<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
WorldCorp, Inc.
____________________
(Name of Issuer)
Common Stock, Par Value $1.00 Per Share
__________________________________________
(Title of Class of Securities)
981423 10 6
_________________
(CUSIP Number)
Tracey R. Greenwald, Esq., Testa, Hurwitz & Thibeault, LLP,
High Street Tower, 125 High Street, Boston, MA 02110
_________________________________________________________________
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and Communications)
April 6, 1998
________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of (Section)240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box./ /
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See (Section)240.13d-7 for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Debentures).
<PAGE> 2
CUSIP No. 981423 10 6 13D Page 2 of 9 Pages
--------------------- -- --
(1) Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (Entities Only)
ROTHSCHILD RECOVERY FUND L.P. EIN 13-3970467
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
WC
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 2,475,769
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
2,475,769
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,475,769
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
15.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
PN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
CUSIP No. 981423 10 6 13D Page 3 of 9 Pages
--------------------- -- --
(1) Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (Entities Only)
ROTHSCHILD RECOVERY ASSOCIATES LLC EIN 13-3970468
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
AF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
DELAWARE
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 2,475,769
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
2,475,769
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,475,769
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
15.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
00
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 981423 10 6 13D Page 4 of 9 Pages
--------------------- -- --
(1) Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (Entities Only)
CHERYL G. GORDON SSN ###-##-####
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
AF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
U.S.A.
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 2,475,769
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
2,475,769
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,475,769
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
15.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 981423 10 6 13D Page 5 of 9 Pages
--------------------- -- --
(1) Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (Entities Only)
WILBUR L. ROSS, JR. SSN ###-##-####
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
AF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
U.S.A.
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 2,475,769
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
2,475,769
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,475,769
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
15.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
CUSIP No. 981423 10 6 13D Page 6 of 9 Pages
--------------------- -- --
Item 1. Security and Issuer
The class of equity securities to which this statement on Schedule 13D relates
is common stock, $1.00 par value per share (the "Common Stock") of WorldCorp,
Inc., a Delaware corporation (the "Issuer"). The reporting persons are the
beneficial owners of 7% convertible subordinated debentures (the "Convertible
Debentures") of the Issuer. The Convertible Debentures are currently
convertible into 2,475,769 shares of such Common Stock (as converted, the
"Converted Shares"). The principal executive offices of the Issuer are located
at 13873 Park Center Road, Suite 490, Herndon, VA 22071.
Item 2. Identity and Background
This statement is being filed by (I) Rothschild Recovery Fund L.P., (II)
Rothschild Recovery Associates LLC, (III) Cheryl G. Gordon, and (IV) Wilbur L.
Ross, Jr. The beneficial ownership of the Converted Shares by Rothschild
Recovery Fund L.P. is a result of its discretionary authority to buy and dispose
of the Convertible Debentures for investment purposes. The beneficial ownership
of the Converted Shares by Rothschild Recovery Associates LLC, Cheryl G. Gordon,
and Wilbur L. Ross, Jr. is a result of their roles as the general partner of
Rothschild Recovery Fund L.P. and as the managing members of the general partner
of Rothschild Recovery Fund L.P., respectively.
I. Rothschild Recovery Fund L.P.
(a) The name of the filer is Rothschild Recovery Fund L.P. (the "Fund"),
a Delaware limited partnership.
(b) The business address of the Fund is c/o Rothschild Inc., 1251 Avenue
of the Americas, New York, NY 10020.
(c) The principal business of the Fund is to provide significant
financial returns through investments in distressed securities
and through selected financing arrangements for companies in
bankruptcy proceedings.
(d) During the past five years, the Fund has not been convicted in any
criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, the Fund has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, Federal or State
securities laws or finding any violation with respect to such laws.
II. Rothschild Recovery Associates LLC
(a) The name of the filer is Rothschild Recovery Associates LLC,
(hereinafter, the "GP"), a Delaware limited liability company.
(b) The business address of the GP is c/o Rothschild Inc., 1251 Avenue
of the Americas, New York, NY 10020.
(c) The principal business of the GP is to serve as the general partner
of the Fund.
(d) During the past five years, the GP has not been convicted in any
criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, the GP has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State
securities laws or finding any violation with respect to such laws.
III. Cheryl G. Gordon
(a) The name of the filer is Cheryl G. Gordon.
(b) The business address of Cheryl G. Gordon is c/o Rothschild Asset
Management Inc., 1251 Avenue of the Americas, New York, NY 10020.
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CUSIP No. 981423 10 6 13D Page 7 of 9 Pages
--------------------- -- --
(c) The principal business of Cheryl G. Gordon is to serve as a
managing member of the GP of the Fund.
(d) During the past five years, Cheryl G. Gordon has not been convicted
in any criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, Cheryl G. Gordon has not been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, Federal or State
securities laws or finding any violation with respect to such laws.
(f) United States
IV. Wilbur L. Ross, Jr.
(a) The name of the filer is Wilbur L. Ross, Jr.
(b) The business address of Wilbur L. Ross, Jr. is c/o Rothschild Inc.,
1251 Avenue of the Americas, New York, NY 10020.
(c) The principal business of Wilbur L. Ross, Jr. is to serve as a
managing member of the GP of the Fund.
(d) During the past five years, Wilbur L. Ross, Jr. has not been
convicted in any criminal proceeding (excluding traffic violations or
similar misdemeanors).
(e) During the past five years, Wilbur L. Ross, Jr. has not been a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violation with
respect to such laws.
(f) United States
Item 3. Source and Amount of Funds or Other Consideration.
The source of the aggregate purchase price of the Convertible Debentures, which
is $7,826,085, was the general working capital of the Fund.
Item 4. Purpose of Transaction.
The Fund is an investment fund formed for the purpose of investing in distressed
securities and establishing financing arrangements for companies in bankruptcy
proceedings. The Fund initially acquired the Convertible Debentures for
investment purposes. Subsequently, the Fund, and indirectly the GP, Cheryl G.
Gordon and Wilbur L. Ross, Jr., became co-proponent of the Issuer's Plan of
Reorganization for bankruptcy which was initially filed in the United States
Bankruptcy Court for the District of Delaware on February 12, 1999. The First
Amended Plan of Reorganization of the Issuer was filed in the United States
Bankruptcy Court for the District of Delaware on March 23, 1999 (the "Amended
Plan"), and is filed herewith. The Disclosure Statement with respect to First
Amended Plan of Reorganization of WorldCorp, Inc. (the "Disclosure Statement")
is also filed herewith. The information required under this item may be found
in the Amended Plan and the Disclosure Statement, which are hereby incorporated
by reference.
The Fund, the GP, Cheryl G. Gordon, and Wilbur L. Ross, Jr. reserve the right to
purchase or sell Convertible Debentures, at any time, without further
notice or prior amendment to this Schedule 13D. They also reserve the right to
change their intentions with respect to any or all of the foregoing and their
right to act either alone or together with any other person or group.
Item 5. Interest in Securities of the Issuer.
Assuming conversion of the Convertible Debentures into the Common Stock of
the Issuer, the Fund, the GP, Cheryl G. Gordon, and Wilbur L. Ross, Jr. would
beneficially own 2,475,769 shares of such Common Stock , representing 15.1% of
the 16,359,014 shares of Common Stock which would be outstanding upon conversion
of the Convertible Debentures. The Fund, and, indirectly, the GP, Ms. Gordon and
Mr. Ross would exercise shared investment power with respect to the
<PAGE> 8
CUSIP No. 981423 10 6 13D Page 8 of 9 Pages
--------------------- -- --
Converted Shares. The Fund, the GP, Ms. Gordon and Mr. Ross have effected no
transactions in the Convertible Debentures or the Common Stock of the
Issuer during the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
Not Applicable.
Item 7. Material to be Filed as Exhibits.
Exhibit 99.1. First Amended Plan of Reorganization of WorldCorp, Inc. as filed
in the United States Bankruptcy Court for the District of Delaware on March
23, 1999.
Exhibit 99.2. Disclosure Statement With Respect To First Amended Plan of
Reorganization of WorldCorp, Inc.
Exhibit 99.3 Joint Filing Agreement
<PAGE> 9
Page 9 of 9
-- --
SIGNATURES
After reasonable inquiry and to the best of his, her, or its knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: May 24, 1999
ROTHSCHILD RECOVERY FUND L.P.
By: Rothschild Recovery Associates LLC,
its general partner
By: /s/ Cheryl G. Gordon
___________________________________
Cheryl G. Gordon
Managing Member
ROTHSCHILD RECOVERY ASSOCIATES LLC
By: /s/ Cheryl G. Gordon
___________________________________
Cheryl G. Gordon
Managing Member
/s/ Cheryl G. Gordon
___________________________________
Cheryl G. Gordon
/s/ Wilbur L. Ross, Jr.
___________________________________
Wilbur L. Ross, Jr.
<PAGE> 10
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
99.1 First Amended Plan of Reorganization of
WorldCorp, Inc., as filed in the United States
Bankruptcy Court for the District of Delaware on
March 23, 1999.
99.2 Disclosure Statement with respect to First
Amended Plan of Reorganization of WorldCorp, Inc.
99.3 Joint Filing Agreement
<PAGE> 1
EXHIBIT 99.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------
In re ) Chapter 11
)
WORLDCORP, INC. ) Case No. 99-298 (MFW)
)
Debtor. )
- ------------------------------------)
FIRST AMENDED PLAN OF REORGANIZATION
OF WORLDCORP, INC.
WILMER, CUTLER & PICKERING
2445 M Street, NW
Washington, DC 20037-1420
Attn: William J. Perlstein
Duane D. Morse
Andrew M. Herman
- and -
YOUNG CONAWAY STARGATT & TAYLOR LLP
1100 North Market Street
11th Floor
Wilmington, DE 19801
Attn: James L. Patton, Jr.
Brendan L. Shannon
ATTORNEYS FOR WORLDCORP, INC.
Dated: March __, 1999
Wilmington, Delaware
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TABLE OF CONTENTS
PAGE
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INTRODUCTION......................................................................................................1
ARTICLE 1
DEFINITIONS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME.....................................................1
A. Scope of Definitions............................................................................1
B. Definitions.....................................................................................2
1.1 Accrued Interest Notes.................................................................2
1.2 Acquisition............................................................................2
1.3 Administrative Claim...................................................................2
1.4 Administrative Convenience Claim.......................................................2
1.5 Affiliates.............................................................................2
1.6 Agreed Senior Claim....................................................................2
1.7 Allowed Claim..........................................................................2
1.8 Allowed . . . Claim....................................................................2
1.9 Atlas..................................................................................3
1.10 Atlas Stockholder Fees and Expenses....................................................3
1.11 Atlas Stockholders.....................................................................3
1.12 Atlas Stockholder Notes................................................................3
1.13 Atlas Stockholders Secured Claims......................................................3
1.14 Atlas Stockholder Warrants.............................................................3
1.15 Available Cash.........................................................................3
1.16 Avoidance Claims.......................................................................4
1.17 Ballot.................................................................................4
1.18 Bankruptcy Code........................................................................4
1.19 Bankruptcy Court.......................................................................4
1.20 Bankruptcy Rules.......................................................................4
1.21 Bar Date...............................................................................4
1.22 Bar Date Order.........................................................................4
1.23 Business Day...........................................................................4
1.24 Cash...................................................................................4
1.25 Cash Available for Senior Notes........................................................4
1.26 Causes of Action.......................................................................4
1.27 Chapter 11 Case........................................................................5
1.28 Claim..................................................................................5
1.29 Claims Objection Deadline..............................................................5
1.30 Class..................................................................................5
1.31 Confirmation Date......................................................................5
1.32 Confirmation Hearing...................................................................5
1.33 Confirmation Hearing Notice............................................................5
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1.34 Confirmation Order.....................................................................5
1.35 Creditors' Committee...................................................................5
1.36 Cure...................................................................................5
1.37 Debenture Indenture....................................................................5
1.38 Debentures.............................................................................5
1.39 Debenture Trustee......................................................................6
1.40 Disallowed Claim.......................................................................6
1.41 Disbursing Agent.......................................................................6
1.42 Disclosure Statement...................................................................6
1.43 Disputed Claim.........................................................................6
1.44 Distribution Date......................................................................6
1.45 Distribution Record Date...............................................................6
1.46 Distribution Reserve...................................................................6
1.47 Earn-Out...............................................................................6
1.48 Effective Date.........................................................................6
1.49 Electing Senior Note Holder............................................................6
1.50 Estate.................................................................................7
1.51 Exhibit................................................................................7
1.52 Existing Securities....................................................................7
1.53 Face Amount............................................................................7
1.54 File or Filed..........................................................................7
1.55 Final Order............................................................................7
1.56 Financial Consulting Agreement.........................................................7
1.57 Fiscal Year............................................................................7
1.58 General Unsecured Claim................................................................7
1.59 Impaired...............................................................................7
1.60 Indemnification Rights.................................................................7
1.61 Indemnitee.............................................................................8
1.62 InteliData.............................................................................8
1.63 InteliData Common Stock................................................................8
1.64 Interest...............................................................................8
1.65 Internal Revenue Code..................................................................8
1.66 Miscellaneous Secured Claims...........................................................8
1.67 Modified Debenture.....................................................................8
1.68 Modified Debenture Indenture...........................................................8
1.69 Modified Senior Notes..................................................................8
1.70 Modified Senior Subordinated Notes Indenture...........................................9
1.71 Old Warrants...........................................................................9
1.72 Operating Cash.........................................................................9
1.73 Other Priority Claim...................................................................9
1.74 Person.................................................................................9
1.75 Petition Date..........................................................................9
1.76 PIK Notes..............................................................................9
1.77 Plan...................................................................................9
1.78 Priority Tax Claim....................................................................10
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1.79 Pro Rata..............................................................................10
1.80 Professional Claim....................................................................10
1.81 Proportionate Share of Cash Available for Senior Notes................................10
1.82 Projections...........................................................................10
1.83 Reinstated or Reinstatement...........................................................10
1.84 Reorganized Debtor....................................................................10
1.85 Restructuring Expenses................................................................10
1.86 RRF...................................................................................11
1.87 RRF Fees and Expenses.................................................................11
1.88 RRF Lenders...........................................................................11
1.89 RRF Loan..............................................................................11
1.90 RRF Loan Documents....................................................................11
1.91 RRF Loan Limit........................................................................11
1.92 Scheduled.............................................................................11
1.93 Schedules.............................................................................11
1.94 SEC...................................................................................11
1.95 Secured Claim.........................................................................12
1.96 Senior Subordinated Notes.............................................................12
1.97 Senior Subordinated Notes Claims......................................................12
1.98 Senior Subordinated Notes Indenture...................................................12
1.99 Senior Subordinated Notes Trustee.....................................................12
1.100 Series A Warrants.....................................................................12
1.101 Series B Warrants.....................................................................12
1.102 Stock Purchase Agreement..............................................................13
1.103 Subordinated Securities Claim.........................................................13
1.104 Sun Capital...........................................................................13
1.105 Sun Options...........................................................................13
1.106 Sun Paper.............................................................................13
1.107 Sun Paper Advisors....................................................................13
1.108 Tax Sharing Agreement.................................................................13
1.109 Transaction Documents.................................................................13
1.110 Transaction Documents Filing Date.....................................................13
1.111 Unimpaired............................................................................14
1.112 Voting Deadline.......................................................................14
1.113 Voting Record Date....................................................................14
1.114 Warrant Notes.........................................................................14
1.115 WCI Common Stock......................................................................14
1.116 World Airways.........................................................................14
1.117 World Airways Secured Loan............................................................14
C. Rules of Interpretation........................................................................14
D. Computation of Time............................................................................14
E. Exhibits and Transaction Documents.............................................................15
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ARTICLE 2
ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS..................................................................15
2.1 Administrative Claims.................................................................15
2.2 Priority Tax Claims...................................................................15
ARTICLE 3
CLASSIFICATION OF CLAIMS AND INTERESTS...........................................................................15
3.1 Class 1...............................................................................16
3.2 Class 2...............................................................................16
3.3 Class 3...............................................................................16
3.4 Class 4...............................................................................16
3.5 Class 5...............................................................................16
3.6 Class 6...............................................................................16
3.7 Class 7...............................................................................16
3.8 Class 8...............................................................................16
3.9 Class 9...............................................................................16
3.10 Class 10..............................................................................16
3.11 Class 11..............................................................................16
3.12 Class 12..............................................................................16
ARTICLE 4
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND NOT IMPAIRED BY THE PLAN..........................16
4.1 Unimpaired Classes of Claims and Interests............................................16
4.2 Impaired Classes of Claims and Interests..............................................17
ARTICLE 5
PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS.................................................................17
5.1 Class 1 (Other Priority Claims........................................................17
5.2 Class 2 (World Airways Secured Loan Claims............................................17
5.3 Class 3 (Miscellaneous Secured Claims.................................................17
5.4 Class 4 (Atlas Stockholders Secured Claims............................................17
5.5 Class 5 (Administrative Convenience Claims............................................18
5.6 Class 6 (Non-Electing Senior Subordinated Notes Claims)...............................18
5.7 Class 7 (Debentures Claims............................................................18
5.8 Class 8 (General Unsecured Claims.....................................................18
5.9 Class 9 (Interests....................................................................19
5.10 Class 10 (Old Warrants................................................................19
5.11 Class 11 (Sun Options.................................................................19
5.12 Class 12 (Electing Senior Subordinated Notes Claims...................................19
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ARTICLE 6
ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE OR MORE IMPAIRED CLASSES OF CLAIMS OR INTERESTS..19
6.1 Impaired Classes of Claims and Interests Entitled to Vote.............................19
6.2 Acceptance by an Impaired Class.......................................................19
6.3 Presumed Acceptances by Unimpaired Classes............................................19
6.4 Classes Deemed to Reject Plan.........................................................20
6.5 Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code.......................20
6.6 Confirmability and Severability of a Plan.............................................20
ARTICLE 7
MEANS FOR IMPLEMENTATION OF THE PLAN.............................................................................20
7.1 Continued Corporate Existence.........................................................20
7.2 Directors and Officers................................................................20
7.3 Employment, Retirement, Indemnification and Other Agreements and Incentive
Compensation Programs.................................................................20
7.4 Certificate of Incorporation and Bylaws...............................................21
7.5 Corporate Action......................................................................21
7.6 Sale of InteliData Common Stock.......................................................21
7.7 Security for RRF Loan.................................................................21
7.8 Issuance of Modified Senior Notes.....................................................22
7.9 Issuance of Modified Debentures, Accrued Interest Notes and Series A and Series B
Warrants..............................................................................22
7.10 Issuance of Atlas Stockholder Warrants................................................22
7.11 Tax Sharing Agreement.................................................................22
7.12 Restructuring of Acquisition Indebtedness.............................................22
7.13 Amendment of Financial Consulting Agreement...........................................23
7.14 Preservation of Causes of Action......................................................23
7.15 Substantial Contribution Compensation and Expenses Bar Date...........................23
7.16 Cancellation of Existing Securities and Agreements....................................24
7.17 Exclusivity Period....................................................................24
7.18 Effectuating Documents; Further Transactions..........................................24
ARTICLE 8
UNEXPIRED LEASES AND EXECUTORY CONTRACTS.........................................................................24
8.1 Assumed Contracts and Leases..........................................................24
8.2 Rejected Contracts and Leases.........................................................25
8.3 Payments Related to Assumption of Executory Contracts and Unexpired Leases............25
8.4 Rejection Damages Bar Date............................................................25
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ARTICLE 9
PROVISIONS GOVERNING DISTRIBUTIONS...............................................................................26
9.1 Time of Distributions.................................................................26
9.2 Interest on Claims....................................................................26
9.3 Disbursing Agent......................................................................26
9.4 Surrender of Securities or Instruments................................................26
9.5 Instructions to Disbursing Agent......................................................26
9.6 Services of Indenture Trustees, Agents and Servicers..................................27
9.7 Record Date for Distributions to Holders of Senior Subordinated Notes and Debentures..27
9.8 Delivery of Distributions.............................................................27
9.9 Procedures for Treating and Resolving Disputed and Contingent Claims..................27
9.10 Fractional Securities; De Minimis Distributions.......................................29
ARTICLE 10
ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE CLAIMS...........................................................29
10.1 Professional Claims...................................................................29
10.2 Stay/Success Fee......................................................................30
10.3 Other Administrative Fees.............................................................30
ARTICLE 11
EFFECT OF THE PLAN ON CLAIMS AND INTERESTS.......................................................................30
11.1 Revesting of Assets...................................................................30
11.2 Discharge of the Debtor...............................................................30
11.3 Compromises and Settlements...........................................................31
11.4 Release of Claims Against Officers, Directors, Etc....................................31
11.5 Release of Claims Against Acquisition, Sun Capital, Sun Paper Advisors, Atlas, Atlas
Stockholders, Etc.....................................................................31
11.6 Release of Claims Against RRF and Holders of Debentures...............................31
11.7 Setoffs...............................................................................32
11.8 Satisfaction of Subordination Rights..................................................32
11.9 Exculpation and Limitation of Liability...............................................32
11.10 Indemnification Obligation............................................................33
11.11 Injunction............................................................................33
11.12 Allowance of Certain Claims...........................................................33
ARTICLE 12
CONDITIONS PRECEDENT.............................................................................................34
12.1 Conditions to Confirmation............................................................34
12.2 Conditions to Consummation............................................................34
12.3 Waiver of Conditions to Confirmation or Consummation..................................36
ARTICLE 13
RETENTION OF JURISDICTION........................................................................................37
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 14
MISCELLANEOUS PROVISIONS.........................................................................................38
14.1 Binding Effect........................................................................38
14.2 Modification and Amendments...........................................................38
14.3 Withholding and Reporting Requirements................................................38
14.4 Committees............................................................................39
14.5 Revocation, Withdrawal or Non-Consummation............................................39
14.6 Notices...............................................................................39
14.7 Term of Injunctions or Stays..........................................................40
14.8 Governing Law.........................................................................40
</TABLE>
vii
<PAGE> 9
INTRODUCTION
WorldCorp, Inc. as debtor and debtor-in-possession in the
above-captioned Chapter 11 reorganization case ("WCI" or the "Debtor"), hereby
proposes the following first amended reorganization plan for the resolution of
the Debtor's outstanding creditor claims and equity interests. Reference is made
to the Disclosure Statement (as defined below) for results of operations,
projections for future operations, risk factors, and a summary and analysis of
the Plan and certain related matters. The Debtor, WorldCorp Acquisition Corp. a
Delaware corporation ("Acquisition") and Rothschild Recovery Fund L.P. ("RRF")
are the proponents of this Plan within the meaning of section 1129 of the
Bankruptcy Code (as defined below).
The cash and securities of the Debtor, as reorganized, will be
distributed to the claimants in each of the classes of the Debtor, as set forth
herein.
Under section 1125(b) of the Bankruptcy Code, a vote to accept or
reject the Plan cannot be solicited from a holder of a claim or interest until
such time as the Disclosure Statement has been approved by the Bankruptcy Court
(as defined below) and distributed to holders of claims and interests entitled
to vote on the Plan. ALL SUCH HOLDERS ARE ENCOURAGED TO READ THIS PLAN AND THE
DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THIS
PLAN.
Subject to the restrictions on modifications set forth in section 1127
of the Bankruptcy Code and Bankruptcy Rule 3019 and those restrictions on
modifications set forth in Article XIV of this Plan, the Debtor expressly
reserves the right to alter, amend or modify this Plan, one or more times,
before its substantial consummation.
ARTICLE 1
DEFINITIONS, RULES OF INTERPRETATION,
AND COMPUTATION OF TIME
-------------------------------------
A. Scope of Definitions
For purposes of this Plan, except as expressly provided or unless the
context otherwise requires, all capitalized terms not otherwise defined shall
have the meanings ascribed to them in Article I of this Plan. Any term used in
this Plan that is not defined herein, but is defined in the Bankruptcy Code or
the Bankruptcy Rules, shall have the meaning ascribed to that term in the
Bankruptcy Code or the Bankruptcy Rules. The words "herein," "hereof,"
"hereunder," and other words of similar import refer to this Plan as a whole,
not to any particular section, subsection or clause, unless the context requires
otherwise. Whenever it appears appropriate from the context, each term stated in
the singular or the plural includes the singular and the plural, and each
pronoun stated in the masculine, feminine or neuter includes the masculine,
feminine and the neuter.
<PAGE> 10
B. Definitions
1.1 "Accrued Interest Notes" means PIK Notes to be issued on the
Effective Date to holders of Allowed Class 7 Claims and
holders of Allowed Class 8 Claims.
1.2 "Acquisition" means WorldCorp Acquisition Corp., a Delaware
corporation.
1.3 "Administrative Claim" means a Claim for payment of an
administrative expense of a kind specified in section 503(b) of
the Bankruptcy Code and entitled to priority pursuant to section
507(a)(1) of the Bankruptcy Code, including, but not limited to, the
actual, necessary costs and expenses, incurred after the Petition
Date, of preserving the Estate and operating the business of the
Debtor, including wages, salaries or commissions for services rendered
after the commencement of the Chapter 11 Case, Professional Claims,
and all fees and charges assessed against the Estate under chapter 123
of title 28, United States Code, and all Allowed Claims that are
entitled to be treated as Administrative Claims pursuant to a Final
Order of the Bankruptcy Court under section 546(c)(2)(A) of the
Bankruptcy Code.
1.4 "Administrative Convenience Claim" means a Claim against the
Debtor that otherwise would be classified as a Class 8 General
Unsecured Claim (other than Claims of holders of Debentures) that is
(a) for $500 or less, or (b) for more than $500 but less than $1,000
if the holder of such Claim has elected, on the Ballot provided for
voting on the Plan within the time fixed by the Bankruptcy Court for
completing and returning such Ballot, to accept $500 in Cash in full
satisfaction, discharge and release of such Claim.
1.5 "Affiliates" has the meaning given such term by section 101(2) of the
Bankruptcy Code.
1.6 "Agreed Senior Claim" means, with respect to an Electing Senior
Note Holder, (a) if such holder is the Senior Subordinated Notes
Trustee, an amount equal to all unpaid fees and expenses incurred by
the Senior Subordinated Notes Trustee through the Effective Date for
which the Debtor is liable under the terms of the Senior Subordinated
Notes Indenture, or (b) with respect to any other Electing Senior Note
Holder, an amount equal to the sum of (i) the aggregate principal
amount of such holder's Senior Subordinated Notes, plus (ii) accrued
and unpaid interest thereon calculated at the rate of 10% per annum
through the Effective Date.
1.7 "Allowed Claim" means a Claim or any portion thereof (a) that has
been allowed by a Final Order, (b) as to which, on or by the Effective
Date, (i) no proof of claim has been filed with the Bankruptcy Court
and (ii) the liquidated and noncontingent amount of which is
Scheduled, other than a Claim that is Scheduled at zero or as
disputed, or (c) for which a proof of claim in a liquidated amount has
been timely filed with the Bankruptcy Court pursuant to the Bankruptcy
Code, any Final Order of the Bankruptcy Court or other applicable
bankruptcy law, and as to which either (i) no objection to its
allowance has been filed within the periods of limitation fixed by the
Bankruptcy Code or by any order of the Bankruptcy Court or (ii) any
objection to its allowance has been settled or withdrawn, or has been
denied by a Final Order, or (d) that is expressly allowed in a
liquidated amount in the Plan.
1.8 "Allowed . . . Claim" means an Allowed Claim of the type described.
2
<PAGE> 11
1.9 "Atlas" means The Atlas Companies, Inc., a Delaware
corporation which was formerly known as Paper Acquisition Corp.
1.10 "Atlas Stockholder Fees and Expenses" means professional fees and
expenses incurred by the Atlas Stockholders in a maximum amount to be
agreed upon between RRF and Sun Paper Advisors prior to the
Confirmation Hearing.
1.11 "Atlas Stockholders" means those Persons (including their
respective officers, directors, partners, shareholders and affiliates
in their capacity as such) who were formerly shareholders of Atlas and
were parties to a Subscription and Contribution Agreement, dated April
20, 1998, by and among themselves, WCI and Acquisition, and who, as a
result of the transactions contemplated by that agreement, became
holders of the Atlas Stockholder Notes and the Old Warrants, and any
of such Persons' successors or assigns.
1.12 "Atlas Stockholder Notes" means, collectively, (a) the 5-year 8%
senior secured promissory notes, dated as of April 20, 1998 and May 5,
1998, issued by Acquisition to the Atlas Stockholders in the aggregate
principal amount of $15 million, and (b) the 1-year 8% senior secured
promissory notes, dated as of April 20, 1998 and May 5, 1998, issued
by Acquisition to the Atlas Stockholders in the aggregate principal
amount of $1 million.
1.13 "Atlas Stockholders Secured Claims" means the Secured Claims held
by the Atlas Stockholders against WCI and Acquisition as set forth in
the Pledge Agreement, dated April 20, 1998, among Sun Paper Advisors,
Inc., a Florida corporation, as collateral agent on behalf of the
Atlas Stockholders, WCI and Acquisition and the Guaranty, dated April
20, 1998, made by WCI in favor of Sun Paper Advisors, as collateral
agent on behalf of the Atlas Stockholders.
1.14 "Atlas Stockholder Warrants" means warrants to purchase from WCI
an aggregate number of shares of common stock of Acquisition equal to
35% of the issued and outstanding stock of Acquisition as of the
Effective Date, which are to be issued as contemplated by the Plan on
the Effective Date pursuant to a warrant agreement substantially in
the form described in the Disclosure Statement. As more specifically
described in such warrant agreement, the Atlas Stockholder Warrants
shall be exercisable from and after the earliest of (a) April 20,
2000, (b) the sale of Acquisition, or (c) an initial public offering
of Acquisition; and shall expire on the close of business on December
31, 2006; and shall be issued pursuant to Section 1145 of the
Bankruptcy Code. The exercise price per share for the Atlas
Stockholder Warrants shall be equal to $28,000, (except that this
price will be adjusted upward to the extent that it does not represent
at least 125% of the appraised fair market value of the shares of
Acquisition as of the Effective Date) payable by issuing the Warrant
Notes to WCI or, in the event of a cash-generating event as more fully
described in the Atlas Stockholder Warrants, in cash.
1.15 "Available Cash" means all cash and cash equivalents actually
received by the Reorganized Debtor during a given period in excess of
amounts required for payment of its operating expenses, including
without limitation trade and other accounts payable, professional fees
and expenses, salaries and benefits, taxes, and other amounts due or
to become due during such period.
3
<PAGE> 12
1.16 "Avoidance Claims" means, subject to Article XI, the Debtor's
Claims against Persons arising under sections 502, 510, 541, 544, 545,
547 through 551 and 553 of the Bankruptcy Code, or under related state
or federal statutes and common law, including fraudulent transfer
laws, whether or nor litigation is commenced to prosecute such Claims.
1.17 "Ballot" means each of the ballot forms that are distributed with
the Disclosure Statement to holders of Claims in Classes that are
impaired under the Plan and entitled to vote under Article VI hereof
in connection with the solicitation of acceptances of the Plan.
1.18 "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended and codified in title 11 of the United States Code, 11
U.S.C.ss.ss.101-1330.
1.19 "Bankruptcy Court" means the Bankruptcy Court of the United
States District Court for the District of Delaware or such other court
as may have jurisdiction over the Chapter 11 Case.
1.20 "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure and the Official Bankruptcy Forms, as amended, the Federal
Rules of Civil Procedure, as amended, as applicable to the Chapter 11
Case or proceedings therein, and the Local Rules of the Bankruptcy
Court, as applicable to the Chapter 11 Case or proceedings therein, as
the case may be.
1.21 "Bar Date" means the deadline for filing all proofs of claims
established by the Bankruptcy Court, except Claims of governmental
units for which proofs of claim are filed, in accordance with section
502(b)(9) of the Bankruptcy Code.
1.22 "Bar Date Order" means that scheduling order entered by the
Bankruptcy Court which establishes the Bar Date.
1.23 "Business Day" means any day, excluding Saturdays, Sundays and
legal holidays, on which commercial banks are open for business in New
York City.
1.24 "Cash" means legal tender of the United States.
1.25 "Cash Available for Senior Notes" means the lesser of (a)
$5,000,000 or (b) the amount by which the RRF Loan Limit exceeds the
sum of (i) the amount of the Allowed Class 2 World Airways Secured
Loan Claim, plus (ii) the amount of the Allowed Class 5 Administrative
Convenience Claims, plus (iii) the amount of unpaid Administrative
Expenses, plus (iv) the amount of Priority Claims required to be paid
on the Effective Date, plus (v) the RRF Fees and Expenses, plus (vi)
the Atlas Stockholder Fees and Expenses, plus (vii) the Operating
Cash.
1.26 "Causes of Action" means, subject to Article XI, any and all
actions, causes of action, suits, accounts, controversies agreements,
promises, rights to legal remedies, rights to equitable remedies,
rights to payment and claims, whether known, unknown, reduced to
judgment, not reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or
unsecured and whether asserted or
4
<PAGE> 13
assertable directly or derivatively, in law, equity or otherwise
including, without limitation, claims against World Airways for
property transferred and not accounted for.
1.27 "Chapter 11 Case" means the Chapter 11 Case of the Debtor,
pending in the Bankruptcy Court.
1.28 "Claim" means a claim against the Debtor, whether or not
asserted, as defined in section 101(5) of the Bankruptcy Code.
1.29 "Claims Objection Deadline" means that day which is 90 days after
the Effective Date, unless extended by the Bankruptcy Court for cause
shown by the Reorganized Debtor.
1.30 "Class" means a category of holders of Claims or holders of
Interests described in Article II of the Plan.
1.31 "Confirmation Date" means the date of entry of the Confirmation Order.
1.32 "Confirmation Hearing" means the hearing on confirmation of the
Plan and related matters under section 1128 of the Bankruptcy Code.
1.33 "Confirmation Hearing Notice" means the notice of, among other
things, the time for submitting Ballots to accept or reject the Plan,
the date, time and place of the Confirmation Hearing and the time for
filing objections to the confirmation of the Plan.
1.34 "Confirmation Order" means the order, in form and substance
reasonably satisfactory to the Debtor, RRF and Sun Paper Advisors,
entered by the Bankruptcy Court, confirming the Plan.
1.35 "Creditors' Committee" means the Official Committee of Unsecured
Creditors appointed pursuant to section 1102(a) of the Bankruptcy Code
in the Chapter 11 Case, if any.
1.36 "Cure" means the distribution within a reasonable period of time
following the Effective Date of Cash, or such other property as may be
agreed upon by the parties or ordered by the Bankruptcy Court, with
respect to the assumption of an executory contract or unexpired lease,
pursuant to section 365(b) of the Bankruptcy Code, in an amount equal
to all unpaid monetary obligations, without interest, or such other
amount as may be agreed upon by the parties, under such executory
contract or unexpired lease, to the extent such obligations are
enforceable under the Bankruptcy Code and applicable bankruptcy law.
1.37 "Debenture Indenture" means that certain Indenture dated as of
May 15, 1992, as amended, supplemented or otherwise modified prior to
the Petition Date, by and between WCI and the Debenture Trustee.
1.38 "Debentures" means, collectively, the 7% Convertible Subordinated
Debentures due 2004 in the principal amount of approximately $65
million issued pursuant to the Debenture Indenture.
5
<PAGE> 14
1.39 "Debenture Trustee" means State Street Bank and Trust Company as
trustee under the Debenture Indenture, or its successor in interest.
1.40 "Disallowed Claim" means a Claim, or any portion thereof, that
(a) has been disallowed by a Final Order, or (b) has not been
scheduled by the Debtor or is Scheduled at zero or as contingent,
disputed or unliquidated and as to which a proof of claim bar date has
been established and has passed but no proof of claim has been filed
or deemed timely filed with the Bankruptcy Court pursuant to either
the Bankruptcy Code or any Final Order of the Bankruptcy Court or
otherwise deemed timely filed under applicable law.
1.41 "Disbursing Agent" means W. Joseph Dryer.
1.42 "Disclosure Statement" means the written disclosure statement
that relates to this Plan, as approved by the Bankruptcy Court
pursuant to section 1125 of the Bankruptcy Code and Bankruptcy Rule
3017, as such disclosure statement may be amended, modified or
supplemented from time to time.
1.43 "Disputed Claim" means a Claim, or any portion thereof, that is
neither an Allowed Claim nor a Disallowed Claim, and includes, without
limitation, Claims that (a) (i) have not been Scheduled by the Debtor
or have been Scheduled at zero, as unknown or as contingent,
unliquidated or disputed and are the subject of a timely filed proof
of claim, or (ii) are the subject of an objection in the Bankruptcy
Court by the Debtor, and (b) the allowance or disallowance of which is
not yet the subject of a Final Order.
1.44 "Distribution Date" means the date, occurring as soon as
practicable after the Effective Date, upon which distributions are
made to holders of Allowed Claims.
1.45 "Distribution Record Date" means the record date for purposes of
making distributions under the Plan on account of Allowed Claims,
which date shall be the fifth (5th) Business Day following the
Confirmation Date.
1.46 "Distribution Reserve" means the Cash and securities to be
reserved pending allowance of Disputed Claims in accordance with
Section 9.9 of the Plan.
1.47 "Earn-Out" means the earn-out payment to the Atlas Stockholders
as specified in Section 1.3 of the Subscription and Contribution
Agreement, dated April 20, 1998, by and among WCI, Acquisition, and
the Atlas Stockholders.
1.48 "Effective Date" means the Business Day on which all conditions
to the consummation of the Plan set forth in Section 12.2 hereof have
been satisfied or waived as provided in Section 12.3 hereof and is the
day upon which this Plan is substantially consummated.
1.49 "Electing Senior Note Holder" means a holder of an Allowed Claim
against the Debtor based upon the Senior Subordinated Notes (including
the Senior Subordinated Notes Trustee) if such holder (a) has voted
its Allowed Claim to accept the Plan and (b) has elected, on the
Ballot provided for voting on the Plan within the time fixed by the
Bankruptcy Court for completing and returning such Ballot, to accept,
in full satisfaction, discharge and release of its Allowed Claim and
of all of its rights (including intercreditor subordination rights and
rights to seek payment of fees and expenses incurred after the
6
<PAGE> 15
Petition Date as an Administrative Claim pursuant to Section 503(b)(3)
or 503(b)(4) of the Bankruptcy Code) with respect to the Senior
Subordinated Notes and the Senior Subordinated Notes Indenture, (x)
its Proportionate Share of the Cash Available for Senior Notes plus
(y) Modified Senior Notes with an aggregate principal amount equal to
the amount by which its Agreed Senior Claim exceeds its Proportionate
Share of the Cash Available for Senior Notes.
1.50 "Estate" mean the bankruptcy estate of the Debtor pursuant to
section 541 of the Bankruptcy Code.
1.51 "Exhibit" means an exhibit annexed to either this Plan or as an
appendix to the Disclosure Statement.
1.52 "Existing Securities" means, collectively, the Senior
Subordinated Notes, the Debentures, the Old Warrants and the Sun
Options.
1.53 "Face Amount" means, (a) when used in reference to a Disputed or
Disallowed Claim, the full stated amount claimed by the holder of such
Claim in any proof of Claim timely filed with the Bankruptcy Court or
otherwise deemed timely filed by any Final Order of the Bankruptcy
Court or other applicable bankruptcy law, and (b) when used in
reference to an Allowed Claim, the allowed amount of such Claim.
1.54 "File" or "Filed" means filed with the Bankruptcy Court in the
Chapter 11 Case.
1.55 "Final Order" means an order or judgment, the operation or effect
of which has not been stayed, reversed or amended and as to which
order or judgment (or any revision, modification or amendment thereof)
the time to appeal or seek review or rehearing has expired and as to
which no appeal or petition for review or rehearing was filed or, if
filed, remains pending.
1.56 "Financial Consulting Agreement" means the Financial Consulting
Agreement, dated April 20, 1998, by and among Sun Capital, WCI and
Acquisition.
1.57 "Fiscal Year" means, with respect to the Debtor, the fiscal year
ending on December 31 of each year, or such other fiscal year as the
Debtor may designate.
1.58 "General Unsecured Claim" means a Claim that is not a Secured
Claim, Administrative Claim, Priority Tax Claim, Other Priority Claim,
Subordinated Securities Claim or a Claim based upon the Senior
Subordinated Notes or the Debentures. 1.1
1.59 "Impaired" refers to any Claim or Interest that is impaired
within the meaning of section 1124 of the Bankruptcy Code.
1.60 "Indemnification Rights" means any obligations or rights of the
Debtor to indemnify or contribute to the losses, liabilities or
expenses of an Indemnitee pursuant to the Debtor's certificate of
incorporation, bylaws or policy of providing employee indemnification,
or applicable state law or specific agreement in respect of any
claims, demands, suits, causes of action or proceedings against an
Indemnitee based upon any act or omission related to an Indemnitee's
service with, for or on behalf of the Debtor.
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<PAGE> 16
1.61 "Indemnitee" means all present and former directors, officers,
employees, agents, advisors or representatives of the Debtor who are
entitled to assert Indemnification Rights.
1.62 "InteliData" means InteliData Technologies Corporation, a
Delaware corporation.
1.63 "InteliData Common Stock" means the common stock, par value $.001
per share, of InteliData.
1.64 "Interest" means the rights of any current or former holder or
owner of any shares of common stock or any other equity securities of
the Debtor authorized and issued prior to the Confirmation Date.
1.65 "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
1.66 "Miscellaneous Secured Claims" means all Secured Claims not otherwise
classified.
1.67 "Modified Debenture" means the debentures to be modified in
accordance with the Plan on the Effective Date to be owned by the
holders of the Debentures and to be issued to the holders of General
Unsecured Claims pursuant to the Modified Debenture Indenture. As more
specifically described in the Modified Debenture Indenture, the
Modified Debentures will accrue interest at the rate of 7% per annum
with payment in the form of cash or, at the option of the Reorganized
Debtor until May 14, 2003, by the issuance of PIK Notes and will
mature on May 15, 2004; provided, however, that no cash payments shall
be made with respect to the Modified Debentures until the Modified
Senior Notes have been paid in full. The Modified Debentures will be
collateralized by (a) a fourth lien, subordinate to the first lien of
the RRF Lenders, the second lien of the Atlas Stockholder and the
third lien of the holders of the Modified Senior Notes, on the
Reorganized Debtor's shares of InteliData Common Stock; (b) a second
lien, subordinate to the first lien of the holders of the Modified
Senior Notes, on (i) the Reorganized Debtor's shares in Acquisition
common stock and any distributions or proceeds from the sale of such
stock, subject to the exercise of the Series A Warrants and the Atlas
Stockholder Warrants, (ii) the accounts receivable of the Reorganized
Debtor, (iii) the equipment and property of the Reorganized Debtor,
and (iv) Available Cash; and (c) a third lien, subordinate to the
first lien of the Atlas Stockholders and the second lien of the
holders of the Modified Senior Notes, on the Warrant Notes, if any.
The Modified Debentures will not be transferable until the later of
(i) the date on which holders of not less than 25% of the outstanding
principal amount of the Modified Debentures deliver a written notice
to the Debenture Indenture Trustee releasing such restriction or (ii)
the first Business Day after results of operations of the Reorganized
Debtor for two quarters following the Effective Date have been
reported on Form 10-Q filed with the SEC.
1.68 "Modified Debenture Indenture" means the Debenture Indenture as
modified pursuant to the terms of the Plan in substantially the form
described in the Disclosure Statement.
1.69 "Modified Senior Notes" means the notes to be issued in
accordance with the Plan on the Effective Date to the holders of the
Senior Subordinated Notes pursuant to the Modified Senior Subordinated
Notes Indenture. As more specifically described in the Modified
8
<PAGE> 17
Senior Subordinated Notes Indenture, the Modified Senior Notes
will accrue interest at the rate of 12.75% per annum. Accrued interest
and principal will be paid quarterly to the extent of Available Cash.
Accrued interest not paid on a current basis in cash will be added to
principal. The Modified Senior Notes shall be entitled to priority
over the Modified Debentures to the extent provided in the Modified
Debenture Indenture. The Modified Senior Notes will be collateralized
by (a) a third lien, subordinate to the first lien of the RRF Lenders
and the second lien of the Atlas Stockholders, on the Reorganized
Debtor's shares of InteliData Common Stock; (b) a first lien on (i)
the Reorganized Debtor's shares in Acquisition common stock and any
distributions or proceeds from the sale of such stock, subject to the
exercise of the Series A Warrants and the Atlas Stockholder Warrants,
(ii) the accounts receivable of the Reorganized Debtor, (iii) the
equipment and property of the Reorganized Debtor, and (iv) Available
Cash; and (c) a second lien, subordinate to the first lien of the
Atlas Stockholders, on the Warrant Notes, if any.
1.70 "Modified Senior Subordinated Notes Indenture" means the Senior
Subordinated Notes Indenture as modified pursuant to the terms of the
Plan in substantially the form described in the Disclosure Statement.
1.71 "Old Warrants" means the warrants currently held by the Atlas
Stockholders prior to the Effective Date to purchase Acquisition
shares from WCI. 1.1
1.72 "Operating Cash" means Cash in the amount of $150,000 to be
reserved for payment of operating expenses of the Reorganized Debtor
incurred after the Effective Date.
1.73 "Other Priority Claim" means a Claim entitled to priority
pursuant to section 507(a) of the Bankruptcy Code other than a
Priority Tax Claim or an Administrative Claim.
1.74 "Person" means an individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company,
limited liability partnership, trust, estate, unincorporated
organization or other entity.
1.75 "Petition Date" means the date on which the Debtor filed its
petition commencing the Chapter 11 Case.
1.76 "PIK Notes" means the additional notes issued by the Reorganized
Debtor to holders of Modified Debentures in satisfaction of interest
payments on the Debentures and Modified Debentures at any time on or
after the Effective Date and before May 14, 2003. The PIK Notes shall
be substantially in the form described in the Disclosure Statement and
shall bear interest at the same rate as the Modified Debentures, which
shall accrue and be added to principal semiannually, and mature on May
14, 2003, and shall otherwise have substantially the same terms and
conditions as the Modified Debentures.
1.77 "Plan" means this plan of reorganization which is proposed by the
Debtor for the resolution of outstanding Claims and interests in this
Chapter 11 Case, as such plan may be amended from time to time in
accordance with the Bankruptcy Code and Section 14.2 herein.
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<PAGE> 18
1.78 "Priority Tax Claim" means a Claim entitled to priority pursuant
to section 507(a)(8) of the Bankruptcy Code.
1.79 "Pro Rata" means, at any time, the proportion that the Face
Amount of a Claim in a particular Class bears to the aggregate Face
Amount of all Claims (including Disputed Claims, but excluding
Disallowed Claims) in such Class, unless the Plan provides otherwise;
provided, however, that solely for the purposes of Pro Rata
distribution of the Series A Warrants and Series B Warrants, Classes 7
and 8 shall be treated as a single Class.
1.80 "Professional Claim" means a Claim of a professional retained in
the Chapter 11 Case pursuant to sections 327 and 1103 of the
Bankruptcy Code or otherwise, for compensation or reimbursement of
costs and expenses relating to services incurred after the Petition
Date and prior to and including the Effective Date.
1.81 "Proportionate Share of Cash Available for Senior Notes" means,
with respect to an Electing Senior Note Holder, Cash in an amount
equal to the lesser of (a) the Agreed Senior Claim of such holder or
(b) the product of the amount of Cash Available for Senior Notes
multiplied by a fraction, the numerator of which is equal to the
Agreed Senior Claim of such holder and the denominator of which is
equal to the sum of the Agreed Senior Claims of all Electing Senior
Note Holders.
1.82 "Projections" means those financial projections covering the
Debtor's operations through Fiscal Year 2001 set forth by the Debtors
in the Disclosure Statement.
1.83 "Reinstated" or "Reinstatement" means (a) leaving unaltered the
legal, equitable and contractual rights to which a Claim entitles the
holder of such Claim so as to leave such Claim Unimpaired in
accordance with section 1124 of the Bankruptcy Code, or (b)
notwithstanding any contractual provision or applicable law that
entitles the holder of such Claim to demand or receive accelerated
payment of such Claim after the occurrence of a default (i) curing any
such default that occurred before or after the Petition Date, other
than a default of a kind specified in section 365(b)(2) of the
Bankruptcy Code; (ii) reinstating the maturity of such Claim as such
maturity existed before such default; (iii) compensating the holder of
such Claim for any damages incurred as a result of any reasonable
reliance by such holder on such contractual provision or such
applicable law; and (iv) not otherwise altering the legal, equitable
or contractual rights to which such Claim entitles the holder of such
Claim; provided, however, that any contractual right that does not
pertain to the payment when due of principal and interest on the
obligation on which such Claim is based, including, but not limited
to, financial covenant ratios, negative pledge covenants, covenants or
restrictions on merger or consolidation, and affirmative covenants
regarding corporate existence prohibiting certain transactions or
actions contemplated by the Plan, or conditioning such transactions or
actions on certain factors, shall not be required to be reinstated in
order to accomplish Reinstatement.
1.84 "Reorganized Debtor" means the Debtor that is reorganized
pursuant hereto and that continues in existence after the Effective
Date.
1.85 "Restructuring Expenses" means those expenses incurred by
WorldCorp in connection with the reorganization including expenses in
connection with negotiation, preparation
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and filing of the Chapter 11 Case, this Plan, the Disclosure
Statement and related matters, including unpaid prepetition fees and
expenses and Allowed Professional Claims incurred by professional and
legal advisors retained by the Debtor or the Creditors Committee. 1.1
1.86 "RRF" means Rothschild Recovery Fund L.P., a Delaware limited
partnership.
1.87 "RRF Fees and Expenses" means professional fees and expenses
incurred by RRF in a maximum amount to be agreed upon between RRF and
Sun Paper Advisors prior to the Confirmation Hearing.
1.88 "RRF Lenders" means RRF and any participants in the RRF Loan.
1.89 "RRF Loan" means a loan to be made by the RRF Lenders to
Acquisition on or prior to the Effective Date, on substantially the
terms and conditions described in the Disclosure Statement and
Appendix B thereto, in an amount equal to the sum of (i) the amount of
the Allowed Class 2 World Airways Secured Loan Claim; plus (ii) the
lesser of $5,000,000 or the sum of the Agreed Senior Claims of
Electing Senior Note Holders; plus (iii) the amount of the Allowed
Class 5 Administrative Convenience Claims; plus (iv) the amount of
unpaid Administrative Expenses (including Professional Claims other
than fees and expenses of professionals retained by the Creditors
Committee); plus (v) up to $100,000 of Professional Claims consisting
of allowed fees and expenses of professionals retained by the
Creditors Committee; plus (vi) the amount of Priority Claims required
to be paid on the Effective Date; plus (vii) the RRF Fees and
Expenses; plus (viii) the Atlas Stockholder Fees and Expenses; plus
(ix) the Operating Cash; provided, however, that the maximum amount of
the RRF Loan will not, without RRF's and Sun Paper Advisors' consent,
exceed the RRF Loan Limit; and provided further that the Debtor may
elect to reduce the amount of the RRF Loan that would otherwise be
made by selling assets with Sun Paper Advisors' consent and the
Court's approval on or before the Effective Date and applying the sale
proceeds to pay a portion of the claims and expenses specified above.
1.90 "RRF Loan Documents" means all documents evidencing or securing
the RRF Loan.
1.91 "RRF Loan Limit" means an amount equal to the sum of (a) the
product of $[0.95] times the number of InteliData shares to be
purchased by Acquisition with proceeds of the RRF Loan from the Debtor
at $[0.95] per share in the InteliData Share Transaction (as defined
below) plus (b) the RRF Fees and Expenses plus (c) the Atlas
Stockholder Fees and Expenses.
1.92 "Scheduled" means, with respect to any Claim or Interest, the
status and amount, if any, of such Claim or Interest as set forth in
the Schedules.
1.93 "Schedules" means the schedules of assets and liabilities and the
statement of financial affairs filed in the Bankruptcy Court by the
Debtor, as such schedules or statement have been or may be amended or
supplemented from time to time in accordance with Bankruptcy Rule 1009
or orders of the Bankruptcy Court.
1.94 "SEC" means the U.S. Securities and Exchange Commission.
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1.95 "Secured Claim" means a Claim secured by a security interest in
or lien upon property of the Estate to the extent of the value, as of
the Effective Date or such later date as is established by the
Bankruptcy Court, of such security interest or lien as determined by a
Final Order of the Bankruptcy Court pursuant to section 506 of the
Bankruptcy Code or as otherwise agreed upon in writing by the Debtor
and the holder of such Claim.
1.96 "Senior Subordinated Notes" means, collectively, the Senior
Subordinated Notes due September 30, 2000 in the principal amount of
approximately $5 million issued pursuant to the Senior Subordinated
Notes Indenture.
1.97 "Senior Subordinated Notes Claims" means all Claims arising under
the terms of the Senior Subordinated Notes, including Claims arising
under the terms of the Senior Subordinated Notes Indenture for payment
of interest, fees and expenses of the Senior Subordinated Notes
Trustee, and other amounts, whether arising before, on or after the
Petition Date.
1.98 "Senior Subordinated Notes Indenture" means that certain
Indenture dated as of September 30, 1996, as amended, supplemented or
otherwise modified prior to the Petition Date, by and between WCI and
the Senior Subordinated Notes Trustee.
1.99 "Senior Subordinated Notes Trustee" means Norwest Bank Minnesota,
National Association, or its successor, in its capacity as trustee
under the terms of the Senior Subordinated Notes Indenture.
1.100 "Series A Warrants" means warrants to purchase from the
Reorganized Debtor an aggregate number of shares of common stock of
Acquisition equal to 45% of the issued and outstanding stock of
Acquisition as of the Effective Date, which are to be issued as
contemplated by the Plan on the Effective Date as units with the
Series B Warrants, Modified Debentures and in the case of Holders of
Class 7 Debentures Claims, Accrued Interest Notes pursuant to a
warrant agreement substantially in the form described in the
Disclosure Statement. As more specifically described in such warrant
agreement, the Series A Warrants shall be exercisable at the earliest
of (a) the fourth anniversary of the Effective Date, (b) the sale of
all or substantially all of the capital stock or assets of
Acquisition, (c) an initial public offering of Acquisition, or (d)
exercise of the Atlas Stockholder Warrants; and shall expire on the
close of business of December 31, 2006; and shall be issued pursuant
to Section 1145 of the Bankruptcy Code. The exercise price per share
for the Series A Warrants shall be equal to at least 125% of the
appraised fair market value of the Acquisition Shares as of the
Effective Date, payable in cash or by surrendering Modified
Debentures, Accrued Interest Notes, or PIK Notes having an aggregate
fair market value, as of the date of exercise, equal to the exercise
price of the Series A Warrants.
1.101 "Series B Warrants" means warrants to purchase from the
Reorganized Debtor an aggregate number of shares of WCI Common Stock
equal to 40% of the pro forma outstanding WCI Common Stock as of the
Effective Date, which are to be issued as contemplated by the Plan on
the Effective Date as units with the Series A Warrants, Modified
Debentures and, in the case of holders of Class 7 Debentures Claims,
Accrued Interest Notes pursuant to a warrant agreement substantially
in the form described in the
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Disclosure Statement. As more specifically described in such
warrant agreement, the warrants shall be exercisable at the earliest
of (a) the fourth anniversary of the Effective Date, (b) upon the sale
of all or substantially all of the stock or assets of Acquisition, or
(c) an initial public offering of Acquisition; shall expire on the
close of business of December 31, 2006; and shall be issued pursuant
to section 1145 of the Bankruptcy Code. The exercise price for the
Series B Warrants shall be equal to at least 125% of the appraised
fair market value of WCI Common Stock as of the Effective Date,
payable in cash or by surrendering the equivalent amount of Modified
Debentures, Accrued Interest Notes, or PIK Notes, valued at par plus
accrued interest.
1.102 "Stock Purchase Agreement" means an agreement substantially in
the form described in the Disclosure Statement between WCI and
Acquisition pursuant to which WCI will sell to Acquisition on the
Effective Date shares of InteliData Common Stock (a) in an amount
equal to 10% of the amount of the RRF loan at a purchase price of
$0.01 per share, and (b) in an amount sufficient, at a purchase price
of $[0.95] per share, to generate proceeds of sale that are
sufficient, when combined with other funds available to the Debtor, to
pay all amounts required to be paid by the Debtor in connection with
the consummation of the Plan.
1.103 "Subordinated Securities Claim" means a Claim subject to
subordination under section 510(b) of the, Bankruptcy Code that arises
from rescission of, or for damages, reimbursement or contribution with
respect to, a purchase or sale of WCI Common Stock or other equity
securities of WCI prior to the Petition Date.
1.104 "Sun Capital" means Sun Capital Partners, Inc., a Florida corporation.
1.105 "Sun Options" means, collectively, the (a) option of Sun Capital
to purchase 3,540,311 shares of WCI Common Stock pursuant to the
WorldCorp Option Agreement, dated April 20, 1998, between Sun Capital
and WCI, and (b) option of Sun Capital to purchase 143 shares of
common stock, par value $.01 per share, of Acquisition pursuant to the
WorldCorp Acquisition Corp. Option Agreement, dated April 20, 1998,
between Sun Capital and WCI.
1.106 "Sun Paper" means Sun Paper Limited Partnership, a Florida
limited partnership.
1.107 "Sun Paper Advisors" means Sun Paper Advisors, Inc., a Florida
corporation.
1.108 "Tax Sharing Agreement" means the two tax-sharing agreements to
be entered into between (i) WCI and Acquisition and (ii) Acquisition
and Atlas, each on the Effective Date and substantially in the forms
described in the Disclosure Statement.
1.109 "Transaction Documents" means all material definitive agreements
to be entered into on the Effective Date in connection with the
consummation of the transactions contemplated by the Plan and
Disclosure Statement
1.110 "Transaction Documents Filing Date" means the date that the
Transaction Documents shall be filed with the Court, which date shall
be at least five days prior to the date set by the Bankruptcy Court as
the initial date to consider confirmation of the Plan.
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1.111 "Unimpaired" refers to any Claim or Interest which is not
Impaired.
1.112 "Voting Deadline" means the date fixed by the Court for receipt
of completed ballots.
1.113 "Voting Record Date" means the date on which the Bankruptcy Court
enters an Order approving the Disclosure Statement.
1.114 "Warrant Notes" means full recourse promissory notes issued by
the Atlas Stockholders to the Reorganized Debtor, substantially in the
form described in the Disclosure Statement, in an amount equal to any
portion of the exercise price of the Atlas Stockholder Warrants that
is not paid in cash at the time of exercise. Each note shall bear
interest at an 4.5% per annum rate, half of which will be payable
semi-annually in cash and the remainder of which will accrue and be
added to the principal balance of the Warrant Note. The outstanding
amount of each Warrant Note will be payable in full on the earlier of
(i) December 31, 2007 or (ii) a liquidity event as defined therein.
1.115 "WCI Common Stock" means shares of AC's common stock and all
options, warrants or rights, contractual or otherwise, if any, to
acquire any such common stock, except for the Sun Options.
1.116 "World Airways" means World Airways, Inc., a Delaware corporation.
1.117 "World Airways Secured Loan" means the loans made by World
Airways as the lender to WCI as the borrower on February 21, 1998 and
April 8, 1998, which loan is secured by a pledge of (i) 350,000 shares
of World Airways, Inc. common stock, par value $.001 per share, owned
by Acquisition, and (ii) 1,615,396 shares of InteliData Common Stock
owned by WCI.
C. RULES OF INTERPRETATION
For purposes of the Plan (a) any reference in the Plan to a contract,
instrument, release, indenture or other agreement or document being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions, (b) any reference in the Plan to an existing document or exhibit
filed or to be filed means such document or exhibit as it may have been or may
be amended, modified or supplemented, (c) unless otherwise specified, all
references in the Plan to Sections, Articles, Schedules and Exhibits are
references to Sections, Articles, Schedules and Exhibits of or to the Plan, (d)
the words "herein" and "hereto" refer to the Plan in its entirety rather than to
a particular portion of the Plan, (e) captions and headings to Articles and
Sections are inserted for convenience of reference only and are not intended to
be a part of or to affect the interpretation of the Plan, and (f) the rules of
construction set forth in section 102 of the Bankruptcy Code and in the
Bankruptcy Rules shall apply.
D. COMPUTATION OF TIME
In computing any period of time prescribed or allowed by the Plan,
unless otherwise expressly provided, the provisions of Bankruptcy Rule 9006(a)
shall apply.
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E. EXHIBITS AND TRANSACTION DOCUMENTS
All Exhibits and Transaction Documents are incorporated into and are a
part of the Plan as if set forth in full herein. All Transaction Documents shall
be Filed with the Bankruptcy Court on or before the Transaction Documents Filing
Date. After the Transaction Documents Filing Date, copies of the Transaction
Documents can be obtained upon written request to [NAME AND ADDRESS OF DELAWARE
COPY SERVICE]
ARTICLE 2
ADMINISTRATIVE EXPENSES
AND PRIORITY TAX CLAIMS
-----------------------
2.1 Administrative Claims. Subject to the provisions of Article X of
the Plan, on the Effective Date, or as soon thereafter as practicable,
a holder of an Allowed Administrative Claim shall receive, in full
satisfaction, settlement, release and discharge of and in exchange for
such Allowed Administrative Claim, (a) Cash equal to the unpaid
portion of such Allowed Administrative Claim, or (b) such other
treatment as to which the Debtor and such holder shall have agreed
upon in writing; provided, however, that Allowed Administrative Claims
with respect to liabilities incurred by the Debtor in the ordinary
course of business during the Chapter 11 Case shall be paid in the
ordinary course of business in accordance with the terms and
conditions of any agreements relating thereto.
2.2 Priority Tax Claims. With respect to each Allowed Priority Tax
Claim, at the sole option of the Reorganized Debtor, the holder of an
Allowed Priority Tax Claim shall be entitled to receive on account of
such Allowed Priority Tax Claim, in full satisfaction, settlement,
release and discharge of and in exchange for such Allowed Priority Tax
Claim, (a) equal Cash payments made on the last Business Day of every
three-month period following the Effective Date, over a period not
exceeding six years after the date of assessment of the tax on which
such Claim is based, totaling the principal amount of such Claim plus
simple interest on any outstanding balance from the Effective Date
calculated at the interest rate available on ninety (90) day United
States Treasury Bills on the Effective Date, (b) such other treatment
agreed to by the holder of such Allowed Priority Tax Claim and the
Debtor or the Reorganized Debtor, provided such treatment is on more
favorable terms to the Debtor or the Reorganized Debtor, as the case
may be, than the treatment set forth in clause (a) hereof, or (c)
payment in full.
ARTICLE 3
CLASSIFICATION OF CLAIMS AND INTERESTS
--------------------------------------
Pursuant to section 1122 of the Bankruptcy Code, set forth below is a
designation of classes of Claims against and interests in the Debtor. A Claim or
Interest is also placed in a
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particular Class for the purposes of voting on the Plan and of receiving
distributions pursuant to the Plan only to the extent that such Claim or
Interest is an Allowed Claim or Interest in that Class and such Claim or
Interest has not been paid, released or otherwise settled prior to the
Effective Date. In accordance with section 1123(a)(1) of the Bankruptcy
Code, Administrative Claims and Priority Tax Claims of the kinds specified
in sections 507(a)(1) and 507(a)(8) of the Bankruptcy Code have not been
classified and their treatment is set forth in Article II above.
3.1 Class 1. Class 1 consists of all Other Priority Claims.
3.2 Class 2. Class 2 consists of World Airways Secured Loan Claim.
3.3 Class 3. Class 3 consists of all Miscellaneous Secured Claims.
3.4 Class 4. Class 4 consists of all Atlas Stockholders Secured
Claims.
3.5 Class 5. Class 5 consists of all Administrative Convenience
Claims.
3.6 Class 6. Class 6 consists of all Senior Subordinated Notes
Claims other than those of Electing Senior Note Holders.
3.7 Class 7. Class 7 consists of all the Debentures Claims.
3.8 Class 8. Class 8 consists of all General Unsecured Claims.
3.9 Class 9. Class 9 consists of all Interests other than the Sun
Options.
3.10 Class 10. Class 10 consists of the Old Warrants.
3.11 Class 11. Class 11 consists of the Sun Options
3.12 Class 12. Class 12 consists of the Senior Subordinated Notes
Claims of Electing Senior Note Holders.
ARTICLE 4
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS
IMPAIRED AND NOT IMPAIRED BY THE PLAN
-------------------------------------
4.1 Unimpaired Classes of Claims and Interests. Class 1 (Other
Priority Claims), Class 2 (World Airways Secured Loan Claim), Class 3
(Miscellaneous Secured Claims), Class 5 (Administrative Convenience
Claims) and Class 9 (Interests) are not Impaired by the Plan.
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4.2 Impaired Classes of Claims and Interests. Class 4 (Atlas
Stockholders Secured Claims), Class 6 (Non-Electing Senior
Subordinated Notes Claims), Class 7 (Debentures Claims), Class 8
(General Unsecured Claims), Class 10 (Old Warrants), Class 11 (Sun
Options), and Class 12 (Electing Senior Subordinated Notes Claims) are
Impaired Classes under the Plan.
ARTICLE 5
PROVISIONS FOR TREATMENT OF
CLAIMS AND INTERESTS
--------------------
5.1 Class 1 (Other Priority Claims). On the Effective Date, or as
soon as practicable thereafter, each holder of an Allowed Class 1
Other Priority Claim shall receive, in full satisfaction, settlement,
release, and discharge of and in exchange for such Allowed Class 1
Other Priority Claim, (a) Cash equal to the amount of such Allowed
Class 1 Other Priority Claim, or (b) such other treatment as to which
the Debtor and such holder shall have agreed upon in writing.
5.2 Class 2 (World Airways Secured Loan Claims). On the Effective
Date, or as soon as practicable thereafter, each holder of an Allowed
Class 2 World Airways Secured Loan Claim shall receive Cash in an
amount equal to the amount of such Allowed Claim.
5.3 Class 3 (Miscellaneous Secured Claims). The legal, equitable
and contractual rights of holders of Allowed Miscellaneous Secured
Claims, if any, shall be Reinstated. The Debtor's failure to object to
such Claims in the Chapter 11 Case shall be without prejudice to the
Reorganized Debtor's right to contest or otherwise defend against such
Claim in the appropriate forum when and if such Claim is sought to be
enforced by the holder thereof. Notwithstanding section 1141(c) or any
other provision of the Bankruptcy Code, all prepetition liens on
property of the Debtor held by or on behalf of the holders of Claims
in this Class with respect to such Claims shall survive the Effective
Date and continue in accordance with the contractual terms of the
underlying agreements with such holders until, as to each such holder,
the Allowed Claims of such holder in this Class are paid in full.
5.4 Class 4 (Atlas Stockholders Secured Claims). On the Effective
Date, or as soon as practicable thereafter, each holder of an Atlas
Stockholders Secured Claim shall have such Claim modified by (i)
having the Guaranty, dated April 20, 1998, made by WCI in favor of Sun
Paper Advisors, as collateral agent on behalf of the Atlas
Stockholders, modified to provide for recourse limited to the
collateral and (ii) having the Pledge Agreement dated April 20, 1998
among WCI, Acquisition and Sun Paper Advisors as collateral agent for
the Atlas Stockholders modified to reflect (a) the Reorganized
Debtor's grant, as collateral security for the payment, performance
and observance of all obligations under the Atlas Stockholder Notes
and the Earn-Out, of (i) a first lien on the Reorganized Debtor's
right, title and interest with respect to the Warrant Notes (including
the Reorganized Debtor's right to receive the Warrant Notes upon
exercise of the Atlas Stockholder Warrants), and (ii) a second lien,
behind the first lien held by the
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RRF Lenders, on the Reorganized Debtor's and Acquisition's
ownership of all shares of common stock, par value $.001 per share, of
InteliData; and (b) the release of all other liens and security
interests of the Atlas Stockholders on property of WCI and
Acquisition.
5.5 Class 5 (Administrative Convenience Claims). On the Effective
Date, or as soon as practicable thereafter, each holder of an Allowed
Class 5 Administrative Convenience Claim, if any, shall receive, in
full satisfaction, settlement, release and discharge of and in
exchange for such Class 5 Administrative Convenience Claim, Cash equal
to (a) the amount of such Allowed Claim if such amount is less than or
equal to $500, or (b) $500, if the amount of such Allowed Claim is
greater than $500 and less than $1,000.
5.6 Class 6 (Non-Electing Senior Subordinated Notes Claims). On
the Effective Date, or as soon as practicable thereafter, each holder
of an Allowed Class 6 Non-Electing Senior Subordinated Notes Claim
shall receive (a) if such holder is the Senior Subordinated Notes
Trustee, Modified Senior Notes with an aggregate principal amount
equal to the sum of all unpaid fees, expenses, and other amounts
payable by the Debtor to the Senior Subordinated Notes Trustee under
the terms of the Senior Subordinated Notes Indenture for the period
ending on the Effective Date; or (b) if such holder is not the Senior
Subordinated Notes Trustee, Modified Senior Notes with an aggregate
principal balance equal to the sum of the unpaid principal amount of
such holder's Senior Subordinated Notes, plus all unpaid interest,
calculated as provided in the Senior Subordinated Notes Indenture,
accrued thereon during the period ending on the Effective Date; and
(c) if the Bankruptcy Court determines that the value, as of the
Effective Date, of the Modified Senior Notes to be issued to such
holder under (a) or (b), as applicable, is less than the amount of
such holder's Allowed Class 6 Non-Electing Senior Subordinated Notes
Claim, additional Modified Senior Notes in an amount that the
Bankruptcy Court determines is sufficient to enable each such holder
to receive, on account of such Allowed Class 6 Non-Electing Senior
Subordinated Notes Claim, Modified Senior Notes of a value, as of the
Effective Date, equal to such holder's Allowed Class 6 Non-Electing
Senior Subordinated Notes Claim.
5.7 Class 7 (Debentures Claims). On the Effective Date, or as
soon as practicable thereafter, each holder of an Allowed Class 7
Claim shall have such Claim modified by having its Debentures modified
to become Modified Debentures with the same principal amount, and by
receiving for accrued but unpaid interest on its Debentures through
the Effective Date (a) its Pro Rata share of the Series A Warrants and
the Series B Warrants, and (b) Accrued Interest Notes with a principal
amount equal to the amount by which such accrued but unpaid interest
exceeds the appraised fair market value of such Warrants as of the
Effective Date.
5.8 Class 8 (General Unsecured Claims). On the Effective Date, or
as soon as practicable thereafter, each holder of an Allowed Class 8
General Unsecured Claim shall have such Claim modified by receiving in
exchange for its existing Claim (a) its Pro Rata share of the Series A
Warrants, (b) its Pro Rata share of the Series B Warrants, (c)
Modified Debentures with a Face Amount equal to the amount by which
the Allowed Amount of such Claim exceeds the appraised fair market
value of such Warrants as of the Effective Date, and (d) Accrued
Interest Notes with a Face Amount equal to interest at the rate of 7%
per annum on such Allowed Claim from the Petition date to the
Effective Date.
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5.9 Class 9 (Interests). On the Effective Date, each holder of
WCI Common Stock shall retain unaltered the legal, equitable and
contractual rights to which such share or other interest of WCI Common
Stock entitled such holder and shall be unimpaired in accordance with
section 1124(1) of the Bankruptcy Code.
5.10 Class 10 (Old Warrants). On the Effective Date, each holder
of an Old Warrant shall have such warrant modified by receiving, in
exchange for and in full satisfaction of such Old Warrant, an Atlas
Stockholder Warrant.
5.11 Class 11 (Sun Options). On the Effective Date, each holder
of a Sun Option shall have such option canceled and shall not receive
any distribution of property under the Plan on account of his, her or
its Sun Option.
5.12 Class 12 (Electing Senior Subordinated Notes Claims). On the
Effective Date, or as soon as practicable thereafter, each Electing
Senior Note Holder shall receive, in full satisfaction, discharge and
release of its Class 12 Senior Subordinated Notes Claim and of all of
its rights (including intercreditor subordination rights and rights to
seek payment of fees and expenses incurred after the Petition Date as
an Administrative Claim) with respect to the Senior Subordinated Notes
and the Senior Subordinated Notes Indenture, (x) its Proportionate
Share of the Cash Available for Senior Notes, plus (y) if its
Proportionate Share of the Cash Available for Senior Notes is less
than its Agreed Senior Claim, Modified Senior Notes with an aggregate
principal amount equal to the difference.
ARTICLE 6
ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE
IMPAIRED CLASSES OF CLAIMS OR INTERESTS
---------------------------------------
6.1 Impaired Classes of Claims and Interests Entitled to Vote.
Subject to Section 6.6 of the Plan, the holders of Claims or interests
in each Impaired Class of Claims or Interests are entitled to vote as
a class to accept or reject the Plan.
6.2 Acceptance by an Impaired Class. In accordance with section
1126(c) of the Bankruptcy Code and except as provided in section
1126(e) of the Bankruptcy Code, an Impaired Class of Claims shall have
accepted the Plan if the Plan is accepted by the holders of at least
two-thirds (2/3) in dollar amount and more than one-half (1/2) in
number of the Allowed Claims of such Class that have timely and
properly voted to accept or reject the Plan.
6.3 Presumed Acceptances by Unimpaired Classes. Claims in Class 1
(Other Priority Claims), Class 2 (World Airways Secured Loan Claims),
Class 3 (Miscellaneous Secured Claims), Class 5 (Administrative
Convenience Claims) and Class 9 (Interests) are Unimpaired by the
Plan. Under section 1126(f) of the Bankruptcy Code, the holders of
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such Claims and Interests are conclusively presumed to accept the Plan
and the votes of such holders will not be solicited.
6.4 Classes Deemed to Reject Plan. Claims in Class 11 (Sun
Options) are not entitled to receive or retain any property under the
Plan. Under section 1126(g) of the Bankruptcy Code, the holders of
Claims and Interests in such Classes are deemed to reject the Plan.
Nevertheless, the Debtor reserves the right to solicit votes in favor
of the Plan by such holders.
6.5 Confirmation Pursuant to Section 1129(b) of the Bankruptcy
Code. To the extent that any Impaired Class entitled to vote rejects
the Plan, the Debtor will request confirmation of the Plan, as it may
be modified from time to time, under section 1129(b) of the Bankruptcy
Code.
6.6 Confirmability and Severability of a Plan. The confirmation
requirements of section 1129 of the Bankruptcy Code must be satisfied
with respect to the Debtor. The Debtor reserves the right to alter,
amend, modify, revoke or withdraw the Plan in accordance with Article
XIV. A determination by the Bankruptcy Court that the Plan as it
applies to the Debtor is not confirmable pursuant to section 1129 of
the Bankruptcy Code shall not limit or affect the Debtor's ability to
modify the Plan to satisfy the confirmation requirements of section
1129 of the Bankruptcy Code.
ARTICLE 7
MEANS FOR IMPLEMENTATION OF THE PLAN
------------------------------------
7.1 Continued Corporate Existence. The Debtor shall, as the
Reorganized Debtor, continue to exist after the Effective Date as a
separate corporate entity, with all the powers of a corporation under
applicable law in the jurisdiction in which it is incorporated and
pursuant to the certificate of incorporation and bylaws in effect
prior to the Effective Date, except to the extent such certificate of
incorporation and bylaws are amended by this Plan, without prejudice
to any right to terminate such existence (whether by merger or
otherwise) under applicable law after the Effective Date.
7.2 Directors and Officers. The officers and directors of the
Reorganized Debtor shall be appointed by the Court pursuant to the
Confirmation Order.
7.3 Employment, Retirement, Indemnification and Other Agreements
and Incentive Compensation Programs. To the extent that the Debtor has
in place as of the Confirmation Date employment, retirement,
indemnification and other agreements with its respective active
directors, officers and employees who will continue in such capacities
after the Effective Date, or retirement income plans, welfare benefit
plans and other plans for such Persons, such agreements, programs and
plans shall remain in place after the Effective Date and the
Reorganized Debtor shall continue to honor such agreements, programs
and plans. However, as of the Effective Date, the Reorganized Debtor
shall have the authority to terminate, amend or enter into employment,
retirement, indemnification and other agreements with its respective
active directors, officers and
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employees and to terminate, amend or implement retirement income
plans, welfare benefit plans and other plans for active employees.
Such agreements and plans may include equity, bonus and other
incentive plans in which officers and other employees of the
Reorganized Debtor may be eligible to participate.
7.4 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of WCI shall be amended as necessary to
satisfy the provisions of the Plan and the Bankruptcy Code. Pursuant
to the Confirmation Order, and without the need for a vote of
stockholders or directors, the certificate of incorporation and bylaws
of the Reorganized Debtor shall be amended to, among other things, (i)
provide, pursuant to section 1123(a)(6) of the Bankruptcy Code, that
non-voting equity securities shall not be issued by the Reorganized
Debtor, and, if applicable, for an appropriate distribution of voting
power among the classes of voting securities issued pursuant to the
Plan or thereafter, including, in the case of any class of equity
securities having a preference over another class of equity securities
with respect to dividends, adequate provisions for the election of
directors representing such preferred class in the event of default in
the payment of such dividends; (ii) to prohibit the acquisition or
accumulation of five percent (5%) or more of the Reorganized Debtor's
stock by any person or entity, taking into account for this purpose
stock owned or acquired by other persons or entities whose stock would
be treated as owned by such person or entity under the attribution
rules applicable under Section 382 of the Internal Revenue Code of
1986 as amended, or any increase in ownership of the Reorganized
Debtor's stock by any such person or entity that holds five percent
(5%) or more as of the Effective Date; and (iii) to provide for the
board of directors of the Reorganized Debtor to consist of the number
of directors serving the terms to be determined by agreement of RRF
and Sun Paper Advisors. The restated certificate of incorporation and
the restated bylaws of the Reorganized Debtor shall be filed with the
Bankruptcy Court prior to the Confirmation Date and shall become
effective on or prior to the Effective Date or within ten (10) days
thereafter as specified therein.
7.5 Corporate Action. Each of the matters provided for under the
Plan involving the corporate structure of the Debtor or the
Reorganized Debtor or corporate action to be taken by or required of
the Debtor or the Reorganized Debtor shall, as of the Effective Date,
be deemed to have occurred and be effective as provided herein, and
shall be authorized and approved in all respects without any
requirement of further action by stockholders or directors of the
Debtor or the Reorganized Debtor.
7.6 Sale of InteliData Common Stock. On the Effective Date, the
Reorganized Debtor will sell shares of InteliData Common Stock to
Acquisition pursuant to the terms of the Stock Purchase Agreement in
order to obtain the funds necessary to pay or reserve for payment of
Administrative Expenses and Other Priority Expenses, make Cash
distributions to holders of Allowed Class 2 Claims, Allowed Class 5
Claims and Allowed Class 12 Claims, make other payments required to be
made on the Effective Date, and obtain the Operating Cash for purposes
of paying operating expenses of the Reorganized Debtor.
7.7 Security for RRF Loan. Repayment of the RRF Loan will be
secured by first liens on all shares of InteliData Common Stock owned
by Acquisition and the Reorganized Debtor.
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7.8 Issuance of Modified Senior Notes. On or before the
Distribution Date, the Reorganized Debtor shall issue the Modified
Senior Notes for distribution in accordance with the terms of the Plan
to holders of Allowed Class 6 Non-Electing Senior Subordinated Notes
Claims and, if applicable, to holders of Class 12 Electing Senior
Subordinated Notes Claims. The Modified Senior Notes shall be exempt
from registration under applicable securities laws pursuant to section
1145(a) of the Bankruptcy Code.
7.9 Issuance of Modified Debentures, Accrued Interest Notes and
Series A and Series B Warrants. On or before the Distribution Date,
the Reorganized Debtor shall issue the Modified Debentures, Accrued
Interest Notes and the Series A and Series B Warrants for distribution
in accordance with the terms of the Plan to holders of Allowed Class 7
Debentures Claims and holders of Allowed Class 8 General Unsecured
Claims, as applicable. The Modified Debentures, Accrued Interest Notes
and the Series A and Series B Warrants shall be exempt from
registration under applicable securities laws pursuant to section
1145(a) of the Bankruptcy Code.
7.10 Issuance of Atlas Stockholder Warrants. On or before the
Distribution Date, the Reorganized Debtor shall issue the Atlas
Stockholder Warrants for distribution in accordance with the terms of
the Plan to holders of Allowed Class 10 Old Warrants. The Atlas
Stockholder Warrants shall be exempt from registration under
applicable securities laws pursuant to section 1145(a) of the
Bankruptcy Code.
7.11 Tax Sharing Agreement. On or before the Effective Date, the
Reorganized Debtor shall enter into the Tax Sharing Agreement with
Acquisition, and Acquisition will enter into the Tax Sharing Agreement
with Atlas.
7.12 Restructuring of Acquisition Indebtedness. On the Effective
Date, with the consent of the Atlas Stockholders, Sun Paper Advisors
and Acquisition, the indebtedness of Acquisition shall be restructured
as follows:
(a) Atlas Stockholder Security Interests. Certain liens and
security interests of the Atlas Stockholders in property of WCI
and Acquisition shall be modified as of the Effective Date to
provide that the Atlas Stockholders will have (a) a first lien on
the Reorganized Debtor's right, title and interest with respect
to the Warrant Notes (including the Reorganized Debtor's right to
receive the Warrant Notes upon exercise of the Atlas Stockholder
Warrants and (b) a second lien, behind the first lien held by the
RRF Lenders, on all shares of InteliData Common Stock owned by
either the Reorganized Debtor or Acquisition. All other liens and
security interests of the Atlas Stockholders in property of WCI
and Acquisition shall be released as of the Effective Date.
(b) Acquisition Note Modifications. The Atlas Stockholder
Notes shall be modified to (i) extend the maturity of the Atlas
Stockholder Notes due April 20, 1999 to April 20, 2003; (ii)
reduce the interest rate on all the Atlas Stockholder Notes from
eight percent (8%) per annum to the higher of five percent (5%)
per annum or the applicable federal rate as of the
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Effective Date as determined by the Internal Revenue
Service, half of which interest will be payable in cash and half
of which will accrue, and be added to the principal amounts of
the Atlas Stockholder Notes; (iii) require prepayments with all
remaining cash available to Acquisition under the Tax Sharing
Agreement after interest is paid on the Acquisition Notes; and
(iv) provide that half of the interest accrued between January 1,
1999 and the Effective Date will be paid in cash and the
remaining half will be added to principal.
(c) Earn-Out Amendment. The terms of the Earn-Out shall be
amended to provide that payments to the Atlas Stockholders with
respect to any businesses acquired after consummation of the
transactions entered into on April 20, 1998 will be equal to 10%
of the EBITDA (calculated as provided in the Earn-Out) of such
businesses, and that the other terms of the Earn-Out apply only
to the businesses acquired by WorldCorp on April 20, 1998.
7.13 Amendment of Financial Consulting Agreement. As of the
Effective Date, the Financial Consulting Agreement will be
amended to (i) eliminate the quarterly consulting fee and (ii)
modify the compensation to be paid to Sun Capital upon the
closing of an M&A Transaction (as such term is defined in the
Financial Consulting Agreement) to an amount equal to 5% of the
first one million dollars ($1,000,000) of consideration, 4% of
the second one million dollars ($1,000,000) of consideration, 3%
of the third one million dollars ($1,000,000) of consideration,
2% of the fourth one million dollars ($1,000,000) of
consideration and 1.5% of the remainder.
7.14 Preservation of Causes of Action. Subject to Article XI, in
accordance with section 1123(b)(3) of the Bankruptcy Code and except
as otherwise provided in the Plan, the Reorganized Debtor shall retain
and may enforce all Causes of Action which the Debtor may hold against
any entity, including, without limitation, any Causes of Action
brought prior to the Petition Date, actions against any Persons for
failure to pay for products or services rendered by the Debtor, all
claims, Causes of Action, suits, proceedings and claims relating to
enforcement of the Debtor's intellectual property rights, including
patents, copyrights and trademarks, and all Causes of Action which may
exist under sections 510, 542, 544 through 550 and 553 of the
Bankruptcy Code or under similar state laws, including, without
limitation, fraudulent conveyance claims, if any, and all other Causes
of Action of a trustee and debtor in possession under the Bankruptcy
Code. The Reorganized Debtor, in the exercise of its business
judgment, will determine whether to enforce such rights. The
Reorganized Debtor or any successors may pursue such litigation claims
in accordance with the best interests of the Reorganized Debtor or the
successors holding such rights of action.
7.15 Substantial Contribution Compensation and Expenses Bar Date.
Any person or entity who requests compensation or expense
reimbursement for making a substantial contribution in the Chapter 11
Case pursuant to section 503(b)(3), (4), and (5) of the Bankruptcy
Code must file an application with the clerk of the Bankruptcy Court,
and serve such application on counsel for the Debtor and as otherwise
required by the
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Bankruptcy Court and the Bankruptcy Code at least five
(5) days before the Effective Date, or be forever barred from seeking
such compensation or expense reimbursement.
7.16 Cancellation of Existing Securities and Agreements. On the
Effective Date, except as otherwise provided for herein, (a) the
Existing Securities and any other note, bond, indenture, or other
instrument or document evidencing or creating any indebtedness or
obligation of the Debtor, except such notes or other instruments
evidencing indebtedness or obligations of the Debtor that are
Reinstated under the Plan, shall be canceled, and (b) the obligations
of, and/or Claims against, the Debtor under, relating or pertaining to
any agreements, indentures or certificates of designations governing
the Existing Securities; any other note, bond, indenture or other
instrument or document evidencing or creating any indebtedness or
obligation of the Debtor, except such notes or other instruments
evidencing indebtedness or obligations of the Debtor that are
Reinstated under the Plan, as the case may be; and intercompany debts
(other than under the Tax Sharing Agreement), shall be released and
discharged; provided, however, that the Senior Subordinated Notes
Indenture shall continue in effect and be modified on the Effective
Date to become the Modified Senior Notes Indenture, and the Debenture
Indenture shall continue in effect and be modified on the Effective
Date to become the Modified Debenture Indenture; provided, further,
that the provisions of this proviso shall not affect the discharge of
the Debtor's liabilities pursuant to the Bankruptcy Code and the
Confirmation Order or result in any expense or liability to the
Reorganized Debtor.
7.17 Exclusivity Period. The Debtor shall retain the exclusive
right to amend or modify the Plan in accordance with Section 14.2, and
to solicit acceptances of any amendments to or modifications of the
Plan, through and until the Effective Date.
7.18 Effectuating Documents; Further Transactions. The Chairman
of the Board of Directors, the Chief Executive Officer or any other
executive officer of the Debtor shall be authorized to execute,
deliver, file or record such contracts, instruments, releases,
indentures and other agreements or documents, and take such actions as
may be necessary or appropriate to effectuate and further evidence the
terms and conditions of the Plan. The Secretary or Assistant Secretary
of the Debtor shall be authorized to certify or attest to any of the
foregoing actions.
ARTICLE 8
UNEXPIRED LEASES AND EXECUTORY CONTRACTS
----------------------------------------
8.1 Assumed Contracts and Leases. With respect to executory
contracts and unexpired leases to which the Debtor is a party, only
those executory contracts and unexpired leases listed on the schedule
described in the Disclosure Statement shall be deemed automatically
assumed as of the Effective Date. The Confirmation Order shall
constitute an order of the Bankruptcy Court approving such
assumptions, pursuant to section 365(b)(1) of the Bankruptcy Code and,
to the extent applicable, section 365(b)(3) of the Bankruptcy Code, as
of the Effective Date. Each executory contract and unexpired lease
that is assumed and relates to the use, ability to acquire or
occupancy of real property
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shall include (a) all modifications, amendments, supplements,
restatements or other agreements made directly or indirectly by any
agreement, instrument or other document that in any manner affect such
executory contract or unexpired lease and (b) all executory contracts
or unexpired leases appurtenant to the premises, including all
easements, licenses, permits, rights, privileges, immunities, options,
rights of first refusal, powers, uses, reciprocal easement agreements
and any other interests in real estate or rights in rem related to
such premises, unless any of the foregoing agreements has been
rejected pursuant to a Final Order of the Bankruptcy Court or is
otherwise rejected as a part of this Plan.
8.2 Rejected Contracts and Leases. Except with respect to
executory contracts and unexpired leases that have previously been
rejected or are the subject of a motion to reject filed on or before
the Confirmation Date, all executory contracts and unexpired leases
that are not set forth in the Disclosure Statement with respect to the
Debtor shall be deemed automatically rejected as of the Effective Date
or such earlier date as the Debtor may have unequivocally terminated
its performance under such lease or contract. The Confirmation Order
shall constitute an order of the Bankruptcy Court approving such
rejections, pursuant to section 365 of the Bankruptcy Code. The Debtor
reserves the right to file a motion on or before the Confirmation Date
to reject any executory contract or unexpired lease.
8.3 Payments Related to Assumption of Executory Contracts and
Unexpired Leases. Any monetary amounts by which each executory
contract and unexpired lease to be assumed under the Plan may be in
default shall be satisfied, under section 365(b)(i) of the Bankruptcy
Code, at the option of the Debtor or the assignee of the Debtor
assuming such contract or lease, by Cure. In the event of a dispute
regarding (a) the nature or the amount of any Cure, (b) the ability of
the Reorganized Debtor or any assignee to provide "adequate assurance
of future performance" (within the meaning of section 365 of the
Bankruptcy Code) under the contract or lease to be assumed, or (c) any
other matter pertaining to assumption, Cure shall occur following the
entry of a Final Order resolving the dispute and approving the
assumption and, as the case may be, assignment.
8.4 Rejection Damages Bar Date. If the rejection by the Debtor,
pursuant to the Plan or otherwise, of an executory contract or
unexpired lease results in a Claim, then such Claim shall be forever
barred and shall not be enforceable against the Debtor or the
Reorganized Debtor or the properties of either of them unless a proof
of claim is filed with the clerk of the Bankruptcy Court and served
upon counsel to the Debtor within thirty (30) days after service of
the earlier of (a) notice of the Confirmation Order, or (b) other
notice that the executory contract or unexpired lease has been
rejected.
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ARTICLE 9
PROVISIONS GOVERNING DISTRIBUTIONS
----------------------------------
9.1 Time of Distributions. Except as otherwise provided for
herein or ordered by the Bankruptcy Court, distributions under the
Plan shall be made on the Distribution Date to holders of all allowed
Claims entitled to receive a distribution under the Plan.
9.2 Interest on Claims. Unless otherwise specifically provided
for in the Plan, Confirmation Order, or required by applicable
bankruptcy law, postpetition interest shall not accrue or be paid on
Claims, and no holder of a Claim shall be entitled to interest
accruing on or after the Petition Date on any Claim. Interest shall
not accrue or be paid upon any Disputed Claim in respect of the period
from the Petition Date to the date a final distribution is made
thereon if and after such Disputed Claim becomes an Allowed Claim.
9.3 Disbursing Agent. The Disbursing Agent shall make all
distributions required under this Plan except with respect to holders
of allowed Class 7 Debentures Claims and Allowed Class 8 General
Unsecured Claims, which distributions shall be deposited with the
Debenture Indenture Trustee, who shall deliver such distributions to
the holders of such Claims in accordance with the provisions of this
Plan and the terms of the Modified Debenture Indenture; provided,
however, that if the Debenture Indenture Trustee is unable to make
such distributions, the Disbursing Agent, with the cooperation of the
Debenture Indenture Trustee, shall make such distributions.
9.4 Surrender of Securities or Instruments. On or before the
Distribution Date, or as soon as practicable thereafter, each holder
of an instrument evidencing a Claim on account of a Senior
Subordinated Note or a Debenture (a "Certificate") shall surrender
such Certificate to the Disbursing Agent, or, with respect to the
Debentures, to the Debenture Indenture Trustee, and such Certificate
shall be canceled. No distribution of property hereunder shall be made
to or on behalf of any such holder unless and until such Certificate
is received by the Disbursing Agent or the Debenture Indenture
Trustee, as the case may be, or the unavailability of such Certificate
is reasonably established to the satisfaction of the Disbursing Agent
or the Debenture Indenture Trustee, as the case may be. Except as
provided below, any such holder who fails to surrender or cause to be
surrendered such Certificate or fails to execute and deliver an
affidavit of loss and indemnity reasonably satisfactory to the
Disbursing Agent or the Debenture Indenture Trustee, as the case may
be, prior to the second (2nd) anniversary of the Effective Date, shall
be deemed to have forfeited all rights and Claims in respect of such
Certificate and shall not participate in any distribution hereunder,
and all property in respect of such forfeited distribution, including
interest accrued thereon, shall revert to the Reorganized Debtor
notwithstanding any federal or state escheat laws to the contrary.
9.5 Instructions to Disbursing Agent. Prior to any distribution
on account of any Senior Subordinated Notes or Debentures, each of the
Senior Subordinated Notes Trustee and the Debenture Indenture Trustee
shall (a) inform the Disbursing Agent as to the amount of properly
surrendered Certificates and (b) instruct the Disbursing Agent, in a
form and manner that the Disbursing Agent reasonably determines to be
acceptable, of the names of the holders of Allowed Class 6
Non-Electing Senior Subordinated Notes Claims,
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Allowed Class 7 Debentures Claims, Allowed Class 8 General
Unsecured Claims, and Allowed Class 12 Electing Senior Subordinated
Notes Claims (as applicable), and the denominations of the Modified
Senior Notes, Modified Debentures, Accrued Interest Notes and Series A
Warrants and Series B Warrants to be issued to each such holder and to
the Senior Subordinated Notes Trustee and the Debenture Indenture
Trustee pursuant to the Plan.
9.6 Services of Indenture Trustees, Agents and Servicers. The
services, with respect to consummation of the Plan, of indenture
trustees, agents and servicers under indentures and other agreements
that govern the rights of holders of Claims, shall be subject to
Sections 7.15 and 10.3 of the Plan.
9.7 Record Date for Distributions to Holders of Senior
Subordinated Notes and Debentures. At the close of business on the
Record Date, the transfer ledgers of the Senior Subordinated Notes
Trustee and the Debenture Indenture Trustee shall be closed, and there
shall be no further changes in the record holders of the Senior
Subordinated Notes or the Debentures. The Reorganized Debtor, the
Senior Subordinated Notes Trustee, the Debenture Indenture Trustee and
the Disbursing Agent shall have no obligation to recognize any
transfer of such Senior Subordinated Notes or Debentures occurring
after the Record Date, and shall be entitled instead to recognize and
deal for all purposes hereunder with only those record holders stated
on the transfer ledgers as of the close of business on the Record
Date.
9.8 Delivery of Distributions. Distributions to holders of
Allowed Claims shall be made by the Disbursing Agent or the Debenture
Indenture Trustee, as the case may be, (a) at the addresses set forth
on the proofs of claim filed by such holders (or at the last known
addresses of such holders if no proof of claim is filed or if the
Debtor has been notified of a change of address), (b) at the addresses
set forth in any written notices of address changes delivered to the
Disbursing Agent after the date of any related proof of claim, (c) at
the addresses reflected in the Schedules if no proof of claim has been
filed and the Disbursing Agent has not received a written notice of a
change of address, or (d) in the case of the holder of an Allowed
Class 7 Debentures Claim, at the addresses contained in the official
records of the Debenture Indenture Trustee. If any holder's
distribution is returned as undeliverable, no further distributions to
such holder shall be made unless and until the Disbursing Agent or the
Debenture Indenture Trustee, as applicable, is notified of such
holder's then current address, at which time all missed distributions
shall be made to such holder without interest. Amounts in respect of
undeliverable distributions made through the Disbursing Agent or the
Debenture Indenture Trustee shall be returned to the Reorganized
Debtor until such distributions are claimed. All claims for
undeliverable distributions shall be made on or before the second
(2nd) anniversary of the Effective Date. After such date, all
unclaimed property shall revert to the Reorganized Debtor and the
claim of any holder or successor to such holder with respect to such
property shall be discharged and forever barred notwithstanding any
federal or state escheat laws to the contrary.
9.9 Procedures for Treating and Resolving Disputed and Contingent
Claims.
(a) No Distributions Pending Allowance. No payments or
distributions will
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be made with respect to all or any portion of a
Disputed Claim unless and until all objections to such
Disputed Claim have been settled or withdrawn or
have been determined by a Final Order, and the
Disputed Claim has become an Allowed Claim. All
objections to Claims must be filed on or before
the Claims Objection Deadline.
(b) Distribution Reserve. The Disbursing Agent will
withhold the Distribution Reserve from the property to
be distributed under the Plan. As to any Disputed
Claim, upon a request for estimation by the Debtors,
the Bankruptcy Court will determine what amount is
sufficient to withhold as the Distribution Reserve. The
Debtor will request estimation for every Disputed Claim
that is unliquidated and the Disbursing Agent will
withhold the Distribution Reserve based upon the
estimated amount of each such Claim as set forth in a
Final Order. The Disbursing Agent will also place in
the Distribution Reserve any dividends, payments or
other distributions made on account of, as well as any
obligations arising from, the property withheld as the
Distribution Reserve, to the extent that such property
continues to be withheld as the Distribution Reserve at
the time such distributions are made or such
obligations arise. If practicable, the Disbursing Agent
will invest any Cash that is withheld in the
Distribution Reserve in a manner that will yield a
reasonable net return, taking into account the safety
of the investment. Nothing in the Plan or Disclosure
Statement will be deemed to entitle the holder of a
Disputed Claim to postpetition interest on such Claim.
(c) Distributions After Allowance. Payments and
distributions from the Distribution Reserve to each
holder of a Disputed Claim, to the extent that it
ultimately becomes an Allowed Claim, will be made in
accordance with provisions of the Plan that govern the
Class of Claims to which such Claim belongs. Promptly
after the date when the order or judgment of the
Bankruptcy Court allowing all or part of such Claim
becomes a Final Order, the Disbursing Agent will
distribute to the holder of such Claim any Cash and
other property in the Distribution Reserve that would
have been distributed on the Distribution Date had such
Allowed Claim been an Allowed Claim on the Distribution
Date. After a Final Order has been entered, or other
final resolution has been reached, with respect to all
Disputed Claims, (i) any Series A and Series B Warrants
held in the Distribution Reserve will be distributed
Pro Rata to holders of Allowed Class 7 Debentures
Claims and Allowed Class 8 General Unsecured Claims,
and (ii) any Cash or other property remaining in the
Distribution Reserve will become property of the
Reorganized Debtor. All distributions made under this
Section of the Plan on account of an Allowed Claim will
be made together with any dividends, payments or other
distributions made on account of, as well as any
obligations arising from, the distributed property as
if such Allowed Claim had been an Allowed Claim on the
Distribution Date.
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9.10 Fractional Securities; De Minimis Distributions. Any
other provision of the Plan notwithstanding, payments of
fractions of shares of Series B Warrants shall not be made.
Whenever any payment of a fraction of a share of Series B
Warrants under the Plan would otherwise be called for, the actual
payment made shall reflect a rounding of such fraction to the
nearest whole share (up or down), with half shares being rounded
down.
ARTICLE 10
ALLOWANCE AND PAYMENT OF CERTAIN ADMINISTRATIVE CLAIMS
------------------------------------------------------
10.1 Professional Claims.
(a) Payment of Interim Amounts. On the Effective Date,
the Debtor shall (i) pay all billed but unpaid
amounts payable to Professionals on a provisional
basis under any order entered by the Court
authorizing such provisional payments prior to a
hearing on the fee applications of Professionals; and
(ii) reserve for payment of all other fees and
expenses of Professionals (including estimated fees
and expenses through the Effective Date) pending
allowance by the Bankruptcy Court.
The Professionals shall estimate fees and expenses
due for periods that have not been billed as of the
Effective Date and the Debtor shall reserve an amount
equal to such estimate. Upon submission of a detailed
invoice covering such period, the Professional shall
be entitled to payment on a provisional basis under
any order entered by the Court authorizing such
provisional payments prior to a hearing on the fee
applications of Professionals.
(b) Upon the Effective Date, any requirement that
Professionals comply with sections 327 through 331 of
the Bankruptcy Code in seeking retention or
compensation for services rendered after such date
will terminate.
(c) Final Fee Applications. All final requests for
payment of Professional Claims must be filed no later
than sixty (60) days after the Effective Date. After
notice and a hearing in accordance with the
procedures established by the Bankruptcy Code and
prior orders of the Bankruptcy Court, the allowed
amounts of such Professional Claims shall be
determined by the Bankruptcy Court.
(d) Notwithstanding anything to the contrary in this
Plan, any Restructuring Expenses for which
Acquisition is liable shall be paid by Acquisition in
accordance with the terms of its obligations if not
paid promptly by the Debtor following approval by
court order.
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10.2 Stay/Success Fee. Provided William F. Gorog ("Gorog")
remains a member of the Debtor's Board of Directors and Chairman
of its Executive Committee during the Chapter 11 period, the
Debtor shall pay to Gorog on the Effective Date a fee in the
amount of $50,000. Gorog shall have an Allowed Administrative
Claim for the amount payable hereunder.
10.3 Other Administrative Fees. All other requests for
payment of an Administrative Claim must be filed with the
Bankruptcy Court and served on counsel for the Debtor no later
than thirty (30) days after the Effective Date. Unless the Debtor
objects to an Administrative Claim within thirty (30) Business
Days after receipt, such Administrative Claim shall be deemed
allowed in the amount requested. In the event that the Debtor
objects to an Administrative Claim, the Bankruptcy Court shall
determine the Allowed amount of such Administrative Claim.
Notwithstanding the foregoing, no request for payment of an
Administrative Claim need be filed with respect to an
Administrative Claim which is paid or payable by the Debtor in
the ordinary course of business.
ARTICLE 11
EFFECT OF THE PLAN ON CLAIMS AND INTERESTS
------------------------------------------
11.1 Revesting of Assets. Except as otherwise provided in
this Plan, on the Effective Date all property comprising the
Estate of the Debtor shall revest in the Reorganized Debtor, free
and clear of all Claims, liens, charges, encumbrances and
Interests of creditors and equity security holders (other than as
expressly provided herein). As of the Effective Date, the
Reorganized Debtor may operate its business and use, acquire and
dispose of property and settle and compromise claims or interests
without supervision of the Court free of any restrictions of the
Bankruptcy Code or Bankruptcy Rules, other than those
restrictions expressly imposed by the Plan and Confirmation
Order. Any unclaimed reserves shall become the sole property of
the Reorganized Debtor two years after the Effective Date.
11.2 Discharge of the Debtor. Pursuant to section 1141(d) of
the Bankruptcy Code, except as otherwise specifically provided in
this Plan or in the Confirmation Order, the distributions and
rights that are provided in this Plan shall be in complete
satisfaction, discharge and release, effective as of the
Confirmation Date (but subject to the occurrence of the Effective
Date), of Claims and Causes of Action, whether known or unknown,
against, liabilities of, liens on, obligations of and Interests
in the Debtor or the Reorganized Debtor or any of their assets or
properties, regardless of whether any property shall have been
distributed or retained pursuant to the Plan on account of such
Claims, including, but not limited to, demands and liabilities
that arose before the Confirmation Date, any liability (including
withdrawal liability) to the extent such Claims relate to
services performed by employees of the Debtor prior to the
Petition Date and that arise from a termination of employment or
a termination of any employee or retiree benefit program
regardless of whether such termination occurred prior to or after
the Confirmation Date, and all debts of the kind specified in
sections 502(g), 502(h) or 502(i)
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of the Bankruptcy Code, whether or not (i) a proof of claim
based upon such debt is filed or deemed filed under section 501
of the Bankruptcy Code, (ii) a Claim based upon such debt is
Allowed under section 502 of the Bankruptcy Code, or (iii) the
holder of a Claim based upon such debt accepted the Plan. The
Confirmation order shall be a judicial determination of the
discharge of all liabilities of the Debtor, subject to the
Effective Date occurring.
11.3 Compromises and Settlements. Pursuant to Bankruptcy
Rule 9019(a), the Debtor may compromise and settle various Claims
(a) against it and (b) that it has against other Persons. The
Debtor expressly reserves the right (with Bankruptcy Court
approval, following appropriate notice and opportunity for a
hearing) to compromise and settle Claims against it and Claims
that it may have against other Persons up to and including the
Effective Date. After the Effective Date, such right shall pass
to the Reorganized Debtor pursuant to Sections 7.16 and 11.1 of
the Plan.
11.4 Release of Claims Against Officers, Directors, Etc. As
of the Effective Date, each present or former officer, director,
employee, professional, agent, or representative of the Debtor or
the Reorganized Debtor shall be released and discharged from any
and all claims and/or Causes of Action arising out of or based
upon their service in any such capacity or any transaction,
event, circumstance or other matter involving or relating to the
Debtor that occurred on or before the Effective Date. Claimants
and equity interest holders of the Debtor shall be enjoined from
commencing or continuing any action, employment of process or act
to collect, offset or recover any claims and/or Causes of Action
released and discharged pursuant to this Section. The parties
shall also exchange mutual releases on the Effective Date as
agreed among the parties.
11.5 Release of Claims Against Acquisition, Sun Capital, Sun
Paper Advisors, Atlas, Atlas Stockholders, Etc. As of the
Effective Date, each of Acquisition, Sun Capital, Sun Paper
Advisors, Atlas, the Atlas Stockholders, and their respective
partners, stockholders, affiliates, and subsidiaries, and the
officers, directors, employees, professionals, agents, and
representatives of any of them in their capacities as such shall
be released and discharged from any and all claims and/or Causes
of Action arising out of or based upon any transaction, event,
circumstance or other matter involving or relating to the Debtor
that occurred on or before the Effective Date. Claimants and
equity interest holders of the Debtor shall be enjoined from
commencing or continuing any action, employment of process or act
to collect, offset or recover any claims and/or Causes of Action
released and discharged pursuant to this Section. The parties
shall also exchange mutual releases on the Effective Date as
agreed among the parties.
11.6 Release of Claims Against RRF and Holders of
Debentures. As of the Effective Date, each holder of Debentures,
including RRF, and their respective partners, stockholders,
affiliates, and subsidiaries, and the officers, directors,
employees, professionals, agents, and representatives of any of
them in their capacities as such shall be released and discharged
from any and all claims and/or Causes of Action arising out of or
based upon any transaction, event, circumstance or other matter
involving or relating to the Debtor that occurred on or before
the Effective Date. Claimants and equity interest holders of the
Debtor shall be enjoined from commencing or continuing any
action, employment of process or act to collect, offset or
recover any claims and/or Causes of Action released
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and discharged pursuant to this Section. The parties shall
also exchange mutual releases on the Effective Date as agreed
among the parties.
11.7 Setoffs. The Debtor may, but shall not be required to,
set off against any Claim, and the payments or other
distributions to be made pursuant to the Plan in respect of such
Claim, claims of any nature whatsoever that the Debtor may have
against the holder of such Claim; but neither the failure to do
so nor the allowance of any Claim hereunder shall constitute a
waiver or release by the Debtor of any such claim that the Debtor
may have against such holder.
11.8 Satisfaction of Subordination Rights. All Claims
against the Debtor, Sun Paper Advisors, Sun Capital, the Atlas
Stockholders and RRF and all rights and claims between or among
holders of Claims relating in any manner whatsoever to Claims
against the Debtor, Sun Paper Advisors, Sun Capital, the Atlas
Stockholders or RRF based upon any claimed subordination rights
(if any), shall be deemed satisfied by the distributions under
the Plan to holders of Claims having such subordination rights,
and such subordination rights shall be deemed waived, released,
discharged and terminated as of the Effective Date. Distributions
to the various Classes of Claims hereunder shall not be subject
to levy, garnishment, attachment or like legal process by any
holder of a Claim by reason of any claimed subordination rights
or otherwise, so that each holder of a Claim shall have and
receive the benefit of the distributions in the manner set forth
in the Plan.
11.9 Exculpation and Limitation of Liability. Except as
otherwise specifically provided in this Plan, the Debtor, the
Reorganized Debtor, RRF, Sun Capital, Sun Paper Advisors, the
Atlas Stockholders, Acquisition, any statutory committee, the
Disbursing Agent, any of such parties' respective present or
former members, officers, directors, employees, advisors,
attorneys, representatives, financial advisors, investment
bankers or agents in their capacities as such and any of such
parties' successors and assigns, shall not have or incur, and are
hereby released from, any claim, obligation, Cause of Action or
liability to one another or to any holder of a Claim or an
Interest, or any other party in interest, or any of their
respective agents, employees, representatives, financial
advisors, attorneys or affiliates, or any of their successors or
assigns, for any act or omission in connection with, relating to
or arising out of the Debtor's Chapter 11 Case, the pursuit of
confirmation of the Plan, the consummation of the Plan, the
administration of the Plan or the property to be distributed
under the Plan, except for their willful misconduct, and in all
respects shall be entitled to reasonably rely upon the advice of
counsel with respect to their duties and responsibilities under
the Plan.
Notwithstanding any other provision of this Plan, no holder
of a Claim or Interest, or other party in interest, none of their
respective agents, employees, representatives, financial
advisors, attorneys or affiliates, and no successors or assigns
of the foregoing, shall have any right of action against the
Debtor, the Reorganized Debtor, RRF, Sun Capital, Sun Paper
Advisors, the Atlas Stockholders, Acquisition, the Disbursing
Agent, or any statutory committee, or any of such parties'
respective present or former members, officers, directors,
employees, advisors, attorneys, representatives, financial
advisors, investment bankers or agents in their capacities as
such or such parties' successors and assigns, for any act or
omission in connection with, relating to or arising out of the
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<PAGE> 41
Chapter 11 Case, the pursuit of confirmation of the Plan, the
consummation of the Plan, the administration of the Plan or the
property to be distributed under the Plan, except for their
willful misconduct.
11.10 Indemnification Obligation. In satisfaction and
compromise of the Indemnitees' Indemnification Rights: (i) all
Indemnification Rights except those based upon any act or
omission arising out of or relating to any Indemnitee's service
with, for or on behalf of the Debtor on or after the Petition
Date (the "Post-Petition Indemnification Rights") shall be
released and discharged on and as of the Effective Date, provided
that the Post-Petition Indemnification Rights shall remain in
full force and effect on and after the Effective Date and shall
not be modified, reduced, discharged or otherwise affected in any
way by the Chapter 11 Case, (ii) the Debtor or the Reorganized
Debtor, as the case may be, covenant to purchase and maintain
directors and officers liability insurance providing coverage for
the Indemnitees for the period after the Effective Date agreed to
among the Reorganized Debtor, RRF and Sun Paper Advisors on or
before the Effective Date insuring such parties in respect of any
claims, demands, suits, causes of action or proceedings against
such Indemnitees based upon any act or omission related to such
Indemnitee's service with, for or on behalf of the Debtor in such
scope and amount as those parties may agree (the "Insurance
Coverage"), and (iii) the Debtor hereby indemnifies Indemnitees
and agrees to pay for any deductible or retention amount that may
be payable in connection with any claim covered under either the
foregoing Insurance Coverage or any prior similar policy.
11.11 Injunction. The satisfaction, release and discharge
pursuant to this Article XI of this Plan shall also act as an
injunction against any Person commencing or continuing any
action, employment of process, or act to collect, offset or
recover any Claim or Cause of Action satisfied, released or
discharged under this Plan to the fullest extent authorized or
provided by the Bankruptcy Code, including, without limitation,
to the extent provided for or authorized by sections 524 and 1141
thereof.
11.12 Allowance of Certain Claims. Claims arising under the
Atlas Stockholder Notes and the Earn-Out shall be Allowed Class 4
Claims in the amounts provided therein. Claims arising under the
Debentures shall be Allowed Class 7 Claims in the amounts
provided therein.
33
<PAGE> 42
ARTICLE 12
CONDITIONS PRECEDENT
--------------------
12.1 Conditions to Confirmation. The following are
conditions precedent to confirmation of the Plan that may be
satisfied or waived in accordance with Section 12.3 of the Plan:
(a) The entry of the Confirmation Order by the Bankruptcy
Court and all other necessary orders of any court
having jurisdiction, and expiration of the appeal
period with respect to the Confirmation Order and with
respect to all other such necessary orders without the
filing of a notice of appeal of any such order or, if
an appeal is filed, such appeal is no longer pending;
provided that, if an appeal of the Confirmation Order
or any other such other order is filed but no stay is
granted in connection with the appeal, the Debtor, with
the consent of RRF and Sun Paper Advisors, may elect to
permit the Effective Date to occur notwithstanding the
pendency of the appeal.
(b) The Confirmation Order shall be in form and substance
reasonably acceptable to the Debtor, RRF and Sun Paper
Advisors.
12.2 Conditions to Consummation. The following are
conditions precedent to the occurrence of the Effective Date,
each of which may be satisfied or waived in accordance with
Section 12.3 of the Plan:
(a) The Confirmation Order shall have been entered by the
Bankruptcy Court and shall be a Final Order, and no
request for revocation of the Confirmation Order under
Section 1144 of the Bankruptcy Code shall have been
made, or, if made, shall remain pending. The
Confirmation Order shall, among other things, provide
that:
(i) provisions of the Confirmation Order are non-
severable and mutually dependent;
(ii) all executory contracts or unexpired leases
assumed by the Debtor during the Chapter 11
Case or under the Plan shall be assigned and
transferred to, and remain in full force and
effect for the benefit of, the Reorganized
Debtor, notwithstanding any provision in
such contract or lease (including those
described in sections 365(b)(2) and (f) of
the Bankruptcy Code) that prohibits such
assignment or transfer or that enables or
requires termination of such contract or
lease;
(iii)the transfers of property by the Debtor (A)
to the Reorganized Debtor (1) are or shall be
legal, valid, and effective transfers of
34
<PAGE> 43
property, (2) vest or shall vest the Reorganized
Debtor with good title to such property free and
clear of all liens, charges, claims, encumbrances
or interests, except as expressly provided in the
Plan or Confirmation Order, (3) do not and shall
not constitute avoidable transfers under the
Bankruptcy Code or under applicable nonbankruptcy
law, and (4) do not and shall not subject the
Reorganized Debtor or holders of Claims,
interests or property to any liability by
reason of such transfer under the Bankruptcy Code
or under applicable nonbankruptcy law, including,
without limitation, any laws affecting
successor or transferee liability, and (B) to
holders of Claims and Interests under the Plan
are for good consideration and value and are in
the ordinary course of the Reorganized Debtor's
business;
(iv) except as expressly provided in the Plan or the
Confirmation Order, the Reorganized Debtor is
discharged effective upon the Effective Date from
any "debt" (as that term is defined in section
101(12) of the Bankruptcy Code), and the Debtor's
liability in respect thereof is extinguished
completely, whether reduced to judgment or not,
liquidated or unliquidated, contingent or
noncontingent, asserted or unasserted, fixed or
unfixed, matured or unmatured, disputed or
undisputed, legal or equitable, known or unknown,
or that arose from any agreement of the Debtor
entered into or obligation of the Debtor incurred
before the Effective Date, or from any conduct of
the Debtor prior to the Effective Date, or that
otherwise arose before the Effective Date,
including, without limitation, all interest, if
any, on any such debts, whether such interest
accrued before or after the Petition Date;
(v) the Plan does not provide for the liquidation of
all or substantially all of the property of the
Debtor and its confirmation is not likely to
be followed by the liquidation of the
Reorganized Debtor or the need for further
financial reorganization;
(vi) the Modified Debentures, Accrued Interest
Notes, PIK Notes, Atlas Stockholder Warrants,
Series A Warrants and the Series B Warrants
issued under the Plan in exchange for Claims
against the Debtor are exempt from registration
under the Securities Act of 1933 pursuant to, and
to the extent provided by, section 1145 of the
Bankruptcy Code.
(b) The Bankruptcy Court shall have entered one or more
orders (which may include the Confirmation Order)
authorizing the assumption of leases and executory
contracts by the Reorganized Debtor.
35
<PAGE> 44
(c) The RRF Lenders, the Reorganized Debtor and
Acquisition shall have entered into the RRF Loan
Documents and the RRF Lenders shall have advanced
sufficient funds to Acquisition to enable it to make
the payments contemplated by the Plan.
(d) Acquisition and the Debtor shall have entered into
the Stock Purchase Agreement and the Debtor shall
have received from Acquisition pursuant to such
agreement sufficient cash, together with cash on
hand, to enable the Debtor to pay or reserve for
payment of all Administrative Expenses, make Cash
distributions to holders of Allowed Class 2 Claims,
Allowed Class 5 Claims, and Allowed Class 12 Claims,
and make all other payments required to be made on
the Effective Date.
(e) Each Tax Sharing Agreement shall have been executed
by the parties thereto.
(f) The Atlas Stockholder Notes shall have been amended
as contemplated by the Plan.
(g) The terms of the Earn-Out shall have been amended as
contemplated by the Plan.
(h) The Financial Consulting Agreement shall have been
amended as contemplated by the Plan.
(i) Acquisition, Sun Paper Advisors and the Atlas
Stockholders shall have executed all other documents
and agreements necessary to implement the Plan in
form and substance satisfactory to them.
(j) the Effective Date must occur on or prior to June 30,
1999;
12.3 Waiver of Conditions to Confirmation or
Consummation. The conditions set forth in Sections 12.1 and
12.2 of the Plan may be waived by the Debtor with the
consent of Sun Paper Advisors and RRF, which shall not be
unreasonably withheld, without any notice to parties in
interest or the Bankruptcy Court and without a hearing. The
failure of the Debtor to exercise any of the foregoing
rights shall not be deemed a waiver of any other rights, and
each such right shall be deemed an ongoing right, which may
be asserted at any time.
36
<PAGE> 45
ARTICLE 13
RETENTION OF JURISDICTION
-------------------------
Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, the
Bankruptcy Court shall have exclusive jurisdiction of all matters arising out
of, and related to, the Chapter 11 Case and the Plan, including, among other
things, the following matters:
(a) to hear and determine pending motions for the assumption or
rejection of executory contracts or unexpired leases or the
assumption and assignment, as the case may be, of executory
contracts or unexpired leases to which the Debtor is a party
or with respect to which the Debtor may be liable, and to hear
and determine the allowance of Claims resulting therefrom
including the amount of Cure, if any, required to be paid to
the holders of such Claims;
(b) to determine any and all pending adversary
proceedings, applications and contested matters;
(c) to ensure that distributions to holders of Allowed Claims are
accomplished as provided herein;
(d) to hear and determine any and all objections to the allowance
or estimation of Claims filed, both before and after the
Confirmation Date, including any objections to the
classification of any Claim or interest, and to allow or
disallow any Claim, in whole or in part;
(e) to enter and implement such orders as may be appropriate if
the Confirmation Order is for any reason stayed, revoked,
modified or vacated;
(f) to issue orders in aid of execution, implementation or
consummation of the Plan;
(g) to consider any modifications of the Plan, to cure any defect
or omission, or to reconcile any inconsistency in any order of
the Bankruptcy Court, including, without limitation, the
Confirmation Order;
(h) to hear and determine all applications for compensation and
reimbursement of Professional Claims under the Plan or under
sections 330, 331, 503(b), 1103 and 1129(a)(4) of the
Bankruptcy Code;
(i) to determine requests for the payment of Claims entitled to
priority under section 507(a)(1) of the Bankruptcy Code,
including compensation of and reimbursement of expenses of
parties entitled thereto;
(j) to hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan,
including disputes arising within 90 days after the Effective
Date under agreements, documents or instruments
37
<PAGE> 46
executed in connection with this Plan;
(k) to hear and determine all suits or adversary proceedings to
recover assets of the Debtor and property of the Estate,
wherever located;
(1) to hear and determine matters concerning state, local and
federal taxes in accordance with sections 346, 505 and 1146 of
the Bankruptcy Code;
(m) to hear any other matter not inconsistent with the Bankruptcy
Code;
(n) to hear and determine all disputes involving the existence,
nature or scope of the Debtor's discharge, including any
dispute relating to any liability arising out of the
termination of employment or the termination of any employee
or retiree benefit program, regardless of whether such
termination occurred prior to or after the Effective Date; and
(o) to enter a final decree closing the Chapter 11 Case.
ARTICLE 14
MISCELLANEOUS PROVISIONS
------------------------
14.1 Binding Effect. Subject to satisfaction or waiver
of the conditions precedent specified in Article XII, the
Plan shall be binding upon and inure to the benefit of the
Debtor, the Reorganized Debtor, Acquisition, Sun Capital,
Sun Paper Advisors, RRF, the Atlas Stockholders, all present
and former holders of Claims, all present and former holders
of Interests, other parties in interest and their respective
successors and assigns.
14.2 Modification and Amendments. The Debtor with the consent of
Sun Paper Advisors and RRF, which shall not be unreasonably
withheld, may alter, amend or modify the Plan in accordance
with section 1127(a) of the Bankruptcy Code at any time. After
the Confirmation Date and prior to substantial consummation of
the Plan as defined in section 1101(2) of the Bankruptcy Code,
the Debtor may, under section 1127(b) of the Bankruptcy Code,
institute proceedings in the Bankruptcy Court to remedy any
defect or omission or reconcile any inconsistencies in the
Plan, the Disclosure Statement or the Confirmation Order, and
such matters as may be necessary to carry out the purposes and
effects of the Plan, so long as such proceedings do not
materially adversely affect the treatment of holders of Claims
or holders of Interests under the Plan; provided, however,
that prior notice of such proceedings shall be served in
accordance with the Bankruptcy Rules or order of the
Bankruptcy Court, and provided further that no amendment that
requires the consent of Sun or RRF shall be made without such
prior consent, which shall not be unreasonably withheld.
14.3 Withholding and Reporting Requirements. In connection with the
Plan and all instruments issued in connection therewith and
distributions thereon, the Debtor shall
38
<PAGE> 47
comply with all withholding and reporting requirements imposed
by any federal, state, local or foreign taxing authority, and
all distributions hereunder shall be subject to any such
withholding and reporting requirements.
14.4 Committees. Effective on the Effective Date, the duties of the
Creditors' Committee, if any, shall terminate, except with
respect to applications for Professional Claims.
14.5 Revocation, Withdrawal or Non-Consummation.
(a) Right to Revoke or Withdraw. The Debtor reserves the
right to revoke or withdraw the Plan at any time
prior to the Effective Date, subject to Bankruptcy
Court approval if Sun Paper Advisors or RRF files a
written objection to such withdrawal within five days
thereafter.
(b) Effect of Withdrawal, Revocation or Non-Consummation.
If the Debtor revokes or withdraws the Plan prior to
the Effective Date, or if the Confirmation Date or the
Effective Date does not occur, then the Plan, any
settlement or compromise embodied in the Plan
(including the fixing or limiting to an amount certain
any Claim or Class of Claims), the assumption or
rejection of executory contracts or leases effected by
the Plan, and any document or agreement executed
pursuant to the Plan shall be null and void. In such
event, nothing contained herein, and no acts taken in
preparation for consummation of the Plan, shall be
deemed to constitute a waiver or release of any Claims
by or against the Debtor or any other Person, to
prejudice in any manner the rights of the Debtor or any
Person in any further proceedings involving the Debtor
or to constitute an admission of any sort by the Debtor
or any other Person.
14.6 Notices. Any notice required or permitted to be provided to
the Debtor under the Plan shall be in writing and served by
(a) certified mail, return receipt requested, (b) hand
delivery, or (c) overnight delivery service, to be addressed
as follows:
WorldCorp, Inc.
13873 Park Center Road, Suite 490
Herndon, VA 20171
Attention: President
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, D.C. 20037-1420
Attention: William J. Perlstein, Esq.
Duane D. Morse, Esq.
39
<PAGE> 48
and
Young Conaway Stargatt & Taylor
1100 North Market Street, 11th Floor
Wilmington, DE 19801
Attention: James L. Patton, Jr., Esq.
Brendan L. Shannon, Esq.
and
Rothschild, Inc.
1251 Avenue of the Americas
New York, NY 10020
Attention: Martha Sproule
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038-4982
Attention: Robin Keller, Esq.
14.7 Term of Injunctions or Stays. Unless otherwise provided herein
or in the Confirmation Order, all injunctions or stays
provided for in the Chapter 11 Case under sections 105 or 362
of the Bankruptcy Code or otherwise, and extant on the
Confirmation Date, shall remain in full force and effect until
the Effective Date.
14.8 Governing Law. Unless a rule of law or procedure is supplied
by federal law (including the Bankruptcy Code and Bankruptcy
Rules) or unless otherwise specifically stated in any
agreement, the laws of the State of Delaware shall govern the
construction and implementation of the Plan, any agreements,
documents and instruments executed in connection with the
Plan, and corporate governance matters.
40
<PAGE> 49
Dated: Herndon, Virginia
March __, 1999
Respectfully submitted,
WORLDCORP, INC., AS DEBTOR AND
DEBTOR-IN-POSSESSION
By:
Its:
WILMER, CUTLER & PICKERING
2445 M Street, NW
Washington, D.C. 20037-1420
William J. Perlstein
Duane D. Morse
Andrew M. Herman
- and -
YOUNG CONAWAY STARGATT & TAYLOR
1100 North Market Street, 11th Floor
Wilmington, DE 19801
James L. Patton, Jr.
Brendan L. Shannon
By:
ATTORNEYS FOR WORLDCORP, INC. AS
DEBTOR AND DEBTOR-IN-POSSESSION
41
<PAGE> 1
EXHIBIT 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
-------------------------------------------)
In re ) Chapter 11
)
WorldCorp, Inc., ) Case No. 99-298 (MFW)
)
Debtor. )
- --------------------------------------------)
DISCLOSURE STATEMENT WITH RESPECT TO
FIRST AMENDED PLAN OF REORGANIZATION OF WORLDCORP, INC.
Young Conaway Stargatt & Taylor LLP Wilmer, Cutler & Pickering
1100 North Market Street 2445 M Street, NW
11th Floor Washington, DC 20037-1420
Wilmington, DE 19801 William J. Perlstein
James L. Patton, Jr. Duane D. Morse
Brendan L. Shannon Andrew M. Herman
Counsel for the Debtor Counsel for the Debtor
Dated: March __, 1999
Wilmington, Delaware
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE UNITED STATES BANKRUPTCY
COURT FOR THE DISTRICT OF DELAWARE (THE "BANKRUPTCY COURT") UNDER SECTION
1125(B) OF THE BANKRUPTCY CODE FOR USE IN THE SOLICITATION OR ACCEPTANCES OF THE
PLAN OF REORGANIZATION DESCRIBED HEREIN. ACCORDINGLY, THE FILING AND
DISTRIBUTION OF THIS DISCLOSURE STATEMENT IS NOT INTENDED, AND SHOULD NOT BE
CONSTRUED, AS A SOLICITATION OF ACCEPTANCES OF SUCH PLAN OF REORGANIZATION. THE
INFORMATION CONTAINED HEREIN SHOULD NOT BE RELIED UPON FOR ANY PURPOSE BEFORE A
DETERMINATION BY THE BANKRUPTCY COURT THAT THIS DISCLOSURE STATEMENT CONTAINS
"ADEQUATE INFORMATION" WITHIN THE MEANING OF SECTION 1125(A) OF THE BANKRUPTCY
CODE.1
<PAGE> 2
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE FIRST AMENDED PLAN
OF REORGANIZATION OF WORLDCORP, INC. (THE "PLAN") AND MAY NOT BE RELIED UPON FOR
ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN. NO PERSON MAY GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR
THE SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETIES BEFORE VOTING TO ACCEPT OR
REJECT THE PLAN. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT
ARE QUALIFIED IN THEIR ENTIRETIES BY REFERENCE TO THE PLAN AND THE EXHIBITS
ANNEXED TO THE PLAN AND THIS DISCLOSURE STATEMENT. THE STATEMENTS CONTAINED IN
THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF AND THERE CAN BE
NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME
AFTER THE DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH
SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(C) OF THE FEDERAL RULES OF
BANKRUPTCY PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE
SECURITIES LAWS OR OTHER NONBANKRUPTCY LAW. THIS DISCLOSURE STATEMENT HAS BEEN
NEITHER APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS
CONTAINED HEREIN. PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING,
SELLING OR TRANSFERRING SECURITIES OR CLAIMS OF WORLDCORP, INC. AND THE
DEBTOR-IN-POSSESSION IN THIS CASE SHOULD EVALUATE THIS DISCLOSURE STATEMENT AND
THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER
ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR
BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER,
BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE
STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING NOR SHALL IT
BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES OR OTHER LEGAL
EFFECTS OF THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY
INTERESTS IN, WORLDCORP, INC.
<PAGE> 3
SUMMARY OF PLAN
The following introduction and summary is qualified in its entirety by,
and should be read in conjunction with, the more detailed information and
financial statements and notes thereto appearing elsewhere in this Disclosure
Statement. All capitalized terms not defined in this Disclosure Statement have
the meanings ascribed to such terms in the First Amended Plan of Reorganization
(the "Plan"), a copy of which is annexed hereto as Appendix A.
WorldCorp, Inc. ("WorldCorp" or the "Debtor") filed for Chapter 11
protection on February 12, 1999 (the "Petition Date") in the United States
Bankruptcy Court for the District of Delaware. The Debtor also filed on the
Petition Date a proposed plan of reorganization intended to bring this case to a
close and to permit the emergence of a reorganized Debtor, together with a
proposed disclosure statement describing that plan. On March 22, 1999, the
Debtor filed its First Amended Plan of Reorganization, which is an amended
version of the plan of reorganization that was filed on the Petition Date. This
Disclosure Statement refers to and describes the First Amended Plan of
Reorganization.
I. Business Overview
WorldCorp is a highly leveraged holding company. As a holding company,
WorldCorp obtains all of its funds through (i) its 80% ownership position in
WorldCorp Acquisition Corp. ("Acquisition"), which in turn owns approximately
50% of the stock of World Airways Inc. ("World Airways") and 100% of the stock
of The Atlas Companies, Inc., which was formerly known as Paper Acquisition
Corp. ("Atlas"), and (ii) WorldCorp's approximately 28% ownership interest in
InteliData Technologies Corporation ("InteliData"). No dividends have been paid
on any of the Debtor's stock holdings since 1992. The ability of World Airways,
Acquisition and Atlas to pay dividends is currently restricted under certain
borrowing arrangements. Additionally, World Airways, Atlas and InteliData
currently intend to retain their future earnings, if any, to fund the growth and
development of their businesses and, therefore, do not anticipate paying any
cash dividends in the foreseeable future. WorldCorp has pledged all of its
shares of InteliData and Acquisition as collateral for certain indebtedness, and
Acquisition has pledged all of its shares in World Airways and Atlas as
collateral for such indebtedness and certain other borrowings (see Section III.A
- - Background of WorldCorp - General Corporate Structure). WorldCorp formerly
sold or borrowed against shares of its stock and stock of subsidiaries in order
to meet certain cash needs, but currently is not in a position to make such
sales because of the pledges mentioned above.
As of the Petition Date, WorldCorp had substantial repayment obligations.
WorldCorp currently has outstanding $5.0 million in aggregate principal amount
of 10.0% senior subordinated notes due September 30, 2000 (the "Senior
Subordinated Notes") issued pursuant to an indenture (the "Senior Subordinated
Notes Indenture"), dated September 30, 1996, between WorldCorp and Norwest Bank
Minnesota, National Association, as trustee (the "Senior Subordinated Notes
Trustee"). Sinking fund payments equal to 20% of the then outstanding principal
balance were required to be made on each of September 30, 1998 and September 30,
1999. No sinking fund payment was made on September 30, 1998. In addition, the
trustee of the
<PAGE> 4
Senior Subordinated Notes contends that the entire outstanding
amount is due and owing as a result of alleged covenant defaults, but has not
accelerated these amounts.
WorldCorp also has outstanding $65.0 million in aggregate principal
amount of 7.0% convertible subordinated debentures due 2004 (the "Debentures")
issued pursuant to an indenture (the "Debenture Indenture") dated as of May 15,
1992, between WorldCorp and State Street Bank and Trust Company, as trustee (the
"Debenture Indenture Trustee"). Interest payments are payable semi-annually on
May 15 and November 15 of each year. Neither of these interest payments was made
in 1998.
WorldCorp borrowed from World Airways $1.75 million on February 21,
1998 and an additional $0.25 million on April 8, 1998, which was used by
WorldCorp to pay debt obligations (jointly, the "World Airways Secured Loan").
Under its present terms, the World Airways Secured Loan bears interest equal to
12% per annum. The World Airways Secured Loan was originally secured by a pledge
of 1 million shares of World Airways common stock. WorldCorp did not make a
scheduled $2 million loan repayment on April 25, 1998. On June 24, 1998,
WorldCorp substituted 1,860,396 shares of InteliData common stock as collateral
in return for the release of 500,000 of the pledged World Airways shares, which
release was memorialized in a letter agreement dated July 1, 1998. On June 25,
1998, World Airways purchased 150,000 of the pledged World Airways shares in
return for a credit against the outstanding balance of the World Airways Secured
Loan equal to $4.55 per share. On August 25, 1998, World Airways sold 245,000 of
the pledged InteliData shares at $.90625 per share ($222,031 in the aggregate)
and applied the proceeds in payment of accrued interest and principal. As of
November 30, 1998, the outstanding balance of the World Airways Secured Loan,
according to World Airways, was $1,333,639, consisting of $1,217,850 of
principal and $32,432 of accrued and unpaid interest and $83,357 of expenses
related to the loan. The loan continues to be secured by 350,000 shares of World
Airways common stock and 1,615,396 shares of InteliData common stock with a
market price of $1.1875 and $1.50, respectively, on January 21, 1999.
WorldCorp has also guaranteed payment of promissory notes in the
aggregate principal amount of $16 million and an Earn-Out issued by Acquisition
to former owners of stock in Atlas in connection with the April 1998 purchase of
Atlas by Acquisition. Those obligations are secured by, among other things, a
pledge of all of WorldCorp's stock in Acquisition and all of WorldCorp's and
Acquisition's stock in InteliData (subject to the prior liens of World Airways
on certain shares of InteliData and World Airways stock).
In addition, WorldCorp has outstanding general unsecured debt in the
aggregate amount of approximately $1,363,000, including an unsecured claim of
World Airways in the amount of $429,421 as of December 31, 1998 consisting of
intercompany charges and advances to WorldCorp.
II. Treatment of Claims and Interests under the Plan
As discussed more fully later in this Disclosure Statement, the Plan
provides for:
. the repayment in full in cash of WorldCorp's administrative and priority
claims,
2
<PAGE> 5
. administrative convenience claims, and secured debt including the World
Airways Secured Loan);
. the distribution of Cash to holders of Senior Subordinated Notes who
vote to accept the Plan and who elect such treatment at the time they
return their ballots for voting on the Plan ("Electing Senior Note
Holders");
. the restructuring of WorldCorp's remaining Senior Subordinated Notes by
the issuance of Modified Senior Notes;
. the restructuring of WorldCorp's Debentures and general unsecured debt by
the issuance of the Modified Debentures, Accrued Interest Notes,
Series A Warrants to purchase 45% of the stock of Acquisition and Series
B Warrants to purchase 40% of the pro forma outstanding stock of WorldCorp;
. the restructuring of indebtedness of WorldCorp and its 80% owned
subsidiary, Acquisition, to the former shareholders of Atlas incurred
in connection with the acquisition of Atlas in 1998; and
. the retention by WorldCorp shareholders of their shares of Common Stock of
WorldCorp.
Cash payments due under the Plan will be funded from the proceeds of a
loan from Rothschild Recovery Fund L.P. ("RRF"), the holder of the largest
amount of WorldCorp's Debentures, to Acquisition, which will upstream funds to
WorldCorp through the purchase of InteliData stock from WorldCorp. Holders of
WorldCorp Debentures and WorldCorp's general unsecured creditors will be offered
the right to participate in the making of such loan, which will be secured by
first priority liens on shares of InteliData stock.
Payments due on the RRF Loan and other obligations of WorldCorp and
Acquisition after emergence from bankruptcy will be made out of monies received
from Atlas and its subsidiaries pursuant to intercompany Tax Sharing Agreements,
and if necessary from the proceeds of sale of InteliData stock. In the event the
Atlas Stockholders and holders of WorldCorp Debentures and general unsecured
claims exercise the Warrants granted to them under the Plan for the 80% of the
stock of Acquisition owned by WorldCorp, WorldCorp would no longer have an
interest in Acquisition or its subsidiaries, but would receive payments upon
exercise of such Warrants, either in cash or in debt instruments, totaling at
least 125% of the appraised fair market value of the shares of Acquisition as of
the Effective Date of the Plan and would retain its remaining stock in
InteliData (subject to the pledge thereof to secure the RRF loan and certain
other indebtedness of WorldCorp and Acquisition).
The Plan was negotiated prior to the Petition Date by the Debtor,
Acquisition, RRF and Sun Paper Advisors, Inc. ("Sun Paper Advisors"), the
collateral agent pursuant to a certain Collateral Agent Agreement entered into
among the Atlas Stockholders, as representative of the Atlas Stockholders.
For a more detailed summary of the major Plan provisions, see Section
VIII.A. "Overall
3
<PAGE> 6
Structure of the Plan."
The Plan constitutes a plan of reorganization for the Debtor. Prior to
approval of the Plan by the Bankruptcy Court, the voting and other confirmation
requirements of the Bankruptcy Code must be satisfied for the Debtor.
Under the Plan, Claims against and Interests in the Debtor are divided
into Classes. A Claim or Interest is placed in a particular Class for the
purposes of voting on a plan of reorganization and of receiving distributions
pursuant to the Plan only to the extent that such Claim or Interest is an
Allowed Claim or Interest in that Class and such Claim or Interest has not been
paid, released or otherwise settled prior to the Effective Date. Certain
unclassified Claims, including Administrative Claims and Priority Tax Claims,
will receive payment in full in Cash either on the Effective Date, as such
Claims are liquidated, in installments over time (as permitted by the Bankruptcy
Code), or as agreed with the holders of such Claims. All other Claims and
Interests are classified into twelve (12) Classes and will receive the
distributions and recoveries (if any) described in the following table.
Under the Bankruptcy Code, only classes of Claims or Equity Interests
that are impaired are entitled to vote to accept or reject the Plan. The Claims
and Interests in each of Class 4 (Atlas Stockholders Secured Claims), Class 6
(Non-Electing Senior Subordinated Notes Claims), Class 7 (Debentures Claims),
Class 8 (General Unsecured Claims), Class 10 (Old Warrants), Class 11 (Sun
Options), and Class 12 (Electing Senior Subordinated Notes Claims) are impaired
Classes under the Plan (collectively, the "Impaired Classes").
Holders of Claims and Interests in Class 1 (Other Priority Claims),
Class 2 (World Airways Secured Loan Claim), Class 3 (Miscellaneous Secured
Claims), Class 5 (Administrative Convenience Claims) and Class 9 (Interests) are
not impaired under the Plan (collectively, the "Unimpaired Classes"). Classes
not impaired under the Plan are deemed to have accepted the Plan.
Claims in Class 11 (Sun Options) are not entitled to receive or retain
any property under the Plan and are deemed to reject the Plan. Nevertheless, the
Debtor reserves the right to solicit votes in favor of the Plan from these
holders.
The classification and treatment for all Classes are summarized below
and described in more detail under Section VIII.A Plan of Reorganization -
General Classification and Treatment of Claims and Interests.
<TABLE>
<CAPTION>
CLASS DESCRIPTION TREATMENT UNDER PLAN
<S> <C>
Class 1 - Other Priority Claims Each holder of an Allowed Class 1 Claim shall receive
on the Effective Date, or as soon as practicable
thereafter, in full satisfaction, settlement, release
and discharge of and in exchange for such Allowed Class
1 Claim, (a) Cash equal to the amount of such Allowed
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
CLASS DESCRIPTION TREATMENT UNDER PLAN
<S> <C>
Class 1 Other Priority Claim, or (b) such other
treatment which the Debtor and such holder shall have
agreed upon in writing.
Class 2 - World Airways Secured Loan Claim Each holder of an Allowed Class 2 Claim shall receive
on the Effective Date, or as soon as practicable
thereafter, in full satisfaction, settlement, release
and discharge of and in exchange for such Allowed Class
2 Claim, Cash equal to the amount of such Allowed Class
2 Claim.
Class 3 - Miscellaneous Secured Claims The legal, equitable and contractual rights of holders
of Allowed Class 3 Claims, if any, shall be Reinstated.
Class 4 - Atlas Stockholders Secured Claims Each holder of an Allowed Class 4 Claim shall have such
Claim modified by having (a) the Guaranty, dated April
20, 1998, modified to limit recourse to the collateral,
and (b) the Pledge Agreement, dated April 20, 1998
modified to reflect (i) reorganized WorldCorp's grant,
as collateral security for the payment, performance and
observance of all obligations under the Atlas
Stockholders Notes and the Earn-Out, of (x) a first
lien on WorldCorp's right, title and interest with
respect to the Warrant Notes (including WorldCorp's
right to receive the Warrant Notes upon exercise of the
Atlas Stockholder Warrants), and (y) a second lien,
behind the first lien held by the RRF Lenders, on all
of the shares of common stock, par value $.001 per
share, of InteliData owned by WorldCorp or Acquisition;
and (ii) the release of all other liens of the Atlas
Stockholders upon property of WorldCorp or Acquisition
Class 5 - Administrative Convenience Claims Each holder of an Allowed Class 5 Claim, if any, shall
receive on the Effective Date, or as soon as
practicable thereafter, in full satisfaction,
settlement, release and discharge of and in exchange
for such Class 5 Claim, Cash equal to (a) the amount of
such Allowed Claim if such amount is less than or equal
to $500, or (b) $500, if the amount of such
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
CLASS DESCRIPTION TREATMENT UNDER PLAN
<S> <C>
Allowed Claim is greater than $500 and less than $1,000 and
such holder elects to accept $500 in cash in full
satisfaction and discharge of such Allowed Claim.
Class 6 - Non-Electing Senior Subordinated Notes On the Effective Date, or as soon as practicable
Claims thereafter, each holder of an Allowed Class 6
Non-Electing Senior Subordinated Notes Claim shall receive
(a) if such holder is the Senior Subordinated Notes
Trustee, Modified Senior Notes with an aggregate principal
amount equal to the sum of all unpaid fees, expenses, and other amounts
payable by the Debtor to the Senior Subordinated Notes Trustee under
the terms of the Senior Subordinated Notes Indenture for the period
ending on the Effective Date; or (b) if such holder is not the
Senior Subordinated Notes Trustee, Modified Senior Notes with an
aggregate principal balance equal to the sum of the unpaid principal
amount of such holder's Senior Subordinated Notes, plus all unpaid
interest, calculated as provided in the Senior Subordinated
Notes Indenture, accrued thereon during the period ending on the
Effective Date; and (c) if the Bankruptcy Court determines that the
value, as of the Effective Date, of the Modified Senior Notes to be
issued to such holder under (a) or (b), as applicable, is less than
the amount of such holder's Allowed Class 6 Non-Electing Senior
Subordinated Notes Claim, additional Modified Senior Notes in an
amount that the Bankruptcy Court determines is sufficient to enable
each such holder to receive, on account of such Allowed Class 6
Non-Electing Senior Subordinated Notes Claim, Modified Senior Notes of
a value, as of the Effective Date, equal to such holder's Allowed Class
6 Non-Electing Senior Subordinated Notes Claim.
Class 7 - Debentures Claims On the Effective Date, or as soon as practicable
thereafter, each holder of an Allowed Class 7
Debentures Claim shall have such Claim modified
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
CLASS DESCRIPTION TREATMENT UNDER PLAN
<S> <C>
by receiving Modified Debentures with the same principal
amount as its Debentures, and by receiving for accrued
but unpaid interest on its Debentures as of the
Effective Date its Pro Rata share of the Series A
Warrants and the Series B Warrants, and Accrued
Interest Notes with a principal amount equal to the
amount by which such accrued but unpaid interest
exceeds the appraised fair market value of the Series A
and Series B Warrants received by such holder.
Class 8 - General Unsecured Claims On the Effective Date, or as soon as practicable
thereafter, each holder of an Allowed Class 8 General
Unsecured Claim shall have such Claim modified by
exchanging its existing Claim for its Pro Rata share of
the Series A Warrants and the Series B Warrants plus
Modified Debentures with a principal amount equal to
the amount by which its Allowed Claim exceeds the
appraised fair market value of the Series A and Series
B Warrants received by such holder, plus Accrued
Interest Notes with a principal amount equal to
interest at 7% per annum on such Allowed Class 8
General Unsecured Claim from the Petition Date to the
Effective Date.
Class 9 - Interests Each holder of WorldCorp Common Stock shall retain
unaltered the legal, equitable and contractual rights
to which such share or other interest of WorldCorp
Common Stock entitled such holder.
Class 10 - Old Warrants On the Effective Date, or as soon as practicable
thereafter, each holder of a warrant issued to the
Atlas Stockholders to purchase shares of Acquisition
stock from WorldCorp ("Old Warrants") shall have such
warrant modified by exchanging it for an Atlas
Stockholder Warrant.
Each holder of an option issued to Sun Capital
Class 11 - Sun Options Partners, Inc. to purchase shares of WorldCorp stock or
shares of Acquisition stock
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
CLASS DESCRIPTION TREATMENT UNDER PLAN
<S> <C>
from WorldCorp (the "Sun Options") shall have such option canceled
and such holder shall not receive any distribution under the Plan.
On the Effective Date, or as soon as practicable
thereafter, each holder of an Allowed Senior
Class 12 - Electing Senior Subordinated Notes Claims Subordinated Notes Claim that votes to accept the Plan
and elects such treatment ("Electing Senior Note
Holder") shall receive, in full satisfaction, discharge
and release of its Class 12 Senior Subordinated Notes
Claim and of all of its rights (including intercreditor
subordination rights and rights to seek payment of fees
and expenses incurred after the Petition Date as an
Administrative Claim) with respect to the Senior
Subordinated Notes and the Senior Subordinated Notes
Indenture, (x) its Proportionate Share of the Cash
Available for Senior Notes (as defined in Section
VIII.A - Plan of Reorganization - General
Classification and Treatment of Claims and Interests)
plus (y )if its Proportionate Share of the Cash
Available for Senior Notes is less than its Agreed
Senior Claim (as defined in Section VIII.A - Plan of
Reorganization - General Classification and Treatment
of Claims and Interests), Modified Senior Notes with an
aggregate principal amount equal to the difference. .
</TABLE>
III. Implementation of the Plan
To become effective, the Plan of Reorganization must be either (i)
accepted by the holders of all impaired classes of Claims and confirmed by the
Bankruptcy Court, or (ii) accepted by at least one impaired class of Claims and
confirmed by the Bankruptcy Court over the objection of non-accepting classes
based upon findings by the Bankruptcy Court that the Plan does not discriminate
unfairly and is fair and equitable with respect to each class of claims or
interests that did not accept the Plan. Generally, a class of claims has
accepted a plan of reorganization if holders of at least two-thirds in amount,
and more than one-half in number, of the claims of that class that actually vote
for acceptance or rejection of the Plan of Reorganization have voted to accept
the Plan of Reorganization.
8
<PAGE> 11
IV. Recovery Analysis
After careful review of the Debtor's current business operations,
estimated recoveries in a liquidation scenario, and prospects as an ongoing
business, the Debtor has concluded that the recovery to creditors will be
maximized by the Debtor's continued operation as a going concern. The Debtor
believes that its assets, comprised of shares in Acquisition (which owns Atlas
and World Airways stock) and InteliData, have value that would not be realized
in a liquidation. According to the liquidation and other analyses prepared by
the Debtor with the assistance of its financial advisors, the value of the
Debtor's estate is greater as a going concern than in a liquidation.
Accordingly, the Debtor believes that the Plan provides the best
recoveries possible for the holders of Claims against the Debtor and recommends
that you vote to accept the Plan.
[Balance of this page intentionally left blank]
9
<PAGE> 12
DISCLOSURE STATEMENT WITH RESPECT TO
PLAN OF REORGANIZATION OF WORLDCORP, INC.
I. INTRODUCTION
WorldCorp submits this disclosure statement (the "Disclosure
Statement") pursuant to section 1125 of the Bankruptcy Code, for use in the
solicitation of votes on the First Amended Plan of Reorganization of WorldCorp
(the "Plan") proposed jointly by WorldCorp, Acquisition and RRF and filed with
the United States Bankruptcy Court for the District of Delaware on March 22,
1999, a copy of which is annexed as Appendix A of this Disclosure Statement.
This Disclosure Statement sets forth certain information regarding the
Debtor's prepetition operating and financing history, the need to seek Chapter
11 protection, and the anticipated organization, operations, and financing of
WorldCorp after commencement of the Plan (as reorganized, WorldCorp is referred
to as the "Reorganized Debtor"). This Disclosure Statement also describes terms
and provisions of the Plan, including certain alternatives to the Plan, certain
effects of confirmation of the Plan, certain risk factors associated with
securities to be issued under the Plan, and the manner in which distributions
will be made under the Plan. In addition, this Disclosure Statement discusses
the confirmation process and the voting procedures that holders of Claims
against and Interests in the Debtor must follow for their votes to be counted.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISK AND OTHER FACTORS
PERTAINING TO THE PLAN AS IT RELATES TO HOLDERS OF CLAIMS AGAINST AND INTERESTS
IN THE DEBTOR, SEE SECTION VIII, "PLAN OF REORGANIZATION," AND SECTION IX,
"CERTAIN FACTORS TO BE CONSIDERED."
THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF
THE PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATED TO THE PLAN,
CERTAIN EVENTS IN THE CHAPTER 11 CASE AND CERTAIN FINANCIAL INFORMATION.
ALTHOUGH THE DEBTOR BELIEVES THAT THE PLAN AND RELATED DOCUMENT SUMMARIES ARE
FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT THEY DO NOT
SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE
DEBTOR'S MANAGEMENT, EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTOR DOES
NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE
FINANCIAL INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
10
<PAGE> 13
II. THE BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES
A. Definitions
Except as otherwise provided herein, capitalized terms not otherwise
defined in this Disclosure Statement have the meanings ascribed to them in the
Plan.
B. Notice to Holders of Claims and Holders of Interests
This Disclosure Statement is being transmitted to certain holders of
Claims against, or Interests in, the Debtor. The purpose of this Disclosure
Statement is to provide adequate information to enable the holders of Claims
against and Interests in the Debtor to make a reasonably informed decision with
respect to the Plan prior to exercising your right to vote to accept or reject
the Plan.
On [___________], 1999, the Bankruptcy Court approved this Disclosure
Statement as containing information of a kind and in sufficient detail adequate
to enable the holders of Claims against and Interests in the Debtor to make an
informed judgment with respect to acceptance or rejection of the Plan. The
Bankruptcy Court's approval of this Disclosure Statement does not constitute
either a guaranty of the accuracy or completeness of the information contained
herein or an endorsement of the Plan by the Bankruptcy Court.
All holders of Claims against and Interests in the Debtor are
encouraged to read this Disclosure Statement and its appendices carefully and in
their entireties before deciding to vote either to accept or to reject the Plan.
This Disclosure Statement contains important information about the Plan,
considerations pertinent to acceptance or rejection of the Plan, and
developments concerning the Chapter 11 Case.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS BY
ITS NATURE FORWARD LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS, AND PROJECTIONS
THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS. Except with respect
to the projections set forth in Section VI, "Projected Financial Information"
(the "Projections") and except as otherwise specifically and expressly stated
herein, this Disclosure Statement does not reflect any events that may occur
subsequent to the date hereof and that may have a material impact on the
information contained in this Disclosure Statement. Neither the Debtor nor the
Reorganized Debtor intends to update the Projections for the purposes hereof;
thus, the Projections will not reflect the impact of any subsequent events not
already accounted for in the assumptions underlying the Projections. Further,
the Debtor does not anticipate that any amendments or supplements to this
Disclosure Statement will be distributed to reflect such occurrences.
Accordingly, the delivery of this Disclosure Statement shall not under any
circumstance imply that the information herein is correct or complete as of any
time subsequent to the date hereof.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT
BEEN PREPARED IN ACCORDANCE WITH
11
<PAGE> 14
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
C. Solicitation Package
Accompanying this Disclosure Statement are copies of (i) the Plan; (ii)
notice fixing the time for filing of acceptances or rejections of the Plan;
(iii) notice fixing the date, time, and place of the hearing to consider
confirmation of the Plan (the "Confirmation Hearing Notice"); (iv) notice fixing
the time for filing objections to the Plan; (v) if you are the holder of
Claim(s) or Interest(s) entitled to vote on the Plan, one or more ballots (and
return envelopes) to be used by you in voting to accept or to reject the Plan;
and (vi) if you are the holder of a Claim in Class 7 (Debentures Claims) or
Class 8 (General Unsecured Claims), forms for electing to participate and
instructions for participating as a lender in the loan to be made by RRF on the
Effective Date.
D. Voting Procedures, Ballots and Voting Deadline
Pursuant to the provisions of the Bankruptcy Code, only classes of
Claims and Interests which are impaired under the terms and provisions of the
Plan are required to vote to accept or reject the Plan. The classes entitled to
vote on the Plan are Class 4 (Atlas Stockholders Secured Claims), Class 6
(Non-Electing Senior Subordinated Notes Claims), Class 7 (Debentures Claims),
Class 8 (General Unsecured Claims), Class 10 (Old Warrants) and Class 12
(Electing Senior Subordinated Notes Claims). Claims in Class 1 (Other Priority
Claims), Class 2 (World Airways Secured Loan Claim), Class 3 (Miscellaneous
Secured Claims) and Class 5 (Administrative Convenience Claims) are not impaired
under the Plan and therefore are deemed under Section 1126(f) of the Bankruptcy
Code to have accepted it. Accordingly, they are not entitled to vote on the
Plan. Claims in Class 11 (Sun Options) are not entitled to receive or retain any
property under the Plan. Under section 1126(g) of the Bankruptcy Code, the
holders of Claims and Interests in such Class are deemed to reject the Plan
Nevertheless, the Debtor reserves the right to solicit votes of such holders in
favor of the Plan. Ballots for acceptance or rejection of the Plan are being
provided only to members of the voting Classes with respect to the Plan. Other
forms of ballot are not acceptable and will not be counted.
Each holder of a Claim or Interest in a Voting Class with respect to
the Plan should read this Disclosure Statement, together with its exhibits and
the Plan in its entirety. After carefully reviewing the Plan, this Disclosure
Statement and the detailed instructions accompanying your Ballot, please
indicate your acceptance or rejection of the Plan by voting in favor of or
against the Plan on the enclosed Ballot. Please complete and sign your original
Ballot (copies will not be accepted) and return it in the envelope provided. For
a summary description of the treatment of each Class, see Section VIII - Plan of
Reorganization.
Each Ballot has been coded specially to reflect the Class of Claims it
represents. Accordingly, in voting to accept or reject the Plan, you must use
only the specially coded Ballot or Ballots sent to you with this Disclosure
Statement.
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY
COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH
12
<PAGE> 15
THE VOTING INSTRUCTIONS ON THE BALLOT AND RECEIVED NO LATER THAN
______________, 1999, AT ______P.M. (EST) (THE "VOTING DEADLINE") BY W. JOSEPH
DRYER (THE "VOTING AGENT"). DO NOT RETURN ANY STOCK CERTIFICATES OR DEBT
INSTRUMENTS WITH YOUR BALLOT.
If you have any questions about (i) the procedure for voting your Claim
or Interest or with respect to the packet of materials that you have received,
(ii) the amount of your Claim or Interest, or (iii) if you wish to obtain, at
your own expense, unless otherwise specifically required by Federal Rule of
Bankruptcy Procedure 3017(d), an additional copy of the Plan, this Disclosure
Statement or any appendices or exhibits to such documents, please contact:
W. Joseph Dryer
5068 W. Plano Parkway
Suite 345
Plano, Texas 75093
(972) 381-4255
E. Confirmation Hearing and Deadline for Objections to Confirmation
Pursuant to section 1128 of the Bankruptcy Code and Federal Rule of
Bankruptcy Procedure 3017(c), the Bankruptcy Court has scheduled the
Confirmation Hearing for ____________, 1999, at ______ (EST) before the
Honorable Mary F. Walrath, at _____________________________, Wilmington,
Delaware 19801. The Confirmation Hearing may be adjourned from time to time by
the Bankruptcy Court without further notice except for the announcement of the
adjournment date made at the Confirmation Hearing or at any subsequent adjourned
Confirmation Hearing. The Bankruptcy Court has directed that objections, if any,
to confirmation of the Plan be filed with the Clerk of the Bankruptcy Court and
served so that they are received on or before [______________, 1999, at _______]
(EST) by:
Counsel for the Debtor:
Young Conaway Stargatt & Taylor, LLP
1100 North Market Street
11th Floor
Wilmington, DE 19801
Attn: James L. Patton, Jr., Esq.
Brendan L. Shannon, Esq.
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attn: Duane D. Morse, Esq.
Andrew Herman, Esq.
13
<PAGE> 16
United States Trustee:
The Office of the United States Trustee
601 Walnut Street
Curtis Center, Suite 950-W
Philadelphia, PA 19106
Attn: John McLaughlin, Esq.
Rothschild Recovery Fund, L.P.
1251 Avenue of the Americas
51st Floor
New York, NY 10020
Attn: Wilbur L. Ross, Jr.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Attn: Robin E. Keller, Esq.
Sun Paper Advisors, Inc.
5355 Town Center Road, Suite 802
Boca Raton, Florida 33486
Attn: Rodger R. Krouse
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attn: Richard S. Miller, Esq.
Dianne Coffino, Esq.
III. BACKGROUND OF WORLDCORP
A. General Corporate Structure
Page __ sets forth a chart depicting the current corporate structure of
WorldCorp, its subsidiaries and its affiliates.
14
<PAGE> 17
[insert chart]
15
<PAGE> 18
1. Ownership of World Airways
WorldCorp was organized in March 1987 to serve as the holding company
for World Airways, which in turn was organized in March 1948 and is the
predecessor to WorldCorp. Currently, WorldCorp, directly or through its 80%
owned subsidiary, Acquisition, owns positions in companies that operate in three
distinct business areas.
WorldCorp's aviation services affiliate, World Airways, is a global
provider of long-range passenger and cargo air transportation outsourcing
services to major international airlines under fixed rate contracts. World
Airways also leads a contractor teaming arrangement that is one of the largest
suppliers of commercial aircraft to the United States Air Force's Air Mobility
Command ("U.S. Air Force"). World Airways was a wholly-owned subsidiary of
WorldCorp in 1993. In February 1994, pursuant to an October 1993 agreement,
WorldCorp sold 24.9% of its ownership in World Airways to MHS Berhad, a
Malaysian aviation company ("MHS"). 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 September, 1997 World Airways purchased 3,227,000
shares of its common stock from WorldCorp. As a result, at December 31, 1997,
WorldCorp owned approximately 46.3% of World Airways. Accordingly, beginning in
September 1997, WorldCorp reported its proportionate share of World Airways'
financial results using the equity method of accounting. In January 1998, MHS
sold 773,000 shares of its World Airways common stock to World Airways.
Effective January 23, 1998, WorldCorp and MHS owned 51.2% and 16.8%,
respectively, of the outstanding common stock of World Airways, with the balance
publicly traded. As discussed below, in April 1998 WorldCorp transferred
3,702,586 of its shares in World Airways to a newly organized subsidiary,
Acquisition.
On March 15, 1999, Mark M. Feldman, WorldCorp's Executive Vice
President and Chief Restructuring Officer; Wilbur Ross, a principal of RRF; and
Rodger Krouse, a principal of Sun Capital were appointed to the World Airways
Board of Directors to replace Patrick F. Graham, WorldCorp's President and Chief
Executive Officer, as representatives of WorldCorp. Mr. Graham resigned as a
Director of World Airways effective February 16, 1999.
2. Ownership of InteliData
WorldCorp also had an ownership interest in US Order, Inc. ("US
Order"), a company which provided products and services for home banking and
smart telephones. In August 1996, US Order and Colonial Data Technologies Corp.
("Colonial Data") entered into an Agreement and Plan of Merger pursuant to which
US Order and Colonial Data would be merged (the "Mergers") with and into a new
public company, InteliData. Pursuant to the Mergers which were consummated on
November 7, 1996, InteliData became the successor corporation to US Order. The
Mergers were treated as a purchase of Colonial Data by US Order. Following the
Mergers, WorldCorp reports its proportionate share of InteliData's financial
results using the equity method of accounting. InteliData develops and markets
products and services for the telecommunications and financial services
industries through its telecommunications and electronic commerce business
divisions. As of the Petition Date WorldCorp owned 8,734,273 shares of
InteliData, or an ownership interest of approximately 28%
16
<PAGE> 19
3. Ownership of Atlas
On April 20, 1998, WorldCorp consummated a transaction (the "Atlas
Transaction") pursuant to which it acquired an 80% indirect interest in Paper
Acquisition Corp., a Delaware corporation.2/ On December 21, 1998 Paper
Acquisition Corp. changed its name to The Atlas Companies, Inc., a Delaware
corporation ("Atlas"). Atlas was organized by of Sun Paper Advisors to acquire
and operate specialty paper businesses. In December 1996, Atlas acquired and
consolidated two companies that produce a variety of coated papers and specialty
inks which are sold to business forms manufacturers. On November 18, 1998, Atlas
acquired Atlas Die, Inc. continuing its strategic plan of providing niche
products to the packaging, business forms and label industries.
Pursuant to the Atlas Transaction, WorldCorp contributed 3,702,586 of
its shares of World Airways (constituting an approximate 51.2% interest in World
Airways) and shares of Atlas that it received from the former stockholders of
Atlas (of which Sun Paper Advisors controlled a majority interest) (the "Atlas
Stockholders"), to Acquisition, in exchange for 800 shares of common stock (80%
of the total capital stock) of Acquisition ("Acquisition Common Stock"). The
Atlas Stockholders contributed the remaining shares of Atlas to Acquisition in
exchange for (i) 200 shares of Acquisition Common Stock, (ii) $15 million of 8%
interest-only promissory notes issued by Acquisition due April 2003, (iii) $1
million of 8% promissory notes issued by Acquisition due March 1, 1999 ((ii) and
(iii) are referred to as the "Atlas Stockholder Notes") and (iv) an earn-out
based on the earnings before interest, taxes, depreciation and amortization of
Atlas during the five years beginning September 1, 1997 ("Earn-Out"). The
Earn-Out is payable, including interest at 10%, in September 2002, and provides
for the Atlas Stockholders to receive an amount equal to the first $10 million
of EBITDA (as defined in the Earn-Out) plus 50% of the excess EBITDA of Atlas
and its subsidiaries during that five-year period. WorldCorp guaranteed payment
of the Atlas Stockholder Notes and Earn-Out and pledged any and all of its
shares of common stock of Acquisition, Atlas, World Airways and
______________________
1 The sellers of the interest acquired by WorldCorp in the Atlas
Transaction have been represented by Sun Paper Advisors in the negotiations that
resulted in the filing of the Plan. WorldCorp has advised Sun Paper Advisors
that, in the absence of a consensual restructuring, WorldCorp intends to
challenge, seek to set aside, and pursue damage claims and other remedies
arising out of the Atlas transaction. Sun Paper Advisors has advised WorldCorp
that the Atlas Stockholders believe they may have similar claims and defenses
against WorldCorp. The respective parties believe the other parties' claims are
without merit.
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InteliData to secure its guarantee. Acquisition pledged any and all of its
shares of common stock of World Airways (350,000 shares of which are currently
subject to a senior lien of World Airways), Atlas and InteliData to the Atlas
Stockholders to collateralize the Atlas Stockholder Notes and the Earn-Out. Also
as part of this transaction, the Atlas Stockholders received Old Warrants to
acquire from WorldCorp 400 shares (40%) of Acquisition Common Stock for an
exercise price of $28,000 per share.
In connection with the Atlas Transaction, WorldCorp and Acquisition
entered into a consulting agreement with Sun Capital Partners, Inc. ("Sun
Capital") pursuant to which Sun Capital is to receive $500,000 per year from
WorldCorp for financial consulting. Sun Capital also received options (the "Sun
Options") to acquire approximately 20% and 10% (after the exercise of such
options and the warrants described above) of the issued and outstanding shares
of common stock of WorldCorp and Acquisition, respectively, which options vest
over five years and expire on the seventh anniversary of the date of such
agreement. The exercise price of the Sun Options to acquire shares of
Acquisition is $28,000 per share, and is payable with a seven-year, full
recourse note, which pays cash interest at 8% per annum.
4. Liens on Shares
As a result of the Atlas Transaction and certain subsequent events,
which are described below, WorldCorp currently owns eight hundred (800) shares
(constituting 80%), of the common stock of Acquisition, and 8,734,273 shares,
constituting approximately twenty-eight percent (28%), of the common stock of
InteliData. Acquisition in turn owns 3,552,588 shares (constituting
approximately 50%) of the common stock of World Airways, and 459,785 shares
(constituting 100%) of the common stock of Atlas. Of these amounts, 350,000
shares of World Airways and 1,615,396 shares of InteliData are pledged to World
Airways to secure repayment of the World Airways Secured Loan, and all of these
shares of Acquisition, InteliData, World Airways and Atlas (including the shares
of World Airways and InteliData that are subject to the prior liens of World
Airways) are pledged to the Atlas Stockholders to secure the obligations
incurred in the Atlas Transaction.
The principal executive offices of WorldCorp are located at Washington
Dulles International Airport in The Hallmark Building, 13873 Park Center Road,
Herndon, Virginia 20171.
B. Overview of World Airways
World Airways is a global provider of long-range wide-body passenger
and cargo air transportation outsourcing services to the U.S. Air Force and to
international airlines under fixed rate contracts. World Airways' passenger and
freight operations employ 12 wide-body aircraft which are operated under
contracts with various airlines. These contracts generally require World Airways
to supply aircraft, crew, maintenance and insurance ("ACMI" or "wet lease"),
while World Airways' customers are responsible for the other operating expenses,
including fuel. World Airways' airline customers have determined that
outsourcing a portion of their wide-body passenger and cargo requirements can be
less expensive, and offers greater operational and financial flexibility than
purchasing new aircraft and additional spare parts required for such
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<PAGE> 21
aircraft. World Airways also leads a contractor teaming arrangement with
other airlines that is one of the largest single suppliers of commercial airlift
services to the United States Air Force Air Mobility Command.
World Airways' operating philosophy is to build on its existing ACMI
relationships to achieve a strong platform for future growth. World Airways
concentrates on ACMI contracts which shift yield, load factor and certain cost
risks to the customer. The customer bears the risk of filling the aircraft with
passengers or cargo and assumes operating expenses, including fuel. World
Airways has elected to emphasize its ACMI business because World Airways sees
opportunities created by a growing global economy, particularly growth in second
and third world economies where the demand for airlift exceeds capacity,
notwithstanding recent problems faced by some developing countries. World
Airways attempts to maximize profitability by combining multi-year ACMI
contracts with short term, higher-yielding ACMI agreements which meet the peak
seasonal requirements of its customers. World Airways responds opportunistically
to rapidly changing market conditions by maintaining a flexible fleet of
aircraft that can be deployed in a variety of configurations.
World Airways focuses its marketing efforts on countries where rapid
economic development drives demand for its services. World Airways believes that
its modern fleet of long-range medium-density wide-body MD-11 and DC10-30
aircraft are well suited to these less dense international routes and provide
superior economics as compared to other popular aircraft such as the Boeing 747
which has greater capacity.
World Airways substantially increases its potential customer base by
being able to serve both passenger and cargo customers. World Airways flies
passenger, cargo and passenger/cargo convertible aircraft that World Airways
believes permit World Airways to target emerging opportunities. During the first
nine months of 1998, World Airways' business relied heavily on its contracts
with Malaysian Airline System Berhad, Philippine Airlines, Inc., P.T. Garuda
Indonesia and the U.S. Air Force. In 1998, these customers provided
approximately 18%, 3%, 15% and 42%, respectively, of World Airways' revenues and
20%, 4%, 17% and 27%, respectively, of total block hours flown. In 1997, these
customers provided approximately 23%, 34%, 13%, and 22%, respectively, of World
Airways' revenues and 25%, 36%, 13%, and 14%, respectively, of total block hours
flown.
C. Overview of InteliData
InteliData develops and markets products and services to assist
financial institutions in their online home banking and electronic bill payment
initiatives. The products are designed to assist consumers in electronically
accessing and transacting business with their banks and credit unions and to
assist financial institutions in connecting to and transacting business with
third parties, including data processors and billers. Its products allow banks
to offer home banking services through multiple front end delivery channels,
including Web banking, PC banking, Intuit's Quicken, Microsoft Money and
bank-sponsored software, using the banks' existing computer infrastructure.
These products allow banks direct contact with their customers without
dependence on third party processors or service bureaus. InteliData's services
are primarily consulting and maintenance agreements to support its products.
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InteliData has been instrumental in creating many of the home banking
and bill payment electronic delivery systems available and has a strong position
in these markets. Its current customer base consists of approximately 25
financial institutions, including BancOne, BB&T, First Tennessee, Fleet
Financial Group, KeyCorp, Merrill Lynch, Mid-Atlantic Corporate Federal Credit
Union, National City/First of America, Summit Bancorp and Visa. InteliData
believes that the total potential market for its existing products of
approximately 450 banks offers significant opportunity for increased market
penetration. InteliData may also develop additional products for this market, as
well as other related markets.
InteliData was formerly engaged in the business of designing,
developing and marketing telecommunications products to support intelligent
network services being developed and implemented by various telephone companies.
In the second quarter of 1998, InteliData adopted a plan to dispose of its
various telecommunications divisions through a sale or liquidation. Its caller
ID inventory was sold in May 1998, and negotiations for the sale of some or all
of the remaining telecommunications assets are being conducted with various
parties.
Now InteliData is focused completely on its online home banking and
electronic bill payment software business. WorldCorp believes that, given
InteliData's technological expertise and strong positions in rapidly developing
markets, InteliData has considerable intermediate and long-term potential.
However, because of the rapid pace of technological change and other factors,
there can be no assurance that InteliData will realize this potential.
D. Overview of Atlas
Atlas was organized in December 1996 to acquire and operate specialty
paper businesses. On December 30, 1996, Atlas acquired all of the common stock
of Frye Acquisition, Inc. and, simultaneously, Atlas acquired, through its
wholly-owned indirect subsidiary, Frye Copysystems, Inc. ("Frye Copysystems"),
selected assets and assumed certain liabilities of Technicarbon Company, L.P.
("Technicarbon," which was merged with Frye Copysystems to form Fryetech, Inc.
("Fryetech")). On November 18, 1998, Atlas acquired Atlas Die, Inc. ("Atlas
Die"), the leading manufacturer of consumable cutting dies in the United States.
Atlas manufactures and supplies coated paper products, specialty inks
and ribbons and consumable cutting dies to customers in the United States,
Canada and numerous foreign markets. Atlas is headquartered in Boca Raton,
Florida and Elkhart, Indiana, and currently has operating plants located in
Dallas, Texas; Newburgh, New York; Indianapolis, Indiana; Palmer, Massachusetts;
Elkhart, Indiana; Cucamonga, California; Chicago, Illinois; Charlotte, North
Carolina; and Richmond, Virginia.
It is expected that Atlas will continue to pursue acquisitions of
specialty paper businesses.
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E. Management of WorldCorp
Board of Directors
Set forth below is certain information as to persons who currently
serve as directors of WorldCorp.
<TABLE>
<CAPTION>
<S> <C>
William F. Gorog, 72 Mr. William F. Gorog has served as Chief Executive Officer of InteliData (and its predecessor,
US Order) since May 1, 1990. He was elected a director of WorldCorp in April 1989 and was
elected Chairman of WorldCorp's Board of Directors in May 1993. In April 1997, Mr. Andrews
replaced Mr. Gorog as Chairman of the Board, and Mr. Gorog was elected Chairman of the
Executive Committee of the Board. From October 1987 until founding US Order in May 1990, he
served as Chairman of the Board of Arbor International, an investment management firm. From
1982 to 1987, he served as President and Chief Executive Officer of Magazine Publishers of
America, a trade association representing the principal consumer publications in the United
States. During the Ford Administration, Mr. Gorog served as Deputy Assistant to the President
for Economic Affairs and Executive Director of the White House Council on International
Economic Policy. Prior to that time, he founded and served as Chief Executive Officer of Data
Corporation, which developed the LEXIS and NEXIS information systems for legal and media
research and which was subsequently sold to the Mead Corporation.
Patrick F. Graham, 58 Mr. Patrick F. Graham was appointed as President and Chief Executive Officer of WorldCorp in
November 1997. Mr. Graham has been a director of WorldCorp since October 1992. Prior to
joining WorldCorp, Mr. Graham was a director of Bain & Company, Inc., a management consulting
firm based in Boston, Massachusetts. Mr. Graham co-founded the firm in 1973. In addition to
his primary responsibilities with Bain clients, he has also served as Bain's Vice Chairman and
Chief Financial Officer. Prior to the start of Bain & Company, Mr. Graham was Group Vice
President with the Boston Consulting Group. His previous experience also includes positions
with IBM, Ford Motor Company, and as a captain in the U.S. Army. Mr. Graham received an M.B.A.
with Distinction from Stanford University's Graduate School of Business. He holds a B.A. from
Knox College, where he graduated magna cum laude, was elected to Phi Beta Kappa and is
currently on the Board of Trustees. Mr. Graham also serves as a director of InteliData, World
Airways and Atlas.
</TABLE>
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<PAGE> 24
Executive Officers
The following table sets forth the names and ages of all executive
officers of WorldCorp and all positions and offices within WorldCorp presently
held by such executive officers:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position Held
Patrick F. Graham 58 President and Chief Executive Officer (effective November 1997)
Mark F. Feldman 47 Executive Vice President and Chief Restructuring Officer (effective as of
February 1, 1999). President and Chief Executive Officer, Cold
Spring Group, Inc. (1993-Present) (reorganization and restructuring
consulting); Various restructuring and corporate development
engagements (case and litigation management) (1995-Present);
Director, SNL Securities, Inc. (1997-Present) (publisher of data
bases and manager of a bank and thrift stock portfolio); Trustee,
Aerospace Creditors Liquidating Trust (1993-1997) (administered and
liquidated assets).
W. Joseph Dryer 43 Treasurer and Secretary (effective as of February 1, 1999). President and
Chief Accounting Officer of Siena Holdings, Inc. since October 4,
1996; prior thereto, Senior Vice President from January 1995; also,
President and Director of Russian River Energy Co. from 1992 to 1994;
and President and Director of Geothermal Resources International,
Inc. since 1994; prior thereto, an officer since 1984.
</TABLE>
On February 1, 1999, WorldCorp entered into a modification of the
pre-existing employment agreement of Patrick Graham. The modification was
negotiated on behalf of WorldCorp by RRF, the holder of the largest amount of
the Debentures, and reflects substantial concessions by Mr. Graham in light of
WorldCorp's financial condition and Chapter 11 filing. It provides for him to be
paid a base salary at a rate of $15,000 per month plus reimbursement for certain
expenses, and to receive a $150,000 bonus upon consummation of the Plan. He
shall also have the right to apply to the Bankruptcy Court for an additional
bonus of up to $25,000 based upon his contributions to the Chapter 11
reorganization. In addition, he relinquished all of his unvested options to
acquire shares of stock in WorldCorp, World Airways, and InteliData, but
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<PAGE> 25
retained his 58,333 vested options to purchase shares of InteliData common stock
from WorldCorp at $2.98 per share.
The Plan provides for Mr. Gorog to receive a fee of $50,000 on the
Effective Date if he remains a member of the Debtor's Board of Directors and the
Chairman of its Executive Committee during the intervening period. Mr. Gorog is
the only remaining outside director of the Debtor, and one of only two remaining
directors of the Debtor. He has played and is expected to continue to play an
important role in the Debtor's efforts to complete a successful restructuring.
In light of the fact that the Debtor currently has no directors and officer
liability insurance and is not in a position to indemnify its directors, Mr.
Gorog would be taking a substantial personal risk by continuing to serve as a
director during the Chapter 11 case. The Debtor, RRF and Sun Paper Advisors have
agreed that a $50,000 fee, payable upon consummation of the Plan as an
Administrative Expense, is appropriate as an incentive for Mr. Gorog to remain a
director during the Chapter 11 case and to compensate him for taking that risk.
IV. FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section contains a summary of WorldCorp's financial
condition and results of operations. This section is not intended to contain the
information which would be required in the Management's Discussion and Analysis
section of SEC filings. For a complete analysis of WorldCorp's, World Airways'
and InteliData's financial results and Management's Discussion and Analysis, see
the reports filed with the SEC on Forms 10-K and 10-Q. WorldCorp has not filed
any quarterly SEC reports since filing a 10-Q on May 20, 1998 for the quarter
ending March 31, 1998.
A. Risk Factors
WorldCorp is a highly leveraged company. As a holding company,
WorldCorp obtains all of its funds through its positions in Acquisition and
InteliData, neither of which is likely to pay dividends in the foreseeable
future. As of the filing date, WorldCorp had substantial parent company debt
service obligations, which are described in detail under "Financial
Developments." In addition, WorldCorp's principal assets are encumbered by
liens, as described under "Liens on Shares."
World Airways
The following is a general description of the business and economic
risk factors that may affect the business operations of World Airways. For a
complete description of the risk factors, see the Form 10-K for the year ended
December 31, 1997 filed with the SEC on March 31, 1998, and the Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998 filed with the SEC on
November 16, 1998.
World Airways operates in a challenging business environment. The
market for outsourcing air passenger and cargo ACMI services is highly
competitive. Certain of the passenger and cargo air carriers against which World
Airways competes possess substantially
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<PAGE> 26
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. In addition, the air transportation industry is highly sensitive
to general economic conditions. Since a substantial portion of passenger airline
travel (both business and personal) is discretionary, the industry tends to
experience severe adverse financial results during general economic downturns
and can be adversely affected by unexpected global political developments. In
addition, World Airways' business has been significantly affected by seasonal
factors. During the first quarter, World Airways typically experiences lower
levels of utilization and yields due to lower demand for passenger and cargo
services relative to other times of the year. World Airways experiences higher
levels of utilization and yields in the second quarter, principally due to peak
demand for commercial passenger services associated with the annual Hadj
pilgrimage. In 1998, World Airways' flight operations associated with the Hadj
pilgrimage occurred from February 28 to May 12. Because the Islamic calendar is
a lunar-based calendar, the Hadj pilgrimage occurs approximately 10 to 12 days
earlier each year relative to the Western (Gregorian) calendar. As a result,
revenues resulting from future Hadj pilgrimage contracts to the extent World
Airways operates under such contracts will continue to shift from the second
quarter to the first quarter over the next several years.
As is common in the air transportation industry, World Airways has
relatively high fixed aircraft costs. World Airways operates a fleet of eight
MD-11 and four DC10-30 wide-body aircraft, and while World Airways believes that
the lease rates on its MD-11 aircraft are favorable relative to lease rates of
other MD-11 operators, World Airways' MD-11 aircraft have higher lease costs
(although lower operating costs) than its DC10-30 aircraft. Therefore, achieving
high average daily utilization of its aircraft (particularly its MD-11 aircraft)
at attractive yields is an important factor in World Airways' financial results.
In addition to fixed aircraft costs, a portion of World Airways' labor costs are
fixed due to monthly minimum guarantees to cockpit crew members and flight
attendants. Factors that affect World Airways' ability to achieve high
utilization in its ACMI business include the compatibility of World Airways'
aircraft with customer needs and World Airways' ability to react on short notice
to customer requirements (which can be unpredictable due to changes in traffic
rights, aircraft delivery schedules and aircraft maintenance requirements).
Other factors that affect the ACMI business include particular domestic and
foreign regulatory requirements, as well as a trend toward aviation deregulation
which is increasing the number of alliances and code share arrangements.
Although World Airways' customers bear the financial risk of filling
World Airways' aircraft with passengers or cargo, World Airways can be affected
adversely if its customers are unable to operate World Airways' aircraft
profitably, or if one or more of World Airways' customers experience a material
adverse change in their market demand, financial condition or results of
operations. Under these circumstances, World Airways can be adversely affected
by receiving delayed or partial payments or by receiving customer demands for
rate and utilization reductions, flight cancellations, and/or early termination
of their agreements.
World Airways derives a significant percentage of its revenues and
block hours from its operations in the Pacific Rim region. Any further economic
decline or any military or political disturbance in this area may interfere with
World Airways' ability to provide service in this area.
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<PAGE> 27
In 1997, the effects of the adverse economic conditions in Malaysia,
Indonesia and other countries in the Asia Pacific Region included a national
liquidity crisis, significant depreciation in the value of the ringgit and the
rupiah, higher domestic interest rates, reduced opportunity for refinancing or
refunding of maturing debts, and a general reduction in spending throughout the
region. These conditions and similar conditions in other countries in the Asia
Pacific Region have had and could continue to have a material adverse effect on
the operations of World Airways.
InteliData
The following is a general description of the business and economic
risk factors that may affect the business operations of InteliData. For a
complete description of the risk factors, see the Form 10-K for the year ended
December 31, 1997 filed with the SEC on March 31, 1998, and the Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998 filed with the SEC on
November 16, 1998.
InteliData's future growth and profitability will depend, in part, upon
consumer acceptance of electronic home banking. Even if this market experiences
substantial growth, there can be no assurance that InteliData's products and
services will be commercially successful or benefit from such growth. Much of
InteliData's success in the home banking market depends on financial
institutions' success in marketing to the consumer. There can be no assurance of
the timing of introduction of, necessary regulatory approvals for, or market
acceptance of these services and applications.
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, 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, other changes in
operating expenses, personnel changes and general economic conditions.
InteliData's business activities are concentrated in a field
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.
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<PAGE> 28
Atlas
Consumable Cutting Dies
While Atlas serves over 1,500 customers in a variety of end markets and
geographies, a limited number of customers account for a large portion of net
sales. The loss of one or several of these important customers would have an
adverse impact on Atlas. There can be no assurance that Atlas will be successful
in retaining such customers or in replacing any lost sales as a result of their
loss.
Technological advances and significant capital requirements
characterize the steel rule die industry. Atlas' success will be dependent on
its ability to continue to implement product innovations and to make appropriate
investments in capital equipment. Although Atlas has been a front runner with
respect to technological advances in this industry, there can be no assurance
that it will be able to continually enhance and improve its existing and
proposed products and processes. There can be no assurance that Atlas will be
able to compete successfully, that its competitors or future competitors will
not develop technologies or products that render Atlas' products and technology
less marketable or that Atlas will be able to successfully enhance its products
or technology or adapt them satisfactorily.
Atlas purchases substantially all of its raw die board from one source.
Although Atlas believes that the vendor will continue to supply sufficient
quantities of quality die board, in the event this source is unable to produce
die board in adequate quantities within a reasonable period of time, or at all,
delays in securing alternative sources would have a material adverse effect on
Atlas' operations.
Carbon Paper Products
The carbon paper products industry is mature and has experienced unit
declines since the mid-1970's. The unit declines are a result of a decrease in
demand for business forms in general since the advent of the personal computer
coupled with advancements in carbonless paper. While management believes there
will continue to be strong demand for carbon paper products for the foreseeable
future, especially for niche applications requiring carbon paper, there can be
no assurance that demand for these products will continue as expected. Atlas'
subsidiary FryeTech intends to diversify its product base through the
introduction of new products. However, there can be no assurance that FryeTech
will be successful in its efforts to introduce such products.
FryeTech's competitors are comprised of a limited number of small "mom
and pop" regional plants that have placed increasing pressure on the price of
carbon paper products. Most of these competitors benefited from the merger of
Frye Copysystems and Technicarbon, the predecessors of FryeTech, because many
customers sought alternatives to one large supplier. These factors contributed
to the reduction of FryeTech's gross margins and sales volumes and there can be
no assurance that such forces will not continue to adversely effect FryeTech's
financial performance.
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<PAGE> 29
FryeTech's two major components of raw material are tissue paper and
ink. FryeTech currently purchases its paper supplies from a limited number of
paper manufacturers. Although FryeTech's supply of tissue paper has been
adequate to meet its production demands, there can be no assurance that
sufficient supplies of this critical component will be available to FryeTech on
a timely basis, at reasonable prices or on favorable terms.
B. Results of Operations
World Airways
Nine Months Ended September 30, 1998 and 1997
Total block hours decreased 7,640 hours, or 22%, to 27,427 hours in
1998 from 35,067 hours in 1997, with an average of 12 available aircraft per day
in 1998 compared to 13.2 in 1997. This decrease is due to one less MD-11
aircraft and one less short-term DC10-30 aircraft in 1998 versus 1997 as well as
low cargo wet lease aircraft utilization in 1998 in comparison to high
utilization on four aircraft flying for Philippine Airlines in 1997. Average
daily utilization (block hours flown per day per aircraft) was 8.4 hours in 1998
and 9.7 hours in 1997. In 1998, wet lease contracts accounted for 70% of total
block hours, a decrease from 83% in 1997 due to continuous air mobility command
flying in 1998 versus redeployment to Garuda Indonesia for Hadj flying in 1997
as well as the end of the Philippine Airlines contract in February 1998.
Operating Revenues. Total operating revenues decreased $32.3 million,
or 13.4% to $208.3 million in 1998 from $240.6 million in 1997. This decrease
corresponds primarily to a decrease in block hours flown in 1998 compared to
1997, partially offset by a shift in business during 1998 with an increase in
full service operations from wet lease operations.
Operating Expenses. Total operating expenses decreased $12.9 million,
or 5.8%, in 1998 to $210.3 million from $223.2 million in 1997.
Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft cost, fuel and maintenance. Also
included are expenses related to flight operations administration. Flight
operations expenses decreased $1.2 million, or 2.2%, in 1998 to $53.7 million
from $54.9 million in 1997. This decrease resulted from no profit sharing bonus
plan accrual in 1998 and a decrease in the cockpit headcount partially offset by
an increase in flight attendant costs and passenger food due to a shift to full
service flying.
Maintenance expenses decreased $4.8 million, or 9.6%, in 1998 to $44.7
million from $49.5 million in 1997. This decrease resulted primarily from a
decrease in the number of aircraft from 13.7 to 12 and a reduction in hours
flown, partially offset by an additional maintenance accrual of $1.4 million
relating to an engine overhaul in the first quarter of 1998. The Company's
maintenance expense has increased on an hourly basis due to escalations in the
specified rates per hour under the Company's maintenance agreement and its aging
engines.
Aircraft costs decreased $6.0 million, or 8.6%, in 1998 to $63.7
million from $69.7 million in 1997. This decrease reflects the return of one
short-term DC10-30 aircraft, two Pratt
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<PAGE> 30
& Whitney engines and one MD-11 aircraft in 1997, and a decrease in aircraft
insurance as a result of a reduction in insurance policy rates, partially offset
by a one-time rent credit received in 1997.
Fuel expenses increased $2.4 million, or 18.6%, in 1998, to $14.9
million from $12.5 million in 1997. This increase is due primarily to an
increase in full service block hours flown offset by a decrease in average fuel
prices.
Promotions, sales and commissions decreased $0.3 million in 1998, or
3.4%, to $7.4 million from $7.7 million in 1997. This decrease resulted
primarily from the end of a Philippine Airlines contract in February 1998
partially offset by expenses incurred in connection with increased revenues
relating to increased Air Mobility Command flying.
Depreciation and amortization decreased $0.3 million, or 3.3%, in 1997
to $6.4 million from $6.7 million in 1997. This decrease resulted primarily from
a decrease in both the depreciation of DC-10 leasehold improvements and
amortization of other assets, offset by an increase in the depreciation of DC-10
and MD-11 engines.
General and administrative expenses decreased $1.1 million, or 5.9%, in
1998 to $18.5 million from $19.6 million in 1997. This decrease was primarily
due to a reduction in wages and fringes, legal expenses, property tax accruals
and FAA fine accruals offset by an increase in general insurance.
Interest expense increased $2.2 million in 1998 to $5.6 million from
$3.4 million in 1997. This increase resulted primarily from the issuance of
$50.0 million of 8% senior subordinated debentures on August 26, 1997.
InteliData
Nine months ended September 30, 1998 and 1997
Revenues. InteliData's revenues for the first nine months of 1998 were
$7,347,000 compared to $10,043,000 in 1997, a decrease of 27% or $2,696,000. The
decrease is attributed primarily to a significant change in the product mix, and
the decline in software, consulting and lease revenues, offset in part by the
increase attributed to Visa royalties. InteliData sold $416,000 in home banking
related software during the first nine months of 1998 compared to $775,000 in
software revenues in the same period in 1997. Consulting and services revenues
aggregated $626,000 in the first nine months of 1998 for services associated
with installations, special projects and feasibility studies for potential
financial institution and banking clients. During the same period in 1997,
InteliData aggregated $973,000 in customer support revenues, which were
remarketed by Visa InterActive to Visa member banks. Leasing and other revenues
aggregated $6,305,000 in the first nine months of 1998 compared to $8,295,000 in
the first nine months of 1997. During the first nine months of 1998, revenues
from leasing and other operations consisted of $4,241,000 from customers within
its lease base, $189,000 in revenues from maintenance contracts related to the
sale of software, and $1,875,000 from deferred royalty revenues related to an
agreement whereby InteliData was prepaid certain royalties in the fourth quarter
of 1997.
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<PAGE> 31
During the same period in 1997, InteliData recognized $7,008,000 from
customers within its lease base and $1,287,000 from monthly service fees for
bill pay operations. The number of active records in InteliData's installed
lease base historically decreases at a rate of approximately 30% per year.
InteliData expects this trend to continue and expects leasing to become a less
significant portion of revenues as its software products gain market share.
Cost of Revenues. InteliData's cost of revenues for the first nine
months of 1998 were $1,825,000 compared to $5,922,000 in 1997, a decrease of 69%
or $4,097,000. InteliData did not recognize any cost of sales associated with
the sale of software during the first nine months of 1998 compared to $223,000
in costs associated with software sales in the same period in 1997. InteliData
did not recognize any cost of sales associated with the sale of software during
the first nine months of 1998 because costs associated with software revenues
were expensed to operations during the period of development. Consulting and
services cost of revenues aggregated $196,000 in the first nine months of 1998
for services associated with installations, special projects and feasibility
studies for potential clients. During the same period in 1997, InteliData
aggregated $860,000 in cost of revenues for customer support revenues, which
were remarketed by Visa InterActive to Visa member banks. Cost of revenues
associated with leasing and other operations aggregated $1,629,000 in the first
nine months of 1998 compared to $4,839,000 in the same period of 1997. During
the first nine months of 1998, InteliData recognized cost of revenues
aggregating $1,629,000 for its lease base. During the same period in 1997,
InteliData recognized cost of revenues aggregating $3,920,000 from customers
within its lease base and $919,000 from monthly service fees for bill pay
operations. The decrease in cost of revenues for InteliData's lease base from
the first nine months of 1997 to the first nine months of 1998 was attributed
primarily to the lease base becoming fully depreciated in the first quarter of
1998 and a decrease in the number of active lease customers.
Overall gross profit margins increased to 75% for the first nine months
of 1998 from 41% for the same period in 1997. The large increase in gross profit
margins was attributed primarily to a shift in the source of revenues for the
Company and the full depreciation of the Company's lease base. InteliData
anticipates that gross profit margins may fluctuate in the future due to changes
in product mix, competitive pricing pressure, the introduction of new products
and changes in the volume and terms of leasing activity.
General and Administrative. General and administrative expenses were
$4,861,000 for the first nine months of 1998 as compared to $6,221,000 in the
first nine months of 1997. The decrease of $1,360,000 was attributed primarily
to unusual and nonrecurring charges for bad debts of $541,000, facilities
expenses of $83,000, staff reductions of $78,000 and estimated legal expenses of
$68,000 recorded as part of InteliData's overhead in the third quarter of 1997.
Exclusive of these charges, general and administrative expenses decreased
$590,000 from the same period in the prior year. The decrease was attributed to
a reduction in headcount and other comprehensive cost reduction measures
implemented by InteliData. Throughout the year, InteliData expects to control
general and administrative expenses and plans to continually assess its
operations in managing the continued development of infrastructure to handle
anticipated business levels.
Selling and Marketing. Selling and marketing expenses increased to
$2,001,000 for the
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<PAGE> 32
first nine months of 1998 from $1,216,000 for the same period
last year. The large increase is primarily attributed to unusually low selling
and marketing expenses in the first quarter of 1997. Considering the change in
InteliData's strategic direction in the third quarter of 1997, InteliData began
investing in selling and marketing programs. InteliData is continually expanding
its marketing efforts in promoting its products. The increase of 65% or $785,000
from the same period last year is attributed primarily to the change in
strategic direction in the third quarter of 1997 and increased direct selling
costs related to the introduction of new products to financial institutions.
Research and Development. Research and development costs were
$2,013,000 in the first nine months of 1998 compared to $3,423,000 for the same
period in 1997. The decrease of $1,410,000 was largely attributable to cost
saving measures relating to personnel costs and more focused research and
development efforts.
Other Income. Other income, primarily investment income, was $718,000
for the first nine months of 1998 compared to $1,155,000 for the same period in
the prior year. The decrease of $437,000 was attributed to decreased cash,
equivalents and short-term investment balances for the first nine months of 1998
compared to the first nine months of 1997. The decrease in cash, equivalents and
short-term investment balances was related to the funding of InteliData's
working capital and operations.
Discontinued Operations. During the second quarter of 1998, InteliData
adopted a plan to dispose of its various telecommunications divisions through a
sale or liquidation. InteliData's Caller ID adjunct inventory was sold in May
1998. Negotiations for the sale of some or all of the remaining
telecommunications assets are being conducted with various parties. At September
30, 1998, the net assets of discontinued operations, consisting primarily of
inventories, trade receivables, equipment, warehouse facilities and liabilities
expected to be assumed by others have been reclassified as current assets at the
estimated net realizable value.
Revenues from discontinued operations were $25,067,000 and $40,092,000
for the nine months ended September 30, 1998 and 1997, respectively. Included
within the loss on disposal was a loss for discontinued operations aggregating
$5,081,000 for the period from the measurement date, June 1, 1998, to September
30, 1998. Also included in the loss on disposal is a pretax provision of
$5,412,000 for estimated operating losses during the phase-out period, which is
expected to be from June 1, 1998 through March 31, 1999. Loss from discontinued
operations is net of income tax benefits associated with the operations of the
telecommunications divisions of $1,422,000.
Weighted Average Outstanding Shares and Basic and Diluted Loss Per
Common Share. The basic and diluted weighted average shares decreased to
31,397,000 for the first nine months of 1998 compared to 31,711,000 for the
first nine months of 1997. The decrease resulted primarily from the purchase of
treasury shares during the third quarter of 1997 and the cancellation of certain
shares of common stock in the first quarter of 1998; partially offset by an
increase in shares issued in accordance with the 1996 Incentive Plan. As a
result of the foregoing, basic and diluted loss per common share from continuing
operations was $(0.08) for the first nine months of 1998 compared to $(0.18) for
the first nine months of 1997; basic and diluted loss per
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<PAGE> 33
common share was$(0.99) for the first nine months of 1998 compared to
$(2.58) for the first nine months of 1997.
Atlas
Three and nine months ended September 30, 1998 and 1997
The following represents the results of operations for Atlas for the
three and nine months ended September 30, 1998 and 1997. Atlas, through a
wholly-owned subsidiary, purchased all of the outstanding stock of Atlas Die on
November 18, 1998. Accordingly, the results of operations for Atlas Die are not
included in the amounts discussed below. The transaction will be accounted for
using the purchase method of accounting.
Net sales for the three and nine months ended September 1998 decreased
$4.1 million and $14.0 million to $7.7 million and $24.1 million compared to the
same period of the preceding period, respectively. The decline can be attributed
to the overall decrease in industry-wide unit demand, volume losses to
competition partially as a result of negative publicity with respect to
WorldCorp's financial position, and generally lower prices. Average weekly sales
during 1998 have been relatively stable as a result of the recovery of certain
customers during the current year.
Gross margin in both the three and nine months ended September 30, 1998
amounted to 36% as compared to 39% for the same periods of 1997. The decrease is
primarily related to lower selling prices required to retain customers.
Selling, general and administrative expenses decreased 65% and 54% to
approximately $219,000 and $1,050,000 for the three and nine months ended
September 30, 1998, respectively, from $627,000 and $2,298,000 for the same
periods of 1997. The reductions are generally a result of staff reductions, the
reduction of management bonuses and lower corporate office costs.
Goodwill amortization increased $2.8 million to $5.9 million during the
nine months ended September 30, 1998 as compared to the same period of the
preceding year representing a change in the amortization period that was
implemented in August 1997.
C. Financing Developments
WorldCorp has issued $65.0 million in aggregate principal amount of
Debentures pursuant to the Debenture Indenture. The Debentures are convertible
into WorldCorp common stock at $11.06 per share, subject to adjustment in
certain events, and bear an annual interest rate of 7%. Semi-annual interest
payments are due on May 15 and November 15. WorldCorp did not make the interest
payments due May 15, 1998 and November 15, 1998, which constituted Events of
Default under the Indenture. The terms of the Debenture Indenture prohibit
WorldCorp from paying dividends to its shareholders following the occurrence of
any events of default by WorldCorp under the Indenture. The Debenture Indenture
also restricts WorldCorp's ability to make other distributions with respect to
its common stock.
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<PAGE> 34
On August 29, 1996, WorldCorp entered into a bridge loan (the "Bridge
Loan") with a financial institution pursuant to which WorldCorp borrowed $25.0
million and subsequently retired its then existing 13- 7/8% Subordinated Notes
of the same amount. The Bridge Loan was due September 29, 1997 and earned
interest of LIBOR plus 2.5%, payable monthly. On September 30, 1996, WorldCorp
issued Senior Subordinated Notes totaling $10.0 million, the proceeds of which
were used to retire $10.0 million of the Bridge Loan in October 1996. The
remaining balance on the Bridge Loan of $15.0 million was repaid in September
1997.
As described above, WorldCorp prepaid $5.0 million of the Senior
Subordinated Notes pursuant to mandatory prepayment obligations under the
Indenture governing the Senior Subordinated Notes (the "Senior Indenture").
There is $5 million of principal remaining outstanding under the Senior
Subordinated Notes.
On February 21, 1998 and April 8, 1998, World Airways loaned WorldCorp
$1.75 million and $0.25 million, respectively ("World Airways Secured Loan"),
which was used by WorldCorp to pay debt obligations. The loan was initially
collateralized by 1,000,000 shares of World Airways common stock owned by
WorldCorp, bore interest at prime plus 2.5% and was due on April 28, 1998.
WorldCorp failed to make the required payment on April 28, 1998. After WorldCorp
failed to make the required payment on April 28, 1998, WorldCorp and World
Airways entered into, and subsequently completed, negotiations to restructure
the World Airways Secured Loan. The restructured loan accrues interest from
April 28, 1998 at 12% and was collateralized with 1,860,396 shares of InteliData
common stock and 500,000 shares of World Airways common stock. If WorldCorp
reduces the loan principal, World Airways will return a pro rata amount of the
collateral. On June 25, 1998, World Airways redeemed 150,000 of the pledged
shares of World Airways common stock for a credit equal to $4.55 per share that
was applied to payment of accrued interest, expenses, and reduction of
principal. On August 25, 1998, World Airways sold 245,000 of the pledged
InteliData shares and applied the proceeds to payment of accrued interest and
reduction of principal. As of November 30, 1998, the outstanding balance of the
loan totaled $1,333,639, consisting of $1,217,850 of principal and $32,432 of
accrued interest and $83,357 of expenses related to the loan. In addition, World
Airways claims that it is owed $399,674 for unsecured intercompany charges at
November 30, 1998.
D. Dividend Policy
WorldCorp has never paid any dividends and does not plan to do so for
the foreseeable future. The Senior Indenture governing the Senior Subordinated
Notes, and the Indenture governing WorldCorp's Debentures, in certain
circumstances, restrict WorldCorp from paying dividends or making distributions
on its common stock. As a holding company, WorldCorp receives all of its funds
through its ownership positions in Acquisition and InteliData, neither of which
intends to pay dividends in the foreseeable future. In addition, the ability of
Acquisition and its subsidiaries, World Airways and Atlas, to pay dividends is
currently restricted under borrowing arrangements.
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<PAGE> 35
E. Income Taxes
As of December 31, 1997, WorldCorp has net operating loss carryforwards
("NOLs") for federal income tax purposes of approximately $63.0 million. There
can be no assurance that the operations of the Reorganized Debtor will generate
taxable income in future years so as to allow the Reorganized Debtor to realize
a benefit from its NOLs. The NOLs are also subject to examination by the
Internal Revenue Service ("IRS") and thus, are subject to adjustment or
disallowance resulting from any such IRS examination. The ability to use the
NOLs to offset income generated by Acquisition and its subsidiaries depends on
the ability of WorldCorp to file a consolidated federal income tax return that
includes Acquisition and its subsidiaries. WorldCorp would not be able to file
such a consolidated return if any of the Atlas Stockholder Warrants or Series A
Warrants were exercised. In addition, the occurrence of an ownership change with
respect to the Debtor, as defined in section 382 of the Internal Revenue Code,
would result in an annual limitation on the utilization of NOLs by the Debtor.
As a result of certain transactions with MHS in 1994, World Airways is
no longer consolidated with WorldCorp for income tax purposes. As of December
31, 1997, World Airways had NOLs for federal income tax purposes of $92.2
million, which are only available to offset future federal taxable income of
World Airways. Of this amount, $27.8 million is subject to a $6.9 million annual
limitation resulting from an ownership change, pursuant to the Internal Revenue
Code of 1986, as amended, which occurred in 1991. In addition, future
transactions in the stock of the Reorganized Debtor, World Airways or World
Airways' stockholders could cause an additional ownership change at World
Airways, which could result in a substantial reduction in the annual limitation
in the use of World Airways' NOLs and the loss of a substantial portion of the
NOLs available to World Airways.
V. LEGAL AND ADMINISTRATIVE PROCEEDINGS
World Airways has periodically received correspondence from the Federal
Aviation Administration ("FAA") with respect to minor noncompliance matters. In
November 1996, as the FAA increased its scrutiny of U.S. airlines, World Airways
was assessed a preliminary civil fine of $810,000 in connection with certain
security violations by ground handling crews contracted by World Airways for
services at foreign airport locations. Under 49 U.S.C., Section 46301, any
violation of pertinent provisions of 49 U.S.C. Subsection 40101 or related rules
is subject to a civil penalty for each violation. Upon review of the evidence or
facts and circumstances relating to the violation, the statute allows for the
compromise of proposed civil penalties. The penalties were proposed by the FAA
in connection with inspections at foreign airport facilities in 1996 and relate
primarily to ground handling services provided by World Airways' customers in
connection with their operations; specifically, the inspection procedures of its
aircraft, passengers and associated cargo. In each of these instances, World
Airways was in compliance with international regulations, but not the more
stringent U.S. requirements, despite the fact that the flights in question did
not originate or terminate in the United States. World Airways has taken steps
to comply with the U.S. requirements. In September 1997, World Airways entered
into a consent order and settlement agreement with the FAA in connection with
the above-mentioned alleged violations. Pursuant to this agreement, the World
Airways is liable for the sum of $610,000, of which $405,000 was paid in
September 1997. The remaining
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<PAGE> 36
$205,000 was suspended and will be forgiven if the World Airways complies
with the provisions of the settlement agreement, including a covenant to avoid
any security violations during the one-year period following the execution of
the settlement agreement. While World Airways believes it is currently in
compliance in all material respects with all appropriate standards and has all
required licenses and authorities, any material non-compliance by World Airways
therewith or the revocation or suspension of licenses or authorities could have
a material adverse effect on the financial condition or results of operations of
World Airways.
In connection with the discontinuance of World Airways' scheduled
service operations, World Airways is subject to claims by various third parties
and maybe subject to further claims in the future. A claim has been filed in
Germany against the World Airways by a tour operator seeking approximately $3.5
million in compensation related to the cancellation of a summer program in 1996.
World Airways believes it has substantial defenses to this action, although no
assurance can be given of the eventual outcome of this litigation.
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 and results of operations of World Airways.
VI. PROJECTED FINANCIAL INFORMATION
The following tables in this section set forth for WorldCorp projected
Consolidated Balance Sheets, Cash Flow Statements and Income Statements for the
years ending 1998 (pro forma), 1999, 2000 and 2001.
A. Basis of Presentation
The projected financial information in the following tables presents
the effect of the Plan and is based upon assumptions that, when reviewed on an
overall basis, the proponents of the Plan consider reasonable. However, the
estimates and assumptions underlying the projected financial information are
subject to significant external economic factors, and other uncertainties and
contingencies beyond WorldCorp's control. These projections involve judgments
based upon past performance and industry trends, which have not necessarily been
indicative of future performance or trends. Consequently, there can be no
assurance that the projected financial results can be realized, or that actual
results will not be higher or lower than those presented.
The projections herein contained are being set forth solely as part of
the submission of the Plan for approval. It has not been WorldCorp's practice to
make such projections publicly available, and it does not plan to change this
practice following the Effective Date.
The projected financial information should be reviewed in conjunction
with the most current Quarterly Reports on Form 10-Q and Annual Reports on Form
10-K of WorldCorp, World Airways and InteliData.
B. Assumptions About Projected Financial Information
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<PAGE> 37
Operating Assumptions
It should be noted that past results have not necessarily been
consistent with WorldCorp management projections and that there are a variety of
factors that may make it impossible for WorldCorp to achieve the results on the
projections.
General
The projections assume that World Airways is consolidated for reporting
purposes for the entire four years, and were prepared as if both wholly-owned
subsidiaries of Atlas -- FryeTech and Atlas Die -- had been owned by WorldCorp
and all debt associated with such acquisitions had been incurred by WorldCorp
effective January 1, 1998. The projections also were prepared as if the Plan had
become effective as of January 1, 1998. The projections exclude any one-time
merger expenses related to the acquisitions of Atlas, or its purchase of Atlas
Die, or any costs associated with the proposed bankruptcy filing and
restructuring.
Sales
The projections assume that slow growth at both World Airways and Atlas
Die offset the modest declines at FryeTech, resulting in total sales growth of
2.0%, 1.7% and 2.2% in 1999, 2000 and 2001 respectively. The forecast also
assumes that no aircraft are added to or removed from World Airways' fleet, and
that Atlas does not complete any new acquisitions or pursue any new product or
market opportunities.
Expenses
The projections include all cash operating expenses of World Airways,
and all cash cost of sales and operating expenses of Atlas. The forecast also
includes operating expenses at WorldCorp (pro forma for the proposed bankruptcy
restructuring for 1998, as opposed to WorldCorp's actual expenses for the year).
Depreciation and Amortization
The projections include all depreciation and goodwill amortization at
World Airways and WorldCorp, including Atlas. Depreciation and amortization is
expected to be approximately the same in 1998, 1999, 2000 and 2001.
Operating Income
The projections assume increased operating income based primarily on
significantly improved performance at World Airways and a stable level of
profitability at Atlas. The forecast assumes World Airways incurs operating
losses in both fiscal 1998 and 1999, but a modest operating profit in fiscal
2000 and 2001. The forecast is based on the assumption that World Airways
achieves improved margins due to modest sales growth and expense reductions in
1999, 2000 and 2001.
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<PAGE> 38
Interest Expense
The projections assume the acquisition of Atlas and its purchase of
Atlas Die, both as of January 1, 1998. Consequently, the forecast includes the
interest on all debt required to finance such transactions (which declines each
year due to amortization of the principal), as well as the interest on the notes
issued by Acquisition to the Atlas Stockholders. The projections include the
interest on WorldCorp's Debentures (which increase each year due to the
pay-in-kind feature, partially offset by principal and interest repayments) and
on the RRF Loan (which declines due to the amortization of the principal). World
Airways interest expense is expected to be approximately the same in 1998, 1999,
2000 and 2001.
Income Taxes
The projections assume that there are no income taxes at either
WorldCorp or World Airways due to the NOLs available at both companies. However,
WorldCorp as the parent of a Federal consolidated group (which, as discussed
above, does not include World Airways) will be subject to alternative minimum
taxes.
Minority Interest
The projections include a provision for the share of profits or losses
in World Airways and in Acquisition attributable to the minority stockholders.
Net Income
The projections assume no gain or loss on the sale of InteliData stock
or equity earnings or losses attributable to such investment.
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<PAGE> 39
C. Projected Consolidated Balance Sheet
WorldCorp, Inc.
Consolidated Balance Sheet
($ in millions)
<TABLE>
<CAPTION>
Pro Forma Projections
-------------- -----------------------------------------------
ASSETS 1998 1999 2000 2001
------ ------ ------ ------
<S> <C> <C> <C> <C>
Current Assets 45.7 45.5 45.1 44.9
Property, Plant & Equipment, net 79.6 75.1 70.9 65.7
Investment in InteliData 2.1 2.0 2.0 2.0
Other Assets 63.5 62.8 62.0 59.9
------- ------- ------- -------
Total Assets 191.0 185.4 180.0 172.5
======= ======= ======= =======
LIABILITIES & EQUITY
Current Liabilities 53.5 53.9 53.1 51.5
Atlas Bank Loan 40.0 33.3 26.7 20.0
RRF Loan 7.8 5.6 3.2 0.4
Accrued Interest Notes 5.1 5.5 5.9 6.4
Modified Debentures 65.4 71.4 76.7 82.4
Atlas Stockholder Notes 16.0 16.4 16.9 17.2
Airways Debt 79.0 83.5 79.4 74.2
------- ------- ------- -------
Total Long-Term Debt 214.3 215.7 208.7 200.6
======= ======= ======= =======
Other Long-Term Liabilities 24.3 23.6 23.0 22.5
Minority Interest (9.7) (13.7) (12.4) (11.1)
Stockholders' Equity (91.5) (93.7) (92.5) (91.0)
--------- --------- --------- ---------
Total Liabilities & Equity 191.0 185.4 180.0 172.5
======== ======== ======== ========
</TABLE>
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<PAGE> 40
D. Projected Consolidated Income Statement
WorldCorp, Inc.
Consolidated Income Sheet
------------------
($ in millions)
<TABLE>
<CAPTION>
Pro Forma Projections
------------- ------------------------------------------------
1998 1999 2000 2001
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales1/ 339.2 346.1 352.1 359.9
Expenses 322.1 321.9 319.3 326.9
Deprec. and Amort. 12.2 12.9 13.6 14.4
------ ------ ------ ------
Operating Income 4.9 11.3 19.2 18.6
Interest Expense 17.2 18.4 17.4 16.3
</TABLE>
___________________________
2
<TABLE>
<CAPTION>
Pro Forma Projections
------------- ------------------------------------------------
Sales 1998 1999 2000 2001
------ ------ ------ ------
<S> <C> <C> <C> <C>
Airways 281.7 290.2 298.9 307.8
Atlas 57.4 56.0 53.2 52.0
------- ------- ------- -------
Total Sales 339.2 346.1 352.1 359.9
% Change 2.0% 1.7% 2.2%
</TABLE>
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<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C>
Pretax Income (12.3) (7.1) 1.8 2.3
Income Taxes -- -- -- --
Minority Interest (7.6) (4.8) 0.5 0.8
Net Income (4.7) (2.2) 1.3 1.5
======== ======== ====== ======
</TABLE>
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<PAGE> 42
E. Projected Consolidated Cash Flow Statement
<TABLE>
<CAPTION>
WorldCorp, Inc.
Consolidated Cash Flow Statement
-----------------------------------
($ in millions)
Pro Forma Projections
------------- ------------------------------------------------
Sources and (Uses) of Cash: 1998 1999 2000 2001
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (4.7) (2.2) 1.3 1.5
Deprec. and Amort. 12.2 12.9 13.6 14.4
Change in Other Assets (0.7) 0.7 2.9 -
Minority Interest (7.6) (4.8) 0.5 0.8
PIK Interest [Modified Debentures 5.0 5.4 5.7 6.1
and Accrued Interest Notes]
Airways Debt Borrowings -- 4.5 -- --
------- -------- ------ ------
Sources of Cash 4.2 16.4 24.0 22.7
Change in Other Assets & Liabilities 3.2 - (0.1) (0.1)
Capital Expenditures 3.7 6.2 7.2 7.2
Frye Seller Notes - - 0.6 -
Munskjo Payments 0.5 0.5 0.5 0.5
Required Bank Debt Amort. 2.5 6.7 6.7 6.7
PIK Interest WCA Notes - (0.4) (0.4) (0.3)
Airways Debt Repayments - - - -
RRF Loan Repayment - 2.2 2.4 2.8
------- ------ ------ ------
Uses of Cash 9.9 15.1 17.0 16.8
======= ====== ====== ======
Free Cash Flow (5.6) 1.2 7.1 5.9
</TABLE>
VII. THE CHAPTER 11 CASE
A. Events Leading to the Debtor's Chapter 11 Filing
WorldCorp is a highly leveraged holding company. As a holding company,
WorldCorp derives all of its revenues from its positions in Acquisition and
InteliData.
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<PAGE> 43
Prior to April 20, 1998, WorldCorp had outstanding secured debt of $2.0
million under the World Airways Secured Loan, and unsecured debt of $5.0 million
plus accrued and unpaid interest under the Senior Subordinated Notes, $65.0
million plus accrued and unpaid interest under the Debentures, and a relatively
small amount of intercorporate and trade debt. WorldCorp's principal assets
consisted of 3,702,586 shares of World Airways common stock, of which 1,000,000
were pledged to World Airways to secure the World Airways Secured Loan, and
9,179,273 shares of InteliData common stock. WorldCorp's remaining shares of
World Airways Common Stock and all of its shares of InteliData common stock were
unencumbered and available for sale by WorldCorp as necessary to meet its cash
needs.
On April 20, 1998, WorldCorp entered into a transaction pursuant to
which it contributed all of its World Airways common stock (equivalent to 51.2%
of World Airways) to, and became the 80% owner of, Acquisition, a newly created
holding company established to own the World Airways common stock and 100% of
Atlas. This transaction was essentially a leveraged buyout of Atlas in that
consideration for the transaction included the issuance to the Atlas
Stockholders of $16 million of Acquisition debt and an Earn-Out under which the
Atlas Stockholders would be entitled to receive from Acquisition an amount equal
to the first $10 million EBITDA (as defined in the Earn-Out) of Atlas during the
period ending August 31, 2002, plus 50% of EBITDA in excess of $10 million of
Atlas during that period. The debt and Earn-Out payable to the Atlas
Stockholders were fully guaranteed by WorldCorp and collateralized by, among
other things, any and all of the stock owned by Acquisition in InteliData, World
Airways and Atlas, and any and all of the stock owned by WorldCorp in
Acquisition, Atlas, World Airways and InteliData.
The purpose of the Atlas transaction was to secure for WorldCorp a
steady source of positive cash flow. Atlas owned several specialty paper
businesses that, while operating in declining segments of the market, could be
expected to generate steady and substantial earnings over the short term and
that could be enhanced or augmented through future acquisitions over the longer
term. While WorldCorp's assets would not be available for sale to raise cash
until after the notes and Earn-Out to the Atlas Stockholders had been paid in
full, WorldCorp was to receive certain tax-sharing payments and management fees
from Acquisition. In effect, WorldCorp traded its ability to sell free assets in
volatile markets for a steady stream of cash generated by Atlas.
For various reasons, including the facts that the tax-sharing
agreements for the Atlas transaction were never executed and that WorldCorp
became involved in disputes with the Atlas Stockholders shortly after the
transaction closed, Atlas made no payments to Acquisition until December 31,
1998. This in turn caused Acquisition to default on its payment obligations
under the Atlas Stockholder Notes and prevented it from paying any management
fees or making any tax-sharing payments to WorldCorp. WorldCorp did not make the
scheduled $2 million loan repayment to World Airways on April 25, 1998. On June
24, 1998, WorldCorp substituted 1,860,396 shares of InteliData common stock as
collateral in return for the release of 500,000 of the pledged World Airways
shares, which release was memorialized in a letter agreement dated July 1, 1998.
On June 25, 1998, World Airways purchased 150,000 of the pledged World Airways
shares in return for a credit against the outstanding balance of the World
Airways Secured Loan equal to $4.55 per share. On August 25, 1998, World Airways
sold 245,000 of the
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pledged InteliData shares and applied the net proceeds of
$222,031 to outstanding interest and principal of the World Airways Secured
Loan.
As of November 30, 1998, WorldCorp had essentially no cash or cash
equivalents and had outstanding debt in excess of $75 million. The holder of the
majority of the $5.0 million outstanding principal amount on the Senior
Subordinated Notes contended that the entire amount outstanding was due and
payable as a result of alleged covenant defaults. WorldCorp also had failed to
make interest payments due May 15, 1998 and November 15, 1998 on $65 million in
outstanding Debentures, and to repay approximately $1.3 million owed to World
Airways under the terms of the secured intercompany loan described above.
Following its default under the Debentures, WorldCorp retained
restructuring advisors and said publicly that it was working on a
reorganization. WorldCorp retained Wilmer, Cutler & Pickering as its
restructuring legal advisor; Cold Spring Group, Inc. as its restructuring
financial advisor; and Joseph Dryer as its financial analyst. Because WorldCorp
lacked the funds to pay all of its advisors on a current basis, WorldCorp
entered into agreements with Wilmer, Cutler & Pickering and Cold Spring Group,
Inc. under which they were to receive fees at enhanced rates only in the case of
a successful reorganization. Payment of those fees, as well as the fees of
Joseph Dryer and the reimbursable expenses of all three advisors, was guaranteed
by Acquisition. Prior to the filing of the Chapter 11 Case, WorldCorp,
Acquisition and the advisors entered into a compromise agreement pursuant to
which the advisors agreed to forego the enhancement of fees contemplated by
their previous agreements in return for payment in cash of their accrued fees at
normal hourly rates. These payments were made from the escrow accounts discussed
below contemporaneously with the execution of the compromise agreement.
On December 31, 1998, Atlas advanced $1 million to Acquisition to be
applied under the tax sharing agreement to be entered into on the Effective Date
of the Plan. Of this amount, $550,000 was paid to the Atlas Stockholders for
amounts owed for interest under the Atlas Stockholder Notes and the remaining
$450,000 was deposited for the benefit of Acquisition into an escrow account
with Wilmer, Cutler & Pickering serving as escrow agent. In addition, the Atlas
Stockholders released their liens upon and permitted WorldCorp to sell 200,000
InteliData shares, which were sold for net proceeds of approximately $342,000.
Funds from the escrow account were used to pay restructuring expenses,
retainers, salaries and expenses before the filing of the Chapter 11 Case.
Remaining funds in the escrow account have been or will be used to pay Chapter
11 Administrative Expenses. Acquisition has also agreed to pay the reasonable
legal fees and expenses incurred by the Atlas Stockholders and RRFin connection
with the reorganization in amounts to be determined by agreement between Sun
Paper Advisors and RRF before the Confirmation Hearing (the "Atlas Stockholder
Fees and Expenses" and the "RRF Fees and Expenses," respectively).
WorldCorp has negotiated with Sun Paper Advisors, which represents the
Atlas Stockholders pursuant to a Collateral Agent Agreement entered into by the
Atlas Stockholders in connection with the Atlas transaction, and with RRF, which
holds the single largest amount of Debentures, to develop the Plan. On February
22, 1999, RRF also acquired $250,000 principal amount of the Senior Subordinated
Notes. RRF intends to elect treatment of its claim with respect of such Notes as
a Class 12 (Electing Senior Subordinated Notes Claim) under the Plan.
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RRF and Acquisition are co-proponents of the Plan. The Debtor expects the Atlas
Stockholders to support the Plan, subject to documentation of definitive
agreements and instruments necessary to implement the Plan in form and substance
satisfactory to the Atlas Stockholders. The Plan contemplates the commencement
of this Chapter 11 Case to achieve the restructuring and obtain the approval of
the creditors. On February 11, 1999, WorldCorp's Board of Directors formally
endorsed the terms of the prenegotiated plan of reorganization and authorized
the commencement of this Case.
B. Continuation of Business
On February 12, 1999 (the "Petition Date"), WorldCorp filed a petition
for relief under Chapter 11 of the Bankruptcy Code. Since the Petition Date, the
Debtor has continued to operate as a debtor-in-possession subject to the
supervision of the Bankruptcy Court and in accordance with the Bankruptcy Code.
Although the Debtor is authorized to operate in the ordinary course of business,
transactions out of the ordinary course of business require Bankruptcy Court
approval.
An immediate effect of the filing of the bankruptcy petition was the
imposition of the automatic stay under the Bankruptcy Code, which, with limited
exceptions, enjoined the commencement or continuation of all collection efforts
by creditors, the enforcement of liens against property of the Debtor and the
continuation of litigation against the Debtor. The automatic stay remains in
effect, unless modified by the Bankruptcy Court, until consummation of a plan of
reorganization.
C. Significant Events
The Debtor filed several motions on the first day of the Case seeking
the relief provided by so-called "first day orders." First day orders are
intended to ensure a seamless transition between a debtor's prepetition and
postpetition business operations by approving certain regular business conduct
that may not be authorized specifically under the Bankruptcy Code.
The first day motions and orders in this Case provided for, among other
things:
o establishment of a disclosure statement hearing date and a
confirmation hearing date; and
o retention of the following professionals to serve on behalf of
the Debtor: Wilmer, Cutler & Pickering as counsel to the Debtor;
Young, Conaway, Stargatt & Taylor as special counsel to the
Debtor; and Arthur Andersen LLP as accountants for the Debtor.
The original version of the plan filed by the Debtor on the Petition
Date provided for payment on the Effective Date to all holders of Senior
Subordinated Notes Claims of cash in an amount equal to principal plus accrued
and unpaid interest at 10% per annum for the period ending on the Petition Date.
At the Petition Date, the Debtor believed this treatment was acceptable to the
holders of Senior Subordinated Notes Claims. After the Petition Date, the
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Senior Subordinated Notes Trustee and Kenneth Grossman of Juris Partners, who
purports to represent certain holders of Senior Subordinated Notes, asserted
that the holders of Senior Subordinated Notes were entitled, under the terms of
the Senior Subordinated Notes Indenture and the subordination provisions of the
Debenture Indenture, to be paid both prepetition and postpetition interest at
the default rate of 12% per annum as well as all of the fees and expenses of the
Senior Subordinated Notes Trustee and its counsel.1/
-
In order to address this assertion, the Debtor and its co-proponents
filed the current Plan, which divides the Senior Subordinated Notes Claims into
two classes: Class 6 and Class 12. Holders of Senior Subordinated Notes who vote
in favor of the Plan and who prefer to receive immediate cash can do so by
electing on their ballots to have their Senior Subordinated Notes Claims
classified in Class 12 (Electing Senior Subordinated Notes Claims). Because the
cash available to the Debtor is limited by the maximum amount of the RRF Loan,
and because the RRF Loan must be used to pay Administrative Claims, including
the cost of amending the original plan and disclosure statement and obtaining
confirmation of the current Plan, the total amount of cash available for
distribution with respect to Electing Senior Subordinated Notes Claims is less
than the total amount Electing Senior Subordinated Noteholders would have
received under the original plan filed on the Petition Date. Nevertheless,
unless substantially all of the holders of Senior Subordinated Notes vote in
favor of the Plan and elect to have their Senior Subordinated Notes Claims
classified in Class 12, the cash available to the Debtor should be sufficient to
pay principal plus interest at 10% per annum through the Effective Date on
Electing Senior Subordinated Notes Claims. If substantially all holders of
Senior Subordinated Notes Claims vote to accept the Plan and elect to have their
Senior Subordinated Notes Claims classified in Class 12, each holder will
receive a proportionate share of available cash plus Modified Senior Notes with
an aggregate principal amount equal to the difference between that amount of
cash and the total of principal plus accrued interest at 10% per annum through
the Effective Date on the holder's Senior Subordinated Notes.
Holders of Senior Subordinated Notes Claims who do not elect such
treatment will be classified in Class 6 (Non-Electing Senior Subordinated Notes
Claims). As discussed below, holders of Class 6 Non-Electing Senior Subordinated
Notes Claims will receive Modified Senior Notes that provide for payment over
time of all amounts those holders are entitled to receive under the Senior
Subordinated Notes Indenture.
D. Alternatives to the Plan
After careful review of the Debtor's current business operations,
estimated recoveries in a liquidation scenario, difficulties inherent in
prosecuting certain alleged claims and prospects as an ongoing business, the
Debtor has concluded that the recovery to creditors will be maximized by the
Debtor's continued operation as a going concern. According to the liquidation
analysis prepared by the Debtor with the assistance of its financial advisors,
the value of the Debtor's Estate is materially greater as a going concern than
in a liquidation. Distributions to creditors
_____________________________
3/ Grossman inititally sought payment from the Debtor of a fee of
$75,000 to $100,000 for representing the Seniot Subordinated Noteholders, but
later withdrew that demand.
- -
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will occur much sooner and have greater value to creditors under the Plan than
under any other alternative. Should the Plan not be confirmed, it is likely that
the Debtor would face liquidation and that unsecured creditors would not receive
any distribution.
In the light of the Debtor's evaluation of the risks of extended
litigation with no assurance of a timely or successful outcome, the likelihood
that such litigation would spawn counterclaims that could reduce any possible
recovery, and the increase in expenses of administration that failure of the
Plan would entail, the Debtor believes that the Plan offers the best prospects
of recovery for the holders of Claims against the Debtor and recommends that you
vote to accept the Plan.
VIII. PLAN OF REORGANIZATION
THE FOLLOWING IS A SUMMARY OF THE SIGNIFICANT ELEMENTS OF THE PLAN.
THIS DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION SET FORTH IN THE PLAN, WHICH IS INCLUDED AS APPENDIX A TO
THIS DISCLOSURE STATEMENT.
THE PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN WILL CONTROL THE
TREATMENT OF CREDITORS AND EQUITY SECURITY HOLDERS UNDER THE PLAN AND WILL, UPON
THE EFFECTIVE DATE, BE BINDING UPON HOLDERS OF CLAIMS AGAINST, OR INTERESTS IN,
THE DEBTOR OR THE REORGANIZED DEBTOR.
A. Overall Structure of the Plan
Prior to filing for relief under Chapter 11 of the Bankruptcy Code, the
Debtor focused on the formulation of a plan of reorganization that would enable
it to emerge quickly from Chapter 11 and preserve its value as a going concern.
The Debtor recognizes that a lengthy and uncertain Chapter 11 Case could
detrimentally affect the confidence in the Debtor by its creditors, impair its
financial condition and dim the prospects for a successful reorganization.
The voting and other confirmation requirements of the Bankruptcy Code
must be satisfied. Under the Plan, Claims against, and Interests in, the Debtor
are divided into Classes according to their relative seniority and other
criteria.
If the Plan is confirmed by the Bankruptcy Court and consummated, (i)
the Claims in certain Classes will be reinstated or modified and receive
distributions equal to the full amount of such Claims, (ii) the Claims in other
Classes will be modified and receive distributions constituting a partial
recovery on such Claims and (iii) in some cases, the Interests will receive no
distribution. On the Effective Date, and at certain times thereafter, the
Reorganized Debtor will distribute securities and other property in respect of
certain Classes and Claims as provided in the Plan. The Classes of Claims
against the Debtor created under the Plan, the treatment of those Classes under
the Plan and the securities and other property to be distributed under the Plan
are described below.
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Because the Debtor is a holding company that derives all of its cash
from interests in Acquisition and InteliData, the Plan contemplates a number of
transactions involving those entities or their securities. Neither of those
entities is a debtor under the Bankruptcy Code, although Acquisition is a
co-proponent of the Plan. Consummation of the Plan is conditioned upon, and will
occur simultaneously with, the transactions involving these nondebtor entities.
The transactions contemplated by the Plan will occur pursuant to the terms of
definitive agreements ("Transaction Documents"). Copies of all material
Transaction Documents will be filed with the Bankruptcy Court at least five (5)
days before the date established by the Bankruptcy Court to consider
confirmation of the Plan and may be obtained upon written request and payment of
copying and mailing charges to [COPY SERVICE].
The terms of the Plan are based upon, among other things, the Debtor's
assessment of its ability to achieve the goals of the business plan, make the
distributions contemplated under the Plan and pay its continuing obligations in
the ordinary course of the Reorganized Debtor's business.
The Debtor shall, as a reorganized corporation, continue to exist after
the Effective Date as a separate corporate entity, with all the powers of a
corporation under applicable law in the jurisdiction in which it is incorporated
and pursuant to the certificate of incorporation and bylaws as amended on the
Effective Date, without prejudice to any right to terminate such existence
(whether by merger or otherwise) under applicable law after the Effective Date.
The transactions contemplated by the Plan will be effected pursuant to
definitive agreements in substantially the forms filed with the Bankruptcy Court
no later than five business days before the Confirmation Hearing. Copies of
these documents may be obtained upon written request and at the cost of the
requesting party from [INSERT NAME AND ADDRESS OF COPY SERVICE].
The major components of the Plan and related transactions are as
follows:
RRF Loan to Acquisition
o On the Effective Date, the RRF Lenders will make a loan to Acquisition
(the"RRF Loan") in an amount equal to the sum of (i) the amount of the
Allowed Class 2 World Airways Secured Loan Claims; plus (ii) the
lesser of $5,000,000 or the aggregate amount of principal and unpaid
interest at 10% per annum through the Effective Date on Senior
Subordinated Notes held by holders of Electing Class 12 Senior Notes
Claims; plus (iii) the amount of the Allowed Class 5 Administrative
Convenience Claims; plus (iv) the amount of unpaid Administrative
Expenses (including Professional Claims other than fees and expenses
of professionals retained by the Creditors Committee); plus (v) up to
$100,000 of Professional Claims consisting of allowed fees and
expenses of professionals retained by the Creditors Committee; plus
(vi) the amount of Priority Claims required to be paid on the
Effective Date; plus (vii) the RRF Fees and Expenses; plus (viii) the
Atlas Stockholder Fees and Expenses; plus (ix) $150,000 to be reserved
for payment of operating expenses of the Reorganized
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Debtor (the "Operating Cash"); provided, however, that the maximum
amount of the RRF Loan will not, without RRF's and Sun Paper
Advisors'consent, exceed an amount (the "RRF Loan Limit") equal
to the sum of (a) the product of $[0.95] times the number of
InteliData shares to be purchased by Acquisition with proceeds
of the RRF Loan from the Debtor at $[0.95] per share in the
InteliData Share Transaction (as defined below) plus (b) the RRF Fees
and Expenses plus (c) the Atlas Stockholder Fees and Expenses; and
provided further that the Debtor may elect to reduce the amount
of the RRF Loan that would otherwise be made by selling assets
with Sun Paper Advisors'consent and the Court's approval on or
before the Effective Date and applying the sale proceeds to pay a
portion of the claims and expenses specified above
o The general terms and conditions of the RRF Loan are set forth in term
sheet attached hereto as Appendix B ("RRF Loan Term Sheet"). Those
general terms and conditions, with additional agreements and
modifications not inconsistent with the RRF Loan Term Sheet, will be
embodied in a definitive loan agreement and related documents to be
executed on the Effective Date.
o The RRF Loan will bear interest at 12.5% per annum, payable quarterly
in cash. Outstanding principal and accrued interest will be paid on a
quarterly basis to the extent funds are available from proceeds of
Atlas Tax Sharing Payments, as discussed below. Any interest not paid
when due will be added to the outstanding principal balance of the RRF
Loan; provided, however, that if accrued interest on the RRF loan is
not paid in cash for two consecutive quarters, RRF will have the right
to require Acquisition to sell InteliData shares in order to pay
accrued interest and principal, failing which there will be an Event
of Default on the RRF Loan. All remaining outstanding principal and
interest under the RRF Loan will be due and payable in full on April
20, 2003.
o Repayment of the RRF Loan will be guaranteed by the Reorganized Debtor
and secured by first liens on all shares of InteliData common stock
owned by Acquisition and the Reorganized Debtor.
o In connection with the making of the RRF Loan, the RRF Lenders will be
entitled to purchase from Acquisition, on the Effective Date, at a
price of $0.01 per share, the number of shares of InteliData common
stock that is equal to ten percent (10%) of the principal amount of
the RRF Loan. (For example, if the amount of the RRF Loan is
$7,500,000, the RRF Lenders will be entitled to buy 750,000 shares of
InteliData common stock from Acquisition at $0.01 per share).
o All holders of Debentures Claims (Class 7) and holders of General
Unsecured Claims (Class 8) will be afforded the right to participate
with RRF on a pro rata basis in making the RRF Loan, including the
right to purchase their pro rata portions of the InteliData Common
Stock to be sold at the purchase price of $0.01 per share. Forms for
electing to participate and instructions for participating as a
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lender in the RRF Loan have been distributed to these holders as
part of the solicitation packaged that included this Disclosure
Statement. Any holder of a Debentures Claim (Class 7) or a General
Unsecured Claim (Class 8) that did not receive participation forms and
wishes to participate in making the RRF Loan should contact Martha
Sproule, Rothschild, Inc., 1251 Avenue of the Americas, New York, NY
10020 in writing prior to the date by which ballots for accepting or
rejecting the Plan are required to be returned. To the extent such
holders do not take up their pro rata shares of the RRF Loan, RRF
will, subject to satisfaction or waiver of the conditions specified in
the definitive loan agreement and related documents, provide the
required funding.
Sale of InteliData Shares From WorldCorp to Acquisition
o Acquisition will use all of the proceeds of the RRF Loan (except for
amounts reserved for payment of legal fees and expenses of RRF and the
Atlas Stockholders) to purchase shares of InteliData common stock from
the Debtor on the Effective Date (the "InteliData Share Transaction").
o The purchase price of the InteliData shares that are the subject of
the InteliData Share Transaction will be $[0.95] per share. In
addition, Acquisition will purchase from the Debtor, at a price of
$0.01 per share, a number of InteliData shares equal to the number of
InteliData shares to be sold to the RRF Lenders in connection with the
RRF Loan.
o Patrick Graham holds vested options to purchase 58,333 shares of
InteliData common stock from WorldCorp at $2.98 per share. To the
extent that WorldCorp's remaining shares of InteliData Common Stock
after the Effective Date are insufficient to satisfy these options,
these options will continue to be exercisable with respect to shares
of InteliData stock purchased by Acquisition in the InteliData Share
Transaction.
Payment of Administrative Expenses
o The Debtor will use a portion of the proceeds of the InteliData Shares
Transaction to pay (or reserve for payment upon allowance by the
Court) on the Effective Date, or as soon as practicable thereafter,
all Administrative Expenses of the Chapter 11 Case and all priority
claims required to be paid on the Effective Date.
Repayment in Full of World Airways Secured Claim
o On the Effective Date, or as soon as practicable thereafter, each
holder of an Allowed Class 2 World Airways Secured Claim will receive
cash from the proceeds of the InteliData Share Transaction in an
amount equal to the amount of such Allowed Claim.
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Issuance of Modified Senior Notes in Exchange for Senior Subordinated
Notes.
o On the Effective Date, or as soon as practicable thereafter, each
holder of an Allowed Class 6 Non-Electing Senior Subordinated Notes
Claim will receive the following:
o if such holder is the Senior Subordinated Notes Trustee, Modified
Senior Notes with an aggregate principal amount equal to the sum of
all unpaid fees, expenses, and other amounts payable by the Debtor to
the Senior Subordinated Notes Trustee under the terms of the Senior
Subordinated Notes Indenture for the period ending on the Effective
Date; or
o if such holder is not the Senior Subordinated Notes Trustee, Modified
Senior Notes with an aggregate principal balance equal to the sum of
the unpaid principal amount of such holder's Senior Subordinated
Notes, plus all unpaid interest, calculated as provided in the Senior
Subordinated Notes Indenture, accrued thereon during the period ending
on the Effective Date; and
o if the Bankruptcy Court determines that the value, as of the Effective
Date, of the Modified Senior Notes to be issued to such holder as
provided above is less than the amount of such holder's Allowed Class
6 Non-Electing Senior Subordinated Notes Claim, additional Modified
Senior Notes in an amount that the Bankruptcy Court determines is
sufficient to enable each such holder to receive value, as of the
Effective Date, equal to such holder's Allowed Class 6 Non-Electing
Senior Subordinated Notes Claim.
o The Modified Senior Notes will accrue interest at the rate of 12.5%
per annum. Accrued interest and principal will be paid quarterly to
the extent of Available Cash. Available Cash means all cash and cash
equivalents actually received by the Reorganized Debtor during a given
period in excess of amounts required for payment of its operating
expenses, including without limitation trade and other accounts
payable, professional fees and expenses, salaries and benefits, taxes,
and other amounts due or to become due during such period. Accrued
interest that is not paid in cash on a current basis will be added to
principal.
o The Modified Senior Notes shall be entitled to priority over the
Modified Debentures to the extent provided in the Debenture Indenture
as amended pursuant to the terms of the Plan (the "Modified Debenture
Indenture").
o The Modified Senior Notes will be collateralized by (a) a third lien,
subordinate to the first lien of the RRF Lenders and the second lien
of the Atlas Stockholders, on the Reorganized Debtor's shares of
InteliData Common Stock; (b) a first lien on (i) the Reorganized
Debtor's shares in Acquisition common stock and any distributions or
proceeds from the sale of such stock, subject to the exercise of the
Series A Warrants and the Atlas Stockholder Warrants, (ii) the
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<PAGE> 52
receivable of the Reorganized Debtor, (iii) the equipment and property
of the Reorganized Debtor, and (iv) Available Cash; and (c) a second
lien, subordinate to the first lien of the Atlas Stockholders, on the
Warrant Notes, if any.
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Option of Accepting Senior Subordinated Note Holders to Receive Cash
o Holders of Senior Subordinated Notes Claims
(including the Senior Subordinated Notes Trustee) who vote
to accept the Plan may elect, by so indicating on the ballot
at the time they vote on the Plan, to receive cash and,
under certain circumstances, Modified Senior Notes on the
Effective Date, or as soon as practicable thereafter, in
full satisfaction, discharge and release of their Senior
Subordinated Notes Claims and of all of their rights
(including intercreditor subordination rights and rights to
seek payment of fees and expenses incurred after the
Petition Date as an Administrative Claim) with respect to
the Senior Subordinated Notes and the Senior Subordinated
Notes Indenture. Holders of Senior Subordinated Notes that
elect such treatment are referred to as "Electing Senior
Note Holders" and their Claims with respect to their Senior
Subordinated Notes are classified in Class 12.
o On the Effective Date, or as soon as practicable thereafter,
each Electing Senior Note Holder will receive, in full
satisfaction, discharge and release of its Class 12 Senior
Subordinated Notes Claim and of all of its rights (including
intercreditor subordination rights and rights to seek payment
of fees and expenses incurred after the Petition Date as an
Administrative Claim) with respect to the Senior Subordinated
Notes and the Senior Subordinated Notes Indenture, (x) its
Proportionate Share of the Cash Available for Senior Notes
plus (y) if its Proportionate Share of the Cash Available for
Senior Notes is less than its Agreed Senior Claim, Modified
Senior Notes with an aggregate principal amount equal to the
difference.
o "Cash Available for Senior Notes" means the lesser of (a)
$5,000,000 or (b) the amount by which the RRF Loan Limit
exceeds the sum of (i) the amount of the Allowed Class 2 World
Airways Secured Loan Claim, plus (ii) the amount of the
Allowed Class 5 Administrative Convenience Claims, plus (iii)
the amount of unpaid Administrative Expenses, plus (iv) the
amount of Priority Claims required to be paid on the Effective
Date, plus (v) the RRF Fees and Expenses, plus (vi) the Atlas
Stockholder Fees and Expenses, plus (vii) the Operating Cash.
o "Agreed Senior Claim" means, with respect to an Electing
Senior Note Holder, (a) if such holder is the Senior
Subordinated Notes Trustee, an amount equal to all unpaid fees
and expenses incurred by the Senior Subordinated Notes Trustee
through the Effective Date and payable by the Debtor under the
Senior Subordinated Notes Trustee, or (b) with respect to any
other Electing Senior Note Holder, an amount equal to the sum
of (i) the aggregate principal amount of such holder's Senior
Subordinated Notes, plus (ii) accrued and unpaid interest
thereon calculated at the rate of 10% per annum through the
Effective Date.
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o "Proportionate Share of Cash Available for Senior Notes"
means, with respect to an Electing Senior Note Holder, Cash in
an amount equal to the lesser of (a) the Agreed Senior Claim
of such holder or (b) the product of the amount of Cash
Available for Senior Notes multiplied by a fraction, the
numerator of which is equal to the Agreed Senior Claim of such
holder and the denominator of which is equal to the sum of the
Agreed Senior Claims of all Electing Senior Note Holders.
o Although the Cash Available for Senior Notes will not exceed
$5,000,000 and will decrease as the Administrative Expenses of
the Chapter 11 Case increase beyond a certain threshold, the
amount of Cash to be distributed to Electing Senior
Noteholders with respect to their Allowed Class 12 Electing
Senior Notes Claims could equal the entire principal amount of
their Senior Subordinated Notes plus accrued interest thereon
at 10% per annum through the Effective Date if certain holders
of Senior Subordinated Notes do not elect such treatment.
o If all or substantially all of the holders of Senior
Subordinated Notes vote to accept the Plan and elect to be
classified in Class 12, each Electing Senior Note Holder will
receive its Proportionate Share of Cash Available for Senior
Notes plus Modified Senior Notes with an aggregate principal
balance sufficient to make up the difference between such cash
and the sum of principal plus accrued interest at 10% per
annum through the Effective Date on such holder's Senior
Subordinated Notes.
o Prior to the Effective Date, the Senior Subordinated Notes
Trustee will advise the Debtor as to the names and
denominations in which the Modified Senior Notes should be
issued, including the denomination of Modified Senior Notes
issuable to the Senior Subordinated Notes Trustee in payment
of its fees, expenses and other amounts incurred during the
period through the Effective Date to which it is entitled
under the terms of the Senior Subordinated Notes Indenture.
Modification of Debentures and Issuance of Modified Debentures and Accrued
Interest Notes and Warrants
o On the Effective Date, or as soon as practicable
thereafter, each holder of an Allowed Class 7 Debentures
Claim will have its Debentures modified by receiving a
Modified Debenture due May 15, 2004 ("Modified Debentures")
in a principal amount equal to the principal amount of its
existing Debenture. In addition, each holder of an Allowed
Class 7 Secured Notes Claim will receive (a) its Pro Rata
share of Series A Warrants and Series B Warrants, together
with (b) additional 7% notes due May 14, 2003 ("Accrued
Interest Notes"), with an aggregate principal amount equal
to the amount by which accrued but unpaid interest through
the Effective Date exceeds the appraised fair market value
of the Series A Warrants and Series B Warrants. The Modified
Debentures will permit interest payments that would
otherwise be due after the Effective Date and before May 15,
2003, to be paid with additional notes due May 14, 2003 (the
"PIK
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Notes"). Unpaid interest on the Accrued Interest Notes
and the PIK Notes will be added to the principal amount of
those notes.
o On the Effective Date, or as soon as
practicable thereafter, each holder of an Allowed General
Unsecured Claim will receive, in exchange for and
satisfaction of its Allowed Claim, its Pro Rata share of
Series A Warrants and Series B Warrants, together with
Modified Debentures having an aggregate principal amount
equal to the amount by which such holder's Allowed Claim
exceeds the appraised fair market value of the Warrants
received, and Accrued Interest Notes with an aggregate
principal amount equal to interest at 7% per annum on such
Allowed Claim from the Petition Date to the Effective Date.
o Each Modified Debenture, Accrued Interest Note, PIK Note,
Series A Warrant and Series B Warrant may be transferred and
exercised separately.
o The Modified Debentures, Accrued
Interest Notes, PIK Notes, Series A Warrants, Atlas
Stockholder Warrants and Series B Warrants (and the shares
of stock that are subject to such Warrants) will be exempt
from registration under applicable securities laws pursuant
to section 1145(a) of the Bankruptcy Code. Holders that may
be deemed to be "affiliates" or "underwriters" of
Acquisition or WorldCorp will have the right to require
registration of the resale of the Warrants (and the warrant
shares) at such Holders' expense.
o The terms of the Modified Debentures, Accrued
Interest Notes, Series A Warrants, Series B Warrants and PIK
Notes will be embodied in definitive documents, including
the Modified Debenture Indenture, to be filed with the
Bankruptcy Court at least five business days before the
Confirmation Date and executed on the Effective Date.
o Interest on the Modified Debentures will accrue at
seven percent (7%) per annum and be payable semiannually.
Until May 14, 2003, interest on the Modified Debentures may
be paid in cash or PIK Notes. The aggregate outstanding
principal balance of the Modified Debentures will be payable
in full on May 15, 2004. Prior to May 15, 2004, holders of
the Modified Debentures will be entitled to pro rata
prepayments of principal and interest from cash received by
the Reorganized Debtor as the result of certain events.
Transfers of the Modified Debentures will be prohibited but
holders of at least 25% of the outstanding principal amount
of the Modified Debentures will have the discretion to
remove this trading restriction at any time after the
Reorganized Debtor has reported its results of operations
for two quarters following the Effective Date.
o The Modified Debentures will be secured by liens upon
(a) WorldCorp's 80% interest in Acquisition and any
distributions or proceeds from the sale of such 80% interest
in Acquisition, subject to the exercise of the Series A
Warrants and the Atlas Stockholder Warrants, (b) WorldCorp's
interest in InteliData stock, (c)
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the accounts receivable of WorldCorp, (d) the equipment
and property of WorldCorp, (e) net payments to WorldCorp
under the Tax Sharing Agreement after certain taxes and
operating expenses are paid by WorldCorp, and (f) a second
lien on the Warrant Notes, if any. The liens securing the
Modified Debentures will be subordinate to the liens of the
RRF Lenders and the Atlas Stockholders on the InteliData
shares, the lien of the Atlas Stockholders on the Warrant
Notes, if any, and to the liens securing the Modified Senior
Notes on all of the above assets
o The Series A Warrants may be exercised to purchase
from the Reorganized Debtor an aggregate number of shares of
common stock of Acquisition equal to 45% of the outstanding
common stock of Acquisition on the Effective Date. The
Series A Warrants (i) will be exercisable, upon 30 days'
prior written notice to the Reorganized Debtor, at the
earliest of (a) the fourth anniversary of the Effective
Date, (b) the sale of Acquisition, (c) an initial public
offering of Acquisition, or (d) exercise of the Atlas
Stockholder Warrants; and (ii) will expire on the close of
business of December 31, 2006. The exercise price for the
Series A Warrants will be equal to at least 125% of the fair
market value of Acquisition Shares as of the Effective Date
payable in cash or by surrendering Modified Debentures,
Accrued Interest Notes and PIK Notes having an aggregate
fair market value on the date of exercise equal to the
aggregate exercise price.
o The Series B Warrants may be exercised to purchase an
aggregate of approximately 9.3 million shares of WorldCorp
common stock, equivalent to 40% of the outstanding
prepetition WorldCorp common stock (pro forma for the
exercise of the Series B Warrants). The Series B Warrants
(i) will be exercisable at the earliest of (a) the fourth
anniversary of the Effective Date, (b) the sale of
Acquisition, or (c) an initial public offering of
Acquisition; and (ii) will expire on the close of business
of December 31, 2006. The exercise price for the Series B
Warrants will be equal to at least 125% of the fair market
value of WorldCorp's common stock as of the Effective Date
payable in cash or by surrendering Modified Debentures,
Accrued Interest Notes and PIK Notes having an aggregate par
value equal to the aggregate exercise price.
o The Accrued Interest Notes and the PIK Notes accrue
interest at the same rate as the Debentures, compounded
semiannually; are subject to the pro rata prepayment prior
to the Modified Debentures; and are secured on the same
basis as the Modified Debentures. Unpaid interest on the
Accrued Interest Notes and PIK Notes accrues and is added to
principal.
Should the holders exercise their Series A Warrants, the Reorganized Debtor
will own a correspondingly smaller amount of shares of Acquisition. If all of
the Series A Warrants are exercised and should the Atlas Stockholders exercise
the Atlas Stockholder Warrants, the Reorganized Debtor will be left with no
ownership in Acquisition. Assuming no other change from the Effective Date, the
property of the Reorganized Debtor would then consist of its holdings of
InteliData common stock that will not be sold to Acquisition on the Effective
Date
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plus the total proceeds (in cash, Modified Debentures, Accrued Interest
Notes, PIK Notes, or Warrant Notes) received by the Reorganized Debtor upon the
sale of its shares in Acquisition pursuant to the exercise of the Series A
Warrants and the Atlas Stockholder Warrants.
WorldCorp Stockholder Interests
o Shares of WorldCorp common stock will remain outstanding and
will automatically become equivalent ownership interests in
the Reorganized Debtor.
o The Reorganized Debtor will continue to be a public company and will file
periodic reports with the SEC.
o The Reorganized Debtor will review periodically the
possibility of having the shares listed on a national
securities exchange or the NASDAQ quotation system.
Atlas Stockholder Claims and Interests.
o On the Effective Date, the warrantsheld by the Atlas
Stockholders to purchase shares of Acquisition from WorldCorp
("Old Warrants") will be canceled, and the Atlas Stockholders
will receive new warrants to purchase from the Reorganized Debtor
an aggregate number of shares of common stock of Acquisition
equal to 35% of the outstanding common stock of Acquisition (the
"Atlas Stockholder Warrants"). The Atlas Stockholder Warrants (i)
will be exercisable immediately at the earliest of (a) April 20,
2000, (b) the sale of Acquisition, or (c) an initial public
offering of Acquisition; and (ii) will expire on the close of
business of December 31, 2006; and (iii) will be exempt from
registration under applicable securities laws pursuant to Section
1145 of the Bankruptcy Code. The exercise price of the Atlas
Stockholder Warrants will be equal to $28,000 per share (or $9.8
million in the aggregate), except that this price will be
adjusted upward to the extent that it does not represent at least
125% of the Fair Market Value of the Acquisition Shares as of the
Effective Date.
o The exercise price of the Atlas Stockholder Warrants may
be paid to the Reorganized Debtor in cash or in the form of one
or more full recourse promissory notes (the "Warrant Notes") that
bear interest at four and one-half percent (4.5%) per annum, half
of which will be payable semi-annually in cash and the remainder
of which will accrue and be added to the principal balance of the
Warrant Notes. The outstanding amount of each Warrant Note will
be payable in full on the earlier of (i) December 31, 2007 or
(ii) a liquidity event as defined therein.
o The obligations of Acquisition to the Atlas Stockholders
will be secured by a second lien on all InteliData shares owned
by the Reorganized Debtor and Acquisition (which will become a
first lien upon release of the lien of the RRF Lenders) and by a
first lien upon all of the Reorganized Debtor's right, title and
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interest with respect to the Warrant Notes (including the
Reorganized Debtor's right to receive the Warrant Notes), if the
Atlas Stockholder Warrants are exercised and the Atlas
Stockholders pay the exercise price by delivering the Warrant
Notes to the Reorganized Debtor. All other liens of the Atlas
Stockholders upon property of WorldCorp or Acquisition will be
canceled as of the Effective Date.
Tax Sharing Agreement
On the Effective Date, the Reorganized Debtor, Acquisition and Atlas
will enter into mutually satisfactory tax sharing agreements (jointly, the "Tax
Sharing Agreement") as follows:
o The Tax Sharing Agreement will require Atlas, to the
extent Atlas is part of a consolidated group with World and
Acquisition, to make quarterly payments ("Atlas Tax Sharing
Payments") to Acquisition equal to all federal and state income
and franchise taxes, for which Atlas and its subsidiaries would
be liable based upon their accrued income if they were not
consolidated for tax purposes with the Reorganized Debtor and
Acquisition.
o The Tax Sharing Agreement will also require Acquisition to
the extent Acquisition is part of a consolidated group with
WorldCorp, to make quarterly payments as set forth below.
o Until the RRF Loan has been repaid in full, a portion (the
"Reserved Portion") of the Atlas Tax Sharing Payments will be
reserved each year for use by Acquisition and WorldCorp, and all
Atlas Tax Sharing Payments in excess of the Reserved Portion will
be paid to the RRF Lenders for application to the outstanding
balance of the RRF Loan. The Reserved Portion will be an amount
equal to the sum of (i) interest payable in cash during the year
under the Atlas Stockholder Notes as modified pursuant to the
Plan (including interest payable in cash for the period from
January 1, 1999 through the Effective Date) ("Cash Interest
Amount") plus (ii) an amount equal to 81.82% of the Cash Interest
Amount. An amount equal to 55% of the Reserved Portion will be
available to Acquisition to pay interest owed to the Atlas
Stockholders under the Atlas Stockholder Notes; and the remaining
45% will be distributed to the Reorganized Debtor.
o After the RRF Loan has been repaid in full, Acquisition
will pay (i) 45% of all Atlas Tax Sharing Payments to the
Reorganized Debtor and (ii) 55% of all Atlas Tax Sharing Payments
to the Atlas Stockholders for application to interest and
principal on the Atlas Stockholder Notes and payment of the
Earn-Out.
Amendment of Certificate of Incorporation. The Debtor's Certificate of
Incorporation will be amended (i) to prohibit the acquisition or accumulation of
5 percent or more, or increasing ownership above 5%, of the Debtor's stock by
any person or entity, taking into account for this purpose stock owned or
acquired by other persons or entities whose stock would be treated as owned by
such person or entity under the attribution rules applicable under Section
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382 of the Internal Revenue Code; and (ii) to provide for the Reorganized
Debtor's Board of Directors to be divided into three groups serving staggered
terms.
Directors and Officers. The officers and directors of the Debtor after
the Effective Date will be specified prior to the Confirmation hearing and
appointed pursuant to the Confirmation Order.
Restructuring of Acquisition Indebtedness.
On the Effective Date, and as a condition of consummation of the Plan,
the indebtedness of Acquisition will be restructured as follows:
o Atlas Stockholder Security Interests. All liens and
security interests of the Atlas Stockholders in property of
WorldCorp and Acquisition other than shares of InteliData will be
modified as of the Effective Date such that the Atlas
Stockholders will have a first lien on WorldCorp's right, title
and interest with respect to the Warrant Notes (including
WorldCorp's right to receive the Warrant Notes upon exercise of
the Atlas Stockholder Warrants), and a second lien, behind the
first lien held by the RRF Lenders, on all of WorldCorp's and
Acquisition's direct and indirect ownership in all of the shares
of common stock, par value $.001 per share, of InteliData. All
other liens and security interests of the Atlas Stockholders on
property of WorldCorp or Acquisition will be canceled as of the
Effective Date.
o Atlas Stockholders Note Modifications. As of the Effective
Date, the Atlas Stockholder Notes will be modified to (i) extend
the maturity of the Atlas Stockholder Notes due March 1, 1999 to
April 20, 2003; (ii) reduce the interest rate on all Atlas
Stockholder Notes from eight percent (8%) per annum to the higher
of five percent (5%) per annum or the applicable federal rate
determined by the IRS, half of which interest will be payable in
cash and half of which will be added to principal; (iii) require
prepayments to Acquisition with all remaining cash available
after amounts are paid to WorldCorp under the Tax Sharing
Agreement after interest is paid on the Atlas Stockholder Notes;
and (iv) provide that half of the interest accrued between
January 1, 1999 and the Effective Date will be paid in cash and
the remaining half will be added to principal.
o Earn-Out Modifications. As of the Effective Date, the
terms of the Earn-Out will be amended and restated to provide
that payments to the Atlas Stockholders with respect to any
businesses acquired after April 20, 1998 will be equal to 10% of
the EBITDA (calculated as provided in the Earn-Out) of such
businesses, and that the other terms of the Earn-Out apply only
to the businesses acquired by WorldCorp on April 20, 1998.
o Amended and Restated Financial Consulting Agreement. As of
the Effective Date, the Financial Consulting Agreement among
WorldCorp, Acquisition and Sun Capital will be amended to (i)
eliminate quarterly fixed fees payable by
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WorldCorp and (ii) modify the compensation to be paid to Sun
Capital upon the closing of an M&A Transaction (as such term is
defined in the Financial Consulting Agreement) to an amount equal
to 5% of the first one million dollars ($1,000,000) of
consideration, 4% of the second one million dollars ($1,000,000)
of consideration, 3% of the third one million dollars
($1,000,000) of consideration, 2% of the fourth one million
dollars ($1,000,000) of consideration and 1.5% of the remainder.
o Amendment of Acquisition Charter Documents. As of the
Effective Date, the Certificate of Incorporation and Bylaws of
Acquisition will be amended in a form to be filed with the Court
prior to the Confirmation hearing.
o Management Agreement. As of the Effective Date, the management
contract under which Acquisition pays WorldCorp a management
fee of $250,000 per quarter will be terminated and all unpaid
amounts due under this contract will be canceled.
B. General Classification and Treatment of Claims and Interests
Section 1122 of the Bankruptcy Code requires that a plan of
reorganization classify the claims of a debtor's creditors and the interests of
its equity holders. The Bankruptcy Code also provides that, except for certain
claims classified for administrative convenience, a plan of reorganization may
place a claim of a creditor or an interest of an equity holder in a particular
class only if such claim or interest is substantially similar to the other
claims of such class.
The Bankruptcy Code also requires that a plan of reorganization provide
the same treatment for each claim or interest of a particular class unless the
holder of a particular claim or interest agrees to a less favorable treatment of
its claim or interest. The Debtor believes that it has complied with this
standard. If the Bankruptcy Court finds otherwise, it could deny confirmation of
the Plan if the holders of Claims and Interests affected do not consent to the
treatment afforded them under the Plan.
C. Treatment of Claims and Interests Under the Plan
Administrative Claims. Subject to the provisions of Article X of the
Plan, on the Effective Date, or as soon thereafter as practicable, a holder of
an Allowed Administrative Claim shall receive, in full satisfaction, settlement,
release and discharge of and in exchange for such Allowed Administrative Claim,
(a) Cash equal to the unpaid portion of such Allowed Administrative Claim, or
(b) such other treatment as to which the Debtor and such holder shall have
agreed upon in writing; provided, however, that Allowed Administrative Claims
with respect to liabilities incurred by the Debtor in the ordinary course of
business during the Chapter 11 Case shall be paid in the ordinary course of
business in accordance with the terms and conditions of any agreements relating
thereto.
Priority Tax Claims. With respect to each Allowed Priority Tax Claim,
at the sole option of the Reorganized Debtor, the holder of an Allowed Priority
Tax Claim shall be entitled to
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receive on account of such Allowed Priority Tax Claim, in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed Priority
Tax Claim, (a) equal Cash payments made on the last Business Day of every
three-month period following the Effective Date, over a period not exceeding six
years after the date of assessment of the tax on which such Claim is based,
totaling the principal amount of such Claim plus simple interest on any
outstanding balance from the Effective Date calculated at the interest rate
available on ninety (90) day United States Treasury Bills on the Effective Date,
(b) such other treatment agreed to by the holder of such Allowed Priority Tax
Claim and the Debtor or the Reorganized Debtor, provided such treatment is on
more favorable terms to the Debtor or the Reorganized Debtor, as the case may
be, than the treatment set forth in clause (a) hereof, or (c) payment in full.
Class 1 (Other Priority Claims). On the Effective Date, or as soon as
practicable thereafter, each holder of an Allowed Class 1 Other Priority Claim
shall receive, in full satisfaction, settlement, release, and discharge of and
in exchange for such Allowed Class 1 Other Priority Claim, (a) Cash equal to the
amount of such Allowed Class 1 Other Priority Claim, or (b) such other treatment
as to which the Debtor and such holder shall have agreed upon in writing.
Class 2 (World Airways Secured Loan Claims). On the Effective Date, or
as soon as practicable thereafter, each holder of an Allowed Class 2 World
Airways Secured Loan Claim shall receive Cash in an amount equal to the amount
of such Allowed Claim.
Class 3 (Miscellaneous Secured Claims). The legal, equitable and
contractual rights of holders of Allowed Miscellaneous Secured Claims, if any,
shall be Reinstated. The Debtor's failure to object to such Claims in the
Chapter 11 Case shall be without prejudice to the Reorganized Debtor's right to
contest or otherwise defend against such Claim in the appropriate forum when and
if such Claim is sought to be enforced by the holder thereof. Notwithstanding
section 1141(c) or any other provision of the Bankruptcy Code, all prepetition
liens on property of the Debtor held by or on behalf of the holders of Claims in
this Class with respect to such Claims shall survive the Effective Date and
continue in accordance with the contractual terms of the underlying agreements
with such holders until, as to each such holder, the Allowed Claims of such
holder in this Class are paid in full.
Class 4 (Atlas Stockholders Secured Claims). On the Effective Date, or
as soon as practicable thereafter, each holder of an Atlas Stockholders Secured
Claim shall have such Claim modified by having the pledge agreement modified (i)
to reflect the Reorganized Debtor's grant, as collateral security for the
payment, performance and observance of all obligations under the Atlas
Stockholder Notes and the Earn-Out, of (x) a first lien on the Reorganized
Debtor's right, title and interest with respect to the Warrant Notes (including
the Reorganized Debtor's right to receive the Warrant Notes upon exercise of the
Atlas Stockholder Warrants) and (y) a second lien, behind the first lien held by
the RRF Lenders, on the Reorganized Debtor's and Acquisition's ownership of all
shares of common stock, par value $.001 per share, of InteliData, and (ii) to
release all other liens of the Atlas Stockholders on property of WorldCorp or
Acquisition.
Class 5 (Administrative Convenience Claims). On the Effective Date, or
as
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soon as practicable thereafter, each holder of an Allowed Class 5
Administrative Convenience Claim, if any, shall receive, in full satisfaction,
settlement, release and discharge of and in exchange for such Class 5
Administrative Convenience Claim, Cash equal to (a) the amount of such Allowed
Claim if such amount is less than or equal to $500, or (b) $500, if the amount
of such Allowed Claim is greater than $500 and less than $1,000, and the holder
has agreed to accept $500 in full satisfaction, discharge and release of such
claim.
Class 6 (Non-Electing Senior Subordinated Notes Claims). On the
Effective Date, or as soon as practicable thereafter, each holder of an Allowed
Class 6 Non-Electing Senior Subordinated Notes Claim shall receive (a) if such
holder is the Senior Subordinated Notes Trustee, Modified Senior Notes with an
aggregate principal amount equal to the sum of all unpaid fees, expenses, and
other amounts payable by the Debtor to the Senior Subordinated Notes Trustee
under the terms of the Senior Subordinated Notes Indenture for the period ending
on the Effective Date; or (b) if such holder is not the Senior Subordinated
Notes Trustee, Modified Senior Notes with an aggregate principal balance equal
to the sum of the unpaid principal amount of such holder's Senior Subordinated
Notes, plus all unpaid interest, calculated as provided in the Senior
Subordinated Notes Indenture, accrued thereon during the period ending on the
Effective Date; and (c) if the Bankruptcy Court determines that the value, as of
the Effective Date, of the Modified Senior Notes to be issued to such holder
under (a) or (b), as applicable, is less than the amount of such holder's
Allowed Class 6 Non-Electing Senior Subordinated Notes Claim, additional
Modified Senior Notes in an amount that the Bankruptcy Court determines is
sufficient to enable each such holder to receive, on account of such Allowed
Class 6 Non-Electing Senior Subordinated Notes Claim, Modified Senior Notes of a
value, as of the Effective Date, equal to such holder's Allowed Class 6
Non-Electing Senior Subordinated Notes Claim.
Class 7 (Debentures Claims). On the Effective Date, or as soon as
practicable thereafter, each holder of an Allowed Class 7 Claim shall receive
(a) Modified Debentures with the same principal amount as its Debentures, (b)
its Pro Rata share of the Series A Warrants and the Series B Warrants and (c)
Accrued Interest Notes with a principal amount equal to the amount by which the
accrued but unpaid interest on such holder's Debentures as of the Effective Date
exceeds the appraised fair market value of such Warrants as of the Effective
Date.
Class 8 (General Unsecured Claims). On the Effective Date, or as soon
as practicable thereafter, each holder of an Allowed Class 8 General Unsecured
Claim shall receive (a) its Pro Rata share of the Series A Warrants and the
Series B Warrants, (b) Modified Debentures with a principal amount equal to the
amount by which the Allowed Amount of such Claim exceeds the appraised fair
market value of such Warrants as of the Effective Date, and (c) Accrued Interest
Notes with a principal amount equal to interest at 7% per annum on such Allowed
Claim from the Petition Date to the Effective Date.
Class 9 (Interests). On the Effective Date, each holder of WorldCorp
Common Stock shall retain unaltered the legal, equitable and contractual rights
to which such share or other interest of WorldCorp Common Stock entitled such
holder and shall be unimpaired in accordance with section 1124(1) of the
Bankruptcy Code.
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Class 10 (Old Warrants). On the Effective Date, each holder of an Old
Warrant shall have such warrant modified by receiving, in exchange for and in
full satisfaction of such Old Warrant, an Atlas Stockholder Warrant.
Class 11 (Sun Options). On the Effective Date, each holder of a Sun
Option shall have such option canceled and shall not receive any distribution of
property under the Plan on account of his, her or its Sun Option. "Sun Option"
means (a) the option of Sun Capital to purchase 3,540,311 shares of WorldCorp
common stock pursuant to the WorldCorp Option Agreement, dated April 20, 1998,
between Sun Capital and WorldCorp, and (b) the option of Sun Capital to purchase
143 shares of Common Stock, par value $.01 per share, of Acquisition pursuant to
the Acquisition Corp. Option Agreement, dated April 20, 1998, between Sun
Capital and WorldCorp.
Class 12 (Electing Senior Subordinated Notes Claims). On the Effective
Date, or as soon as practicable thereafter, each Electing Senior Note Holder
will receive, in full satisfaction, discharge and release of its Class 12 Senior
Subordinated Notes Claim and of all of its rights (including intercreditor
subordination rights and rights to seek payment of fees and expenses incurred
after the Petition Date as an Administrative Claim) with respect to the Senior
Subordinated Notes and the Senior Subordinated Notes Indenture, (x) its
Proportionate Share of the Cash Available for Senior Notes plus (y) if its
Proportionate Share of the Cash Available for Senior Notes is less than its
Agreed Senior Claim, Modified Senior Notes with an aggregate principal amount
equal to the difference.
IX. CERTAIN FACTORS TO BE CONSIDERED
The holder of a Claim against or Interest in the Debtor should read and
carefully consider the following factors, as well as the other information set
forth in this Disclosure Statement (and the documents delivered together
herewith and/or incorporated by reference herein), before deciding whether to
vote to accept or to reject the Plan.
A. General Considerations
The formulation of a reorganization plan is the principal purpose of a
chapter 11 case. The Plan sets forth the means for satisfying the holders of
Claims against and Interests in the Debtor. Certain Claims and Interests receive
no distributions pursuant to the Plan. See Section VIII.C, "Treatment of Claims
and Interests Under the Plan," herein. Reorganization of the Debtor's business
and operations under the proposed Plan also avoids the potentially adverse
impact of a liquidation on the Debtor's employees, and many of their payors,
providers, and lessors.
B. Certain Bankruptcy Considerations
If the Plan is not confirmed and consummated, there can be no assurance
that the Chapter 11 Case will continue rather than be converted to a liquidation
or that any alternative plan of reorganization would be on terms as favorable to
the holders of the Impaired Claims as the terms of the Plan. If a liquidation or
protracted reorganization were to occur, there is a
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substantial risk that there would be little, if any, value available for
distribution to the holders of Claims (other than Secured Claims). In addition,
if a liquidation or protracted reorganization were to occur, there is a
substantial risk that holders of Secured Claims would receive less than they
will receive under the Plan.
C. Inherent Uncertainty of Financial Projections
The Projections set forth above cover the Debtor's operations through
Fiscal Year 2001. These Projections are based on numerous assumptions including
the timing, confirmation and consummation of the Plan in accordance with its
terms, the anticipated future performance of the Reorganized Debtor, industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the Reorganized Debtor and some or all of which
may not materialize. In addition, unanticipated events and circumstances
occurring subsequent to the date that this Disclosure Statement was approved by
the Bankruptcy Court may affect the actual financial results of the Reorganized
Debtor's operations. These variations may be material and may adversely affect
the ability of the Reorganized Debtor to make payments with respect to
post-Effective Date indebtedness. Because the actual results achieved throughout
the periods covered by the Projections may vary from the projected results, the
Projections should not be relied upon as a guaranty, representation or other
assurance of the actual results that will occur.
Except with respect to the Projections and except as otherwise
specifically and expressly stated herein, this Disclosure Statement does not
reflect any events that may occur subsequent to the date hereof and that may
have a material impact on the information contained in this Disclosure
Statement. Neither the Debtor nor the Reorganized Debtor intend to update the
Projections for the purposes hereof; thus, the Projections will not reflect the
impact of any subsequent events not already accounted for in the assumptions
underlying the Projections.
D. Liquidity
WorldCorp is a highly leveraged holding company. All of WorldCorp's
revenues are generated through its positions in Acquisition and InteliData,
which have not paid dividends on its common stock since 1992. Acquisition and
InteliData currently intend to retain their future earnings, if any, to fund the
growth and development of their businesses and, therefore, do not anticipate
paying any cash dividends in the foreseeable future. Accordingly, the
Reorganized Debtor's ability to pay principal and interest on the Modified
Debentures, Accrued Interest Notes and PIK Notes is dependent on receipt of
payments under the Tax Sharing Agreement and on the sale of shares of InteliData
and payments, if any, on the exercise of Warrants.
E. Future Business
After consummation of the transactions contemplated by the Plan, the
Reorganized Debtor's ownership interest in InteliData will be substantially
reduced, and all of its remaining shares of InteliData common stock will be
subject to liens to secure repayment of the RRF Loan and the Atlas Stockholder
Guarantee, as modified pursuant to the Plan. Furthermore, if the Series A
Warrants and all of the Atlas Stockholder Warrants are exercised, the
Reorganized
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Debtor will no longer hold any interest in Acquisition. As a result,
the Reorganized Debtor may need to raise new capital to finance future
operations or acquisitions.
X. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain U.S. federal income tax
consequences of the Plan to the Debtor, to certain holders of Claims and to the
RRF Lenders. The summary provides general information only and does not purport
to address all of the federal income tax consequences that may be applicable to
the Debtor or to any particular holder of Claims in light of such holder's own
individual circumstances. In particular, the summary does not address the
federal income tax consequences of the Plan to holders of Claims that may be
subject to special rules, such as foreign persons, S corporations, insurance
companies, financial institutions, regulated investment companies,
broker-dealers and tax-exempt organizations. The summary also does not address
foreign, state, local, estate or gift tax consequences of the Plan, nor does it
address the federal income tax consequences to holders of Claims that will
either be satisfied in full under the Plan or will not receive any recovery
under the Plan.
This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the final, temporary and proposed Treasury regulations promulgated
thereunder, judicial decisions and administrative rulings and pronouncements of
the Internal Revenue Service ("IRS"), all as in effect on the date hereof and
all of which are subject to change (possibly with retroactive effect) by
legislation, judicial decision or administrative action. Moreover, due to a lack
of definitive authority, uncertainties exist with respect to various tax
consequences of the Plan. The Debtor has not requested a ruling from the IRS
with respect to the matters discussed in this summary and no opinion of counsel
has been sought or obtained by the Debtor with respect thereto.
This summary assumes that the Atlas Stockholder Notes, the Earn-Out,
the Debentures, the Modified Debentures, the Accrued Interest Notes, the PIK
Notes, the Senior Notes, the Modified Senior Notes and the RRF Loan each
constitute debt rather than equity for federal income tax purposes. It also
assumes that the Claims discussed herein (other than General Unsecured Claims
and claims of the Senior Subordinated Notes Trustee for unpaid fees, expenses
and other amounts), any consideration received with respect to such Claims under
the Plan and the RRF Loan are held as capital assets within the meaning of Code
section 1221.
THE TAX CONSEQUENCES TO THE HOLDERS OF CLAIMS MAY VARY BASED UPON THE
INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER. MOREOVER, THE TAX CONSEQUENCES OF
CERTAIN ASPECTS OF THE PLAN ARE UNCERTAIN DUE TO THE LACK OF APPLICABLE LEGAL
PRECEDENT AND THE POSSIBILITY OF CHANGES IN THE APPLICABLE TAX LAW. THERE CAN BE
NO ASSURANCE THAT THE IRS WILL NOT CHALLENGE ANY OF THE TAX CONSEQUENCES
DESCRIBED HEREIN, OR THAT SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE SUSTAINED.
ACCORDINGLY, EACH HOLDER OF A CLAIM SHOULD CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE FOREIGN, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE PLAN.
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A. Federal Income Tax Consequences to the Debtor
1. Consequences of Modification of Debentures
The Debentures will be modified under the Plan to become Modified
Debentures with the same principal amount, plus Accrued Interest Notes having a
principal amount equal to accrued but unpaid interest on the Debentures less the
appraised fair market value of the Warrants. In addition, holders of Debentures
would receive Warrants. The Modified Debentures would differ from the Debentures
as follows: (i) the Modified Debentures would permit interest payments that
would otherwise be due after the Petition Date and before May 15, 2003 to be
paid with PIK Notes; (ii) the Modified Debentures would be subject to pro rata
prepayment of principal upon certain events generating cash for the Debtor; and
(iii) the Modified Debentures would be secured by certain assets. The Accrued
Interest Notes and PIK Notes would be unconditionally due and payable on May 14,
2003. The Accrued Interest Notes and the PIK Notes would accrue interest at the
same rate as the Debentures, compounded semiannually; would be subject to pro
rata prepayment prior to the Modified Debentures; and would be secured on the
same basis as the Modified Debentures.
Whether a modification of a debt instrument constitutes an exchange for
federal income tax purposes depends on whether that modification is considered a
"significant" modification under the applicable Treasury regulations. The
modification of the Debentures pursuant to the Plan should not be treated as a
significant modification. As a result, the Modified Debentures and Accrued
Interest Notes should not be treated as acquired in an exchange, but rather as a
continuation of the Debentures for federal income tax purposes, and the Debtor
should not recognize any income or loss as a result of the modification. The
Debtor will report on this basis for federal income tax purposes.
Because the Debentures were issued before August 13, 1996, their
modification should not be treated as creating any debt instruments that are
issued with original issue discount ("OID"). The Debtor will accordingly deduct
interest with respect to the resulting Modified Debentures, the PIK Notes issued
with respect thereto, and the Accrued Interest Notes in accordance with its
accrual method of accounting, as applied to the continuation of the Debentures.
If, contrary to the foregoing, the Debentures were treated as having
been exchanged for federal income tax purposes, the Debtor could have
cancellation of indebtedness ("COI") income if the issue price of the Modified
Debentures (as determined under the OID rules) were less than the face amount of
the Modified Debentures. The issue price of a Modified Debenture that is not
treated as a continuation of a Debenture for federal income tax purposes is
discussed in more detail below in connection with the tax treatment of holders.
2. Interest Deductions for 1998 Amounts
The Debtor has previously accrued interest deductions for interest that
was accrued but not paid on May 15, 1998 and November 15, 1998. The Debtor will
not recognize any further interest deduction with respect to the Debentures
solely as a result of the confirmation of the
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Plan, except that the Debtor will be entitled to an interest deduction if and
to the extent that the Warrants are issued in exchange for interest not
previously deducted.
3. Issuance of Warrants to Holder of Debentures
The Debtor will not recognize income or deduction as the result of
issuing the Warrants to holders of Debentures, except that the Debtor will be
entitled to a deduction for the value of the Warrants if and to the extent that
such Warrants are issued in exchange for interest not previously deducted.
4. Consequences of Exchange of General Unsecured Claims for Modified
Debentures and Warrants
The exchange by a holder of a General Unsecured Claim for Modified
Debentures and Warrants will be treated as a taxable exchange. As discussed in
greater detail below, the Debtor expects that Modified Debentures issued to
holders of General Unsecured Claims will have an issue price equal to their face
amount, less the value of the associated Warrants, so that the portion of any
General Unsecured Claim that is not paid with Warrants will be deemed to be paid
with debt in the same principal amount. The Debtor accordingly does not expect
to incur COI income upon the exchange of General Unsecured Claims for Modified
Debentures and Warrants. Furthermore, any deemed cancellation of a portion of a
General Unsecured Claim would only give rise to COI income to the extent that
the claim would not be deductible if paid. Modified Debentures received by
holders of General Unsecured Claims will be treated as issued with OID, and the
Debtor will deduct OID on such Modified Debentures as it accrues in accordance
with the OID rules.
The Debtor should not recognize income or loss as the result of issuing
the Warrants in partial exchange for General Unsecured Claims.
10 5. Consequences of Exchange of Senior Subordinated Notes Claims
The issuance of Modified Senior Notes and/or cash pursuant to the Plan
to holders of Senior Subordinated Notes Claims, including both the Senior
Subordinated Notes Trustee and holders of Senior Subordinated Notes, will be
treated as an exchange for federal income tax purposes. The Debtor expects that
the issue price of the Modified Senior Notes will be equal to their stated
principal amount. Assuming that this is the case, the Debtor will recognize COI
income on the exchange in an amount equal to the sum of the amounts by which (a)
the principal, interest and other amounts owed to each holder of a Senior
Subordinated Notes Claim under the terms of the Senior Subordinated Notes
Indenture exceeds (b) the amount of cash plus the stated principal amount of the
Modified Senior Notes issued to such holder. If, however, the issue price of the
Modified Senior Notes were less than the stated principal amount of such
instruments, the Debtor could have additional COI income as a result of the
exchange. The determination of the issue price of the Modified Senior Notes is
discussed in more detail below in connection with the tax treatment of holders.
Modified Senior Notes received by holders of Senior Subordinated Notes
Claims will be
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treated as issued with OID. The Debtor will deduct OID on the
Modified Senior Notes as it accrues in accordance with the OID rules.
2.
3. 6. Cancellation of Indebtedness Income Generally
As discussed above, it is possible that the Debtor will realize COI
income for federal income tax purposes as a result of certain aspects of the
Plan. Section 108(a) of the Code provides that such COI income is excluded from
gross income if it arises in a Title 11 proceeding. Under Code section 108(b),
any COI income that is excluded from income under section 108(a) is applied to
reduce certain of the debtor's tax attributes. Attributes are reduced in the
following order: NOLs, general business credit carryovers, minimum tax credit
carryovers, capital loss carryovers, the debtor's basis in its property and
foreign tax credit carryovers.
4. 7. Eligibility to File Consolidated Returns
The ability of the Debtor to use its NOLs to offset taxable income
generated by Acquisition, Atlas and Atlas' subsidiaries depends on the Debtor
being eligible to join with Acquisition, Atlas and Atlas' subsidiaries in filing
a single consolidated federal income tax return. In order to qualify to file
such a return, the Debtor must own stock possessing at least 80 percent of the
value and 80 percent of the vote of Acquisition, and Acquisition must own a like
amount of stock in Atlas. The Debtor presently owns 80 percent of Acquisition's
outstanding stock and Acquisition presently owns all of Atlas' outstanding
stock, and the Debtor intends to file a consolidated return with Acquisition and
Atlas for as long as this remains the case. If at any time the Debtor were
considered not to own 80 percent of Acquisition's outstanding stock for federal
income tax purposes, the Debtor's NOLs could not, after that time, be used to
offset taxable income generated by Acquisition and its subsidiaries, and those
companies would generally be liable for income taxes on their separately
computed income.
8. Section 382 of the Code
Section 382 of the Code imposes certain limitations on the carryforward
of NOLs and other attributes after an "ownership change." In general, an
ownership change occurs if the stock ownership of a corporation changes by more
than 50 percentage points during a three-year testing period. If at any time the
Debtor were considered to undergo an ownership change, there would be
limitations on the extent to which the Debtor's NOLs could be used to offset
taxable income arising after the ownership change.
9. Sale of InteliData Shares to Acquisition
The Debtor's sale of InteliData shares to Acquisition in connection
with the RRF Loan will be a taxable transaction on which the Debtor will be
required to realize gain or loss as if the InteliData shares were sold for their
fair market value. The Debtor will be required to recognize such gain or loss
currently with respect to the InteliData shares that are sold by Acquisition to
the RRF Lenders at $0.01 per share (the "Discount Shares"). Application of the
Debtor's NOLs to offset any gain recognized on the sale of the Discount Shares
would reduce the amount of the NOLs available to offset taxable income generated
by the Debtor and its subsidiaries.
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Acquisition should, however, be entitled to deduct as interest an amount equal
to the spread between the fair market value of the InteliData shares and the
amount received for those shares from the RRF Lenders over the life of the RRF
Loan.
The Debtor will defer any gain or loss on the sale of InteliData shares
other than the Discount Shares to Acquisition under the Treasury regulations
applicable to corporations filing consolidated returns. The Debtor would
generally be required to recognize any such deferred gain or loss immediately
before any transaction that results in the Debtor no longer being eligible to
file a consolidated return with Acquisition. The Debtor would also recognize
such deferred gains or losses if and to the extent that Acquisition sells or
otherwise disposes of those InteliData shares. Although the Debtor will be able
to use any available NOLs and other tax attributes to offset any deferred gain
when that gain is recognized, there can be no assurance that the Debtor will, at
such time, have sufficient NOLs to fully offset the gain or that the Debtor's
NOLs will not be subject to limitations that could prevent the NOLs from being
used to fully offset such gain.
10 Alternative Minimum Tax
The Code provides that, for any taxable year, a corporation's federal
income tax liability equals the greater of (a) the regular tax computed at
standard corporate rates on taxable income and (b) the alternative minimum tax
("AMT") computed at a 20 percent rate on a broader base, alternative minimum
taxable income ("AMTI"). For purposes of computing a corporation's regular
federal income tax liability, all of the income recognized in a taxable year may
be offset by available NOLs and other tax carryovers (to the extent permitted
under, inter alia, sections 382 and 383 of the Code). By contrast, for purposes
of computing AMTI, NOLs (as determined for AMT purposes) and other tax
carryovers generally are taken into account, but they may not offset more than
90 percent of the pre-NOL AMTI. Thus, a corporation that is currently profitable
for AMT purposes generally will be required to pay federal income tax at an
effective rate of at least 2 percent of its pre-NOL AMTI (i.e., 10 percent of
the 20 percent AMT tax rate), regardless of the amount of its NOLs. As a result,
even if the Debtor is otherwise able to fully shelter its income with NOLs, it
will be subject to current taxation in any year in which it has positive net
pre-NOL AMTI. To the extent that a corporation's AMT liability for any taxable
year exceeds its regular federal income tax liability, the excess may be carried
forward as a credit against its regular tax liability in subsequent years.
B. Federal Income Tax Consequences to Holders of Claims
The federal income tax consequences of the Plan to holders of Claims
will depend on several factors, including but not limited to (1) whether a
holder's Claim (or portion thereof) constitutes a claim for principal or
interest, (2) the type of consideration received by a holder in exchange for the
Claim and (3) whether a holder has taken a bad debt or worthless security
deduction with respect to its Claim.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
TREATMENT UNDER THE PLAN OF THEIR PARTICULAR CLAIMS.
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1. Tax Consequences of the Modification of the Debentures
As discussed above, the Modified Debentures and Accrued Interest Notes
should be treated as a continuation of the Debentures for federal income tax
purposes. Accordingly, issuance of Modified Debentures and Accrued Interest
Notes to holders of Debentures should not result in the recognition of gain or
loss by the holders of Debentures.
If, contrary to this interpretation, there is deemed to be an exchange
of Debentures and claims for accrued interest thereon for Modified Debentures,
Accrued Interest Notes and Warrants for federal income tax purposes, the federal
income tax consequences of the Plan to holders of Debentures will depend on
whether the Debentures and the Modified Debentures qualify as "securities"
within the meaning of the provisions of the Code governing reorganizations. The
Treasury regulations provide that rights, such as warrants, that are issued by a
party to a reorganization to acquire its own stock will be treated as
securities. There is, however, no definitive guidance as to when a debt
instrument will be considered a security. In general, a debt instrument
constitutes a security if it represents a participating, continuing interest in
the issuer, rather than merely a right to a cash payment. The term of a debt
instrument is usually regarded as a significant factor in determining whether it
is a security. The IRS has ruled that a debt instrument with a maturity of ten
years or more is treated as a security. Under the case law, debt instruments
with maturities ranging between five and ten years are often held to be
securities. Debt instruments with a five-year term or less rarely qualify as
securities. For purposes of the discussion that follows, it is assumed that the
Debentures and the Modified Debentures will be treated as securities, and that
the Accrued Interest Notes will not be treated as securities. It is possible,
however, that the IRS could take a different position, particularly with respect
to the Modified Debentures.
Assuming that the Debentures and Modified Debentures are treated as
securities, a deemed exchange of Debentures for Modified Debentures would
qualify as a recapitalization within the meaning of section 368(a)(1)(E) of the
Code. If the exchange were treated in that manner, the federal income tax
consequences would be as follows:
(i) A Debenture holder would not recognize loss on the exchange, but would
recognize gain to the extent of the lesser of the amount of gain realized
and the amount specified by sections 354 and 356 of the Code. The amount of
gain realized by a holder would be equal to the excess of (a) the issue
price of the Modified Debentures over (b) such holder's adjusted tax basis
in its Debentures. The amount specified by sections 354 and 356 of the Code
would equal the fair market value of the excess of the "principal amount"
of the Modified Debentures over the "principal amount" of the Debentures
exchanged therefor. There is no authority directly on point on the
interpretation of the term "principal amount" in this context. The term may
be applied literally to refer to the respective principal amounts payable
at maturity on the Modified Debentures and the Debentures. It is also
possible, however, that the term "principal amount" may be interpreted to
refer to the issue price of the Modified Debentures and the adjusted issue
price of the Debentures, in each case as determined at the time of the
Effective Date, so that the fair market value of the excess principal
amount would be the difference between the two, if any.
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(ii) Any gain recognized on the exchange would constitute capital gain, and such
capital gain would qualify as long-term capital gain if the holder has held
the Debentures for more than one year as of the Effective Date.
(iii) A Debenture holder should have an aggregate tax basis in its Modified
Debentures equal to such holder's adjusted tax basis in the Debentures
exchanged therefor, reduced by the fair market value of the excess of the
principal amount of the Modified Debentures received by the holder over the
principal amount of the Debentures exchanged for such Modified Debentures,
and increased by any gain recognized on the exchange. The holding period of
the Modified Debentures should include the holding period of the Debentures
exchanged therefor.
If the modification of the Debentures were deemed an exchange for
federal income tax purposes and if such exchange failed to qualify as a
recapitalization, a Debenture holder would recognize gain or loss upon the
modification of its Debentures as if those Debentures were sold for an amount
equal to the issue price of the Modified Debentures received therefor. The issue
price of the Modified Debentures should be their face amount unless, as
discussed in greater detail below, the Debentures or the Modified Debentures are
treated as publicly traded within the meaning of the OID rules. Any gain or loss
on the modification of the Debentures would constitute capital gain or loss, and
would qualify as long-term capital gain or loss if the holder has held the
Debentures for more than one year as of the Effective Date. A Debenture holder's
basis in its Modified Debentures would be equal to the issue price of the
Modified Debentures exchanged therefor.
2. Tax Consequences of Receipt of Warrants and Accrued Interest Notes.
50. Receipt of Warrants by a Debenture holder will be
taxable as interest income, except to the extent a
holder has previously reported such interest as income
(and has not claimed a deduction from writing off the
previously included income). The reportable amount will
be the fair market value of the Warrants. A Debenture
holder's tax basis in Warrants received for unpaid
Debenture Interest should be equal to the fair market
value of the Warrants, and the holding period for such
Warrants and such Accrued Interest Notes should
commence on the day following the Effective Date.
60. Receipt of Accrued Interest Notes by a Debenture holder
should not give rise to any income or deduction. Such
Accrued Interest Notes should be treated as part of the
continued holding of Debentures, for the reasons
described above. If, contrary to this interpretation,
the Debentures are treated as having been exchanged for
federal income tax purposes, the holder would be
treated as having received interest income upon receipt
of the Accrued Interest Notes, except to the extent a
holder has previously reported such interest as income
(and has not claimed a deduction from writing off the
previously included income). The amount
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of such interest income would be equal to the issue price
of the Accrued Interest Notes. The issue price of the
Accrued Interest Notes, in the event they are not
treated as part of the continued holding of Debentures,
is discussed in more detail below.
7. 3. Tax Consequences of an Exchange of General Unsecured
Claims
Assuming that the General Unsecured Claims do not qualify as securities
for purposes of the Code provisions governing reorganizations, the exchange by a
holder of a General Unsecured Claim for Modified Debentures, Series A Warrants
and Series B Warrants will be treated as a taxable exchange. The holder would
recognize gain or loss based on the difference between (a) the sum of the issue
price of the Modified Debentures and the fair market value of the Series A
Warrants and Series B Warrants received by the holder and (b) such holder's
adjusted tax basis in its General Unsecured Claim. Such gain or loss would be
ordinary or capital gain or loss depending on whether the General Unsecured
Claim is held as a capital asset. If the gain or loss is capital gain or loss,
such gain or loss will be long-term capital gain or loss if the holder has held
its General Unsecured Claim for more than one year as of the Effective Date. The
issue price of the Modified Debentures is discussed in more detail below.
Any consideration received for a General Unsecured Claim that is
allocable to both accrued but unpaid interest on, and the principal amount of, a
General Unsecured Claim will be taxable to the holder as interest income to the
extent of the unpaid interest, unless the holder has previously reported such
interest as income (and has not claimed a deduction from writing off the
previously included income). Only the balance of the distribution after the
allocation of proceeds to accrued interest would be considered received by the
holder in respect of the principal amount of the General Unsecured Claim. Such
an allocation would reduce the amount of gain, or increase the amount of loss,
realized by the holder with respect to the General Unsecured Claim. If such loss
were a capital loss, it would not offset any amount of the distribution that was
treated as ordinary interest income (except, in the case of individuals, to the
limited extent that capital losses may be deducted against ordinary income).
8. 4. Tax Consequences of Owning and Disposing of the Modified
Debentures and the Accrued Interest Notes
a. Original Issue Discount and Determination of Issue Price
As discussed above, the Modified Debentures and Accrued Interest Notes
should be treated
as a continuation of the Debentures for federal income tax
purposes. Although the matter is not free from doubt, because the Debentures
were issued before August 13, 1996, Modified Debentures and Accrued Interest
Notes received as a result of the modification of the Debentures should not be
treated as being issued with OID. Holders of the Modified Debentures, Accrued
Interest Notes and PIK Notes should as a result take into account interest on
such Modified Debentures, Accrued Interest Notes and PIK Notes in accordance
with their method of accounting, as applied to a holding of the Debentures.
Modified Debentures received in exchange for General Unsecured Claims
will be treated
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as issued with OID. In addition, if, contrary to the foregoing,
the modification of the Debentures were treated as an exchange for federal
income tax purposes, the Modified Debentures and Accrued Interest Notes received
as a result of the modification would be treated as issued with OID.
The holder of a debt instrument issued with OID is required to include
in gross income for federal income tax purposes the sum of the daily portions of
OID for each day during the taxable year or portion thereof that it holds the
debt instrument, regardless of whether or not it actually receives a payment
relating to the OID in such year. The daily portion is determined by allocating
to each day of the relevant "accrual period" a pro rata portion of an amount
equal to (1) the product of (a) the "adjusted issue price" of the debt
instrument at the beginning of each accrual period, multiplied by (b) the yield
to maturity of the debt instrument, less (2) the sum of any payments of
"qualified stated interest" ("QSI") during the accrual period. The adjusted
issue price of a debt instrument at any given time is its issue price increased
by all accrued OID for prior accrual periods and decreased by the amount of any
payment previously made on the debt instrument other than payments of QSI.
Interest payments constitute payments of QSI if they are actually and
unconditionally payable at least annually in cash or property, other than debt
instruments of the issuer, at a single fixed or qualified floating rate (or a
combination of the two).
For purposes of computing OID (if any) with respect to the Modified
Debentures, the holder of a Modified Debenture will generally be required to
take into account accruals and payments with respect to any PIK Note issued in
respect of such Modified Debenture. None of the interest payments on the
Modified Debentures or the Accrued Interest Notes will qualify as QSI. The
accrual period for each of the Modified Debentures, Accrued Interest Notes and
PIK Notes (except for any initial short period) is each semiannual period ending
on May 15 and November 15 of each calendar year through and including the
maturity date of those instruments.
The issue price of a Modified Debenture issued in exchange for a
General Unsecured Claim should be equal to its face amount. If, however, the
Modified Debentures were treated as publicly traded for purposes of the OID
rules, or if the modification of the Debentures were treated as an exchange for
federal income tax purposes and the Debentures were treated as publicly traded,
the issue price of the Modified Debentures received in exchange for a General
Unsecured Claim would be equal to the fair market value of the Modified
Debentures or, if applicable, the Debentures as of the Effective Date. The
Modified Debentures or the Debentures would be treated as publicly traded for
purposes of the OID rules if they were considered to be traded on an established
market (as defined in such rules) at any time during the 60 day period beginning
30 days before confirmation of the Plan or if they were subject to a temporary
restriction on trading a purpose of which is to avoid characterization as being
publicly traded. While the Debtor cannot provide assurance on this point, the
Debtor does not expect that the Modified Debentures or the Debentures will be
treated as publicly traded, as that term is used in the OID rules.
As previously discussed, Modified Debentures and Accrued Interest Notes
issued as a result of the modification of the Debentures would not be treated as
issued with OID unless, contrary to the analysis described above, such
modification is deemed to constitute an exchange for federal income tax
purposes. In this event, the Modified Debentures and Accrued Interest
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Notes would be treated as a unitary debt instrument with an issue price that
should be equal to its aggregate face amount. If, however, either the Debentures
or the resulting debt instrument consisting of the resulting Modified Debentures
and Accrued Interest Notes were treated as publicly traded under the rules
described above, the issue price of the resulting debt instrument would be equal
to its fair market value as of the Effective Date. While the Debtor cannot
provide assurance on this point, the Debtor does not expect that any of the
Debentures, the resulting Modified Debentures, or the resulting Accrued Interest
Notes, will be publicly traded, as that term is used under the OID rules.
Since each holder of a Modified Debenture or Accrued Interest Note that
is treated as issued with OID will recognize as ordinary income, through the
accrual of OID, the full amount of interest with respect to the Modified
Debenture (as well as with respect to any PIK Note issued with respect to such
Modified Debenture) or Accrued Interest Note, such holder generally should not
recognize additional ordinary income upon receipt of a PIK Note or a cash
payment of stated interest.
Upon disposition of a Modified Debenture issued with OID, or of a PIK
Note issued in respect thereof, the holder will be required (unless it disposes
of a Modified Debenture together with all PIK Notes issued in respect thereof)
to allocate the adjusted tax basis, adjusted issue price, stated redemption
price at maturity and acquisition premium (discussed below), if any, of the
combined Modified Debenture and PIK Note among the instruments retained and the
instruments disposed of in order to determine OID with respect to the retained
instruments. Although it is not clear, it is likely that the adjusted tax basis
and adjusted issue price of a Modified Debenture would be allocated between such
Modified Debenture and any PIK Note issued in respect thereof at the time of
such issuance based on their respective principal amounts. OID on the retained
instruments would accrue in the same manner as described above.
b. Amortizable Bond Premium
If the tax basis of a holder's debt instrument exceeds its "amount
payable at maturity," the excess may be deductible by the holder as "amortizable
bond premium" under Code section 171 on a constant interest rate basis over the
term of such instrument. Such deductions are available only if the holder makes
or has made a timely election under Code section 171. If a holder makes an
election to amortize bond premium, the amortization deductions may be subject to
certain limitations, including the investment interest limitations of Code
section 163(d) or the overall limitation on itemized deductions under Code
section 68. In addition, the tax basis of such debt instrument must be reduced
by the amount of the aggregate amortization deductions allowable for the bond
premium. Finally, any such election would apply to all debt instruments held or
subsequently acquired by the electing holder and could not be revoked without
permission from the IRS.
c. Market Discount
A holder of a debt instrument comprised of some or all of a Modified
Debenture, Accrued Interest Note, or PIK Note generally will be required to
treat any gain recognized on the sale, exchange, redemption or other disposition
of such debt instrument as ordinary income to the
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extent of any accrued market discount. The market discount rules also provide
that a holder that acquires a debt instrument at a market discount may be
required to defer the deduction of a portion of any interest expense that may
otherwise be deductible on any indebtedness incurred or maintained to purchase
or carry such debt instrument until the holder disposes of the debt instrument
in a taxable transaction.
Market discount generally is the excess of the stated redemption price
at maturity of a debt instrument (adjusted to exclude any unaccrued OID) over
the holder's tax basis in the instrument immediately after its acquisition. In
addition, under a de minimis exception, the amount of market discount is
considered to be zero if it is less than the product of .25% of the stated
redemption price at maturity multiplied by the number of complete years from the
acquisition to maturity. Market discount generally will accrue ratably during
the period from the date of acquisition to the maturity date, unless the holder
elects to accrue such discount on the basis of the constant yield method.
A holder of a debt instrument acquired at a market discount may elect
to include the market discount in income as interest as it accrues, in which
case the foregoing rules would not apply. This election would apply to all debt
instruments with market discount acquired by the electing holder on or after the
first full day of the first taxable year to which the election applies. The
election may be revoked only with the consent of the IRS.
Pursuant to the OID regulations, holders of debt instruments are
permitted to elect to include all interest, discount (including de minimis
market discount) and premium on a debt instrument in income currently on a yield
to maturity basis. Such an election would constitute an election to include
market discount currently in income on all market discount bonds held by such
holders. Holders of debt instruments arising from the Plan should consult their
own tax advisors regarding the availability and advisability of making such an
election.
d. Dispositions
Upon the sale, exchange or redemption of a Modified Debenture, Accrued
Interest Note, or PIK Note, a holder will generally recognize gain or loss in an
amount equal to the difference between the amount of cash and the fair market
value of the property received and the holder's adjusted tax basis in the debt
instrument disposed of. Such gain or loss will be capital gain or loss, except
to the extent of any accrued but unpaid interest and any accrued market
discount, and will be long-term capital gain or loss if the holder's holding
period exceeds one year at the time of the sale, exchange or redemption.
As noted above, the OID Regulations treat a Modified Debenture issued
with OID, and any PIK Notes issued with respect thereto, as part of the same
debt instrument. If, however, a holder disposes of a Modified Debenture or a PIK
Note separately, in order to determine the amount of its gain or loss recognized
the holder will be required to allocate the adjusted tax basis, adjusted issue
price and acquisition premium of the combined debt instrument among the
components retained and disposed of.
Also as noted above, the Modified Debentures and Accrued Interest Notes
resulting from
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the modification of the Debentures, as well as the PIK Notes issued with
respect thereto, should be treated as a continuation of the Debentures. Although
not subject to the OID Regulations, a holder disposing of a separate instrument
comprising the continuation of a Debenture should also allocate tax basis of the
combined debt instrument among the components retained and disposed of.
9. 5. Tax Consequences of the Series A and Series B Warrants
No gain or loss will be recognized by a holder upon the exercise of
Series A Warrants for stock in Acquisition, or upon the exercise of Series B
Warrants for stock in the Debtor, except that gain or loss will be recognized
with respect to any Modified Debentures that are used to pay the exercise price
of such Series A Warrants or Series B Warrants. A holder's tax basis in the
shares of Acquisition or the Debtor received upon the exercise of the Series A
or Series B Warrants, as applicable, will equal the sum of the holder's adjusted
tax basis in the Warrants exercised plus the price paid upon the exercise
thereof. The holding period of the Acquisition or Debtor stock received upon the
exercise of Series A or Series B Warrants will not include the period during
which the Warrants were held by such holder.
The sale or exchange by a holder of its Series A or Series B Warrants
will result in the recognition of gain or loss to the holder for federal income
tax purposes in an amount equal to the difference between the amount realized on
such sale or exchange and the holder's tax basis in the Warrants. Such gain or
loss will constitute capital gain or loss, assuming that the Acquisition or
Debtor stock would have been a capital asset in the hands of the holder had the
Warrants been exercised. Such capital gain or loss should qualify as long-term
capital gain or loss if such holder has held its Warrants for more than one
year.
If a holder's Series A or Series B Warrants lapse without exercise, the
holder will recognize a capital loss equal to the holder's tax basis in the
lapsed Warrants. Any such capital loss should be long-term if such holder has
held the lapsed Warrants for more than one year.
6. Tax Consequences of Exchange of Senior Subordinated Notes Claims
Assuming that the Senior Subordinated Notes are not treated as
securities for purposes of the Code provisions governing reorganizations, the
issuance of Modified Senior Notes and/or cash to the holders of Senior
Subordinated Notes Claims, including both the Senior Subordinated Notes Trustee
and holders of Senior Subordinated Notes, will be treated as a taxable exchange.
Each holder of a Senior Subordinated Notes Claim will recognize gain or loss on
the exchange based on the difference between (a) the sum of the cash and the
issue price of the Modified Senior Notes received by such holder, and (b) the
holder's adjusted tax basis in the Senior Subordinated Notes Claim exchanged
therefor. The issue price of the Modified Senior Notes will equal their stated
principal amount, unless either the Senior Subordinated Notes or the Modified
Senior Notes are treated as publicly traded under the rules described above in
the discussion of the tax consequences of owning the Modified Debentures. The
Debtor does not expect that the Senior Subordinated Notes or the Modified Senior
Notes will be treated as publicly traded under these rules, although no
assurance can be provided on this point.
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Any gain or loss recognized by a holder on the exchange of a Senior
Subordinated Notes Claim for Modified Senior Notes and/or cash would be capital
gain or loss, except that (a) gain recognized on such an exchange would be
treated as ordinary income to the extent of any market discount not previously
included in income by the holder, and (b) gain or loss recognized by the Senior
Subordinated Notes Trustee, if any, will be capital only if the Senior
Subordinated Notes Trustee's Claim is held as a capital asset. To the extent
that such gain or loss is a capital gain or loss, it would be long-term capital
gain or loss if the holder has held its Senior Subordinated Notes Claim for more
than one year as of the Effective Date.
Because the timing of the payments on the Modified Senior Notes will be
contingent on the amount of Available Cash, interest payments on the Modified
Senior Notes will not qualify as payments of QSI and the Modified Senior Notes
will be treated as issued with OID. Holders of Modified Senior Notes will be
required to include OID in income as it accrues in accordance with the OID rules
described above.
C. Federal Income Tax Consequences to the RRF Lenders
Because the timing of the payments on the RRF Loan will be contingent
on the timing of payments made under the Tax Sharing Agreement, the interest
payments on the RRF Loan will not qualify as payments of QSI, and the RRF Loan
will be treated as a debt instrument issued with OID. In addition, the RRF
Lenders will be required for federal income tax purposes to allocate to the
right they receive to acquire InteliData shares an amount of the RRF Loan
proceeds equal to the fair market value of the InteliData shares less the stated
$.01 per share price. The amount allocated to the right to acquire the
InteliData shares will be treated as reducing the issue price of the RRF Loan
and creating additional OID. The RRF Lenders' basis in the InteliData shares
they acquire upon the exercise of the right will equal the fair market value of
those shares as of the Effective Date.
The contingent timing of the payments under the RRF Loan could affect
the yield of the RRF Loan as computed for purposes of the OID rules. As a
result, the RRF Loan will be subject to the Treasury regulations governing
contingent payment debt instruments. After consultation with the RRF Lenders,
Acquisition will, as required by these regulations, determine a comparable yield
and a projected payment schedule for the RRF Loan. Acquisition will then report,
and the RRF Lenders would generally be required to recognize, interest on the
RRF Loan in the manner provided in the OID rules based on the comparable yield
and projected payment schedule, with adjustments if actual payments differ from
projected payments. An RRF Lender that determines its own projected payment
schedule and accrues interest on the basis of such schedule must disclose this
fact and the basis for such schedule to the IRS. Acquisition will use its best
judgment based on the facts known to it as of the Effective Date to determine
the comparable yield and projected payment schedule, but no assurance can be
given that the IRS will agree with Acquisition's determination.
XI. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS
In order to confirm the Plan, the Bankruptcy Code requires that the
Bankruptcy Court
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make a series of determinations concerning the Plan, including
that (a) the Plan has classified Claims and Interests in a permissible manner;
(b) the Plan complies with the technical requirements of Chapter 11 of the
Bankruptcy Code; (c) the Debtor proposed the Plan in good faith, and (d) the
Debtor's disclosures as required by Chapter 11 of the Bankruptcy Code have been
adequate and have included information concerning all payments made or promised
by the Debtor in connection with the Plan. The Debtor believes that all of these
conditions will have been met by the date set for the hearing on confirmation
and will seek rulings of the Bankruptcy Court to such effect at that hearing.
The Bankruptcy Code also requires that the Plan shall have been
accepted by the requisite votes of creditors and equity security holders (except
to the extent that "cram down" is available under Section 1129(b) of the
Bankruptcy Code); that such Plan be feasible (that is, that there be a
reasonable prospect that the Debtor will be able to perform its obligations
under the Plan and continue to operate its business and will not likely require
further financial reorganization); and that such Plan is in the "best interests"
of all impaired creditors and equity security holders (that is, that impaired
creditors and equity holders will receive at least as much pursuant to such Plan
as they would receive in a Chapter 7 liquidation). To confirm the Plan, the
Bankruptcy Court must find that all of these conditions are met with respect to
the Plan. Thus, even if the creditors and equity security holders of the Debtor
accept the Plan by the requisite votes, the Bankruptcy Court must make
independent findings respecting such Plan's feasibility and whether it is in the
best interests of the Debtor's creditors and equity security holders before it
may confirm such Plan.
A. Classification of Claims and Interests
The Bankruptcy Code requires that a plan of reorganization place each
creditor's claim and each equity security holder's interest in a class with
other Claims and Interests which are "substantially similar." The Debtor
believes that the Plan meets the classification requirements of the Bankruptcy
Code.
B. Voting
Impaired Classes. As a condition to confirmation, the Bankruptcy Code
requires that each Impaired Class of Claims or Interests accept the Plan. A
Class is "impaired" if the legal, equitable or contractual right attaching to
the Claim or Interests of that class are modified, other than by curing defaults
and reinstating maturity or by payment in full in cash. The Bankruptcy Code
defines acceptance of a plan by an impaired class of Claims as acceptance by
holders of two-thirds in dollar amount and a majority in number of Claims of
that class who actually vote to accept or reject such plan. The Bankruptcy Code
defines acceptance of a plan by an impaired class of Interests (equity
securities) as acceptance by holders of two-thirds of the number of shares in
such Class who actually vote. Holders of Claims or Interests who fail to vote
are not counted as either accepting or rejecting the plan. Each holder of a
security issued under an indenture is entitled to vote with respect to such
security; indenture trustees cannot vote on any Plan on behalf of such holders.
Holders of Claims and Interests included in Class 4 (Atlas Stockholders Secured
Claims), Class 6 (Non-Electing Senior Subordinated Notes Claims), Class 7
(Debentures Claims), Class 8 (General Unsecured Claims), Class 10 (Old
Warrants), Class 11
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(Sun Options), and Class 12 (Electing Senior Subordinated
Notes Claims) are impaired under the Plan.
The Bankruptcy Court has fixed voting procedures for holders of certain
Impaired Claims. For a discussion of Bankruptcy Court approved voting
procedures, see Section II - The Bankruptcy Plan Voting Instructions and
Procedures.
Classes That Are not Impaired. Classes of Claims that are not impaired
under the Plan are deemed to have accepted the Plan. Holders of Claims and
Interests in Class 1 (Other Priority Claims), Class 2 (World Airways Secured
Loan Claim), Class 3 (Miscellaneous Secured Claims), Class 5 (Administrative
Convenience Claims) and Class 9 (Interests) are not impaired under the Plan.
Under section 1126(f) of the Bankruptcy Code, the holders of Unimpaired
Classes are conclusively presumed to accept the Plan and the votes of such
holders will not be solicited.
Claims in Class 11 (Sun Options) are not entitled to receive or retain
any property under the Plan. Under section 1126(g) of the Bankruptcy Code, the
holders of Claims and Interests in such Classes are deemed to reject the Plan.
Nevertheless, the Debtor reserves the right to solicit votes in favor of the
Plan from these holders.
C. Best Interests Test
Notwithstanding the acceptance of the Plan by each Impaired Class,
Section 1129(a)(7) of the Bankruptcy Code requires that the Bankruptcy Court
determine that the Plan is in the best interests of all classes of creditors and
equity security holders impaired by the Plan. The best interests test requires
that the Bankruptcy Court find that, unless a member of the class has consented
to a lesser recovery, the Plan provides to each member of each impaired Class of
Claims and Interests a recovery which has a value at least equal to the value of
the distribution which each such person would receive if the Debtor were
liquidated under Chapter 7 of the Bankruptcy Code. The Debtor believes that the
Plan meets the "best interests" test.
D. Liquidation Analysis
The following liquidation analysis (the "Liquidation Analysis") has
been prepared to provide an estimate of recoveries that might be realized by
holders of various classes of claims and interests if the assets of the Debtor
were liquidated in a Chapter 7 proceeding, as an alternative to the
distributions contemplated by the Plan. The Liquidation Analysis presents two
alternative scenarios, entitled "Estimated Reorganization Value" and "Estimated
Liquidation Value" respectively. The assumptions and calculations underlying
these different scenarios are explained below. These explanations are followed
by a table that sets forth the estimated recoveries under each scenario.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered reasonable by the Debtor,
are inherently subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Debtor, and
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assumptions with respect to liquidation decisions that are subject to change.
Accordingly, there can be no assurance that the values shown for Estimated
Reorganization Value will in fact be realized if the Plan is confirmed and
becomes effective, or that the values shown for Estimated Liquidation Value
would be realized if the Debtor were, in fact, to undergo such a Chapter 7
liquidation.
Reorganization Scenario
The reorganization scenario assumes that the Plan is confirmed and
become effective on March 31, 1991. Distributions under the Plan, other than
with respect to Disputed Claims, are assumed to be made on the Effective Date.
Investment in InteliData and Acquisition. The Plan calls for the Debtor
to sell InteliData shares to Acquisition on the Effective Date in return for
cash in an amount sufficient to pay all of the administrative expenses of the
Chapter 11 case and to repay the World Airways secured claim and the
Administrative Convenience Creditors in full, and to repurchase Modified Senior
Notes from Electing Senior Noteholders. The purchase price per share of
InteliData stock in this transaction will be set at $[0.95] per share for shares
to be retained by Acquisition and $0.01 per share for shares to be resold to the
RRF Lenders at that price. Both prices are expected to represent a discount from
market value at the Effective Date, in recognition of the facts that (i) in
connection with the RRF Loan, Acquisition will be required to transfer to the
RRF Lenders, a number of InteliData shares equal to 10% of the amount of the RRF
Loan and to pledge its remaining shares of InteliData to the RRF Lenders to
secure the RRF Loan, (ii) Acquisition will be assuming recourse liability for
the loan, and (iii) as owner of 80% of the shares of acquisition, Reorganized
Debtor will retain 80% of any net economic value transferred to and retained by
Acquisition. For purposes of illustration, the reorganization scenario assumes
that the market value of the shares is $1.50 per share at the Effective Date.
The InteliData shares retained by the Debtor, as well as those purchased by
Acquisition and not transferred to the RRF Lenders, are valued at this assumed
market value. Eighty percent of the value of the InteliData shares owned by
Acquisition in excess of the amount of the RRF Loan is added to the Debtor's
investment in Acquisition.
Because the amount of cash required to fund the Plan depends upon
whether and to what extent Senior Subordinated Noteholders elect to receive cash
on the Effective Date, the Liquidation Analysis presents two cases, entitled
"Case 1" and "Case 2." Case 1 assumes that all Senior Subordinated Noteholders
(including the Senior Subordinated Notes Trustee) elect to receive cash on the
Effective Date, causing the cash needs of the Debtor and the amount of the RRF
Loan to be approximately $5,000,000 higher than in Case 2, which assumes that
all Senior Subordinated Noteholders (including the Senior Subordinated Notes
Trustee) receive Modified Senior Notes payable over time from future tax-sharing
payments. Because the Debtor's cash needs and the amount of the RRF Loan are
smaller in Case 2, (i) fewer InteliData shares are sold to Acquisition, (ii) the
number of shares sold at the nominal price of $0.01 per share is correspondingly
reduced, and (iii) the dilutive effect of Acquisition's 20% minority interest is
reduced. Accordingly, the proceeds available for distribution to creditors under
Reorganization Scenario Case 2 are higher than under Case 1. This effect is
offset, however, by the increased amount of the Modified Senior Notes issued in
Case 2 and by the fact that the Modified Senior
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Notes will continue to accrue interest after the Effective Date at 12.75% per
annum.
Administrative Expenses. Certain Chapter 11 professionals hold
retainers that will be applied toward payment of their allowed Chapter 11 fees
and expenses. In addition, a portion of the proceeds of the Debtor's prepetition
sale of InteliData Shares remained in escrow on the Petition Date for purposes
of paying Chapter 11 Administrative Expenses. The estimated amount of these
unapplied retainers and escrowed funds is listed under Assets. The estimated
amounts shown for Chapter 11 Professional Fees include fees and expenses that
will be paid from these retainers. Allowed Chapter 11 fees and expenses in
excess of retainers will be paid on the Effective Date from proceeds of sale of
InteliData shares.
Secured Claims. The World Airways claim is secured by liens upon
1,615,396 InteliData shares owned by the Debtor and by 350,000 World Airways
shares owned by Acquisition. The amount shown for this claim includes all
principal, accrued interest and unpaid expenses through November 30, 1998. This
claim is assumed to be paid in full under both the reorganization scenario and
the liquidation scenario.
The Atlas Stockholder Secured Claim is secured by liens upon any and
all of the Debtor's shares of stock in InteliData, Atlas, World Airways and
Acquisition, as well as by liens upon any and all of Acquisition's shares of
stock in InteliData, World Airways and Atlas. The Plan provides for the Atlas
Stockholders to release their liens on the shares of Acquisition but to modify
their liens upon the InteliData Shares, so that such liens are subject to the
prior liens of the RRF Lenders. Because the reorganization scenario assumes that
the liabilities secured by these liens will be paid by Acquisition from
distributions under the Tax Sharing Agreement, no distribution to the Atlas
Stockholders is shown.
Unsecured Claims. The Plan contemplates that Administrative Convenience
Creditors will be paid in full on the Effective Date from the proceeds of sale
of the InteliData shares to Acquisition.
The Plan provides for holders of Class 6 Non-Electing Senior
Subordinated Notes Claims to receive Modified Senior Notes with an aggregate
principal amount equal to the sum of (i) the outstanding principal balance of
the Senior Subordinated Notes, plus (ii) interest accrued through the Effective
Date at the rates provided in the Senior Subordinated Notes Indenture, plus
(iii) all fees, expenses, and other amounts incurred through the Effective Date
for which the Debtor is liable under the terms of the Senior Subordinated Notes
Indenture. The Plan also provides, however, that holders of Senior Subordinated
Notes (including the Senior Subordinated Notes Trustee) who vote to accept the
Plan may elect to receive, in full satisfaction of their rights (including
intercreditor subordination rights and any right to seek payment of
post-petition fees and expenses as an Administrative Claim) with respect to the
Senior Subordinated Notes and under the Senior Subordinated Notes Indenture,
their proportionate share of the cash available for distribution to Electing
Senior Note Holders plus, if that cash is insufficient to pay them principal
plus accrued interest at 10% per annum through the Effective Date, Modified
Senior Notes with an aggregate principal balance equal to the difference. (The
maximum amount of cash available for distribution to Electing Senior Noteholders
is equal to $[5 million] and is subject to reduction if Administrative Expense
exceed a certain level.)
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The Liquidation Analysis presents two alternative reorganization
scenarios, entitled "Case 1" and "Case 2." Case 1 assumes that all Senior
Subordinated Noteholders (including the Senior Subordinated Notes Trustee) elect
to receive cash on the Effective Date in exchange for their Modified Senior
Notes and relinquishment of their rights under the Senior Subordinated Notes
Indenture. Because the $5 million of available cash assumed under Case 1 is not
sufficient to pay all Senior Noteholders the full amount of principal plus
interest at 10% per annum plus the Senior Subordinated Notes Trustee's fees and
expenses through the Effective Date, Case 1 provides for issuance of Modified
Senior Notes in an aggregate principal amount equal to the difference, which is
assumed to be $500,000. Case 2 assumes that none of the Senior Subordinated
Noteholders elect such treatment and that all receive Modified Senior Notes. The
Debtor estimates that default interest, postpetition interest, fees, expenses
and other amounts payable under the terms of the Senior Subordinated Notes
Indenture will cause the aggregate principal amount of the Modified Senior Notes
to be $250,000 more than the sum of principal plus prepetition interest at the
non-default rate. The Modified Senior Notes are to be paid over time from
proceeds of tax-sharing payments after the RRF Loan has been repaid.
The Plan provides for holders of Debentures Claims and General
Unsecured Claims to receive a combination of Modified Debentures, Accrued
Interest Notes and Series A and Series B Warrants with an aggregate value as of
the Effective Date equal to the amount of their Allowed Claims plus interest at
7% per annum from the Petition Date to the Effective Date. The recoveries shown
for these creditors in the Estimated Reorganization Value column of the
Liquidation Analysis represent a pro rata allocation of the estimated value of
the undistributed assets of the Reorganized Debtor. The Plan contemplates that
these creditors will receive payments from cash received by the Reorganized
Debtor under the Tax Sharing Agreement after payment of the company's
administrative expenses. Because distributions to the Reorganized Debtor under
the Tax Sharing Agreement are not expected to exceed its administrative expenses
until the RRF Loan and, if applicable, the Modified Senior Notes have been
repaid in full, the Liquidation Analysis does not attribute value to the
Modified Debentures, Accrued Interest Notes, and Warrants in excess of their pro
rata share of the estimated value of the undistributed assets of the Reorganized
Debtor.
Interests, Warrants and Options. The Plan contemplates that WorldCorp
shareholders will retain their interests and be the shareholders of the
Reorganized Debtor. Similarly, the Old Warrants will be exchanged for Atlas
Stockholder Warrants that are similar in most respects to the Old Warrants.
Accordingly, the Liquidation Analysis treats both of these classes as receiving
100% distributions in the reorganization scenario. The Plan provides for the Sun
Options to be canceled and for the holders to receive no distribution.
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Liquidation Scenario
The liquidation scenario assumes that the Debtor's Chapter 11 case is
converted to a liquidation under Chapter 7 and a trustee is appointed on March
31, 1999 (the "Conversion Date"), and that the investment assets of the Debtor
are liquidated for cash during the period ending December 31, 1999 (the
"Liquidation Period"). The proceeds of sale are assumed to be invested by the
Chapter 7 trustee in accordance with the guidelines set forth in Section 345 of
the Code until distribution. The Debtor has assumed for the purpose of the
Liquidation Analysis that the interest earned on investment proceeds by the
Chapter 7 trustee would offset the loss associated with the time value of money
due to any delay in making final distributions to creditors.
The liquidation scenario further assumes that the Chapter 7 trustee
does not seek to set aside the Atlas transaction and that the Atlas Stockholders
do not assert damage claims against the estate arising out of that transaction.
While the Debtor believes that it has legitimate grounds for attacking the Atlas
transaction, the uncertainty, additional cost and delay associated with such
litigation, coupled with the likelihood of defenses and counterclaims by the
Atlas Shareholders, make any net recovery too speculative to be included in a
comparative analysis.
Investment in InteliData and Acquisition. The value shown for the
Debtor's investment in InteliData represents the shares owned at the petition
date valued at the assumed value of $1.50 per share, less a 15% discount. This
discount is attributable to the fact that the number of shares owned by the
Debtor is far too large to be sold into the public market without significantly
depressing the price, but is not large enough to give a private purchaser
control of the company. The value shown for the Debtor's investment in
Acquisition represents 80% of the current market value of 3,522,586 shares of
common stock of World Airways that are owned by Acquisition.
Administrative Expenses. In addition to Chapter 11 administrative
expenses, which are assumed to be incurred during the period before the case is
converted, the liquidation scenario assumes a Chapter 7 trustee's fee equal to
3% of the value of the assets and other Chapter 7 expenses (including Chapter 11
professional fees) of $300,000.
Secured Claims. In the liquidation scenario, the World Airways Secured
Loan Claim is assumed to be paid in full from the proceeds of sale of the
InteliData shares that secure the claim. The Atlas Stockholder Secured Claim, in
the amount of $16 million plus amounts due under the Earn-Out, is secured by
liens on all of the remaining InteliData shares and all of the Debtor's shares
in Acquisition. Because the estimated value of these shares is less than the
amount of the claim, which is assumed to be equal to $17 million, all remaining
proceeds of sale of these assets are assumed to be paid to the holders of the
Atlas Stockholder Secured Claim.
Remaining Claims and Interests. Because the total amount of estimated
proceeds in the liquidation scenario is less than the aggregate amount of
secured claims and administrative expenses, holders of Senior Subordinated Notes
Claims, Debentures Claims, General Unsecured Claims, Interests, Old Warrants and
Sun Options are projected to receive no distribution in the liquidation
scenario.
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[Insert Liquidation Analysis Spreadsheet]
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Liquidation Analysis Notes:
(a) Represents cash on hand at December 31, 1998.
(b) Liquidation scenario: Represents $50,000 unapplied retainer held by
Chapter 11 professionals plus $61,764 of escrowed cash reserves as of
Petition Date. Reorganization scenario: Represents Liquidation scenario
retainers and reserves plus assumed $237,500 tax sharing payment
received during April 1999.
(c) Receivables include an employee receivable, accrued interest and any
miscellaneous items. After a review of the terms of the receivables,
the Debtor assumes full collection.
(d) No increase in value of common stock is assumed.
(e) Represents estimated professional fees as follows:
Young Conaway $100,000
Wilmer Cutler 250,000
Arthur Anderson 50,000
Creditors Committee Professionals 100,000
Other 100,000
(f) Represents budgeted salary, reimbursements and office
expenses through April 1999 (g) Reorganization scenario assumes
initial notice expense of $10,000 plus plan printing and distribution
expense of $20,000. Liquidation scenario assumes reorganization
expenses plus Chapter 7 notice expenses of $10,000.
(h) Represents budgeted compensation plus expense reimbursements through
April 1999.
(i) Represents agreed confirmation bonus payments to WorldCorp's Chairman
and CEO payable on the Effective Date of the confirmed Chapter 11 Plan.
(j) Represents a Trustee's fee equal to 3% of Assets plus Chapter 7
professional fees and other administrative expenses of $300,000.
(k) Represents principal, accrued interest and unpaid expenses on the
secured note payable to World Airways through May 31, 1999 without
discount.
(l) The reorganization scenario assumes that the Atlas Stockholder Secured
Claims will be paid in full by WorldCorp Acquisition from amounts
received under the Tax Sharing Agreement. Accordingly, distributions to
these creditors from Reorganized Debtor are assumed to be zero.
(m) Case 1 of the reorganization scenario assumes that all Senior
Subordinated Noteholders elect to accept cash plus Modified Senior
Notes in an aggregate amount equal to principal plus interest at 10%
per annum plus the fees and expenses of the Senior Subordinated Notes
Indenture Trustee through the Effective Date in full satisfaction of
their claims. This total is assumed to be $5.5 million, and available
cash is assumed to be $5 million, resulting in the issuance of
$500,000 of Modified Senior Notes under Case 1. Case 2 of the
reorganization scenario assumes that none of the Senior Subordinated
Noteholders elect this treatment and that, instead, they receive
Modified Senior Notes with an aggregate principal balance equal to the
sum of (i) the principal balance of the Senior Subordinated Notes plus
(ii) accrued interest through the Effective Date at the rates provided
in the Senior Subordinated Notes Indenture plus (iii) all fees,
expenses and other amounts for which the Debtor is liable under the
Senior Subordinated Notes Indenture. The inclusion of default interest
and penalties in the Case 2 scenario is assumed to add $250,000 to the
amount of liability assumed in the Case 1 scenario. The liquidation
scenario assumes that the Senior Notes Claims are limited to principal
plus prepetition
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interest and fees payable under the Senior Subordinated Notes
Indenture. The elimination of postpetition interest, fees and expenses
is assumed to reduce the Senior Subordinated Notes Claim in the
liquidation scenario by $150,000 compared to the Case 1 reorganization
scenario. (n) The reorganization scenario assumes (i) that all
payments to WorldCorp Acquisition under the Tax Sharing Agreement in
excess of certain reserved amounts during the first three years after
the Effective Date will be used to repay either the RRF Loan or the
Modified Senior Notes, and (ii) any recoveries from WorldCorp
Acquisition for the use of certain tax benefits of the Debtor by
WorldCorp Acquisition in the first three years after the Effective
Date will be offset by administrative expenses of the reorganized
company. The reorganization scenario does not reflect any recovery
from increased tax-sharing payments to WorldCorp after the RRF Loan
has been repaid. (o) The Reorganization Analysis assumes that all
warrants issued on the Effective Date remain unexercised.
E. Feasibility
Section 1129(a)(11) of the Bankruptcy Code requires a finding that
confirmation of the Plan is not likely to be followed by the liquidation or the
need for further financial reorganization. The Debtor believes that the
Reorganized Debtor will be able to perform its obligations under the Plan and
continue to operate its business without requiring further financial
reorganization. The feasibility of the Plan is demonstrated by the projected
financial statements for the years 1998 through 2001 under the heading
"Projected Financial Information." Such projected financial statements represent
the best estimate of the Debtor's management as to the items set forth therein.
They are believed by management and its financial advisors to be based upon
assumptions which, when considered on an overall basis for the projection
period, are reasonable.
F. Non-Consensual Confirmation
The Bankruptcy Code provides for confirmation of the Plan even if it is
not accepted by all Impaired Classes, as long as at least one Impaired Class of
Claims has accepted it (without counting the acceptances of insiders). The
"cramdown" provisions are set forth in Section 1129(b) of the Bankruptcy Code.
The Plan may be confirmed under the cramdown provisions if, in addition
to satisfying the other requirements of Section 1129 of the Bankruptcy Code, it
(i) is "fair and equitable" and (ii) "does not discriminate unfairly" with
respect to each Class of Claims or Interests that is Impaired under, and has not
accepted, such Plan. As used by the Bankruptcy Code, the phrases "discriminate
unfairly" and "fair and equitable" have narrow and specific meanings unique to
bankruptcy law.
The requirement that a plan not "discriminate unfairly" means that a
dissenting Class must be treated equally with respect to other Classes of the
same rank. In the event of a "cramdown," Classes which are afforded treatment of
unequal value compared to the treatment
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afforded other Classes of equal rank could not be maintained without the
consent of other Classes.
The "fair and equitable" standard, also known as the "absolute priority
rule," requires that a dissenting Class receive full compensation for its
allowed Claims or Interests before any junior Class receives or retains any
property.
If the holders of any impaired Class vote to reject the Plan, the Plan
may be confirmed under Section 1129(b) of the Bankruptcy Code if holders of all
Claims and Interests junior to those of the impaired Class do not receive or
retain any property under the Plan.
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CONCLUSION
This Disclosure Statement was approved by the Bankruptcy Court after
notice and a hearing. The Bankruptcy Court has determined that this Disclosure
Statement is adequate and contains information sufficient for holders of Claims
and Interests to make an informed judgment about the Plan. However, such
approval does not mean that the Bankruptcy Court recommends either acceptance or
rejection of the Plan.
Dated: March 22, 1999
Herndon, Virginia
WorldCorp, Inc.
Debtor
By: ______________________
Name:
Title:
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SUMMARY OF PLAN...................................................................................................1
I. Business Overview...............................................................................1
II. Treatment of Claims and Interests under the Plan................................................2
III. Implementation of the Plan......................................................................8
IV. Recovery Analysis...............................................................................9
I. INTRODUCTION............................................................................................10
II. THE BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES..................................................11
A. Definitions....................................................................................11
B. Notice to Holders of Claims and Holders of Interests...........................................11
C. Solicitation Package...........................................................................12
D. Voting Procedures, Ballots and Voting Deadline.................................................12
E. Confirmation Hearing and Deadline for Objections to Confirmation...............................13
III. BACKGROUND OF WORLDCORP.................................................................................14
A. General Corporate Structure....................................................................14
B. Overview of World Airways......................................................................18
C. Overview of InteliData.........................................................................19
D. Overview of Atlas..............................................................................20
E. Management of WorldCorp........................................................................20
IV. FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................................................23
A. Risk Factors...................................................................................23
B. Results of Operations..........................................................................26
C. Financing Developments.........................................................................31
D. Dividend Policy................................................................................32
E. Income Taxes...................................................................................32
V. LEGAL AND ADMINISTRATIVE PROCEEDINGS....................................................................32
VI. PROJECTED FINANCIAL INFORMATION.........................................................................33
A. Basis of Presentation..........................................................................33
B. Assumptions About Projected Financial Information..............................................34
C. Projected Consolidated Balance Sheet...........................................................36
D. Projected Consolidated Income Statement........................................................37
</TABLE>
<PAGE> 90
<TABLE>
<S> <C>
E. Projected Consolidated Cash Flow Statement.....................................................39
VII. THE CHAPTER 11 CASE.....................................................................................39
A. Events Leading to the Debtor's Chapter 11 Filing...............................................39
B. Continuation of Business.......................................................................42
C. Significant Events.............................................................................42
D. Alternatives to the Plan.......................................................................43
VIII. PLAN OF REORGANIZATION..................................................................................44
A. Overall Structure of the Plan..................................................................44
B. General Classification and Treatment of Claims and Interests...................................56
C. Treatment of Claims and Interests Under the Plan...............................................56
IX. CERTAIN FACTORS TO BE CONSIDERED........................................................................59
A. General Considerations.........................................................................59
B. Certain Bankruptcy Considerations..............................................................59
C. Inherent Uncertainty of Financial Projections..................................................59
D. Liquidity......................................................................................60
E. Future Business................................................................................60
X. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.............................................................60
A. Federal Income Tax Consequences to the Debtor..................................................61
B. Federal Income Tax Consequences to Holders of Claims...........................................65
C. Federal Income Tax Consequences to the RRF Lenders.............................................72
XI. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS.........................................................73
A. Classification of Claims and Interests.........................................................74
B. Voting.........................................................................................74
C. Best Interests Test............................................................................75
D. Liquidation Analysis...........................................................................75
E. Feasibility....................................................................................82
F. Non-Consensual Confirmation....................................................................82
CONCLUSION.......................................................................................................84
</TABLE>
APPENDICES
Appendix A -- Plan of Reorganization of WorldCorp, Inc.
Appendix B -- RRF Loan Term Sheet
<PAGE> 1
JOINT FILING AGREEMENT
Pursuant to Rule 13d-1(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), each of the hereby agrees to the joint filing of
this statement on Schedule 13D under the Exchange Act and any additional
amendments thereto relating to the equity securities of WorldCorp, Inc., a
Delaware corporation. Such Schedule 13D statement and amendments thereto, when
signed and filed by the undersigned, shall be deemed to be filed on behalf of
each of them.
Date: May 24, 1999
ROTHSCHILD RECOVERY FUND L.P.
By: Rothschild Recovery Associates LLC,
its general partner
By: /s/ Cheryl G. Gordon
___________________________________
Name: Cheryl G. Gordon
Title: Managing Member
ROTHSCHILD RECOVERY ASSOCIATES LLC
By: /s/ Cheryl G. Gordon
___________________________________
Name: Cheryl G. Gordon
Title: Managing Member
/s/ Cheryl G. Gordon
___________________________________
Cheryl G. Gordon
/s/ Wilbur L. Ross, Jr.
___________________________________
Wilbur L. Ross, Jr.
