Company") and in the accompanying Letter
of Transmittal and instructions thereto (the "Letter of Transmittal"), this form
or one substantially equivalent hereto must be used to accept the Company's
Exchange Offer (the "Exchange Offer") to exchange all of its outstanding 10.00%
Senior Subordinated Notes due 2000 (the "Old Notes") for its 10.00% Senior
Subordinated Notes due 2000, which have been registered under the Securities Act
of 1933, as amended, if certificates for the Old Notes are not immediately
available or if the Old Notes, the Letter of Transmittal or any other documents
required thereby cannot be delivered to the Exchange Agent, prior to 5:00 P.M.,
New York City time, on the Expiration Date (as defined in the Prospectus). This
form may be delivered by an Eligible Institution by hand or transmitted by
facsimile transmission, overnight courier or mail to the Exchange Agent as set
forth below. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY
PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To: Norwest Bank Minnesota, National Association, The Exchange Agent
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
By Hand: By Facsimile:
Norwest Bank Minnesota,National Norwest Bank Minnesota, National
Association Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
-------------------------
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A
FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to WORLDCORP, INC., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus and the Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged,
___________________ Old Notes pursuant to the guaranteed delivery procedures set
forth in Instruction 1 of the Letter of Transmittal.
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time, on the business
day prior to the Expiration Date.
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution
of the undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<CAPTION>
Certificate No(s). for Old Notes (if available): Address:
<S> <C>
- -------------------------------------------------- ---------------------------------------------------
- -------------------------------------------------- ---------------------------------------------------
Principal Amount of Old Notes: Area Code and Telephone No.:
- ------------------------------------------------- --------------------------------------------------
- ------------------------------------------------- Signature(s):
Name(s) of Record Holder(s): --------------------------------------------------
- ------------------------------------------------- --------------------------------------------------
- ------------------------------------------------- Dated:
--------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information:
<PAGE>
- -------------------------------------------------------------------------------
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
...............................................................................
...............................................................................
...............................................................................
Capacity:
...............................................................................
Address(es):
...............................................................................
...............................................................................
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents that the above named person(s) "own(s)" the Old Notes tendered hereby
within the meaning of Rule 14e-4 under the Exchange Act, (b) represents that
such tender of Old Notes complies with Rule 14e-4 under the Exchange Act and (c)
guarantees that delivery to the Exchange Agent of certificates for the Old Notes
tendered hereby, in proper form for transfer, with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will be
received by the Exchange Agent at one of its addresses set forth above within
five business days after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET
FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone No.:
----------------------------------------------------
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(Please Type or Print)
Title:
------------------------------------------------------------------------
Date:
-----------------------------
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT
WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE.
