As filed with the Securities and Exchange Commission on April 18, 2000
Registration No. 333- ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
WORLD AIRWAYS, INC.
-------------------
(Exact name of registrant as specified in charter)
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
Delaware (703) 834-9200 94-1358276
-------- --------------- ----------
State or other (Address, including zip code, (I.R.S. employer
jurisdiction of and telephone number, including identification number)
incorporation or area code, of registrant's
organization) principal executive offices)
CATHY SIGALAS Copies of communications to:
General Counsel and Secretary ROBERT E. OLSEN, ESQ.
World Airways, Inc. 1750 Tysons Blvd., Suite 1200
13873 Park Center Road, Suite 490 McLean, Virginia 22102
Herndon, Virginia 20171 Tel: (703) 749-1357
(703) 834-9200 Fax: (703) 714-8357
- ---------------------------------------
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. ____
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.__X__
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. _____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. _____
(continued on following page)
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount maximum maximum Amount of
Title of to be registered(1) offering price aggregate registration
securities to be registered per share offering price fee
- ---------------------------------- ------------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per 2,201,351 shares $.75 (2) $1,651,013.25 $435.87
share
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per 1,000,000 shares $2.50 (3) $2,500,000.00 $660.00
share
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per 1,000,000 shares $2.50 (3) $2,500,000.00 $660.00
share
- ---------------------------------------------------------------------------------------------------------------------------
Total: 4,201,351 shares $6,651,013.25 $1,755.87
===========================================================================================================================
</TABLE>
(1) Subject to adjustment in accordance with Rule 416(a) and (b).
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c), based on the average of the high and low
prices reported for the Common Stock on the Nasdaq SmallCap Market on
April 14, 2000.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(g)(i).
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. It is
part of a registration statement that we filed with the Securities and Exchange
Commission. The securities may not be sold until the registration statement
becomes effective. This prospectus is not an offer to sell these securities, and
it is not soliciting an offer to buy them, in any state or other jurisdiction
where an offer and sale would not be permitted.
Subject to Completion, Dated April 18, 2000
PROSPECTUS
- ----------
4,201,351 Shares
WORLD AIRWAYS, INC.
Common Stock
We are registering 4,201,351 shares of our common stock for sale or
distribution by the selling security holders named in this prospectus. We will
not receive any of the proceeds of sale. The selling security holders may sell
or distribute the shares from time to time in public trading transactions at the
market price, in negotiated transactions, or in any other way described in this
prospectus. The offering will not be underwritten.
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "WLDA". The closing sale price of our common stock on that market on
April ___ , 2000, was $____ per share.
Investing in our common stock involves a high degree of risk. See "Risk
Factors," beginning on page 8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ________ ____ ,
2000.
<PAGE>
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly, and current
reports, proxy statements, and other information with the SEC. You may read and
copy these reports, proxy statements, and other information at the SEC's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Please call the SEC at (800) SEC-0330 for
more information about the operation of the public reference rooms. You may also
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Our SEC filings are also available at the SEC's web site at
"http://www.sec.gov" and at our own web site at "http://www.worldair.com".
The SEC allows us to "incorporate by reference" information included in
documents that we file with it, which means that we may disclose important
information to you by referring you to other documents. Information incorporated
by reference is an important part of this prospectus, and documents that we file
later with the SEC will automatically update and supersede that information. We
are incorporating by reference in this prospectus the documents listed below
and, until the termination of the offering, any future filings which we make
with the SEC under Sections 13(a), 13(c), 14, and 15 (d) of the Securities
Exchange Act of 1934:
- Our annual report on Form 10-K for the year ended December 31,
1999, which contains our financial statements for our latest
fiscal year, and
- Our registration statement on Form 8-A, as amended, which includes
a description of our common stock.
We will provide you, without cost, with a copy of any of these filings
on request made orally or in writing to us at the following address:
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
Attn: Investor Relations
Tel: (703) 834-9200
Fax: (703) 834-9360
<PAGE>
WORLD AIRWAYS, INC.
We are a U.S. certificated airline, founded in 1948. We provide
long-range domestic and international supplemental air transportation service,
for both passengers and cargo, to the United States government, international
air carriers, tour operators, major international freight forwarders, and cruise
ship companies. We do not provide scheduled service. We are a Delaware
corporation. Our principal executive offices are located near Washington Dulles
International Airport in The Hallmark Building, 13873 Park Center Road, Suite
490, Herndon, Virginia 20171, and our main telephone number is (703) 834-9200.
Shares Being Offered
In 1987, we became a wholly-owned subsidiary of WorldCorp, Inc., a
Delaware corporation. In 1994, WorldCorp sold 24.9% of its interest to Naluri
Berhad, a Malaysian aviation company. In October 1995, we became publicly owned
after an initial public offering of our common stock. Since then, we have issued
shares to our employees and others under various employee benefit plans.
On February 12, 1999, WorldCorp sought protection from its creditors,
under Chapter 11 of the United States Bankruptcy Code, in the United States
Bankruptcy Court for the District of Delaware. Since then, WorldCorp has
continued to own and manage its various properties as debtor and
debtor-in-possession. Those properties include ownership of approximately 21.6%
of our outstanding common stock which WorldCorp holds both directly and
indirectly through a wholly-owned subsidiary, WorldCorp Acquisition Corp., a
Delaware corporation, now also in bankruptcy proceedings in Delaware. As a
result, the beneficial owners of WorldCorp's interests are in a position to have
a significant influence over the outcome of many issues affecting World Airways
stockholders. In August 1999, we concluded an agreement with WorldCorp and
WorldCorp Acquisition Corp., approved by the bankruptcy court, under which we
reacquired 1,069,000 shares of our common stock in payment and satisfaction of
approximately $1.8 million in debt owed to us by WorldCorp. As a result of that
transaction, we are no longer a creditor of WorldCorp.
On March 16, 2000, WorldCorp and WorldCorp Acquisition Corp. filed with
the bankruptcy court a proposed liquidating plan of reorganization that calls
for the remaining shares of our common stock which they own to be sold or
distributed to some of their creditors. Under the plan, WorldCorp and WorldCorp
Acquisition Corp. would cease operations, distribute their assets, and be
dissolved. The bankruptcy court has scheduled a plan confirmation hearing for
April 26, 2000. WorldCorp and WorldCorp Acquisition Corp. have also filed with
the bankruptcy court a motion to establish an auction procedure for selling the
remaining shares, before the effective date of any confirmed plan, for the
highest and best bid. Whether they distribute the shares to their creditors
under a confirmed plan or sell them in an approved sale for the highest and best
bid, WorldCorp and WorldCorp Acquisition Corp. are using this prospectus to
offer the remaining shares at market prices, in negotiated transactions, or in
any other way described in this prospectus. On March 31, 2000, they owned an
aggregate of 2,201,351 of our shares.
<PAGE>
In August 1999 and March 2000, respectively, we entered into separate
agreements with International Lease Finance Corporation, a California
corporation, and The Boeing Company, a Delaware corporation, our principal
aircraft lessors. Under each agreement, we issued warrants, exercisable at any
time during the five years after the date of each warrant agreement, to purchase
up to 1,000,000 shares of our common stock at a purchase price of $2.50 per
share. We also agreed to register the shares, before or after exercise of the
warrants, for public sale. Accordingly, ILFC and Boeing are using this
prospectus to offer a total of 2,000,000 shares of our common stock which they
have the right to acquire, at market prices, in negotiated transactions, or in
any other way described in this prospectus.
Market for Our Shares
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "WLDA". The closing sale price of our common stock on that market on
April ___ , 2000, was $____ per share.
Our Business
We provide supplemental aircraft to our customers under two types of
contracts. These are called "wet leases" (also known as "ACMI contracts") and
"full service contracts" (also known as "charters"). Under wet leases, we supply
aircraft, crew, maintenance, and insurance only, while the customers agree to be
responsible for other operating costs, including fuel. Under full service
contracts, we supply ACMI and agree to be responsible for most other operating
costs, including landing, handling, and fuel. In either case, the customer bears
the risk of filling the aircraft.
We generally charge our customers on a block hour basis. "Block hours"
are the elapsed time from the moment an aircraft first moves under its own power
at the point of origin to the time it comes to rest at its final destination. We
generally charge a lower rate per block hour for wet leases than full service
contracts.
We focus our marketing efforts on the U.S. Air Force Air Mobility
Command, international leisure tour operators, freight operators, international
airlines operating in countries where rapid economic development drives demand
for our services, and cruise ship companies. During the last ten years, a
material portion of our revenues has been derived from providing charter
transportation services to airlines transporting pilgrims to the annual Hadj
pilgrimage in Mecca. All of our aircraft are operated under long-term leases. We
believe that our fleet of modern aircraft is well suited to the needs of our
customers and provides superior economic service.
The market for passenger and cargo ACMI and full service charter
business is highly competitive. Some of the passenger and cargo air carriers
that we compete against have substantially greater financial resources and more
extensive facilities and equipment than we do. We believe that the age of an
aircraft fleet, the passenger, range, and payload capacities of aircraft, and
price are the principal competitive factors in our industry. Competitors in the
<PAGE>
passenger charter market include Martinair, Tower Air, Omni Air International,
and American Trans Air. Competitors in the cargo charter market include
all-cargo carriers Atlas Air, Gemini Air Cargo, Polar Air Cargo, and Kitty Hawk
and scheduled and non-scheduled passenger carriers that have substantial belly
capacity. Our ability to compete depends, in part, upon our success in
convincing major international airlines and tour operators that outsourcing some
portion of their air passenger and cargo business is cost-effective.
The domestic and international air transportation industry is highly
sensitive to general economic conditions and can be adversely affected by
unexpected global political developments. In fact, during the 1997-99 period, we
were adversely affected by economic conditions in Malaysia, Indonesia, and other
countries in the Asia Pacific region. Those conditions included national
liquidity crises, currency devaluations, higher regional interest rates, reduced
opportunities for refinancing or refunding of maturing debts, and a general
reduction in spending throughout the region. Largely as a result of these
factors, we operated unprofitably in our 1998 and 1999 fiscal years. However,
management believes that these conditions have started to improve and will
provide new opportunities to lease aircraft to airline customers, particularly
customers which have deferred or canceled new aircraft orders but are now in
need of providing additional airlift.
Due to the high fixed costs of leasing and maintaining aircraft and the
costs for cockpit crewmembers and flight attendants, our aircraft must have high
utilization at attractive rates in order for us to operate profitably. Although
our strategy is to enter into long-term contracts with customers, the terms of
existing customer contracts are shorter than the terms of our aircraft leases.
Customers
Our business has historically been dependent on a few major customers,
the loss of any one or more of which could have a material adverse effect on our
business. In 1999, our principal customers were the United States Air Force and
Malaysian Airline System Berhad. They provided approximately 51% and 9%,
respectively, of our revenues and 35% and 11%, respectively, of total block
hours flown. In 1998, our principal customers were the USAF, MAS, and P.T.
Garuda Indonesia. They provided approximately 41%, 19%, and 12%, respectively,
of our revenues and 27%, 18%, and 13%, respectively, of total block hours flown.
In 1997, the same customers provided approximately 25%, 21%, and 10%,
respectively, of our revenues and 16%, 23%, and 11%, respectively, of total
block hours flown. A contract with Philippine Airlines, which expired in
February 1998, provided 31% of our revenues and 34% of our block hours flown in
1997.
USAF. We have provided air transportation services, principally
internationally, to the USAF since 1956. In exchange for requiring pledges of
aircraft to the Civil Reserve Aircraft Fleet for use in times of national
emergency, the USAF awards contracts to CRAF participants, acting alone or
through teaming arrangements, for peacetime transportation of personnel and
cargo.
Until the government's 1999 fiscal year, we led a contractor teaming
arrangement that enjoyed a large share of the USAF's overall commercial airlift
requirement. During a period in
<PAGE>
which the U.S. military downsized substantially, our portion of the fixed USAF
award increased from $15.6 million for the government's 1993 fiscal year to $86
million for the government's 1999 fiscal year. However, our teaming agreement
negotiations for the government's 2000 fiscal year resulted in a substantially
reduced share of the USAF's fixed commercial airlift requirement, $27 million.
Nevertheless, we expect to obtain an increased share of Air Mobility
Command expansion flying, which the USAF customarily awards in addition to the
fixed contract flying. In our 1999 fiscal year, our revenue from the fixed award
was $94 million, and our AMC expansion revenue was $40.5 million. In December
1999, the AMC asked us to operate passenger charter flights from January 28,
2000 through April 2000 to replace another carrier. The value of the additional
flying is approximately $13.5 million.
Malaysian Airline System. We have provided wet lease transportation
services to Malaysian Airline System since 1981. Naluri, which owned 18.9% of
our outstanding common stock at March 31, 2000, owns approximately 28% of MAS.
Beginning in October 1999, we ceased operating for MAS as a result of its
failure to make required monthly payments for our aircraft. MAS disputes its
obligation to make payments after September 30, 1999. We deployed our aircraft
elsewhere following MAS's cessation of payments.
Renaissance Cruises. We began flying one aircraft for Renaissance
Cruises in August 1999, providing exclusive air service to Athens and Istanbul
from New York, and the contract was later extended. We expect to dedicate a
second aircraft to Renaissance in 2000 and a third in 2001. The additional
aircraft would expand the current service and provide additional service to
Lisbon and Barcelona. We expect that Renaissance will become one of our more
significant customers in future years.
Garuda. We have flown for Garuda periodically since 1973. In 1997,
approximately 40,000 of the 200,000 Indonesians who traveled to Mecca for the
Hadj pilgrimage flew on our aircraft. We operated six aircraft for Garuda during
the 1998 pilgrimage, and we are operating four aircraft for Garuda for the 2000
Hadj.
STAF. We have entered into an agreement with Servicios De Transportes
Aereos Fueguinos to provide one cargo aircraft to STAF for a three-year term
that began in May 1998.
Aircraft Fleet
Our fleet consists of eight leased MD-11 and two leased DC10-30
aircraft. The MD-11 aircraft include five passenger aircraft (two of which are
long-range versions), one freighter aircraft, and two convertible aircraft. The
DC10-30 aircraft include one passenger aircraft and one convertible aircraft.
<PAGE>
Maintenance
Airframe and engine maintenance costs account for most of our
maintenance expenses, and they typically increase as the aircraft fleet ages. We
outsource major airframe maintenance and engine work to several suppliers,
including United Technologies Corporation's Pratt & Whitney Group.
Aviation Fuel
We purchase aviation fuel at spot prices from major oil companies,
under delivery contracts at often frequented commercial locations and from
United States military organizations at military bases. Fluctuations in the
price of fuel have not had a significant impact on our operations in recent
years because, in general, our customer contracts limit our exposure to fuel
price increases. Nevertheless, substantial increases in the cost, or reductions
in the availability, of aviation fuel could have a material adverse effect on
the air transportation industry in general and accordingly on our financial
condition and results of operations.
Regulatory Matters
We are subject to numerous regulations of the U.S. Department of
Transportation, the Federal Aviation Administration, and other federal, state,
and local government agencies. In 1999, the FAA issued a notice of proposed
rulemaking concerning an airworthiness directive that would require the
replacement of insulation blankets on our MD-11aircraft, within four years, at
an estimated cost of approximately $4.9 million per aircraft. We have not
determined how any portion of the replacement cost for which we might be
responsible would be financed.
Our international operations are generally governed by a network of
bilateral civil air transport agreements providing for the exchange of traffic
rights between governments which then select and designate air carriers
authorized to exercise such rights.
Employees
On February 29, 2000, we had 849 full time equivalent employees
classified as follows:
Classification Number
----------------------------- ------
Management 15
Administrative and Operations 270
Cockpit Crew 232
Flight Attendants 332
---
Total: 849
<PAGE>
Our flight attendants, cockpit crewmembers, and dispatchers are represented
under collective bargaining agreements amendable June 30, 2000, June 30, 2003,
and December 31, 2003, respectively. Fewer than twelve of our employees are
dispatchers.
RISK FACTORS
- --------------------------------------------------------------------------------
Some of the statements contained or incorporated by reference in this prospectus
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Statements about our expectations, beliefs, plans, objectives, assumptions, or
future events or performance are not historical facts and may be
forward-looking. Forward-looking statements are often, but not always, made
through the use of words or phrases like "anticipate," "estimate," "plans,"
"projects," "continuing," "ongoing," "expects," "management believes," "we
believe," "we intend," and similar words or phrases. Accordingly, these
statements involve estimates, assumptions, and uncertainties. Any
forward-looking statements are qualified in their entirety by reference to the
factors, including risk factors, discussed in this prospectus or incorporated by
reference.
Because the factors discussed in this prospectus or incorporated by reference
could cause actual results or outcomes to differ materially from those expressed
in forward-looking statements, you should not over-rely on forward-looking
statements. Further, each forward-looking statement speaks only as of the date
on which it is made, and we undertake no obligation to update any
forward-looking statement to reflect later events or circumstances as they
occur.
- --------------------------------------------------------------------------------
Investing in our common stock involves a high degree of risk. Before
agreeing to buy, you should carefully consider the following risk factors, in
addition to the other information contained or incorporated by reference in this
prospectus:
Our history of operating losses and expected future losses may hurt our ability
to realize our business goals, to operate profitably, or even to continue
operations.
We have experienced operating losses during each of our last two fiscal
years. During the years ended December 31, 1999 and 1998, we incurred losses
from continuing operations before income taxes and an extraordinary item of
approximately $13.7 million and $10.9 million, respectively, and we expect to
incur an operating loss in our current fiscal year. At December 31, 1999, we had
current assets of approximately $30.3 million and deficit working capital of
approximately $24.9 million. We have historically financed our working capital
and capital expenditure needs out of cash flow from operations, sales of our
common stock, secured borrowings, and other financing from banks and other
lenders. However, as a result of our recent operating losses, extended decline
in the market price of our common stock, and other factors, we have no practical
ability to rely on several of these sources. Specifically, our cash flows from
operating activities have declined significantly since 1997, much of our cash
flow is used to
<PAGE>
repay borrowings, we have little or no additional borrowing capability under our
existing credit arrangements, all of them asset-based, and there is no perceived
market demand for new issuances of our debt or equity securities. In March 2000,
we commenced a salary reduction program for many of our employees in an effort
to save $5 million over 18 months. The realization of our business goals, the
return to profitable operations, or even continued operations, under these
circumstances, may depend on our ability, over the next two to three years, to
establish and maintain collaborative arrangements with our aircraft lessors,
current credit providers, and customers and to establish new sources of revenue
with minimal capital expenditures. We are seeking to accomplish each of these
objectives but may not succeed.
Our liquidity needs may impair our ability to compete in a capital- and
labor-intensive industry.
In August 1997, we issued $50 million of 8% subordinated senior
debentures, due August 26, 2004 and convertible into shares of our common stock
at a rate of $8.90 per share, and used net proceeds of approximately $30.6
million to repurchase four million shares of our common stock from WorldCorp and
Naluri. During 1999, the holders of $1.2 million of the debentures converted
them into our common stock, and we repurchased approximately $8.2 million
principal amount of the debentures at approximately a 75% discount from face
value. Nevertheless, at December 31, 1999, our long-term obligations net of
current maturities totaled $52.1 million (including $40.5 million in principal
amount of debentures). We have established no sinking fund or other mechanism to
assure payment of the debentures when they come due, and we have no arrangements
or understandings with any debenture holders regarding the possible conversion
of the debentures or the restructuring of the debt which they represent. To
increase capacity and effectively compete in the airline industry normally
requires large investments of capital for the purchase or long-term lease of
aircraft, engines, and spare parts and large investments in cockpit crew, flight
attendants, and other personnel. Through restructuring our existing aircraft
leases and entering into new leases on more attractive terms and conditions, we
have been seeking to mitigate that risk. Nevertheless we retain substantial
liquidity requirements for debt service and operations, and without any assured
source of new capital financing, we may not be able to acquire the equipment,
personnel, and other resources we need.
Our business is a market niche activity which is subject to fluctuations in
demand.
We have incurred long-term lease and other obligations to hold aircraft
and personnel available for lease to established airline companies and other
users of transportation services. Our strategy is to seek to enter into
long-term leases with our customers, but our existing commitments for aircraft
are for longer terms than our customer commitments. We have historically been
dependent on a small number of customers and potential customers, the loss of
any one or more of which could have a material adverse effect on our business
and operations. Furthermore, our ability to compete in the airline industry
requires us to convince the United States government, whose funding is subject
to annual appropriations, to contract with us and to persuade other air
transportation providers to outsource a portion of their business to us. There
is no long-term pent-up demand for our services, and we therefore typically have
unused capacity to fill over a six- to twelve-month horizon. This is an
inherently risky business model for which
<PAGE>
there are no clear strategies for success, and it places a premium on our being
able to respond opportunistically to transitory market developments.
Political and economic developments beyond our control may impact adversely on
our business and operations.
In recent years, much of our operations and an even greater share of
our operating revenues have been dependent on our relationship with the USAF Air
Mobility Command and with customers in the Asia Pacific region. The
establishment of teaming arrangements for CRAF contracts, the awarding of
government contracts, and the structure or even the continuation of the CRAF
program involve many political, economic, and other factors over which we have
no control. In the United States government's 2000 fiscal year, we lost
approximately two-thirds of the USAF's fixed commercial airlift requirement that
we enjoyed in the government's previous fiscal year. The Asia Pacific region,
meanwhile, endured a major economic crisis, with adverse impact on our operating
revenues, in 1997-99. We cannot predict how future military spending budgets,
aircraft requirements, national security considerations for a continued strong
and balanced CRAF, the political and economic stability of other countries
(including those in the Asia Pacific region), and the stability of our
competitors will interact to affect our future business.
Airworthiness directives of the FAA may impose significant financial burdens on
us.
We are subject to regulation by the U.S. Federal Aviation
Administration and other agencies. The FAA has the power to issue airworthiness
directives, the effect of which may be to require us to modify our aircraft, at
our expense, to meet perceived inadequacies throughout the airline industry. If
we were financially unable to meet a particular airworthiness directive, or if
we concluded that complying with an airworthiness directive could not be
cost-justified, we would be unable to operate the related aircraft. We expect
the FAA to issue an airworthiness directive in 2000 that would require the
replacement of the insulation blankets in our eight MD-11 aircraft, within four
years, at a cost of approximately $4.9 million per aircraft. We have not
determined how any portion of that cost for which we might be responsible woul
be financed.
If our lessors claimed a default under any of our MD-11 aircraft leases, they
could cancel the leases on twelve months notice.
In 1999, we renegotiated the lease terms for our eight MD-11 aircraft.
In connection with those negotiations, we gave the lessors, Boeing and ILFC, the
right to cancel the lease of any of the aircraft on twelve months notice, should
we fail to meet defined financial performance requirements. We failed to meet
the financial performance requirements in 1999, without receiving notice of
default or cancellation, and we may continue to be unable to meet them in 2000.
Any failure to meet the financial performance requirements and cancellation of
the leases could make it difficult or impossible for us to perform on existing
contracts with our customers.
If we fail to reach agreement with our flight attendants, we could be subject to
a labor stoppage.
<PAGE>
Approximately 39% of our employees are flight attendants, who are
represented by a labor union. We have entered into a collective bargaining
agreement with the union, and that agreement will be amendable June 30, 2000.
Any failure to reach timely agreement with our flight attendants could lead to a
labor stoppage that would impair our ability to continue operations and to serve
our customers.
We are subject to several large contingent liabilities which, if not resolved in
our favor, could impair our operations.
A German tour operator is seeking damages of approximately $3.5 million
against us, in a German court, in connection with a contract dispute. Our flight
attendants challenge our compliance with contract provisions requiring us to use
foreign flight attendant crews on our flights for Garuda and other foreign
carriers, and have filed several grievances against us under which they seek
sizeable awards of back pay. We believe that we have meritorious defenses to
each of these claims. Nevertheless, if these and other contingent liabilities
are not resolved in our favor, our net earnings would be reduced or our net
losses increased, perhaps substantially, and our cash available for operations
would be further limited.
Any delisting of our common stock by Nasdaq might make it difficult for our
shareholders to sell their shares.
Our common stock is included for trading on the Nasdaq SmallCap Market
under the symbol "WLDA". Continued inclusion on that market is subject to our
meeting various requirements relating to our assets, capital, earnings, stock
price, and corporate governance. Current requirements for continued listing
include (1) maintaining net tangible assets of $2 million, market capitalization
of $35 million, or net income of $500,000 in the last fiscal year or in two of
the last three fiscal years, (2) at least 500,000 shares publicly held with a
market value of at least $1 million (excluding shares held directly or
indirectly by any officer or director and by any more than 10% beneficial
shareholder), (3) a minimum bid price for our common stock of $1.00, (4) at
least two market makers, and (5) at least 300 round-lot holders of our shares.
At December 31, 1999, we did not meet the first of these five requirements. Our
shares are therefore subject to being delisted, in which case trading would
likely be conducted in the over-the-counter market on the NASD Bulletin Board or
in the National Quotation Bureau "pink sheets". This might make it more
difficult for the holders of our common stock to obtain accurate market value
quotations or to sell or pledge their shares. In addition, delisting could
subject our common stock to onerous regulation as a "penny stock," further
restricting the ability of broker-dealers to sell it.
Federal law and our charter documents limit our non-U.S. ownership.
As required by federal law, our charter documents provide that no more
than 25% of our voting stock may be beneficially owned or controlled by persons
who are not citizens of the United States. Any person proposing to purchase the
shares offered by the selling security
<PAGE>
holders will be required to give assurances that the proposed purchase will
comply with these provisions. These provisions may restrict our ability to seek
capital on attractive terms.
Since becoming a public company, we have never paid dividends.
Since becoming a public company in 1995, we have never paid any cash
dividends, and we do not anticipate paying cash dividends in the foreseeable
future.
The sale of our shares by WorldCorp and WorldCorp Acquisition Corp. in this
offering will probably result in a substantial limitation of our net
operating loss carryforwards for tax purposes.
At December 31, 1999, we had net operating loss carryforwards for
federal income tax purposes of $73.4 million, which may be available to reduce
our U.S. federal income tax obligation in future years. However, if we fail to
generate future taxable income before the net operating loss carryforwards
expire, the opportunity to use them will be lost. Moreover, Section 382 of the
Internal Revenue Code limits the use of net operating loss carryforwards in the
event of an "ownership change," as defined in the Code. Based on the current
market value of our common stock, an ownership change occurring in the near
future would severely limit, and might cause a substantial loss of, our existing
net operating loss carryforwards to offset future taxable income. The sale,
distribution to creditors, or other transfer of our common stock by WorldCorp
and WorldCorp Acquisition Corp. as described in this prospectus, together with
other transactions affecting the ownership of our common stock, will probably
result in a severe limitation of our ability to use our existing net operating
loss carryforwards to offset future taxable income.
USE OF PROCEEDS
We will not receive any proceeds from the sale or distribution of the
shares of common stock offered by the selling security holders.
SELLING SECURITY HOLDERS
We are registering for sale or distribution 4,201,351 shares of our
common stock which, at March 31, 2000, were beneficially owned by the following
selling security holders:
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Number Shares Beneficially
Owned Before of Shares Owned After
the Offering Being the Offering
Offered -------------------
---------
Selling Security Holder Number Percent Number Percent
- ----------------------------- --------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
WorldCorp, Inc. 2,201,351 21.6% 2,201,351 0 0.0%
444 Madison Avenue, Suite 703
New York, NY 10222
Attn: Mark M. Feldman,
President
The Boeing Company 1,000,000 8.9% 1,000,000 0 0.0%
7755 E. Marginal Way South
Seattle, WA 98108
International Lease Finance 1,000,000 8.9% 1,000,000 0 0.0%
Corporation
1999 Avenue of the Stars
Suite 3900
Los Angeles, CA 90067
</TABLE>
The selling security holders provided us with the information in this
section for use in this prospectus. At March 31, 2000, WorldCorp owned 13,761
shares directly and 2,187,590 shares indirectly, through its wholly-owned
subsidiary, WorldCorp Acquisition Corp. Boeing and ILFC have the right to
acquire their shares, for $2.50 per share, upon the exercise of currently
exercisable common stock purchase warrants. ILFC is a wholly-owned subsidiary of
National Union Fire Insurance Company of Pittsburgh, Pa., and National Union is
a wholly-owned subsidiary of American International Group, Inc., with which
other companies ILFC shares beneficial ownership of our warrant shares.
Percentages of shares outstanding before the offering are based on the
10,179,419 shares of our common stock outstanding on March 31, 2000 and, in the
case of Boeing and ILFC, assume the exercise in full of their warrants. Shares
to be offered and shares beneficially owned after the offering assume the
exercise in full of the warrants and the sale of all shares offered,
respectively.
WorldCorp is our affiliate based on its stock ownership and the fact
that three of its controlling persons - Wilbur L. Ross, Jr., Gordon C.
McCormick, and Mark M. Feldman - are members of our Board of Directors. As
lessors, Boeing and ILFC provide us with eight of the ten of the aircraft which
we use in our operations under written lease agreements. They too may be deemed
to be our affiliates based on their beneficial stock ownership or the control
which they may be deemed to exercise as lessors, or both.
<PAGE>
PLAN OF DISTRIBUTION
Each of the selling security holders may sell our shares of common
stock from time to time in one or more transactions at fixed prices, at market
prices at the time of sale, at varying prices determined at the time of sale, or
at negotiated prices. Thus, for example, each selling security holder may offer
the shares in any one or more of the following transactions:
- on any national securities exchange or quotation service on
which the common stock may be listed or quoted at the time of
sale, including the Nasdaq SmallCap Market
- in the over-the-counter market
- in private transactions
- through the sale and exercise of options
- by pledge to secure debts or other obligations
In addition, WorldCorp and WorldCorp Acquisition Corp., as
debtors-in-possession, have the discretion, (a) subject to the entry by the
bankruptcy court of an order permitting them to sell their portion of our shares
under Section 363 of the Bankruptcy Code, to offer and sell the shares prior to
the effective date of their confirmed liquidating plan of reorganization for the
highest and best bid, in which case holders of allowed WorldCorp debenture
claims and general unsecured claims would receive ratable distributions of the
net proceeds, or (b) subject to the entry by the bankruptcy court of an order
confirming their liquidating plan of reorganization, to offer to the holders of
allowed WorldCorp debenture claims and general unsecured claims the right, but
not the obligation, to receive a ratable distribution of the shares. The terms
of any distribution to WorldCorp's creditors would be developed in the context
of WorldCorp's bankruptcy proceeding and communicated to those claimants by
separate documents. Any shares not disposed of in this fashion would be held by
WorldCorp or other liquidating entity for future sale or other disposition for
the benefit of holders of allowed WorldCorp debenture claims and general
unsecured claims.
Until the effective date of WorldCorp's liquidating plan of
reorganization, the decision to sell our shares under Section 363 or to hold
them for later sale or distribution will be made by WorldCorp's management,
consisting principally of its president, after consultation with its official
committee of unsecured creditors. If the shares are sold under Section 363, any
disagreement between WorldCorp's management and the WorldCorp creditors
committee as to the highest and best bid will be resolved in favor of the
creditors committee. After the effective date, any sale or other disposition of
the shares by WorldCorp or other liquidating entity will be made by a
liquidating agent under the supervision of a liquidating committee representing
WorldCorp's creditors. Mark M. Feldman, president of
<PAGE>
WorldCorp, and Wilbur L. Ross, Jr. and Gordon C. McCormick, members or
representatives of members of WorldCorp's committee of unsecured creditors and
the liquidating committee, are members of our Board of Directors.
If required, we will distribute a supplement to this prospectus to
describe material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold
from time to time directly by the selling security holders. Alternatively, the
selling security holders may from time to time offer shares of common stock to
or through underwriters, broker-dealers, or agents. The selling security
holders, and any underwriters, broker-dealers, or agents that participate in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933. Any profits on the resale of
shares of common stock and any compensation received by any underwriter,
broker-dealer, or agent may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather
than under the terms of this prospectus. The selling security holders may not
sell all of the shares. The selling security holders may transfer, will, or gift
such shares by other means not described in this prospectus.
To comply with the securities laws of some jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in some jurisdictions, the common stock may not be offered
or sold unless it has been registered or qualified for sale or an exemption is
available and complied with.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may not simultaneously engage in market-making
activities with respect to the common stock for nine business days prior to the
start of the distribution. In addition, each selling security holder and any
other person participating in a distribution will be subject to the Securities
Exchange Act of 1934, which may limit the timing of purchases and sales of
common stock by the selling security holders or any such other person. These
factors may affect the marketability of the common stock and the ability of
brokers or dealers to engage in market-making activities.
All expenses of this registration will be allocated among the selling
security holders based on the number of shares offered by each under this
prospectus. These expenses include the SEC registration fees and state
securities or "blue sky" filing fees, legal fees, accounting fees, printing
expenses, Nasdaq listing fees, and other charges. We estimate that total
expenses in connection with this offering will be approximately $75,000. We will
pay Boeing and ILFC's share of the registration expenses as provided in the
warrant agreements under which they acquired their registration rights.
WorldCorp will pay the share of the registration expenses allocable to it and to
WorldCorp Acquisition Corp.
<PAGE>
Except during the first 90 days after the effective date of the
registration statement of which this prospectus is a part, any selling security
holder requesting or requiring a post-effective amendment to the registration
statement or a supplement to this prospectus will pay all expenses in connection
with the preparation of the post-effective amendment or supplement. During the
first 90 days after the effective date of the registration statement, we will
pay these expenses for Boeing and ILFC, and the WorldCorp liquidating entity
will pay these expenses with respect to any of our shares it may then own.
The selling security holders will pay all selling expenses, including
any broker-dealer discounts and commissions, transfer fees, and taxes and tax
withholdings, in connection with their sale or distribution of our shares.
LEGAL MATTERS
Cathy Sigalas, Esq., our general counsel, has given her opinion that
the shares offered in this prospectus have been validly authorized and that the
shares which have been issued are, and the shares which may be acquired upon the
exercise of issued and outstanding warrants, when issued for the consideration
set forth in the warrant agreements, will be, validly issued, fully paid, and
nonassessable.
EXPERTS
Our financial statements as of December 31, 1999 and 1998, and for each
of the years in the three-year period ended December 31, 1999, have been
incorporated by reference in the registration statement of which this prospectus
is a part in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of KPMG
LLP as experts in accounting and auditing.
<PAGE>
Table of Contents
Page
Where You Can Get More Information 2
World Airways, Inc. 3
Risk Factors 8
Use Of Proceeds 12
Selling Security Holders 12
Plan Of Distribution 14
Legal Matters 16
Experts 16
-------------------------
4,201,351 Shares
WORLD AIRWAYS, INC.
Common Stock
------------------------
PROSPECTUS
------------------------
Until _________ ___, 2000, all dealers that effect transactions in
these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
_____________ ____ , 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses Of Issuance And Distribution.
The expenses in connection with the distribution of the securities
being registered are set forth in the following table (all amounts except the
registration fee and the listing fee are estimated):
SEC Registration Fee $ 1,756
Nasdaq SmallCap Market Listing Fee 7,500
Legal fees and expenses 40,000
Accounting fees and expenses 10,000
Transfer agent fees 7,500
Printing fees 7,500
Miscellaneous 744
-------
Total $75,000
Item 15. Indemnification of Officers and Directors.
The Registrant's Certificate of Incorporation and Bylaws include
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") and (ii)
require the Registrant to indemnify its directors and officers to the fullest
extent permitted by applicable law, including circumstances in which
indemnification is otherwise discretionary. Pursuant to Section 145 of the DGCL,
a corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred by them in
connection with any suit to which they are or are threatened to be made, a party
by reason of their serving in such positions so long as they acted in good faith
and in a manner they reasonably believed to be in or not opposed to, the best
interests of the corporation and with respect to any criminal action, they had
no reasonable cause to believe their conduct was unlawful. The Registrant
believes that these provisions are necessary to attract and retain qualified
persons as directors and officers. These provisions do not eliminate the
directors' or officers' duty of care, and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under the DGCL. In addition, each director will continue to be
subject to liability pursuant to Section 174 of the DGCL, for breach of the
director's duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to
<PAGE>
the Registrant or its stockholders, for acts or omission that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the Registrant or its stockholders, for improper transactions between
the director and the Registrant and for improper loans to directors and
officers. The provision also does not affect a director's responsibilities under
any other law, such as the federal securities law or state or federal
environmental laws.
The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Registrant and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The Registrant has an insurance policy covering the officers and
directors of the Registrant with respect to certain liabilities, including
liabilities arising under the Securities Act or otherwise.
Item 16. Exhibits and Exhibit Index.
Exhibit Consecutive
No. Description Page
2.1 First Amended Joint Liquidating Plan of Reorganization of 29
WorldCorp, Inc. and WorldCorp Acquisition Corp., dated as
of March 14, 2000, United States Bankruptcy Court for the
District of Delaware, Case Nos. 99-298 (MFW) and 99-2582 (MFW)
2.2 Disclosure Statement with Respect to First Amended Joint Liquidating
Plan of Reorganization of WorldCorp, Inc. and WorldCorp
Acquisition Corp., dated as of March 14, 2000, United States
Bankruptcy Court for the District of Delaware, Case Nos. 99-298
(MFW) and 99-2582 (MFW) (Exhibit A intentionally omitted)
4.1 Amended and Restated Certificate of Incorporation and Amended *
and Restated Bylaws of World Airways, Inc. (Exhibits 3.1 and
3.2 to the Registrant's Registration Statement on Form S-1,
Commission File No. 33-95488, filed August 8, 1995)
<PAGE>
Exhibit Consecutive
No. Description Page
4.2 Warrant Agreement between World Airways, Inc. and
The Boeing Company, dated March 28, 2000
4.3 Warrant Agreement between World Airways, Inc. and International
Lease Finance Corporation, dated August 24, 1999
5.1 Opinion of Cathy Sigalas, Esq.
10.1 [Any agreements for the purchase of the securities]
23.1 Consent of KPMG LLP
23.2 Consent of Cathy Sigalas, Esq. (contained in Exhibit 5.1)
24.1 Powers of Attorney (see Signature Page) 24
- -----------
* Incorporated by reference pursuant to Rule 411(c).
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period during which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or any decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low end or high end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
<PAGE>
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for purposes of determining liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities to be offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which shall remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Herndon, Virginia, on April 18, 2000.
WORLD AIRWAYS, INC.
By: _____________________________
Hollis L. Harris
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Hollis L. Harris, Gilberto M. Duarte,
Jr., and Cathy Sigalas, or any of them, his or her true and lawful
attorneys-in-fact and agent with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agent or their substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated, in Herndon, Virginia, on April 18, 2000.
Signature Title
/s/ Hollis L. Harris Chairman and Chief Executive Officer
Hollis L. Harris (Principal Executive Officer)
/s/ Daniel J. Altobello Director
Daniel J. Altobello
/s/ A. Scott Andrews Director
A. Scott Andrews
<PAGE>
_____________________________ Director
Joel H. Cowan
/s/ Mark M. Feldman Director
Mark M. Feldman
/s/ Ronald R. Fogleman Director
Ronald R. Fogleman
_____________________________ Director
Dato' Wan Malek Ibrahim
_____________________________ Director
Kheng Yew Lim
/s/ Gordon C. McCormick Director
Gordon C. McCormick
/s/ Russlee L. Ray, Jr. Director
Russell L. Ray, Jr.
_____________________________ Director
Wilbur L. Ross, Jr.
/s/ Peter M. Sontag Director
Peter M. Sontag
/s/ Gilberto M. Duarte, Jr. Chief Financial Officer Principal
Gilberto M. Duarte, Jr. Financial and Accounting Officer)
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------
In re Chapter 11
WORLDCORP, INC. and Case Nos. 99-298 (MFW)
WORLDCORP ACQUISITION CORP., and 99-2582
(Jointly Administered)
Debtors.
- ------------------------------------
FIRST AMENDED JOINT LIQUIDATING PLAN OF REORGANIZATION
OF WORLDCORP, INC. AND WORLDCORP ACQUISITION CORP.
WILMER, CUTLER & PICKERING
2445 M Street, NW
Washington, DC 20037-1420
Attn: Duane D. Morse
H. Colby Lane
- 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. and
WorldCorp Acquisition Corp.
Dated: March 14, 2000
Wilmington, Delaware
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION....................................................................
ARTICLE I DEFINITIONS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME.....
1.1 Scope of Definitions..........................................
1.2 Definitions...................................................
1.3 Rules of Interpretation.......................................
1.4 Computation of Time...........................................
1.5 Exhibits and Transaction Documents............................
ARTICLE II SUBSTANTIVE CONSOLIDATION.....................................
2.1 Substantive Consolidation of Cases for Purposes of
Distributions.................................................
ARTICLE III ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS...................
3.1 Administrative Claims.........................................
3.2 Priority Tax Claims...........................................
ARTICLE IV CLASSIFICATION OF CLAIMS AND INTERESTS............................
4.1 Class 1.......................................................
4.2 Class 2.......................................................
4.3 Class 3.......................................................
4.4 Class 4.......................................................
4.5 Class 5.......................................................
4.6 Class 6.......................................................
ARTICLE V IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS
IMPAIRED AND NOT IMPAIRED BY THE PLAN.............................
5.1 Unimpaired Classes of Claims and Interests....................
5.2 Impaired Classes of Claims and Interests......................
ARTICLE VI PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS..........
6.1 Class 1 (Other Priority Claims)...............................
6.2 Class 2 (Administrative Convenience Claims)...................
6.3 Class 3 (Senior Notes Claims).................................
6.4 Class 4 (Debentures Claims)...................................
6.5 Class 5 (General Unsecured Claims)............................
6.6 Class 6 (Interests)...........................................
ARTICLE VII ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF
REJECTION BY ONE OR MORE IMPAIRED CLASSES OF
CLAIMS OR INTERESTS..............................................
7.1 Impaired Classes of Claims and Interests Entitled to Vote.....
7.2 Acceptance by an Impaired Class...............................
7.3 Presumed Acceptances by Unimpaired Classes....................
7.4 Classes Deemed to Reject Plan.................................
7.5 Confirmation Pursuant to Section 1129(b) of the Bankruptcy
Code..........................................................
7.6 Confirmability and Severability of the Plan...................
ARTICLE VIII MEANS FOR IMPLEMENTATION OF THE PLAN......................
8.1 Allocation of Assets..........................................
8.2 Initial Distribution of Assets................................
8.3 Distribution Procedures.......................................
8.4 The Liquidating Entity; Duties of the Liquidating Agent.......
8.5 Establishment and Operation of WorldCorp LLC..................
8.6 Wind-Up and Dissolution of WorldCorp and Acquisition..........
8.7 Operation of the Disputed Claims Reserve......................
8.8 The Administrative Claims Reserve.............................
8.9 The Unclaimed Distributions Reserve...........................
8.10 Miscellaneous Implementation Provisions.......................
8.11 Tax Reporting.................................................
ARTICLE IX EXECUTORY CONTRACTS.......................................
9.1 Rejection of All Contracts....................................
9.2 Effect of Rejection...........................................
ARTICLE X ALLOWANCE AND PAYMENT OFCERTAIN ADMINISTRATIVE
CLAIMS..........................................................
10.1 Professional Claims...........................................
10.2 Other Administrative Fees.....................................
ARTICLE XI EFFECT OF THE PLAN ON CLAIMS AND INTERESTS......................
11.1 Compromises and Settlements...................................
11.2 Release of Claims Against Officers, Directors, Etc............
11.3 Setoffs.......................................................
11.4 Satisfaction of Subordination Rights..........................
11.5 Exculpation and Limitation of Liability.......................
11.6 Indemnification Obligation36
11.7 Modification of Releases......................................
ARTICLE XII CONDITIONS PRECEDENT............................................
12.1 Conditions to Consummation....................................
12.2 Waiver of Conditions to Consummation..........................
ARTICLE XIII RETENTION OF JURISDICTION.......................................
ARTICLE XIV MISCELLANEOUS PROVISIONS........................................
14.1 Binding Effect................................................
14.2 Modification and Amendments...................................
14.3 Withholding and Reporting Requirements........................
14.4 Committee.....................................................
14.5 Revocation, Withdrawal or Non-Consummation....................
14.6 Notices.......................................................
14.7 Term of Injunctions or Stays..................................
14.8 Governing Law.................................................
<PAGE>
INTRODUCTION
WorldCorp, Inc. ("WorldCorp") and WorldCorp Acquisition Corp.
("Acquisition" and, together with WorldCorp) as debtors and
debtors-in-possession in the above-captioned Chapter 11 reorganization cases
("Debtors"), hereby propose the following joint liquidating plan of
reorganization for the resolution of the Debtors' outstanding creditor claims
and equity interests (the "Plan"). Reference is made to the Disclosure Statement
(as defined below) for results of operations, risk factors, and a summary and
analysis of the Plan and certain related matters. The Debtors are the proponents
of the Plan within the meaning of section 1129 of the Bankruptcy Code (as
defined below).
The Plan provides for all of the property of the Debtors to be
liquidated or distributed over time to the holders of allowed claims. Holders of
interests in WorldCorp will receive no distribution under the Plan. An initial
distribution is to occur on the effective date of the Plan. Assets not
distributed on the effective date are to be held by a liquidating entity
administered by managers who will, among other things, liquidate assets, resolve
disputed claims, pursue any reserved causes of action, wind up the affairs of
the Debtors, and make subsequent and final distributions. Unless the Debtors
function as the liquidating entity, the Debtors will be dissolved immediately
after the initial distribution under the Plan.
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 Section 14.2 of this Plan, the Debtors expressly
reserve the right to alter, amend or modify this Plan, one or more times, before
its substantial consummation.
ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION,
AND COMPUTATION OF TIME
1.1 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.
1.2 DEFINITIONS
"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, directors fees, or commissions for services rendered after
the commencement of the Chapter 11 Case, Professional Claims, Claims
arising under Section 365(g)(2)(A) or Section 503(b)(3) of the
Bankruptcy Code, 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.
"Administrative Claims Reserve" means the reserve for payment of
Administrative Claims which may become Allowed Claims after the
Effective Date, in an amount equal to the sum of all Administrative
Claims (including claims for compensation and expenses incurred in
making a substantial contribution and estimated fees and expenses of
professionals through the Effective Date) not paid in full on the
Effective Date.
"Administrative Convenience Claim" means a Claim (other than Claims of
holders of Debentures) against the Debtors that otherwise would be
classified as a Class 5 General Unsecured Claim that is for $500 or
less.
"Airways" means World Airways, Inc., a Delaware corporation.
"Airways Shares" means shares of common stock of Airways.
"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.
"Allowed Claim" means an Allowed Claim of the type described.
"Available Cash" means all cash and cash equivalents actually received
or held by the Liquidating Entity 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.
"Avoidance Claims" means, subject to Article XI, the Debtors' Causes of
Action 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 has been commenced to prosecute such Causes
of Action.
"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.
"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. 101-1330.
"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 Cases.
"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 Cases or
proceedings therein, and the Local Rules of the Bankruptcy Court, as
applicable to the Chapter 11 Cases or proceedings therein, as the case
may be.
"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.
"Business Day" means any day, excluding Saturdays, Sundays and legal
holidays, on which commercial banks are open for business in New York
City.
"Cash" means legal tender of the United States.
"Causes of Action" means 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
assertable directly or derivatively, in law, equity or otherwise.
"Chapter 11 Case" means, with respect to each Debtor, the Chapter 11
Case of such Debtor, pending in the Bankruptcy Court; and "Chapter 11
Cases" means the Chapter 11 Cases of both Debtors.
"Claim" means a claim against the Debtor, whether or not asserted, as
defined in section 101(5) of the Bankruptcy Code.
"Claims Objection Deadline" means, except as provided in Section 9.2,
the Confirmation Date, unless extended by the Bankruptcy Court for
cause shown.
"Class" means a category of holders of Claims or holders of Interests
described in Article IV of the Plan.
"Class 3/4 Effective Date Assets" means all Effective Date Remaining
Assets other than the Class 5 Effective Date Assets.
"Class 5 Effective Date Assets" means (i) the amount of Cash that is
equal to the product of the total amount of Cash included in the
Effective Date Remaining Assets multiplied by the Class 5 Percentage;
(ii) the number of InteliData Shares that is equal to the product of
the total number of InteliData Shares included in the Effective Date
Remaining Assets multiplied by the Class 5 Percentage; and (iii) the
number of Airways Shares that is equal to the product of the total
number of Airways Shares included in the Effective Date
Remaining Assets multiplied by the Class 5 Percentage.
"Class 5 Percentage" means the percentage that is equal to the ratio of
the aggregate Face Amount of Claims in Class 5 to the aggregate Face
Amount of all Claims in Classes 3, 4 and 5.
"Closing Price" means, with respect to the Airways Shares or the
InteliData Shares, (i) the day's last trade price as reported by NASDAQ
or (ii) if no trades occurred on such day, the average of the last
"bid" and "ask" price reported by NASDAQ for such day.
"Confirmation Date" means the date of entry of the Confirmation Order.
"Confirmation Order" means the order, in form and substance reasonably
satisfactory to the Debtors and the Committee entered by the Bankruptcy
Court, confirming the Plan.
"Committee" means the Official Committee of Unsecured Creditors
appointed pursuant to section 1102(a) of the Bankruptcy Code in
WorldCorp's Chapter 11 Case.
"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.
"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 WorldCorp and The First National Bank of
Boston, as indenture trustee, for which State Street Bank and Trust
company now serves as successor indenture trustee.
"Debenture Trustee" means State Street Bank and Trust Company as
successor trustee to the First National Bank of Boston under the
Debenture Indenture, or its successor in interest.
"Debenture Trustee Fees" means all unpaid fees, expenses and other
amounts payable to the Debenture Trustee under the terms of the
Debenture Indenture through the Effective Date.
"Debentures" means, collectively, the 7% Convertible Subordinated
Debentures due 2004 in the principal amount of approximately $65
million issued pursuant to the Debenture Indenture.
"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.
"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.
"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, (b) the allowance or disallowance of which is not yet
the subject of a Final Order, and (c) contained claims arising from
disputes over the terms of the inter-creditor agreement.
"Disputed Claims Reserve" means the reserve, if any, established on the
Effective Date by the Liquidating Agent to provide for the payment of
Disputed Claims that are Allowed after the Effective Date.
"Distribution Record Date" means the record date for purposes of making
distributions under the Plan on account of Allowed Claims, which date
shall be April 21, 2000.
"Effective Date" means the Business Day on which all conditions to the
consummation of the Plan set forth in Section 12.1 hereof have been
satisfied or waived as provided in Section 12.2 hereof and is the day
upon which this Plan is substantially consummated.
"Effective Date Remaining Assets" means all of the assets of the
Debtors other than (i) amounts to be paid on the Effective Date to
holders of Allowed Administrative Claims, Allowed Priority Tax Claims,
Allowed Class 1 Other Priority Claims, and Allowed Class 2
Administrative Convenience Claims, and (ii) the Reserved Assets.
"Estate" mean the bankruptcy estate of each of the Debtors pursuant to
section 541 of the Bankruptcy Code.
"Exhibit" means an exhibit annexed either to this Plan or as an
appendix to the Disclosure Statement.
"Existing Securities" means, collectively, the WorldCorp Common Stock,
the Senior Notes, and the Debentures.
"Face Amount" means, (a) with respect to Senior Notes Claims, the
amount owed by WorldCorp under the Senior Notes Indenture as of the
WorldCorp Petition Date; (b) with respect to the Debenture Claims, the
amount owed by WorldCorp under the Debenture Indenture as of the
WorldCorp Petition Date; (c) with respect 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 (d) with respect to an Allowed Claim
other than a Senior Notes Claim or Debenture Claim, the allowed amount
of such Claim.
"File" or "Filed" means filed with the Bankruptcy Court in the Chapter
11 Cases.
"Final Distribution" means the distribution of the Final Distribution
Assets on the Termination Date.
"Final Distribution Assets" means all assets of the Liquidating Entity
other than the Wind-Up Reserve.
"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.
"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.
"General Unsecured Claim" means a Claim that is not a Secured Claim,
Administrative Claim, Priority Tax Claim, Other Priority Claim,
Administrative Convenience Claim, Subordinated Securities Claim or a
Claim based upon the Senior Notes or the Debentures.
"Impaired" refers to any Claim or Interest that is impaired within the
meaning of section 1124 of the Bankruptcy Code.
"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.
"Indemnitee" means all present and former directors, officers,
employees, agents, advisors or representatives of the Debtor who are
entitled to assert Indemnification Rights.
"Initial Distribution" means the initial distribution of assets to the
holders of Allowed Claims on the Effective Date pursuant to Section
8.2.
"InteliData" means InteliData Technologies Corporation, a Delaware
corporation.
"InteliData Shares" means shares of common stock, par value $.001 per
share, of InteliData.
"Interest" means the rights of any current or former holder or owner of
any shares of common stock or any other equity securities of WorldCorp
authorized and issued prior to the Confirmation Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Liquidating Agent" means W. Joseph Dryer.
"Liquidating Committee" means three individuals, one of whom shall be
designated by RRF and two of whom shall be chosen by the members of the
Committee other than RRF and the Senior Notes Trustee.
"Liquidating Entity" means the entity responsible under the Plan for
holding, administering, liquidating and distributing the assets of the
Debtors that are not Distributed to creditors on the Effective Date.
The Liquidating Entity shall be the Debtors unless otherwise agreed
between the Debtors and the Committee prior to the Effective Date.
"Liquidation Reserve" means a Cash reserve established by the
Liquidating Agent, in an amount to be specified in a budget attached to
the Confirmation Order, which shall be used for payment of expenses of
the Liquidating Agent and the Liquidating Entity in performing their
functions under Article VIII of the Plan, including, but not limited
to, expenses of liquidating any assets held by the Liquidating Entity,
litigating any Pending Debtor Claims, preparing tax returns, filing
monthly operating reports in the Bankruptcy Cases (if required), paying
quarterly U.S. Trustee's fees (if required), paying fees and expenses
of professionals and agents retained by the Liquidating Agent, paying
other expenses incurred in the administration of the Liquidating
Entity, dissolving the Debtors and, if applicable, WorldCorp LLC,
making a final distribution to creditors, and funding the Wind-Up
Reserve, if any.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Other Priority Claim" means a Claim, if any, entitled to priority
pursuant to section 507(a) of the Bankruptcy Code other than a Priority
Tax Claim or an Administrative Claim.
"Pending Debtor Claims" means all Causes of Action and Avoidance Claims
that the Debtors have asserted against any Person prior to the
Effective Date in any adversary proceeding, contested matter or other
litigation and which, as of the Effective Date, have not been waived,
settled, released or denied by Final Order of the court having
jurisdiction over the proceeding in which such Cause of Action or
Avoidance Claim was asserted.
"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.
"Petition Date" means, with respect to each Debtor, the date on which
such Debtor filed its petition commencing its Chapter 11 Case.
"Plan" means this joint liquidating plan of reorganization which is
proposed by the Debtors for the resolution of outstanding Claims and
Interests in these Chapter 11 cases, as such Plan may be amended from
time to time in accordance with the Bankruptcy Code and Section 13.2
herein.
"Post Petition Indemnification Rights" has the meaning given to such
term in Section 11.6.
"Priority Tax Claim" means a Claim entitled to priority pursuant to
section 507(a)(8) of the Bankruptcy Code.
"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.
"Professional" means a consultant, accountant, attorney or other
professional service provider retained by the Debtors pursuant to
Sections 327 and 1103 of the Bankruptcy Code or otherwise.
"Professional Claim" means a Claim of a Professional for compensation
or reimbursement of costs and expenses relating to services incurred
after the Petition Date and prior to and including the Effective Date.
"Reserved Assets" means (i) the Administrative Claims Reserve; (ii) the
Liquidation Reserve; (iii) the Cash, Airways Shares and any other
assets deposited in the Disputed Claims Reserve on the Effective Date;
(iv) all Pending Debtor Claims, if any; (v) any tax-sharing receivable
from The Atlas Companies, Inc.; and (vi) any other assets of the
Debtors that are neither abandoned nor distributed on the Effective
Date.
"RRF" means Rothschild Recovery Fund L.P., a Delaware limited
partnership.
"SEC" means the U.S. Securities and Exchange Commission.
"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.
"Senior Notes" means, collectively, the Senior Notes due September 30,
2000 in the principal amount of $5 million issued pursuant to the
Senior Notes Indenture.
"Senior Notes Claims" means all Claims arising under the terms of the
Senior Notes Indenture, including Claims for payment of principal, pre-
and post-petition interest, and Senior Notes Trustee Fees, whether
arising before, on or after the Petition Date.
"Senior 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 WorldCorp and the Senior
Notes Trustee.
"Senior Note Claim Recovery Amount" means, with respect to a holder of
Senior Notes, an amount equal to the sum of the aggregate principal
amount of Senior Notes held by such holder, plus unpaid interest
thereon at the rate of ten percent (10%) per annum through February 11,
1999, plus interest on such unpaid pre-petition interest at the rate of
ten percent (10%) per annum, plus interest on the aggregate principal
amount of Senior Notes held by such holder at the rate of ten percent
(10%) per annum from February 12, 1999, through the day immediately
preceding the date of the Initial Distribution to holders of Allowed
Class 3 Senior Notes Claims.
"Senior Notes Trustee" means Norwest Bank Minnesota, National
Association, or its successor, in its capacity as trustee under the
terms of the Senior Notes Indenture.
"Senior Notes Trustee Fees" means all unpaid fees, expenses and other
amounts payable to the Senior Notes Trustee under the terms of the
Senior Notes Indenture through the Effective Date.
"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 WorldCorp Common Stock or other
equity securities of WorldCorp prior to the Petition Date.
"Termination Date" means the date upon which the Liquidating Agent
makes the Final Distribution from the Liquidating Entity.
"Transaction Documents Filing Date" means the date that the Transaction
Documents shall be filed with the Court, which date shall be at least
five Business Days prior to the date set by the Bankruptcy Court as the
initial date to consider confirmation of the Plan.
"Transaction Documents" means any 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
"Treasury Regulations" means all final, temporary and proposed
regulations promulgated under the Internal Revenue Code of 1986, as
amended.
"Unclaimed Distributions" means distributions to holders of Allowed
Class 3 Senior Notes Claims, Allowed Class 4 Debentures Claims, and
Allowed Class 5 General Unsecured Claims that are returned as
undeliverable.
"Unclaimed Distributions Reserve" means the reserve created with the
distributions with respect to Allowed Class 5 General Unsecured Claims
that are returned as undeliverable which may be claimed after the
Effective Date, but are not distributed with respect to Disputed Claims
as of the Effective Date.
"Unimpaired" refers to any Claim or Interest which is not Impaired.
"Value" means, as of any measurement date, (i) with respect to Cash,
the face amount of such Cash, (ii) with respect to Airways Shares or
InteliData Shares, the weighted average of the Closing Prices of such
shares for the 10-day period ending on the Business Day immediately
preceding the Confirmation Date, (iii) with respect to office equipment
and supplies, the greater of the highest cash bid price or the average
of the prices quoted in writing by three independent parties (which may
be dealers in such assets) with expertise in valuing equipment or
supplies of that type, and (iv) with respect to any other assets, the
fair market value of such assets as determined by an independent
professional experienced in valuing such assets, or by the Bankruptcy
Court.
"Wind-Up Reserve" means a Cash reserve to be established by the
Liquidating Agent at the time of making a final distribution to
creditors for purposes of paying the expenses of such final
distribution and winding up the affairs of the Liquidating Entity after
such final distribution, including the projected costs of dissolving
the Liquidating Entity, preparing final tax returns, filing reports or
other documents in the Chapter 11 Cases or under applicable
nonbankruptcy law, and storing or disposing of records and any other
property of the Liquidating Entity.
"WorldCorp Common Stock" means shares of WorldCorp common stock and all
options, warrants or rights, contractual or otherwise, if any, to
acquire any such common stock.
"WorldCorp LLC" means a limited liability company established under
Delaware law to be the Liquidating Entity if so required by the Plan.
"WorldCorp LLC Operating Agreement" means the agreement establishing
WorldCorp LLC if so required by the Plan.
1.3 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.
1.4 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.
1.5 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 Delaware Legal Copy,
824 North Market Street, Suite 527, Wilmington, DE 19801, telephone
(302) 426-1570, fax (302) 426-1586.
ARTICLE II
SUBSTANTIVE CONSOLIDATION
2.1 SUBSTANTIVE CONSOLIDATION OF CASES FOR PURPOSES OF DISTRIBUTIONS. The
Plan is predicated upon, and it is a condition precedent to
confirmation of the Plan that the Court provides in the Confirmation
Order for, substantive consolidation of the Chapter 11 Cases of the
Debtors into a single Chapter 11 case for purposes of this Plan and the
distributions hereunder. Pursuant to such final order, (i) all assets
and liabilities of the Debtors will be merged, (ii) any obligations
executed by either Debtor will be deemed to be one obligation of the
Debtors, (iii) any claims filed or to be filed in connection with any
such obligation will be deemed one claim against the Debtors, (iv) each
Claim filed in the Chapter 11 case of either Debtor will be deemed
filed against the Debtors in the consolidated Chapter 11 case, in
accordance with the substantive consolidation of the assets and
liabilities of the Debtors and, and (v) all transfers, disbursements
and distributions made by either Debtor will be deemed to be made by
both of the Debtors. Holders of Allowed Claims in each Class shall be
entitled to their Pro Rata share of assets available for distribution
to such Class without regard to which Debtor was originally liable for
such Claim.
ARTICLE III
ADMINISTRATIVE EXPENSES
AND PRIORITY TAX CLAIMS
3.1 ADMINISTRATIVE CLAIMS. On the Effective Date, or as soon thereafter as
practicable, each holder of an Allowed Administrative Claim shall be
entitled to 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 Debtors and such holder
shall have agreed upon in writing; provided, however, that Allowed
Administrative Claims with respect to liabilities incurred by the
Debtors in the ordinary course of business during the Chapter 11 Cases
shall, at the option of the Debtors, be paid in the ordinary course of
business in accordance with the terms and conditions of any agreements
relating thereto. Each Administrative Claim that becomes an Allowed
Administrative Claim after the Effective Date shall be paid in Cash by
the Liquidating Agent from the Administrative Claims Reserve and, to
the extent the Administrative Claims Reserve is inadequate for such
purpose, from other Cash of the Liquidating Entity within five (5)
Business Days after such claim becomes an Allowed Administrative Claim.
3.2 PRIORITY TAX CLAIMS. With respect to each Allowed Priority Tax Claim,
at the sole option of the Debtors, 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 Debtors or the Liquidating
Agent, provided such treatment is on more favorable terms to the
Debtors or the Liquidating Agent, as the case may be, than the
treatment set forth in clause (a) hereof, or (c) payment in full in
Cash on the later of the Effective Date or within five (5) Business
Days after such Claim becomes an Allowed Claim.
ARTICLE IV
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 Debtors. A Claim
or Interest is also placed in a 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.
4.1 CLASS 1. Class 1 consists of all Other Priority Claims.
4.2 CLASS 2. Class 2 consists of all Administrative Convenience Claims.
4.3 CLASS 3. Class 3 consists of all Senior Notes Claims.
4.4 CLASS 4. Class 4 consists of all Debentures Claims.
4.5 CLASS 5. Class 5 consists of all General Unsecured Claims.
4.6 CLASS 6. Class 6 consists of all Interests and Subordinated Securities
Claims.
ARTICLE V
IDENTIFICATION OF CLASSES OF CLAIMS AND
INTERESTS IMPAIRED AND NOT IMPAIRED BY THE PLAN
5.1 UNIMPAIRED CLASSES OF CLAIMS AND INTERESTS. Class 1 (Other Priority
Claims) and Class 2 (Administrative Convenience Claims) are not
Impaired by the Plan.
5.2 IMPAIRED CLASSES OF CLAIMS AND INTERESTS. Class 3 (Senior Notes
Claims), Class 4 (Debentures Claims), Class 5 (General Unsecured
Claims), and Class 6 (Interests) are Impaired Classes under the Plan.
ARTICLE VI
PROVISIONS FOR TREATMENT
OF CLAIMS AND INTERESTS
6.1 Class 1 (Other Priority Claims). On the Effective Date, each holder of
an Allowed Class 1 Other Priority Claim, if any, 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.
6.2 CLASS 2 (ADMINISTRATIVE CONVENIENCE CLAIMS). On the Effective Date,
each holder of an Allowed Class 2 Administrative Convenience Claim, if
any, shall receive, in full satisfaction, settlement, release and
discharge of and in exchange for such Class 2 Administrative
Convenience Claim, Cash equal to the amount of such Allowed Claim.
6.3 CLASS 3 (SENIOR NOTES CLAIMS). On the Effective Date, the Senior Notes
Trustee Fees shall be paid in Cash, and each other holder of an Allowed
Class 3 Senior Notes Claim shall receive Cash in an aggregate amount
equal to such holder's Senior Note Claim Recovery Amount. All
distributions to holders of Class 3 Senior Notes Claims shall be made
from the Class 3/4 Effective Date Assets.
6.4 CLASS 4 (DEBENTURES CLAIMS). On the Effective Date, the Debenture
Trustee Fees shall be paid in Cash from the Class 3/4 Effective Date
Assets. Each holder of an Allowed Class 4 Debenture Claim other than
the Debenture Trustee shall receive, (a) on the Effective Date, (i) a
Pro Rata distribution of the remaining Cash included in the Class 3/4
Effective Date Assets; and (ii) if such holder is offered the
opportunity to receive a distribution of Airways Shares and such holder
so elects, a Pro Rata distribution of the Airways Shares included in
the Class 3/4 Effective Date Assets; and (b) on the Termination Date,
the distributions provided in Section 8.4 of the Plan. Any Airways
Shares included in the Class 3/4 Effective Date Assets that are not
distributed to holders of Allowed Class 4 Debenture Claims on the
Effective Date will be held by the Liquidating Entity for sale or other
disposition for the benefit of holders of Allowed Class 4 Debentures
Claims as their interests may appear.
6.5 CLASS 5 (GENERAL UNSECURED CLAIMS). Each holder of an Allowed Class 5
General Unsecured Claim shall receive, (a) on the Effective Date, (i) a
Pro Rata distribution of the Cash included in the Class 5 Effective
Date Assets; and (ii) if such holder is offered the opportunity to
receive a distribution of Airways Shares and such holder so elects, a
Pro Rata distribution of the Airways Shares included in the Class 5
Effective Date Assets; and (b) on the Termination Date, the
distributions provided in Section 8.4 of the Plan. Any Airways Shares
included in the Class 5 Effective Date Assets that are not distributed
to holders of Allowed Class 5 General Unsecured Claims on the Effective
Date, and any Airways Shares that are included in the Class 5 Effective
Date Assets, will be held by the Liquidating Entity for sale or other
disposition for the benefit of holders of Allowed Class 5 General
Unsecured Claims as their interests may appear.
6.6 CLASS 6 (INTERESTS) Holders of Interests and Subordinated Securities in
Class 6 shall receive no distribution under the Plan. On the first
Business Day after the Effective Date, all outstanding shares of
WorldCorp Common Stock and all other interests in the Debtors shall be
cancelled without further action of any party. The Debtors shall be
dissolved at the time and in the manner described in Section 8.6.
ARTICLE VII
ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE
IMPAIRED CLASSES OF CLAIMS OR INTERESTS
7.1 IMPAIRED CLASSES OF CLAIMS AND INTERESTS ENTITLED TO VOTE. Subject to
Section 7.6 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.
7.2 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.
7.3 PRESUMED ACCEPTANCES BY UNIMPAIRED CLASSES. Claims in Class 1 (Other
Priority Claims) and Class 2 (Administrative Convenience Claims) are
Unimpaired by the Plan. Under section 1126(f) of the Bankruptcy Code,
the holders of such Claims and Interests are conclusively presumed to
accept the Plan and the votes of such holders will not be solicited.
7.4 CLASSES DEEMED TO REJECT PLAN. Holders of Interests in Class 6 will not
receive or retain any property under the Plan. Holders of Interests in
Class 6 will be deemed to reject the Plan in accordance with section
1126(g) of the Bankruptcy Code and their votes will not be solicited.
7.5 CONFIRMATION PURSUANT TO SECTION 1129(B) OF THE BANKRUPTCY CODE. As
holders of Interests in Class 6 will be deemed to reject the Plan, the
Debtors will request confirmation of the Plan, as it may be modified
from time to time, under section 1129(b) of the Bankruptcy Code.
7.6 CONFIRMABILITY AND SEVERABILITY OF THE PLAN. The confirmation
requirements of section 1129 of the Bankruptcy Code must be satisfied
with respect to the Debtors. The Debtors reserve the right to alter,
amend, modify, revoke or withdraw the Plan. A determination by the
Bankruptcy Court that the Plan as it applies to the Debtors is not
confirmable pursuant to section 1129 of the Bankruptcy Code shall not
limit or affect the Debtors' ability to modify the Plan to satisfy the
confirmation requirements of section 1129 of the Bankruptcy Code.
ARTICLE VIII
MEANS FOR IMPLEMENTATION OF THE PLAN
The Plan is to be implemented in a manner consistent with the provisions of
section 1123 of the Bankruptcy Code. The Plan contemplates that the following
will occur.
8.1 Allocation of Assets. On the Effective Date, prior to making any
distribution, the Liquidating Agent shall allocate the assets of the
Debtors as follows:
(a) Cash shall be allocated: first to the Allowed Administrative
Claims; second, to the Administrative Claims Reserve; third,
to the Liquidation Reserve; fourth, to the Allowed Priority
Tax Claims; fifth, to the Allowed Class 1 Other Priority
Claims; sixth, to the Allowed Class 2 Administrative
Convenience Claims; and seventh, on a pari passu basis, to the
Class 5 Effective Date Distributable Assets in accordance with
the Class 5 Percentage and to the Class 3/4 Effective Date
Distributable Assets to the extent of the remaining Cash; and
(b) Airways Shares, if any, shall be allocated, on a PARI PASSU
basis, to the Class 5 Effective Date Assets in accordance with
the Class 5 Percentage and to the Class 3/4 Effective Date
Assets to the extent of the remaining Airways Shares.
8.2 INITIAL DISTRIBUTION OF ASSETS. Subject to Section 12.2, on the
Effective Date, the Liquidating Agent will:
(a) pay (i) the Allowed Administrative Claims, (ii) subject to
Section 3.2, the Allowed Priority Tax Claims, (iii) the
Allowed Class 1 Other Priority Claims, and (iv) the Allowed
Class 2 Administrative Convenience Claims in Cash;
(b) deposit in the Administrative Claims Reserve Cash in an amount
equal to the sum of all Administrative Claims (including
claims for compensation and expenses incurred in making a
substantial contribution and estimated fees and expenses of
professionals through the Effective Date) not paid in full on
the Effective Date;
(c) deposit in the Liquidation Reserve Cash in an amount specified
in the budget attached to the Confirmation Order;
(d) (i) distribute the Class 5 Effective Date Assets consisting of
Cash to the holders of Allowed Class 5 General Unsecured
Claims; (ii) if holders of Allowed Class 5 General Unsecured
Claims have been offered the opportunity to receive a
distribution of Airways Shares, distribute to each holder that
so elects a Pro Rata portion of the Airways Shares included in
the Class 5 Effective Date Assets; and (iii) deliver any
Airways Shares included in the Class 5 Effective Date Assets
that are not distributed to holders of Allowed Class 5 General
Unsecured Claims on the Effective Date to the Liquidating
Entity to be held by the Liquidating Entity for sale or other
disposition for the benefit of holders of Allowed Class 5
General Unsecured Claims as their interests may appear;
(e) distribute to the Senior Notes Trustee, from the Class 3/4
Effective Date Assets, (i) Cash in an amount equal to the
Senior Notes Trustee Fees and, (ii) for the account of the
holders of Allowed Class 3 Senior Notes Claims, Cash equal to
each holder's Senior Note Claim Recovery Amount;
(f) distribute to the Debenture Trustee, from the Class 3/4
Effective Date Assets, Cash in an amount equal to the
Debenture Trustee Fees; and
(g) from the Class 3/4 Effective Date Assets that remain after the
distributions with respect to the Senior Notes Trustee Fees,
the Debenture Trustee Fees and the Class 3 Senior Notes
Claims, (i) distribute to the Debenture Trustee for the
account of the holders of Allowed Class 4 Debenture Claims,
the remaining Cash included in the Class 3/4 Effective Date
Assets; (ii) if holders of Allowed Class 3/4 Debenture Claims
have been offered the opportunity to receive a distribution of
Airways Shares, distribute to each holder that so elects a Pro
Rata portion of the Airways Shares included in the Class 3/4
Effective Date Assets; and (iii) deliver any Airways Shares
included in the Class 3/4 Effective Date Assets that are not
distributed to holders of Allowed Class 4 Debenture Claims on
the Effective Date to the Liquidating Entity to be held by the
Liquidating Entity for sale or other disposition for the
benefit of Allowed Class 4 Debenture Claims as their interests
may appear.
8.3 DISTRIBUTION PROCEDURES.
Time of Distributions. The Initial Distribution to holders of Allowed
Claims entitled to receive a distribution under the Plan shall be made
on the Effective Date. Notwithstanding the foregoing, if the Effective
Date does not occur within 10 days after the Confirmation Order is
entered, then, subject to Bankruptcy Court approval in the
Confirmation Order, and provided the Confirmation Order is then in
effect and has not been stayed, on the first business day after the
tenth day after the Confirmation Order is entered, the Liquidating
Agent shall make the Initial Distribution to holders of Allowed Class 3
Senior Notes Claims. If the Bankruptcy Court declines to approve a
distribution to holders of Class 3 Senior Notes Claims before the
Effective Date, the Initial Distribution to holders of Allowed Class 3
Senior Notes Claims will occur on the Effective Date or as promptly
thereafter as possible.
INTEREST ON CLAIMS. Unless otherwise specifically provided for in the
Plan, Confirmation Order, or required by applicable bankruptcy law,
post-petition 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. For federal income tax
purposes and to the extent allowable under applicable Treasury
Regulations, a distribution will be allocated to the principal amount
of an Allowed Claim first and then, to the extent the distribution
exceeds the principal amount of the Allowed Claim, to the portions of
the Allowed Claim representing accrued but unpaid pre-petition or
post-petition interest.
LIQUIDATING AGENT. Subject to Section 12.2, the Liquidating Agent shall
make all distributions required to be made under this Plan on the
Effective Date. Distributions of assets to holders of Allowed Class 3
Senior Notes Claims shall be deposited with the Senior Notes Trustee,
or to the extent directed in writing by the Senior Note Trustee,
distributed directly to the beneficial holders of the Senior Notes.
Distributions of assets to holders of Allowed Class 4 Debentures Claims
shall be deposited with the Debenture Trustee. Distributions of assets
to holders of Allowed Class 5 General Unsecured Claims shall be made
directly to such holders. Any Airways Shares that are not distributed
to holders of Allowed Class 4 Debenture Claims or Allowed Class 5
General Unsecured Claims shall be held by the Liquidating Entity for
sale or other disposition for the benefit of such holders. The Senior
Notes Trustee and the Debenture Trustee shall deliver distributions
deposited with them to the holders of such Claims in accordance with
the provisions of this Plan; provided, however, that if the Senior
Notes Trustee and the Debenture Trustee, respectively, are unable to
make such distributions, the Liquidating Agent, with the cooperation of
the Senior Notes Trustee and the Debenture Trustee, shall make such
distributions.
SURRENDER OF SECURITIES OR INSTRUMENTS. On or before the Effective
Date, or as soon as practicable thereafter, each holder of an
instrument evidencing a Claim on account of a Senior Note or a
Debenture (a "Certificate") shall surrender such Certificate to the
Senior Notes Trustee or the Debenture Trustee, as the case may be, 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 Senior Notes Trustee or the
Debenture Trustee, as the case may be, or the unavailability of such
Certificate is reasonably established to the satisfaction of the Senior
Notes Trustee or the Debenture Trustee, as the case may be, by delivery
of an affidavit of loss that includes an undertaking to indemnify the
Senior Notes Trustee or the Debenture Trustee, as the case may be,
against liability with respect to such lost certificate.
SERVICES OF INDENTURE TRUSTEES, AGENTS AND SERVICERS. The fees and
expenses, 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 paid as provided
in Section 8.2(e) and (f) of the Plan. Fees and expenses of the
Debenture Trustee accruing after the Effective Date with respect to its
role as distribution agent for holders of the Allowed Class 4 Debenture
Claims shall be paid in full as an Administrative Claim as and when the
same shall become due.
RECORD DATE FOR DISTRIBUTIONS TO HOLDERS OF SENIOR NOTES AND
DEBENTURES. At the close of business on the Distribution Record Date,
the transfer ledgers of the Senior Notes Trustee and the Debenture
Trustee shall be closed, and there shall be no further changes in the
record holders of the Senior Notes or the Debentures. The Debtors, the
Senior Notes Trustee, the Debenture Trustee and the Liquidating Agent
shall have no obligation to recognize any transfer of such Senior Notes
or Debentures occurring after the Distribution 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 Distribution Record Date.
DELIVERY OF DISTRIBUTIONS. Distributions to holders of Allowed Claims
shall be made by the Liquidating Agent, Senior Notes Trustee or the
Debenture 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
Liquidating 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 Liquidating Agent has not received a written notice of a
change of address, (d) in the cases of the holders of an Allowed Class
3 Senior Note Claim, at the addresses contained in the official records
of the Senior Notes Trustee or directly to the beneficial owners of the
Senior Notes if so directed by the Senior Notes Trustee, or (e) in the
case of the holder of an Allowed Class 4 Debentures Claim, at the
addresses contained in the official records of the Debenture Trustee.
Unclaimed Distributions to holders of Allowed Class 3 Senior Notes
Claims or holders of Allowed Class 4 Debentures claims shall be
retained and administered by the Senior Notes Trustee or the Debentures
Trustee, as applicable, in accordance with the terms of the Senior
Notes Indenture or the Debenture Indenture, as applicable. Any other
Unclaimed Distributions shall be transferred to the Liquidating Entity
to be placed in the Unclaimed Distributions Reserve. All claims for
Unclaimed Distributions shall be made before the first (1st)
anniversary of the Effective Date, or the Termination Date, whichever
is sooner. On such date, all Unclaimed Distributions shall revert to
the Liquidating Entity and the holders of the Claims entitled to such
Unclaimed Distributions shall be forever barred from receiving such
Unclaimed Distributions, which shall be distributed as part of the
Final Distribution in accordance with Section 8.4.
PROCEDURES FOR TREATING AND RESOLVING DISPUTED AND CONTINGENT CLAIMS.
(i) NO DISTRIBUTIONS PENDING ALLOWANCE. No payments or
distributions will 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.
(ii) DISPUTED CLAIMS RESERVE. All distributions with respect to
Disputed Claims shall be deposited in the Disputed Claims
Reserve. The Debtor will request estimation for every Disputed
Claim that is contingent or unliquidated, and the Liquidating
Agent will deposit distributions with respect to such Claims
in the Disputed Claims Reserve based upon the estimated amount
of each such Claim as set forth in a Final Order.
FRACTIONAL SECURITIES; DE MINIMUS DISTRIBUTIONS. Any other provision of
the Plan notwithstanding, payments of fractions of shares constituting
distributable assets shall not be made. Whenever any payment of a
fraction of a share 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.
8.4 THE LIQUIDATING ENTITY; DUTIES OF THE LIQUIDATING AGENT.
(a) IDENTITY AND MANAGEMENT OF LIQUIDATING ENTITY. The Debtors
shall be the Liquidating Entity unless the Debtors and the
Committee agree prior to the Effective Date that WorldCorp LLC
should be formed to be the Liquidating Entity. The Liquidating
Entity shall be managed by the Liquidating Agent under the
supervision of the Liquidating Committee.
(b) ASSETS OF THE LIQUIDATING ENTITY. The Liquidating Entity
will hold and administer the following assets: (i) the
Administrative Claims Reserve; (ii) the Liquidation Reserve;
(iii) the Disputed Claims Reserve; (iv) all Pending Debtor
Claims, if any; (v) any Airways Shares owned by the Debtors as
of the Effective Date that are not distributed to holders of
Allowed Class 4 Debentures Claims and holders of Allowed Class
5 General Unsecured Claims pursuant to Section 12.2; (vi) any
tax-sharing receivable from The Atlas Companies, Inc.; and
(vii) any other assets of the Debtors that are neither
abandoned nor distributed on the Effective Date. If WorldCorp
LLC is the Liquidating Entity, the Liquidating Agent, on
behalf of the Debtors, will transfer and assign the foregoing
assets to WorldCorp LLC on the Effective Date. Office
equipment and supplies shall be sold by the Liquidating Agent
for Cash equal to the Value of such equipment and supplies,
and the net proceeds of such sales shall be administered by
the Liquidating Entity.
(c) OPERATIONS OF THE LIQUIDATING ENTITY. The Liquidating Entity
shall perform its stated purposes in a manner consistent with
the nature of the assets to be administered, obligations to be
satisfied, claims to be disputed, and causes of action to be
pursued. During the term of its existence, the Liquidating
Entity will comply with all of its obligations, including, but
not limited to, obligations arising by operation of law or
pursuant to the terms of the Plan.
(d) POWERS AND DUTIES OF LIQUIDATING AGENT. Subject to the consent
of the Liquidating Committee, the Liquidating Agent shall have
all duties, powers, and standing and authority necessary to
implement the Plan and to administer and liquidate the
Reserved Assets and any other assets of the Liquidating Entity
for the benefit of holders of Allowed Claims. The Liquidating
Agent's powers shall include, without limitation, the
following:
(i) Administration of the Administrative Claims Reserve;
(ii) Administration of the Liquidation Reserve;
(iii) Administration of the Unclaimed Distributions
Reserve;
(iv) Investing any cash of the Liquidating Entity;
(v) Selling or otherwise transferring for value any
Airways Shares or other assets that are included in
the Reserved Assets;
(vi) Filing with the Bankruptcy Court the reports required
by the Plan;
(vii) Preparing and filing of tax and informational returns
for the Liquidating Entity;
(viii) Retaining such Professionals as the Liquidating Agent
may in its discretion deem necessary for the
operation and management of the Liquidating Entity;
(ix) Compromising or settling any Claims against the
Debtors;
(x) Setting off amounts owed to the Debtors against any
and all amounts otherwise due to be distributed to
the holder of a Claim under the Plan;
(xi) Abandoning any Reserved Assets that cannot be sold or
otherwise disposed of for Value and whose
distribution to holders of Allowed Claims would not
be feasible or cost-effective in the reasonable
judgment of the Liquidating Agent;
(xii) The Liquidating Agent shall also administer the
Disputed Claims Reserve, which shall be maintained as
a separate, segregated fund as described in Section
8.7. The Liquidating Agent's services as manager of
the Liquidating Entity and administrator of the
Disputed Claims Reserve shall be considered as being
provided in separate capacities. The Liquidating
Entity shall indemnify the Liquidating Agent for its
actions as administrator of the Disputed Claims
Reserve to the fullest extent allowed by law; and
(xiii) The Liquidating Agent shall be deemed the
representative of the estate under ss. 1123(b)(3)(B)
of the Bankruptcy Code with all rights to pursue or
settle, in the Liquidating Agent's discretion, any
and all Pending Debtor Claims held by the Liquidating
Entity. Any recoveries therefrom shall be distributed
in accordance with the provisions of the Plan.
(xiv) The Liquidating Agent may increase or decrease the
amount of the Liquidation Reserve as it may in its
discretion deem necessary upon thirty (30) days prior
written notice to the Debenture Trustee. If excess
funds remain in the Liquidation Reserve, such excess
funds shall distributed as part of the Final
Distribution.
(e) TAX VALUATION OF ASSETS. As soon as possible after the
Effective Date, but in no event later than thirty (30) days
thereafter, the Liquidating Agent shall determine, in good
faith, the value of the assets (other than Cash) distributed
to holders of Allowed Claims and, if applicable, transferred
to WorldCorp LLC under the Plan. The value determined by the
Liquidating Agent shall be conclusive absent manifest error.
All parties (including, without limitation, the Debtors, the
Liquidating Agent, the holders of Allowed Claims and the
members of WorldCorp LLC) shall use this valuation for all
federal income tax purposes. This valuation shall be made
available by the Liquidating Agent upon written request of the
parties or their assigns.
(f) DISTRIBUTIONS BY THE LIQUIDATING AGENT. Subject to the consent
of the Liquidating Committee, the Liquidating Agent will be
empowered to make both periodic distributions and a final
distribution.
(i) OFFER TO DISTRIBUTE AIRWAYS SHARES. If Airways
Shares held by the Liquidating Entity are registered
for public distribution on Form S-3 under the
Securities Act of 1933, then, within ten (10) days
after such registration becomes effective, the
Liquidating Agent shall offer, in accordance with
applicable securities laws, to each holder of an
Allowed Class 4 Debenture Claim and to each holder of
an Allowed Class 5 General Unsecured Claim, the
opportunity to elect to receive any unsold Airways
Shares allocated to such Allowed Claim under this
Plan. The Liquidating Agent shall (A) distribute to
holders of Allowed Class 4 Debentures Claims or
Allowed Class 5 Debentures Claims that elect to
receive distributions of Airways Shares, the Airways
Shares that are allocated to their Allowed Claims;
and (B) hold any remaining Airways Shares for sale or
other disposition for the benefit of holders of
Allowed Class 4 Debentures Claims or Allowed Class 5
General Unsecured Claims that have not elected to
receive distributions of Airways Shares. The
beneficial interests of creditors in the Liquidating
Entity shall be adjusted as necessary to take account
of any such distributions to creditors.
Notwithstanding the foregoing, the Liquidating Agent
shall not be required to make de minimus
distributions of Airways Shares.
(ii) SALES OR OTHER DISPOSITIONS OF UNDISTRIBUTED AIRWAYS
SHARES. The Liquidating Agent shall have the right to
sell, or otherwise dispose of, any Airways Shares
held by the Liquidating Entity that are not
distributed to creditors under the Plan at a price
and in a manner that, in the judgment of the
Liquidating Agent, will maximize the value of such
shares. Upon a sale of Airways Shares, the
Liquidating Agent shall distribute all net proceeds
of the sale of such shares to the holders of Allowed
Class 4 and 5 Claims, as their interests dictate;
provided, however, that the Liquidating Agent will
not be required to make de minimus distributions.
(iii) TAX-SHARING RECEIVABLES, AVOIDANCE ACTIONS AND OTHER
CAUSES OF ACTIONS. Net proceeds received under the
tax-sharing arrangements with The Atlas Companies,
Inc. or as a result of Pending Debtor Claims will be
distributed on an interim basis, or as a part of the
Final Distribution; provided, however, that the
Liquidating Agent will not be required to make de
minimus distributions.
(iv) FINAL DISTRIBUTION. On the Termination Date, the
Liquidating Agent shall
(A) establish the Wind-Up Reserve;
(B) distribute to holders of Allowed Class 5
General Unsecured Claims, in accordance with
their interests, the Final Distribution
Assets held for their account; provided,
however, that the Liquidating Agent will not
be required to make de minimus
distributions; and
(C) distribute to the Debenture Trustee for the
account of holders of Allowed Class 4
Debenture Claims, in accordance with their
interests, the Final Distribution Assets
remaining after the distribution to holders
of Allowed Class 5 General Unsecured Claims.
(v) REMAINING FUNDS. If funds remain in the Wind-Up
Reserve after the Liquidating Agent has performed all
of his responsibilities under the Plan, such excess
funds shall be delivered to the Debenture Trustee for
supplemental distribution to holders of Allowed Class
4 Debenture Claims; provided, however, that the
Debenture Trustee shall not be required to make DE
MINIMUS distributions. The Debenture Trustee shall be
entitled to deduct from any such supplemental
distribution its fees and expenses for making such
supplemental distribution.
(g) TIMING OF FINAL DISTRIBUTION. Subject to the consent of the
Liquidating Committee, the Liquidating Agent shall make the
Final Distribution when, (i) in the reasonable judgment of the
Liquidating Agent there are no sources of potential Available
Cash for distribution; and (ii) there remain no Disputed
Claims; and (iii) the Liquidating Agent is in a position to
make the Final Distribution in accordance with applicable law,
but in any event the Liquidating Agent shall make the Final
Distribution no later than two (2) years after the Effective
Date or as soon thereafter as the Liquidating Agent is in a
position to make the Final Distribution in accordance with
applicable law. The date on which the Final Distribution is
made is referred to as the "Termination Date."
(h) DISCHARGE OF LIQUIDATING AGENT. After making the Final
Distribution, the Liquidating Agent shall file in the
Bankruptcy Court a final report of distributions, whereupon
the Liquidating Agent shall have no further duties under the
Plan.
(i) COMPENSATION OF LIQUIDATING AGENT. The compensation of the
Liquidating Agent shall be determined by agreement between the
Liquidating Agent and the Committee prior to the Confirmation
Date and shall be paid by the Liquidating Entity. The
Liquidating Agent shall also be entitled to reimbursement of
his reasonable expenses.
8.5 ESTABLISHMENT AND OPERATION OF WORLDCORP LLC. If WorldCorp LLC is to be
the Liquidating Entity under the Plan, the following provisions shall
apply.
(a) FORMATION OF WORLDCORP LLC. WorldCorp LLC shall be formed on
the Effective Date pursuant to the LLC Operating Agreement. To
the extent necessary or appropriate, the Liquidating Agent and
the Debtors shall execute the LLC Operating Agreement. The
Liquidating Agent shall thereupon be authorized to take all
other steps necessary to complete the formation of WorldCorp
LLC.
(b) TAX TREATMENT OF TRANSFER OF ASSETS TO WORLDCORP LLC. If
WorldCorp LLC is the Liquidating Entity under the Plan, then,
for all federal income tax purposes, all parties (including,
without limitation, the Debtors, the Liquidating Agent, and
the holders of membership interests in WorldCorp LLC) shall
treat the transfer of assets to WorldCorp LLC in accordance
with the terms of the Plan as a transfer by the Debtors to the
holders of Allowed Claims in Classes 4 and 5, followed by a
transfer by such holders to WorldCorp LLC. If WorldCorp LLC is
the Liquidating Entity under the Plan, it shall be deemed not
to be the same legal entity as the Debtors, but only the
assignee of the Debtors' assets.
(c) MEMBERSHIP INTERESTS IN WORLDCORP LLC. If WorldCorp LLC is
the Liquidating Entity under the Plan, then, on the Effective
Date, each holder of an Allowed Class 4 Claim or an Allowed
Class 5 Claim shall, by operation of the Plan, (i) be admitted
to WorldCorp LLC as a member of WorldCorp LLC, (ii) become
bound by the LLC Operating Agreement, and (iii) receive an
uncertificated membership interest in WorldCorp LLC in the
same proportion as the Face Amount of its Allowed Claim bears
to the aggregate Face Amount of all Claims in Classes 4 and 5,
as adjusted pursuant to Section 8.4(f)(i). Membership
interests with respect to Disputed Claims shall be held by the
Liquidating Agent in the Disputed Claims Reserve pending
allowance or disallowance of such Claims. No other entity,
including the Debtors or Debtors in Possession, shall have any
interest, legal, beneficial, or otherwise, in WorldCorp LLC or
the Reserved Assets or Causes of Action upon their assignment
and transfer to WorldCorp LLC. The Liquidating Agent shall
maintain a registry of the membership interests in WorldCorp
LLC.
(d) NON-TRANSFERABILITY OF MEMBERSHIP INTERESTS IN WORLDCORP LLC.
If issued, membership interests in WorldCorp LLC will be
non-transferable, except with respect to the following
transfers: (a) distributions of membership interests in
WorldCorp LLC from the Disputed Claims Reserve; (b) transfers
under the laws of descent, including transfers from an estate
or testamentary trust; (c) transfers between certain
designated family members; (d) transfers involving
distributions from certain qualifying retirement plans; (e)
transfers in which the tax basis of the WorldCorp LLC
membership interest in the hands of the transferee is
determined in whole or in part with reference to its basis in
the hands of the transferor; and (f) "block transfers" as
defined in section 1.7704-1(e)(2) of the Treasury Regulations.
In the case of transfers described in (b) through (f), the
Liquidating Agent shall have the right to receive written
notice thirty days prior to the proposed transfer, including
all pertinent facts and, if applicable, documents relating to
the transfer; to approve or disapprove the transfer and impose
any conditions with respect to the transfer that the
Liquidating Agent deems necessary or advisable in its sole
discretion; to require from the transferor or obtain from
counsel to WorldCorp LLC (at the Liquidating Agent's option)
an opinion in form and substance satisfactory to the
Liquidating Agent that the transfer will not cause WorldCorp
LLC to be taxable as a corporation for federal income tax
purposes; and to require the transferor to reimburse WorldCorp
LLC for any expenses incurred in connection with the proposed
transfer, whether or not approved. Any transfer not approved
by the Liquidating Agent pursuant to these procedures will be
null and void.
(e) TERMINATION OF WORLDCORP LLC. As promptly as possible after
the Final Distribution, the Liquidating Agent shall wind up
the affairs of WorldCorp LLC, file final tax returns, arrange
for storage of its records for a period of not less than three
years, and dissolve it pursuant to applicable law.
8.6 WIND-UP AND DISSOLUTION OF WORLDCORP AND ACQUISITION. The Liquidating
Agent shall be responsible for winding up the affairs of WorldCorp and
Acquisition after the Effective Date, including but not limited to
preparing and filing final tax returns for the Debtors, paying any
franchise taxes and other fees that are due in connection with the
dissolution of the Debtors, filing dissolution documents pursuant to
Del. Code Ann. tit. 8, ss. 303 and taking any other actions that are
necessary to wind up the Debtors' affairs. If WorldCorp LLC is the
Liquidating Entity under the Plan, the Liquidating Agent shall complete
such wind-up and file such dissolution documents as promptly as
possible after the Effective Date. If the Debtors are the Liquidating
Entity under the Plan, the Liquidating Agent shall file such
dissolution documents promptly after the Liquidating Agent makes the
Final Distribution. The costs and expenses of completing the wind-up
and dissolution of the Debtors shall be paid by the Liquidating Entity.
8.7 OPERATION OF THE DISPUTED CLAIMS RESERVE.
(a) GENERAL. The Liquidating Agent shall set aside, segregate and
hold in escrow for the benefit of holders of Disputed Claims,
the property included in the Disputed Claims Reserve,
including any membership interests in WorldCorp LLC (and any
cash distributable on account thereof) deposited in the
Disputed Claims Reserve pursuant to Section 8.5(c).
(b) DISTRIBUTIONS AFTER ALLOWANCE OF DISPUTED CLAIMS. Payments
and distributions from the Disputed Claims 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 Liquidating Agent
will distribute to the holder of such Claim any Cash and other
property in the Disputed Claims Reserve that would have been
distributed on the Effective Date had such Allowed Claim been
an Allowed Claim on the Effective Date. To the extent that the
holder of such Claim would have received a membership interest
in WorldCorp LLC had such Claim been an Allowed Claim as of
the Effective Date, (i) such holder shall be admitted to the
LLC as a member; (ii) such holder shall become bound by the
LLC Operating Agreement; and (iii) the Liquidating Agent shall
distribute to the holder of such Allowed Claim the
uncertificated membership interests in WorldCorp LLC to which
such holder would have been entitled under the Plan had such
claim been allowed as of the Effective Date, together with any
cash and earnings attributable thereto, after reduction for
all costs and expenses attributable to such membership
interest, cash and earnings (including without limitation,
attorneys' fees and any taxes imposed on the Disputed Claims
Reserve).
(c) ADDITIONS TO DISPUTED CLAIMS RESERVE. The Liquidating Agent
will add to the Disputed Claims Reserve any dividends,
payments or other distributions made on account of, as well as
any obligations arising from, the property withheld as the
Disputed Claims Reserve, to the extent that such property
continues to be withheld as the Disputed Claims Reserve at the
time such distributions are made or such obligations arise. If
practicable, the Liquidating Agent will invest any Cash that
is withheld in the Disputed Claims Reserve. Nothing in the
Plan or Disclosure Statement will be deemed to entitle the
holder of a Disputed Claim to post-petition interest on such
Claim.
(d) DISTRIBUTION OF AMOUNTS RESERVED FOR DISALLOWED CLAIMS. To the
extent a Disputed Claim is disallowed, the amount reserved for
that claim (including, if applicable, membership interests in
WorldCorp LLC) will be paid out to other creditors on a Pro
Rata basis, provided however that the Liquidating Agent will
not be required to make de minimus distributions from the
Disputed Claims Reserve.
(e) PAYMENT OF TAX ATTRIBUTABLE TO TAXABLE INCOME OF WORLDCORP
LLC. In the event, and to the extent, the Disputed Claims
Reserve has insufficient funds to pay taxes attributable to
any membership interests held therein, the necessary funds to
pay such taxes shall be advanced to the Disputed Claims
Reserve by the Liquidating Entity and the Disputed Claims
Reserve shall reimburse the Liquidating Entity therefore from
future distributions and disbursements to or for the benefit
of the Disputed Claims Reserve.
(f) TAX TREATMENT OF DISPUTED CLAIMS RESERVE. Subject to
definitive guidance from the Internal Revenue Service or a
court of competent jurisdiction to the contrary (including the
receipt by the Liquidating Agent of a private letter ruling if
the Liquidating Agent so requests one, or receipt of an
adverse determination on audit if not contested by the
Liquidating Agent), the Liquidating Agent shall (i) treat the
Disputed Claims Reserve (A) if the Liquidating Entity is
WorldCorp LLC, as a discrete trust for federal income tax
purposes, consisting of separate and independent shares to be
established in respect of each Disputed Claim, in accordance
with the trust provisions of the Code, or (B) if the
Liquidating Entity is the Debtors, as a grantor trust for
federal income tax purposes, of which the Debtors are the
grantors, in accordance with the grantor trust provisions of
the Code; and (ii) to the extent permitted by applicable law,
report consistently with the foregoing for state and local
income tax purposes. All holders of Allowed and Disputed
Claims shall report, for tax purposes, consistently with the
foregoing.
8.8 THE ADMINISTRATIVE CLAIMS RESERVE. If the aggregate amount of Allowed
Administrative Claims exceeds the amount of the Administrative Claims
Reserve, the Liquidating Agent shall satisfy the excess Allowed
Administrative Claims from other assets of the Liquidating Entity
before making any further distributions with respect to Allowed Claims.
If excess funds remain in the Administrative Claims Reserve after all
Allowed Administrative Claims have been paid, such excess funds shall
be distributed as part of the Final Distribution.
8.9 THE UNCLAIMED DISTRIBUTIONS RESERVE. Unclaimed Distributions to holders
of Allowed Class 3 Senior Notes Claims or holders of Allowed Class 4
Debentures claims shall be retained and administered by the Senior
Notes Trustee or the Debenture Trustee, as applicable. Unclaimed
Distributions to holders of other claims shall be held by the
Liquidating Agent in the Unclaimed Distributions Reserve. If the
Creditor to whom an Unclaimed Distribution was payable makes a claim
for such distribution before the Termination Date, the Senior Notes
Trustee, Debenture Trustee, or Liquidating Agent, as applicable, shall
deliver such Unclaimed Distribution to such Creditor upon proof of such
Creditor's entitlement thereto. Unclaimed Distributions that remain
unclaimed as of the Termination Date shall be redistributed to other
creditors in the same Class as part of the Final Distribution, and the
Creditors originally entitled to receive such Unclaimed Distributions
shall have no further right thereto.
8.10 MISCELLANEOUS IMPLEMENTATION PROVISIONS.
(a) REPORTS OF DISTRIBUTIONS BY THE LIQUIDATING ENTITY. Every 90
days after the Effective Date, the Liquidating Agent shall
file with the Court a report detailing the calculation of
Available Cash for the immediately preceding ninety day period
(including a summary of costs incurred pursuant to Section 8.4
of the Plan and, if applicable, the WorldCorp LLC Operating
Agreement, any receipts of the Liquidating Entity, and a
summary of disbursements from, or increases in the amount of,
any Reserve). The report shall also detail the number of hours
the Liquidating Agent has devoted to the operation and
management of the Liquidating Entity during the immediately
preceding 90-day period, provide a summary of the duties and
operations so performed, and be accompanied by copies of
receipts for any expense in excess of one hundred dollars
($100.00) for which the Liquidating Agent is reimbursed by the
Liquidating Entity.
(b) PRESERVATION OF PENDING DEBTOR CLAIMS. In accordance with
section 1123(b)(3) of the Bankruptcy Code and except as
otherwise provided in the Plan, the Liquidating Entity shall
retain all Pending Debtor Claims against any entity. Subject
to the consent of the Liquidating Committee, the Liquidating
Agent, in the exercise of its business judgment, will
determine whether to pursue such Pending Debtor Claims in
accordance with the best interests of the beneficiaries of the
Liquidating Entity. All Causes of Action and Avoidance Claims
that the Debtors may have against any Person as of the
Effective Date that are not Pending Debtor Claims shall be
deemed waived and released as of the Effective Date.
(c) SUBSTANTIAL CONTRIBUTION COMPENSATION AND EXPENSES BAR DATE.
Any person or entity who requests compensation or expense
reimbursement pursuant to section 503(b)(3), (4), and (5) of
the Bankruptcy Code for making a substantial contribution in
the Chapter 11 Case must file an application with the Clerk of
the Bankruptcy Court, and serve such application on counsel
for the Debtors and as otherwise required by the Bankruptcy
Court and the Bankruptcy Code so as to be received by the
earlier of (i) 30 days after the Confirmation Date or (ii)
five (5) days before the Effective Date. Claims for
substantial contribution that are not filed and served within
the foregoing limitations period shall be forever barred.
Timely filed claims for substantial contribution that have not
been Allowed or Disallowed as of the Effective Date shall be
included in calculating the Administrative Claims Reserve.
(d) INVESTMENTS BY THE LIQUIDATING AGENT. Except with respect to
Airways Shares held by the Liquidating Entity under the Plan
or securities received in exchange for or with respect to such
shares, the investment power of the Liquidating Agent shall be
limited to investments in cash, money market funds and
treasury bills.
(e) CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS. On the
Effective Date, except as otherwise provided for herein, (i)
the Existing Securities and any other security, note, bond,
indenture, or other instrument or document evidencing or
creating any indebtedness or obligation of the Debtors, shall
be canceled, and (ii) the obligations of, and/or Claims
against, the Debtors under, relating or pertaining to any
agreements, indentures or certificates of designations
governing the Existing Securities; any other security, note,
bond, indenture or other instrument or document evidencing or
creating any indebtedness or obligation of the Debtors, as the
case may be; and intercompany debts shall be released and
discharged. As of the Effective Date, the Senior Notes Trustee
and the Debenture Trustee shall be released from their
obligations under the Senior Notes Indenture and the Debenture
Indenture, respectively, except for their obligations to
deliver to holders of Allowed Class 3 Senior Notes Claims and
Allowed Class 4 Debenture Claims the distributions made under
the Plan.
(f) EXCLUSIVITY PERIOD. The Debtors, with the consent of the
Committee, which shall not be unreasonably withheld, shall
retain the exclusive right to amend or modify the Plan and to
solicit acceptances of any amendments to or modifications of
the Plan, through and until the Effective Date.
(g) EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS. The Chairman of
the Board of Directors, the Chief Executive Officer, any other
executive officer of either of the Debtors, and the
Liquidating Agent 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 either of the Debtors, or
the Liquidating Agent shall be authorized to certify or attest
to any of the foregoing actions.
8.11 TAX REPORTING
(a) Tax Returns and Reports. The Liquidating Agent shall be
responsible for filing tax returns on behalf of the
Liquidating Entity.
(b) TAX TREATMENT OF WORLDCORP LLC. If WorldCorp LLC is formed to
be the Liquidating Entity under the Plan, the following
provisions shall be applicable.
(i) Partnership Tax Status. WorldCorp LLC shall be
treated as a partnership for federal tax purposes
and, to the extent permitted under applicable law,
for state and local income tax purposes. The
Liquidating Agent shall be responsible for
distributing information statements to the holders of
the membership interests in WorldCorp LLC, setting
forth each member's allocable share of the income,
loss, deduction or credit of WorldCorp LLC.
(ii) ALLOCATION OF WORLDCORP LLC TAXABLE INCOME, LOSS,
DEDUCTIONS AND CREDITS. For federal income tax
purposes, WorldCorp LLC's taxable income, loss,
deductions and credits shall be allocated among the
members of WorldCorp LLC in a manner consistent with
applicable Treasury Regulations taking into account
each holder's relative economic interest in WorldCorp
LLC. Each holder of a membership interest in
WorldCorp LLC will be required to take into account
the holder's allocable share of the income, loss
deduction or credit of WorldCorp LLC in determining
the holder's taxable income for federal income tax
purposes.
(C) OTHER REPORTS. The Liquidating Agent shall file (or cause to
be filed) any other statements, returns or disclosures
relating to the Liquidating Entity that are required by any
governmental unit or applicable law.
(D) EXPEDITED TAX DETERMINATIONS. The Liquidating Agent is
authorized to request an expedited determination under section
505(b) of the Bankruptcy Code for all tax returns filed for or
on behalf of the Liquidating Entity for all taxable periods
through the termination of the Liquidating Entity.
(E) EXEMPTION FROM TRANSFER TAXES. Pursuant to section 1146(c) of
the Bankruptcy Code, the issuance, transfer, or exchange of
notes or equity securities under the Plan or the making or
delivery of any deed or other instrument or transfer under, in
furtherance of, or in connection with the Plan, including
without express or implied limitation, any transfers to or by
the Liquidating Entity shall not be subject to any transfer,
sales or other similar tax.
ARTICLE IX
EXECUTORY CONTRACTS
9.1 REJECTION OF ALL CONTRACTS. As of the Confirmation Date, all executory
contracts and unexpired leases of the Debtors not previously assumed or
rejected shall be deemed rejected.
9.2 EFFECT OF REJECTION. Claims arising from rejection of executory
contracts or unexpired leases not previously assumed shall be included
in Class 5. Holders of such Claims shall have ten (10) days after the
Confirmation Date to file proofs of such Claims. Copies of all such
proofs of Claim must be served on the Liquidating Agent and the
Liquidating Committee. Any such proofs of Claim not filed and served
within ten (10) days after the Confirmation Date shall be forever
barred. The time period to object to such Claims for purposes of
Section 9.1 of the Plan shall be 30 days from the date such Claim is
filed.
ARTICLE X
ALLOWANCE AND PAYMENT OF
CERTAIN ADMINISTRATIVE CLAIMS
10.1 PROFESSIONAL CLAIMS.
(a) On the Effective Date, the Liquidating Agent shall reserve
Cash for payment of all billed but unpaid 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 Liquidating Agent shall reserve an amount equal to such
estimate.
(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) All final requests for payment of Professional Claims must be
filed no later than thirty (30) 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 and paid by
the Liquidating Entity out of the Reserved Assets.
10.2 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 Debtors so as to be received by the earlier of (a)
30 days after the Confirmation Date or (b) five (5) days before the
Effective Date. Timely filed requests for payment of Administrative
Claims that have not been Allowed or Disallowed as of the Effective
Date shall be included in calculating the Administrative Claims
Reserve. Unless the Debtors or Liquidating Agent objects to an
Administrative Claim within thirty (30) days after receipt, such
Administrative Claim shall be deemed allowed in the amount requested.
In the event that the Debtors or the Liquidating Agent objects to an
Administrative Claim, the Bankruptcy Court shall determine the Allowed
amount of such Administrative Claim. Notwithstanding the foregoing, (i)
no request for payment of an Administrative Claim need be filed with
respect to an Administrative Claim which is paid or payable by the
Debtors in the ordinary course of business; and (ii) all requests for
payment of Professional Claims and requests for compensation or expense
reimbursement pursuant to section 503(b)(3), (4), and (5) of the
Bankruptcy Code for making a substantial contribution in the Chapter 11
Case shall be subject to review and allowance or disallowance by the
Bankruptcy Court.
ARTICLE XI
EFFECT OF THE PLAN ON CLAIMS AND INTERESTS
11.1 COMPROMISES AND SETTLEMENTS. Pursuant to Bankruptcy Rule 9019(a), the
Debtors may compromise and settle various Claims (a) against them and
(b) that they have against other Persons. The Debtors expressly reserve
the right (with Bankruptcy Court approval, following appropriate notice
and opportunity for a hearing) to compromise and settle Claims against
them and Pending Claims that they may have against other Persons up to
and including the Effective Date. After the Effective Date, such right
shall pass to the Liquidating Agent.
11.2 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 Debtors or the
Liquidating Agent shall be deemed to have been 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 Debtors that
occurred on or before the Effective Date; provided, however, that
nothing in this section shall be deemed to (a) release (i) any such
person from liability for acts or omissions that are the result of
fraud, gross negligence, willful misconduct, or willful violation of
the securities laws or the Internal Revenue Code; (ii) any Pending
Claim the Debtors and/or the Liquidating Agent may have under Chapter 5
of the Bankruptcy Code; or (iii) the Claims, if any, of the United
States; (b) prevent the Debtors or the Liquidating Agent from objecting
to the Claim of any such person; or (c) preclude police, federal tax,
or regulatory agencies from fulfilling their statutory duties. Holders
of Claims or Interests 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; provided, however, that the injunction provided for in
this section shall not (x) bar actions based upon liability for acts or
omissions that are the result of fraud, gross negligence, willful
misconduct or willful violation of the securities laws or the Internal
Revenue Code; (y) preclude police, federal tax, or regulatory
authorities from fulfilling their statutory duties; or (z) bar the
Claims, if any, of the United States.
11.3 SETOFFS. The Debtors 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 Debtors 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 Debtors of any such claim that
the Debtors may have against such holder. After the Effective Date,
such right shall pass to the Liquidating Agent.
11.4 SATISFACTION OF SUBORDINATION RIGHTS. All Claims against the Debtors
and all rights and claims between or among holders of Claims relating
in any manner whatsoever to Claims against the Debtors 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.
11.5 EXCULPATION AND LIMITATION OF LIABILITY.
(a) Except as otherwise specifically provided in this Plan, the
Debtors, WorldCorp LLC, the Creditors' Committee, the
Liquidating 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 Debtors' Chapter 11 cases,
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, and in all respects shall be
entitled to rely reasonably upon the advice of counsel with
respect to their duties and responsibilities under the Plan;
provided, --------- however, that nothing in this section
shall be deemed to release any such person ------- from
liability for acts or omissions that are the result of fraud,
gross negligence, willful misconduct, or willful violation of
the securities laws or the Internal Revenue Code.
(b) 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 Debtors, the Liquidating Agent, or the Creditors'
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 Chapter 11 cases, 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; provided, however, that
----------------- nothing in this section shall be deemed to
release any such person from liability for acts or omissions
that are the result of fraud, gross negligence, willful
misconduct, or willful violation of the securities laws or the
Internal Revenue Code.
11.6 INDEMNIFICATION OBLIGATION. In satisfaction and compromise of the
Indemnitees' Indemnification Rights, 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 Debtors 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 as rights against the
Liquidating Entity and shall not be modified, reduced, discharged or
otherwise affected in any way by the Chapter 11 cases, except as
specifically provided in the Plan. All claims against the Liquidating
Entity with respect to Post-Petition Indemnification Rights must be
asserted in writing to the Liquidating Agent at least five (5) business
days prior to the Final Effective Date or be forever barred. If any
such claims are timely asserted, the Final Distribution shall not occur
until all such timely asserted claims have been paid in full or
disallowed pursuant to an order of the Bankruptcy Court.
11.7 MODIFICATION OF RELEASES. If and to the extent that the Bankruptcy
Court concludes that the inclusion in the Plan of any portion of the
foregoing releases would prevent confirmation, then the Debtors reserve
the right to amend the Plan so as to give effect as much as possible to
the foregoing releases, or to delete them.
ARTICLE XII
CONDITIONS PRECEDENT
12.1 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 12.2 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, provided that, if an appeal of the
Confirmation Order or any other such order is filed but no
stay is granted in connection with the appeal, the Debtors or
the Committee, with the consent of the other or the approval
of the Bankruptcy Court, may elect to permit the Effective
Date to occur notwithstanding the pendency of appeal.
(b) The Confirmation Order shall be in a form and substance
acceptable to the Debtors and the Committee and shall, among
other things, provide that:
(i) provisions of the Confirmation Order are non-
severable and mutually dependent;
(ii) all transfers of property by the Debtors (A) to
WorldCorp LLC, if any, (1) are or shall be legal,
valid, and effective transfers of property, (2) vest
or shall vest WorldCorp LLC 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 Liquidating Agent 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.
(c) The Bankruptcy Court shall have entered orders (i) granting or
denying any motion filed by the Debtors for authority to sell
Airways Shares pursuant to Section 363 of the Bankruptcy Code,
and (ii) Allowing or Disallowing any Disputed Claims. Any
motion to sell Airways Shares will be subject to higher and
better offers from competing bidders. In the event of a
disagreement between the Debtors and the Committee as to which
bid represents the highest and best offer for the Airways
Shares, the Committee's decision will control.
12.2 WAIVER OF CONDITIONS TO CONSUMMATION. The conditions set forth in
Section 12.1 of the Plan may be waived, if legally waivable, by the
Debtors, with the consent of the Committee, 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 Debtors 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.
(a) EARLY PAYMENT OF SENIOR NOTES CLAIMS. If the Effective Date
has not occurred within 10 days after the Confirmation Order
is entered, then, subject to Bankruptcy Court approval in the
Confirmation Order, and provided the Confirmation Order is
then in effect and has not been stayed, on the first Business
Day after the tenth day after the Confirmation Order is
entered, the Liquidating Agent shall make the Initial
Distribution to holders of Allowed Class 3 Senior Notes
Claims. If the Bankruptcy Court declines to approve a
distribution to holders of Class 3 Senior Notes Claims before
the Plan becomes effective, the Initial Distribution to
holders of Allowed Class 3 Senior Notes Claims will occur on
the Effective Date or as promptly thereafter as practicable.
(b) If the condition in Section 12.1(c) has not been satisfied by
April 27, 2000, such condition shall be automatically waived
unless otherwise requested in writing by the Committee.
ARTICLE XIII
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 Cases and the Plan, including, among other things,
the following matters:
13.1 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 either Debtor is a party or with respect to which
either 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;
13.2 to determine any and all pending adversary proceedings, applications
and contested matters;
13.3 to ensure that distributions to holders of Allowed Claims are
accomplished as provided herein;
13.4 to hear and determine motions for approval of the terms of sale of
assets by the Liquidating Agent;
13.5 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;
13.6 to enter and implement such orders as may be appropriate if the
Confirmation Order is for any reason stayed, revoked, modified or
vacated;
13.7 to issue orders in aid of execution, implementation or consummation
of the Plan;
13.8 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;
13.9 to hear and determine all applications for allowance of Professional
Claims and all other applications for compensation or reimbursement of
expenses under the Plan or under sections 330, 331, 503(b), 1103 and
1129(a)(4) of the Bankruptcy Code;
13.10 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;
13.11 to hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan, including
disputes arising under agreements, documents or instruments executed in
connection with this Plan;
13.12 to hear and determine all suits or adversary proceedings to recover
assets of the Debtors and property of the Estates, wherever located;
13.13 to hear and determine matters concerning state, local and federal taxes
in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;
13.14 to hear and determine all other disputes arising out of or related to
the Chapter 11 Cases, 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;
13.15 to hear any other matter not inconsistent with the Bankruptcy Code; and
13.16 to enter a final decree closing the Chapter 11 Cases.
ARTICLE XIV
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 Debtors, the Liquidating Agent, all present
and former holders of Claims, all present and former holders of
Interests, all other parties in interest and their respective
successors and assigns.
14.2 MODIFICATION AND AMENDMENTS. The Debtors, with the consent of the
Committee, 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 Debtors, with the consent of the Committee, which
shall not be unreasonably withheld, 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.
14.3 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with the Plan and
all instruments issued in connection therewith and distributions
thereunder, the Debtors, the Liquidating Entity and the Liquidating
Agent shall 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 COMMITTEE. As of the Effective Date, the duties of the Creditors'
Committee shall terminate, except with respect to applications for
Professional Claims.
14.5 REVOCATION, WITHDRAWAL OR NON-CONSUMMATION.
(a) The Debtors, with the consent of the Committee, shall have the
right to revoke or withdraw the Plan at any time prior to the
Effective Date.
(b) If the Debtors revoke or withdraw 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 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:
If to the Debtors:
WorldCorp, Inc.
WorldCorp Acquisition Corp.
444 Madison Avenue
Suite 703
New York, NY 10222
Attention: Mark M. Feldman, President
with copies to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, D.C. 20037-1420
Attention: Duane D. Morse, Esq.
H. Colby Lane, Esq.
and
Young Conaway Stargatt & Taylor
1100 North Market Street, 11th Floor
Wilmington, DE 19801
Attention: James L. Patton, Jr., Esq.
Brendan L. Shannon, Esq.
If to the Liquidating Agent:
W. Joseph Dryer
5068 West Plano Parkway
Suite 345
Plano, TX 75093
If to the Liquidating Committee:
Wilbur L. Ross, Jr.
Rothschild, Inc.
1251 Avenue of the Americas
51st Floor
New York, NY 10020
Gordon McCormick
M. J. Whitman, Inc.
767 Third Avenue
New York, NY 10017
Thomas Siering
EBF & Associates
601 Carlson Parkway
Suite 200
Minnetonka, MN 55305
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.
Respectfully submitted,
WORLDCORP, INC., AND WORLDCORP ACQUISITION CORP.
As Debtors and Debtors-in-Possession
By: _______________________________________
Its: _______________________________________
WILMER, CUTLER & PICKERING
2445 M Street, NW
Washington, D.C. 20037-1420
Duane D. Morse
H. Colby Lane
- 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. AND WORLDCORP ACQUISITION
CORP. as Debtors and Debtors-in-Possession
Dated: March 14, 2000
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- ------------------------------------
In re Chapter 11
WORLDCORP, INC., and Case Nos. 99-298 (MFW)
WORLDCORP ACQUISITION CORP., and 99-2582 (MFW)
Debtors. (Jointly Administered)
- ------------------------------------
DISCLOSURE STATEMENT WITH RESPECT TO FIRST AMENDED
JOINT LIQUIDATING PLAN OF REORGANIZATION OF
WORLDCORP, INC. AND WORLDCORP ACQUISITION CORP.
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 Duane D. Morse
James L. Patton, Jr. H. Colby Lane
Brendan L. Shannon COUNSEL FOR THE DEBTORS
COUNSEL FOR THE DEBTORS
Dated: March 14, 2000
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
OF 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/
- --------
1/ Legend to be removed upon entry by the Clerk of Order of the
Bankruptcy Court approving this Disclosure Statement.
- --------
<PAGE>
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE JOINT LIQUIDATING
PLAN OF REORGANIZATION OF WORLDCORP, INC. AND WORLDCORP ACQUISITION CORP. (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.
THE SOLICITATION PURSUANT TO THIS DISCLOSURE STATEMENT WILL
EXPIRE AT 4:00 P.M. PREVAILING EASTERN TIME ON APRIL 11, 2000 (THE "VOTING
DEADLINE"). TO BE COUNTED, BALLOTS MUST BE ACTUALLY RECEIVED IN ACCORDANCE WITH
THE VOTING INSTRUCTIONS BY THE BALLOTING AGENT ON OR BEFORE THE VOTING DEADLINE.
PLEASE SEE ARTICLE II OF THIS DISCLOSURE STATEMENT FOR THE VOTING INSTRUCTIONS.
BALLOTS WILL NOT BE ACCEPTED VIA FACSIMILE.
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
DEBTORS-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. OR WORLDCORP ACQUISITION CORP.
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT AND BECOMES
EFFECTIVE, ALL HOLDERS OF CLAIMS AND INTERESTS (INCLUDING THOSE WHO REJECTED OR
WHO ARE DEEMED TO HAVE REJECTED OR ACCEPTED THE PLAN AND THOSE WHO DID NOT
SUBMIT BALLOTS TO ACCEPT OR REJECT THE PLAN) WILL BE BOUND BY THE TERMS OF THE
PLAN.
<PAGE>
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 Joint Liquidating Plan
of Reorganization of WorldCorp, Inc. and WorldCorp Acquisition Corp. (the
"Plan"), a copy of which is annexed hereto as Appendix A.
WorldCorp, Inc. ("WorldCorp") filed for Chapter 11 protection on
February 12, 1999 (the "WorldCorp Petition Date") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").
WorldCorp also filed on the Petition Date a proposed plan of reorganization
("Original Reorganization Plan") together with a proposed disclosure statement
describing that plan. On March 22, 1999, WorldCorp filed its First Amended
Reorganization Plan, which was an amended version of the plan of reorganization
that was filed on the Petition Date, together with a proposed disclosure
statement describing that First Amended Reorganization Plan. The First Amended
Reorganization Plan was subsequently withdrawn because WorldCorp and its
co-proponent, Rothschild Recovery Fund LLP ("RRF"), were unable to reach
agreement with the holders of WorldCorp's 10% senior subordinated notes on the
treatment of their claims under the First Amended Reorganization Plan.
WorldCorp Acquisition Corp. ("Acquisition") filed its Chapter 11
petition in the Bankruptcy Court on July 2, 1999 (the "Acquisition Petition
Date"). Pursuant to an order entered by the Bankruptcy Court, WorldCorp's
Chapter 11 case (the "WorldCorp Case") and Acquisition's Chapter 11 case (the
"Acquisition Case" and together with the WorldCorp Case, the "Cases") were
consolidated for purposes of administration.
On January 10, 2000, WorldCorp and Acquisition (together, the
"Debtors") filed a proposed Joint Liquidating Plan of Reorganization and
accompanying disclosure statement. On March 14, 2000, the Debtors filed their
First Amended Joint Liquidating Plan of Reorganization (the "Plan"). This
disclosure statement pertains to the Plan.
I. Business Overview
WorldCorp and Acquisition are holding companies. WorldCorp owns 100% of
the stock of Acquisition and, at the time the WorldCorp Case was filed, owned
approximately 28% of the stock of InteliData Technologies Corporation
("InteliData"), a publicly traded company that develops and markets products and
services for the telecommunications and financial services industries. The
InteliData stock has since been sold for cash in broker transactions pursuant to
Rule 144 under the Securities Act of 1933. Acquisition owns approximately 38% of
the stock of World Airways, Inc. ("World Airways"), a publicly traded company
that is a global provider of long-range passenger and cargo air transportation
services to major international airlines and the United States government.
Acquisition was formed in April 1998 as part of a series of related
transactions (collectively, the "Paper Transaction") in which, among other
things, (i) Acquisition acquired all of the stock of The Atlas Companies, Inc.
("Atlas"), a maker of specialty papers that was once known as Paper Acquisition
Corp., and all but 13,671 of the shares of World Airways stock then owned by
WorldCorp, (ii) WorldCorp received 80% of the stock of Acquisition, and (iii)
the former owners of Atlas (the "Atlas Shareholders") received 20% of the stock
of Acquisition plus promissory notes and an earn-out based upon the future
earnings of Atlas, all of which were guaranteed by WorldCorp and secured by
liens on substantially all of the assets of Acquisition and WorldCorp. (The
terms of the Paper Transaction are described more fully below under the heading
HISTORY OF WORLDCORP AND ACQUISITION PRIOR TO WORLDCORP'S CHAPTER 11 BANKRUPTCY
FILING.)
On July 9, 1999, after many months of negotiation, the Debtors filed an
adversary proceeding in the Cases seeking to set aside the Paper Transaction.
This adversary proceeding was resolved by a settlement approved by the
Bankruptcy Court by order entered November 18, 1999 and consummated on November
29, 1999 (the "Atlas Settlement"). Pursuant to the Atlas Settlement, among other
things, (a) Acquisition transferred its shares of stock in Atlas to the Atlas
Shareholders, (b) the Atlas Shareholders transferred their minority interest in
Acquisition to WorldCorp, (c) the notes, earn-out, liens and other obligations
owed to the Atlas Shareholders and their affiliates were canceled, (d) the
Debtors paid the Atlas Shareholders $280,000 in cash, and (e) the parties
exchanged mutual releases.
As a result of the Atlas Settlement, WorldCorp became the 100% owner of
Acquisition, the Debtors relinquished their ownership interest in Atlas,
Acquisition was left with essentially no liabilities, and the Debtors now own
their assets free and clear of any liens, claims or interests. This will enable
the Debtors to distribute the vast majority of their assets, or the value
thereof, in a liquidating reorganization.
Because they are holding companies, the Debtors obtain all of their
funds through their interests in their subsidiaries. World Airways has not paid
any dividends since 1992, and its ability to do so is currently restricted under
certain borrowing arrangements. Neither InteliData nor Acquisition has ever paid
any dividends. Additionally, World Airways 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, substantially all of the funding for payment of the
Debtors' liabilities must come from sales of shares of InteliData and Airways.
Since May 1999, when the Debtors obtained authorization from the Bankruptcy
Court to sell InteliData shares in broker transactions under Rule 144 of the
Securities Act of 1933, the Debtors have raised over $59 million in cash by
selling InteliData Shares. The Debtors sold the last of their InteliData shares
on March 13, 2000. As discussed below, the Debtors sold a substantial block of
the Airways Shares to Airways in August 1999 at an above-market price in
satisfaction of Airways' secured and unsecured claims against WorldCorp. The
Debtors' ability to sell Airways shares under Rule 144 has been limited both by
the very low trading volume of that stock and by the Debtors' status as
"affiliates" of Airways under applicable securities laws, but the Debtors are in
the process of commencing such sales. In addition, the Debtors have received an
offer from a small group of accredited investors to purchase a substantial block
of the remaining Airways shares in a private transaction that is exempt from the
registration requirements of federal securities laws, and are pursuing efforts
to obtain registration of any Airways shares not sold in that transaction.
Nevertheless, the Plan provides for the possibility that some of the Airways
Shares may remain unsold when the Plan becomes effective.
II. Debt Obligations
WorldCorp has substantial repayment obligations. It currently has
outstanding $5.0 million in aggregate principal amount of 10.0% senior
subordinated notes due September 30, 2000 (the "Senior Notes") issued pursuant
to an indenture (the "Senior Notes Indenture") dated September 30, 1996 between
WorldCorp and Norwest Bank Minnesota, National Association, as trustee (the
"Senior 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 either date,
and no interest or other payments have been made since March 31, 1998. According
to a proof of claim filed by the Senior Notes Trustee, the total amount
outstanding under the Senior Notes Indenture and owed by WorldCorp as of the
date of WorldCorp's Chapter 11 filing was $5,553,895, consisting of $5.0 million
of principal and $553,895 of accrued interest, fees and expenses. Although the
Senior Notes are unsecured and are not entitled to claim postpetition interest
in WorldCorp's bankruptcy case, they are entitled to recover those amounts from
distributions to holders of WorldCorp's 7% convertible subordinated debentures
due 2004 as set forth in the intercreditor subordination provisions of the
Debenture Indenture (as defined below), which the Plan assumes remain
enforceable in bankruptcy.
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 The First National Bank of Boston, which has been
succeeded by State Street Bank and Trust Company, as indenture trustee (the
"Debenture Trustee"). Interest payments are payable semi-annually on May 15 and
November 15 of each year. No interest has been paid on the Debentures since
November 15, 1997. According to proofs of claim filed by the Debenture Trustee,
the total amount outstanding under the Debenture Indenture as of February 12,
1999, when WorldCorp filed its Chapter 11 petition, was $70,811,885.41,
consisting of $65.0 million of principal, $5,806,179.16 of accrued and unpaid
interest, and $5,706.25 of unpaid trustee's fees and expenses. Because the
Debentures are unsecured, holders of Debentures are not entitled to claim
postpetition interest in WorldCorp's bankruptcy case. The principal and interest
due on the Debentures are contractually subordinated to the Senior Notes
pursuant to the terms of the Debenture Indenture.
As of the WorldCorp Petition Date, WorldCorp was indebted to World
Airways under a secured loan arrangement that had an outstanding balance of
approximately $1.3 million (the "World Airways Secured Loan"). The World Airways
Secured Loan was secured by a pledge of 350,000 shares of World Airways common
stock and 1,615,396 shares of InteliData common stock. World Airways also had an
unsecured intercompany claim in the amount of $465,143.49 in connection with
various prepetition services and benefits, such as office space and insurance,
provided to WorldCorp or advances and payments made on its behalf. The World
Airways claims were satisfied pursuant to a the terms of a settlement agreement
dated July 9, 1999 that was approved by the Bankruptcy Court by order entered
August 6, 1999 and consummated on August 13, 1999 (the "World Airways
Settlement"). Under the terms of the World Airways Settlement, (i) Acquisition
sold 1,065,394 shares of World Airways stock to WorldCorp at a price of $1.56225
per share -- equal to the average of the closing prices of the World Airways
stock for the 30 days ending July 16, 1999 -- and WorldCorp transferred those
shares to World Airways at the same per-share price in satisfaction of the World
Airways claims; (ii) World Airways paid WorldCorp $75,000; and (iii) the parties
exchanged mutual releases. The World Airways Loan and World Airways Settlement
are discussed in more detail below under the heading HISTORY OF THE CHAPTER 11
CASES -- THE WORLD AIRWAYS SETTLEMENT. As a result of the World Airways
Settlement, World Airways ceased to be a creditor of either Debtor, and its
liens on WorldCorp's InteliData shares were released.
WorldCorp also has outstanding prepetition general unsecured debt in
the aggregate amount of approximately $650,000, consisting of trade payables,
borrowings from directors, director's fees and amounts owed to professional
service providers. As stated above, Acquisition has essentially no debt.
III. Treatment of Claims and Interests under the Plan
The Plan constitutes a liquidating plan of reorganization for the
Debtors. 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
Debtors. Under the Plan, Claims against and Interests in the Debtors are divided
into Classes. A Claim or Interest is placed in a particular Class for the
purposes of voting on the 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 or Allowed, 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 six (6) 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 3 (Senior Notes Claims), Class 4 (Debenture
Claims), Class 5 (General Unsecured Claims), and Class 6 (Interests) are
impaired Classes under the Plan (collectively, the "Impaired Classes").
Holders of Claims and Interests in Class 1 (Other Priority Claims) and
Class 2 (Administrative Convenience Claims) are not impaired under the Plan (the
"Unimpaired Classes"). Classes not impaired under the Plan are deemed to have
accepted the Plan.
Claims in Class 6 (Interests) are not entitled to receive or retain any
property under the Plan. Accordingly, holders of Class 6 Interests are deemed to
reject the Plan. Their votes will not be solicited.
The classification and treatment for all Classes are summarized below
and described in more detail under Section VII.A - PLAN OF REORGANIZATION -
GENERAL CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS.
CLASS DESCRIPTION TREATMENT UNDER PLAN
Class 1 - Other Priority Claims On the Effective Date, each holder of an
Allowed Class 1 Other Priority Claim, if
any, shall receive (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 - Administrative
Convenience Claims On the Effective Date, each holder of an
Allowed Class 2 Administrative Convenience
Claim, if any, shall receive, in full
satisfaction, settlement, release and
discharge of and in exchange for such
Class 2 Administrative Convenience Claim,
Cash equal to the amount of such Allowed
Claim.
Class 3 - Senior Notes Claims On the Effective Date, the Senior Notes
Trustee Fees shall be paid in Cash, and
each other holder of an Allowed Class 3
Senior Notes Claim shall receive Cash in
an aggregate amount equal to such holder's
Senior Note Claim Recovery Amount. All
distributions to holders of Class 3 Senior
Notes Claims shall be made from the Class
3/4 Effective Date Assets.
Class 4 - Debenture Claims On the Effective Date, the Debenture
Trustee Fees shall be paid in Cash from
the Class 3/4 Effective Date Assets. Each
holder of an Allowed Class 4 Debenture
Claim other than the Debenture Trustee
shall receive, (a) on the Effective Date,
(i) a Pro Rata distribution of the
remaining Cash included in the Class 3/4
Effective Date Assets; and (ii) if such
holder is offered the opportunity to
receive a distribution of Airways Shares
and such holder so elects, a Pro Rata
distribution of the Airways Shares
included in the Class 3/4 Effective Date
Assets; and (b) on the Termination Date,
the distributions provided in Section 8.4
of the Plan. Any Airways Shares included
in the Class 3/4 Effective Date Assets
that are not distributed to holders of
Allowed Class 4 Debenture Claims on the
Effective Date will be held by the
Liquidating Entity for sale or other
disposition for the benefit of holders of
Allowed Class 4 Debentures Claims as their
interests may appear.
Class 5 - General Unsecured Each holder of an Allowed Class 5 General
Claims Unsecured Claim shall receive, (a) on the
Effective Date, (i) a Pro Rata
distribution of the Cash included in the
Class 5 Effective Date Assets; and (ii) if
such holder is offered the opportunity to
receive a distribution of Airways Shares
and such holder so elects, a Pro Rata
distribution of the Airways Shares
included in the Class 5 Effective Date
Assets; and (b) on the Termination Date,
the distributions provided in Section 8.4
of the Plan. Any Airways Shares included
in the Class 5 Effective Date Assets that
are not distributed to holders of Allowed
Class 5 General Unsecured Claims on the
Effective Date will be held by the
Liquidating Entity for sale or other
disposition for the benefit of holders of
Allowed Class 5 General Unsecured Claims
as their interests may appear. Class 6 -
Interests On the first Business Day after
the Effective Date, each holder of
WorldCorp Common Stock and Subordinated
Securities shall have its Interest and
stock certificates canceled and shall
receive no distribution under the Plan.
IV. Implementation of the Plan
A. Overall Structure of the Plan
The Plan provides for all of the property of the Debtors, consisting
primarily of cash and shares of World Airways, to be sold or distributed over
time to holders of Allowed Claims. Holders of Interests will receive no
distribution under the plan and their Interests will be canceled.
- The Plan becomes effective when the Bankruptcy Court has
entered a Confirmation Order, the Confirmation Order has
become final and non-appealable, and all other conditions to
consummation have been satisfied. Provided other conditions to
consummation have been satisfied, the Debtors, with the
consent of the Committee, can elect to allow the Plan to
become effective while the Confirmation Order is still subject
to appeal as long as no stay pending appeal has been issued.
- If the Plan has not become effective within 10 days after the
Confirmation Order is entered, then, subject to Bankruptcy
Court approval in the Confirmation Order and provided the
Confirmation Order is then in effect and has not been stayed,
the Debtors will make an advance distribution of cash to pay
off the Class 3 Senior Notes Claims in order to prevent the
continued accrual of additional interest and fees in
connection with those Claims. If the Bankruptcy Court declines
to approve a distribution to holders of Class 3 Senior Notes
Claims before the Plan becomes effective, payment of the Class
3 Senior Notes Claims will occur when the Plan becomes
effective.
- It is a condition to the effectiveness of the Plan that the
Bankruptcy Court has granted or denied all pending motions
filed by the Debtors for authorization to sell Airways Shares
and has allowed or disallowed all Disputed Claims. The Debtors
anticipate that the Bankruptcy Court will rule on these
matters on or before April 26, 2000. Any motion to sell
Airways Shares will be subject to higher and better offers
from competing bidders. In the event of a disagreement between
the Debtors and the Committee as to which bid represents the
highest and best offer for the Airways Shares, the Committee's
decision will control. The Plan provides that, if these
conditions to effectiveness of the Plan have not been
satisfied by April 27, 2000, they will be automatically waived
unless the Committee otherwise requests.
- Once the Plan becomes effective, the Liquidating Agent will
use the Debtors' cash to pay or provide for the future payment
of Administrative Claims, Priority Tax Claims, operating and
liquidation expenses, and Claims in Classes 1 and 2.
- The Debtors' remaining cash and any Airways Shares, which are
referred to in the Plan as the Effective Date Remaining
Assets, will then be allocated on a pro rata basis between
Class 5 General Unsecured Claims on one hand and Class 3
Senior Notes Claims and Class 4 Debentures Claims on the other
hand. If there has been an advance distribution of cash to pay
off the Senior Notes Claims as discussed below, this
allocation will be made as if that advance distribution had
not occurred.
- If the Debtors' Airways Shares have been registered under the
Securities Act of 1933 before the Plan becomes effective, the
Debtors may offer, in accordance with applicable securities
laws, to holders of Class 4 Debentures Claims and holders of
Class 5 General Unsecured Claims the opportunity to receive
distributions of the Airways Shares allocated to their claims
when the Plan becomes effective. The decision whether to make
such an offer will be made in consultation with the Committee
in light of circumstances at the time any such registration
statement becomes effective. If the Airways Shares are
registered after the Plan becomes effective, any such offer
will be made by the Liquidating Agent.
- The cash allocated to the Class 5 General Unsecured Claims
will be distributed to those creditors as soon as the Plan
becomes effective, and any Airways Shares allocated to them
that are not distributed will be held for future sale or other
disposition for their benefit.
- The Liquidating Agent will use the cash allocated to the Class
3 Senior Notes Claims and the Class 4 Debenture Claims to pay
the Senior Notes Claims in full, including pre- and
post-petition interest at 10% on the Senior Notes and fees of
the Senior Notes Trustee accruing through the Effective Date.
- The fees and expenses of the Debentures Trustee will be paid
in cash.
- All remaining cash allocated to the Class 3 Senior Notes
Claims and the Class 4 Debentures Claims will be distributed
to the holders of Class 4 Debenture Claims. Any Airways Shares
that were allocated to the Class 3 Senior Notes Claims and
the Class 4 Debenture Claims and are not distributed to
holders of Class 4 Debenture Claims will be held for future
sale or other disposition for their benefit.
- Any assets that are not distributed to creditors when the Plan
becomes effective will be held by the Liquidating Entity. The
Liquidating Entity may be either the Debtors or a newly formed
limited liability company named WorldCorp LLC, but the Plan
provides that the Debtors will serve as the Liquidating Entity
unless the Debtors and the Committee agree to form WorldCorp
LLC for that purpose.
- The liquidation of any remaining assets and final
distributions to creditors after the Effective Date will be
handled by a Liquidating Agent supervised by three creditor
representatives comprising the Liquidating Committee. The
Liquidating Agent will administer the operating and claims
reserves created under the Plan, have the power to sell or
distribute any Airways Shares that are assets of the
Liquidating Entity, prosecute or settle any pending legal
claims, and make a final distribution to creditors in
accordance with their interests. The Liquidating Agent will
also manage WorldCorp LLC if it is formed, file final tax
returns, provide for storage of records, dissolve the Debtors
and WorldCorp LLC if it is formed, and file a final report
with the Bankruptcy Court.
B. Bankruptcy Procedures
To become effective, the Plan 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. Holders of 100% of the Senior Notes Claims and a
substantial percentage of the Class 4 Debentures Claims sit on the Creditors
Committee and have negotiated with the Debtors about the terms of the Plan. The
Debtors expect the Committee and its members to support the Plan.
V. Recovery Analysis
Based upon a careful review of the Debtors' assets and liabilities, the
fact that the Debtors have no ongoing business operations or operating
management, and the estimated recoveries in a Chapter 7 liquidation, the Debtors
have concluded that the recovery to creditors will be maximized by the Debtors'
liquidation under Chapter 11 of the Bankruptcy Code. Accordingly, and because
this is a Liquidating Plan under which all of the Debtors' assets or the
proceeds thereof will be distributed to creditors, the Debtors believe that the
Plan provides the best recoveries possible for the holders of Claims against the
Debtors and recommends that you vote to accept the Plan.
The following tables compares the recoveries by unsecured creditors
that were projected in the liquidation analyses for the Original Reorganization
Plan and the Amended Reorganization Plan with the recoveries projected under
this Plan.
COMPARISON OF PROJECTED RECOVERIES
Original Plan 1st Amended Plan Current Plan2/
------------- ---------------- --------------
Senior Notes
Claim Amount3/ $ 5,750,000 $ 5,750,000 $ 5,750,000
Projected Recovery $ 5,400,000 $ 5,750,000 $ 5,750,000
Percent Recovery 94% 100% 100%
Debentures
Claim Amount4/ $70,000,000 $70,000,000 $70,000,000
Projected Recovery $ 6,329,581 $ 7,299,815 $48,658,000
Percent Recovery 9.04% 10.43% 69.5%
General Unsecured
Claim Amount5/ $ 1,491,000 $ 1,491,000 $1,026,000 6/
Projected Recovery $ 134,830 $ 155,498 $ 737,000
Percent Recovery 9.04% 10.43% 71.8%
- --------
2/ The analysis was prepared for purposes of comparing projected recoveries
under the different plans and is based upon various assumptions, including
assumptions about the value of WorldCorp's stock in InteliData and World
Airways. No assurance can be given that these assumptions will prove to be
correct. Accordingly, actual recoveries by creditors may differ from those
shown in the summary.
3/ Includes estimated accrued interest and trustee's fees through the
effective date.
4/ Includes accrued interest through the WorldCorp petition date and estimated
trustee's fees through the effective date.
5/ Represents amounts owed by WorldCorp as of the petition date.
6/ Reduction reflects payment of Airways general unsecured claim in Airways
Shares as part of the Airways settlement.
- -------
This dramatic improvement in recovery was made possible by the Debtors'
successful strategy of settling the Airways Secured Loan claim and eliminating
the debts owed to the Atlas Stockholders, thereby eliminating the liens that
would have encumbered the InteliData and Airways shares under the earlier plans;
and (ii) an increase in the value of the InteliData Shares during the course of
these Chapter 11 Cases.
Moreover, an analysis prepared by Arthur Andersen LLP at the request of
the Debtors, a summary of which follows, demonstrates that the net recovery by
unsecured creditors under this liquidation plan is significantly greater than
the recovery creditors could have expected to receive under either of the prior
reorganization plans even after adjusting for increases in the value of
InteliData Shares during the Chapter 11 period. To equalize the effect of those
increases, Arthur Andersen valued the InteliData Shares held under the earlier
plans at the average of the per-share prices WorldCorp has received for its
InteliData Shares. While this adjustment significantly increases the projected
recoveries under the prior reorganization plans, even those increased recoveries
are well below the projected recoveries under the current liquidating plan, as
shown by the following table:
COMPARISON OF PROJECTED RECOVERIES AS ADJUSTED
Original Plan 1st Amended Plan Current Plan
------------- ---------------- ------------
Senior Notes
Claim Amount $ 5,750,000 $ 5,750,000 $ 5,750,000
Projected Recovery $ 5,400,000 $ 5,750,000 $ 5,750,000
Percent Recovery 94% 100% 100%
Debentures
Claim Amount $70,000,000 $70,000,000 $70,000,000
Projected Recovery $29,758,000 $29,352,000 $48,658,000
Percent Recovery 42.5% 41.9% 69.5%
General Unsecured
Claim Amount $ 1,491,000 $ 1,491,000 $ 1,026,000
Projected Recovery $ 634,000 $ 691,000 $ 737,000
Percent Recovery 42.5% 46.3% 71.8%
Moreover, while the earlier reorganization plans provided for the creditors to
receive restructured long-term debt obligations and warrants, the current
liquidation plan would give them substantially all of their recoveries in the
form of cash as soon as the Plan becomes effective.
<PAGE>
DISCLOSURE STATEMENT WITH RESPECT TO JOINT
PLAN OF REORGANIZATION OF WORLDCORP, INC. AND
WORLDCORP ACQUISITION CORP.
I. INTRODUCTION
WorldCorp and Acquisition submit 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 Joint Liquidating Plan of
Reorganization of WorldCorp and Acquisition (the "Plan") proposed jointly by
WorldCorp and Acquisition and filed with the United States Bankruptcy Court for
the District of Delaware on March 3, 2000, a copy of which is annexed as
Appendix A of this Disclosure Statement.
This Disclosure Statement sets forth certain information regarding the
Debtors' prepetition operating and financing history, the need to seek Chapter
11 protection, and the anticipated liquidation of WorldCorp and Acquisition.
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 distributed
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
Debtors 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 DEBTORS, SEE SECTION VII, "THE LIQUIDATING PLAN OF REORGANIZATION," AND
SECTION VIII, "CERTAIN FACTORS TO BE CONSIDERED" OF THIS DISCLOSURE STATEMENT.
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 CASES AND CERTAIN FINANCIAL INFORMATION.
ALTHOUGH THE DEBTORS BELIEVE 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
DEBTORS' MANAGEMENT, EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTORS DO
NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE
FINANCIAL INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
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 Debtors. The purpose of this Disclosure
Statement is to provide adequate information to enable the holders of Claims
against and Interests in the Debtors 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 March __, 2000, 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 Debtors 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 Debtors 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 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 Debtors nor the
Liquidating Agent 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 Debtors do 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 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; and (v) if you are the holder of
Claim(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.
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 3 (Senior Notes Claims), Class 4 (Debentures Claims)
and Class 5 (General Unsecured Claims). Claims in Class 1 (Other Priority
Claims) and Class 2 (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 6 (Interests) 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 Class 6 (Interests) are deemed to reject the Plan.
Accordingly, their acceptances are not being solicited. 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 in a voting class with respect to the Plan
should read this Disclosure Statement, together with its exhibits, the Plan in
their 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 VII - THE LIQUIDATING
PLAN OF REORGANIZATION.
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY
COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING INSTRUCTIONS ON
THE BALLOT AND RECEIVED NO LATER THAN APRIL 11, 2000, AT 4:00 P.M. (EST) (THE
"VOTING DEADLINE") BY LOGAN & COMPANY (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:
Mark M. Feldman
President and Chief Executive Officer
WorldCorp, Inc.
Care of:
Commonwealth Capital Partners
444 Madison Avenue, Suite 703
New York, NY 10022
(212) 317-2500
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 April 11, 2000, at 11:00 a.m. (EST) before the
Honorable Mary F. Walrath, at 824 North Market Street, Marine Midland Plaza,
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 April 11,
2000, at 4:00 p.m. (EST) by:
Counsel for the Debtors:
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.
H. Colby Lane, Esq.
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.
III. BACKGROUND OF THE DEBTORS
A. General Corporate Structure
WorldCorp and Acquisition are holding companies. Neither Debtor carries
on any business operations of its own. WorldCorp's assets consist principally of
cash, stock in Acquisition, stock in World Airways, Inc. ("World Airways"), a
tax-sharing receivable from The Atlas Companies, Inc. ("Atlas"), and pending
litigation against WorldCorp's former Chairman T. Coleman Andrews that is the
subject of a proposed settlement scheduled to be considered by the Bankruptcy
Court on March 24, 2000. At the time WorldCorp filed its Chapter 11 petition, it
also owned about 29% of the stock of InteliData Technologies Corporation
("InteliData"), but those shares have been sold for cash in broker transactions
during the course of the Chapter 11 case. Acquisition is a wholly owned
subsidiary of WorldCorp. Its assets consist of cash and stock in World Airways.
Information about World Airways is presented below under the heading "ASSETS AND
LIABILITIES." The offices of WorldCorp are located at 444 Madison Avenue, Suite
703, New York, NY 10022 c/o Commonwealth Capital Partners.
B. Management of WorldCorp
1. Board of Directors
Set forth below is certain information as to the persons who serve as
directors of WorldCorp as of the date of this Disclosure Statement.7/
- --------
7/ Mr. William F. Gorog, who is Chairman and Chief Executive Officer of
InteliData, resigned as a director of WorldCorp effective February 11,
2000 in order to terminate the affiliate relationship between the two
corporations for purposes of applicable securities laws. Prior to Mr.
Gorog's resignation, WorldCorp had reduced its holdings of InteliData
Shares to an amount less than 10 % of the outstanding voting stock of
InteliData.
- --------
Mark M. Feldman, 49 Mr. Mark M. Feldman has been President, Chief Executive
Officer, and Chief Restructuring Officer of WorldCorp
since June 28, 1999. Prior to that, he was Executive
Vice President and Chief Restructuring Officer from
February 1, 1999 through June 27, 1999. Mr. Feldman is
also President and Chief Executive Officer of Cold
Spring Group, Inc. (1993-Present), a reorganization and
restructuring consulting firm. Additionally, he has
served as the Executive in charge of restructuring and
corporate development for solvent corporations and
chapter 11 debtors (1995-Present). He is a Trustee of
Baron Asset Fund (1987-Present), a mutual fund, a
Director of SNL Securities, Inc. (1997-Present), a
publisher of data bases and manager of a bank and
thrift stock portfolio, and a Director of World
Airways, Inc. (1999-Present), an airline which is an
affiliate of the Debtors. Mr. Feldman has sat on or
represented numerous chapter 11 creditors committees
and he served as a Trustee of Aerospace Creditors
Liquidating Trust (1993-1997), a trust that was formed
to administer and liquidate assets in the
reorganization of LTV Aerospace and Defense Company.
W. Joseph Dryer, 43 Mr. W. Joseph Dryer has been Treasurer and Secretary of
WorldCorp since February 1, 1999. He is also 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.
Robert LeBuhn Mr. Robert LeBuhn was appointed a director of WorldCorp
on March 10, 2000. He is also a Director of Enzon,
Inc., U.S. Airways Group, Inc., Acceptance Insurance
Companies, Inc. and Cambrex Corporation, as well as
President and a Trustee of the Geraldine R. Dodge
Foundation. Mr. LeBuhn was Chairman of Investor
International (U.S.), Inc., a subsidiary of Investor
AB, part of Sweden's Wallenberg Group from 1992 until
his retirement in Sepbember 1994, and was its President
from August 1984 through June 1992. He is also a former
Managing Director of Rothschild, Inc.
2. 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:
Name Age Position Held
Mark M. Feldman 49 President, Chief Executive Officer and Chief
Restructuring Officer (since June 28, 1999).
(Executive Vice President and Chief
Restructuring Officer February 1, 1999 to
June 28, 1999). (see above)
W. Joseph Dryer 43 Treasurer and Secretary (effective as of
February 1, 1999). (see above)
C. Management of Acquisition
Director: Mark M. Feldman since June 28, 1999
Officers: Mark M. Feldman, President and CEO since
June 28, 1999
W. Joseph Dryer, Secretary and Treasurer since
June 28, 1999
IV. HISTORY OF WORLDCORP AND ACQUISITION PRIOR TO WORLDCORP'S
CHAPTER 11 BANKRUPTCY FILING
WorldCorp is a highly leveraged holding company organized in 1987 to be
the parent corporation of World Airways. Acquisition, which is also a holding
company, was organized in April 1998 for the purpose of consummating a
transaction that ultimately led to WorldCorp's Chapter 11 bankruptcy filing.
WorldCorp currently owns 100% of the stock of Acquisition.
WorldCorp and Acquisition have no business operations of their own.
They derive all of their revenues from their ownership of shares of operating
companies. Both WorldCorp and Acquisition own shares of World Airways. WorldCorp
formerly owned shares of InteliData, but all of those shares have been sold in
broker transactions during the Chapter 11 case.
World Airways and InteliData are operating companies. World Airways is
a global provider of passenger and cargo air transportation services. Its
business and operations are described below under the heading "ASSETS AND
LIABILITIES -- INVESTMENT IN WORLD AIRWAYS." InteliData develops and markets
products and services to assist financial institutions in providing online home
banking and bill payment services.
As of April 20, 1998, WorldCorp owned 3,702,586 shares of common stock
of World Airways, representing approximately 51.2% of the outstanding common
stock of World Airways, and 9,179,273 shares of common stock of InteliData,
representing approximately 30% of the outstanding common stock of InteliData.
All of these shares were owned directly by WorldCorp. All of the InteliData
shares and all but 1,000,000 of the World Airways shares were unencumbered and
available for sale by WorldCorp as necessary to meet its cash needs.
As of April 20, 1998, WorldCorp had substantial indebtedness for
borrowed money. It had outstanding secured debt of $2.0 million under a loan
from World Airways (the "World Airways Secured Loan"), which was secured by a
pledge of 1,000,000 shares of World Airways common stock. WorldCorp also had
outstanding $5.0 million principal amount of unsecured 10% senior subordinated
notes due September 30, 2000 ("Senior Notes") issued pursuant to an indenture
(the "Senior Notes Indenture") dated September 30, 1996 between WorldCorp and
Norwest Bank Minnesota, National Association, as indenture trustee (the "Senior
Notes Trustee"). It had outstanding $65.0 million principal amount of 7%
convertible subordinated debentures ("Debentures") issued pursuant to an
indenture (the "Debenture Indenture") dated May 15, 1992 between WorldCorp and
The First National Bank of Boston, which has been succeeded by State Street Bank
and Trust Company, as indenture trustee (the "Debenture Trustee").
On April 20, 1998, WorldCorp entered into a transaction pursuant to
which it contributed almost all of its World Airways common stock (equivalent to
51.2% of World Airways) to, and became the 80% owner of, Acquisition.
Acquisition was a newly created holding company established to own the World
Airways common stock and 100% of the stock of The Atlas Companies, Inc.
("Atlas"), a manufacturer of specialty papers that was then known as Paper
Acquisition Corp. As part of the transaction, the stock of Atlas was contributed
to Acquisition by the former owners of that company (the "Atlas Stockholders").
This transaction was essentially a leveraged buyout of Atlas in that
consideration for the transaction included the issuance to the Atlas
Stockholders of 20% of the stock of Acquisition, $16 million of promissory notes
issued by Acquisition (the "Atlas Stockholder Notes") and an earn-out under
which the Atlas Stockholders would be entitled to receive from Acquisition an
amount equal to the first $10 million of 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 "Earn-Out"). The Atlas Stockholder
Notes and Earn-Out were fully guaranteed by WorldCorp and collateralized by,
among other things, any and all of the stock owned by Acquisition in World
Airways and Atlas, and any and all of the stock owned by WorldCorp in
Acquisition 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 issued to the Atlas Stockholders had been
paid in full, WorldCorp was to receive certain tax-sharing payments and
management fees from Acquisition.
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.
WorldCorp also failed to make interest payments due May 15, 1998 and November
15, 1998 on $65 million in outstanding Debentures. In addition, 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. A timeline prepared by Arthur
Andersen that illustrates the Atlas transaction and subsequent defaults appears
on the next page of this Disclosure Statement.
[Timeline illustrating WorldCorp insolvency, the Atlas transaction, subsequent
defaults and WorldCorp's filing for bankruptcy appears here.]
On June 24, 1998, WorldCorp substituted 1,860,396 shares of InteliData
common stock as collateral for the World Airways Secured Loan in return for the
release of 500,000 of the pledged World Airways shares. On June 25, 1998, World
Airways purchased 150,000 of the remaining 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 and applied the net proceeds of $222,031 to
outstanding interest and principal of the World Airways Secured Loan.
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 to perform the functions of comptroller.
Because WorldCorp lacked the funds to pay all of its advisors on a current
basis, WorldCorp entered into agreements with the two firms and Mr. Dryer under
which they were to receive fees at enhanced rates only in the case of a
successful reorganization. Payment of those fees and the reimbursable expenses
of all three advisors, was guaranteed by Acquisition.
From May 1998 until it filed its Chapter 11 petition on February 12,
1999, WorldCorp negotiated with Sun Paper Advisors, Inc. ("Sun") on behalf of
the Atlas Stockholders, and with Rothschild Recovery Fund, L.P. ("RRF"), which
holds the single largest amount of Debentures, to develop a plan of
reorganization. RRF entered into a confidentiality agreement with WorldCorp and
its affiliates on October 27, 1998 to gain access to information for use in
these negotiations. In the course of these negotiations, Sun and RRF developed a
reorganization structure that became the basis for WorldCorp's original proposed
plan of reorganization (the "Original Reorganization Plan") and accompanying
disclosure statement, both of which were filed simultaneously with WorldCorp's
petition under Chapter 11 of the Bankruptcy Code. That plan contemplated the
commencement of WorldCorp's Chapter 11 case in order to achieve the proposed
restructuring and obtain the approval of creditors. On February 11, 1999,
WorldCorp's Board of Directors formally endorsed the terms of the Original
Reorganization Plan and authorized the commencement of the WorldCorp Case.
On December 31, 1998, while the parties were still discussing the
planned restructuring, Atlas advanced $1 million to Acquisition to be applied
under the tax sharing agreement to be entered into on the effective date of the
Original Reorganization 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. Prior to the filing of WorldCorp's Chapter 11 Case,
WorldCorp, Acquisition and their restructuring 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 account contemporaneously with the execution of the
compromise agreement. Remaining funds in the escrow account were used to pay
Chapter 11 Administrative Expenses of the WorldCorp Case.
V. HISTORY OF THE CHAPTER 11 CASES
On February 12, 1999 (the "WorldCorp Petition Date"), WorldCorp filed a
petition for relief under Chapter 11 of the Bankruptcy Code. Acquisition did not
file its Chapter 11 petition until July 2, 1999 (the "Acquisition Petition
Date"), but was a co-proponent of and a participant in the Original
Reorganization Plan that WorldCorp filed with its Chapter 11 petition. Since
filing their Chapter 11 petitions, WorldCorp and Acquisition have operated as
Debtors-in-possession subject to the supervision of the Bankruptcy Court and in
accordance with the Bankruptcy Code. Although the Debtors are authorized to
operate in the ordinary course of business, transactions outside of the ordinary
course of business require Bankruptcy Court approval.
An immediate effect of the filing of each 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 Debtors and the
continuation of litigation against the Debtors. The automatic stay remains in
effect, unless modified by the Bankruptcy Court, until consummation of a plan of
reorganization.
WorldCorp filed several motions on the first day of its 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
orders entered in the WorldCorp case provided for, among other things, retention
of Wilmer, Cutler & Pickering as counsel to the Debtors; Young, Conaway,
Stargatt & Taylor as special counsel to the Debtors; and Arthur Andersen LLP as
accountants for the Debtors. Similar orders were entered when Acquisition filed
its Chapter 11 petition, so that these professionals now are employed by both
Debtors. In addition, the Bankruptcy Court entered an order providing for joint
administration of the Chapter 11 cases, allowing hearings and filing of
documents to be handled jointly.
-- THE ORIGINAL REORGANIZATION PLAN
WorldCorp's original proposed plan of reorganization was negotiated
among Sun, RRF and the Debtors, filed simultaneously with WorldCorp's Chapter 11
Petition, and co-propounded by WorldCorp, Acquisition and RRF. The Original
Reorganization Plan contemplated a reorganization of WorldCorp as a consolidated
going concern that included Atlas and its subsidiaries as the group's principal
operating entities. The theory of the Original Reorganization Plan was that, if
payment of interest on the Debentures was delayed for a time, the income
generated by operations of Atlas would be sufficient to allow all debts to be
paid in full and WorldCorp's shareholders to maintain their interests in order
to preserve net operating losses that could offset Atlas income for tax
purposes. The Original Reorganization Plan included the following elements:
- the repayment in full in cash of WorldCorp's administrative
and priority claims, administrative convenience claims and
secured debt (including the World Airways Secured Loan);
- payment in cash of all principal and prepetition interest on
the Senior Notes;
- the restructuring of WorldCorp's Debentures and general
unsecured debt by the issuance of modified Debentures, accrued
interest notes, warrants to purchase 45% of the stock of
Acquisition and warrants to purchase 40% of the pro forma
outstanding stock of WorldCorp;
- the restructuring of the Atlas Stockholder Notes and the
Earn-Out; and
- the retention by WorldCorp shareholders of their shares of
Common Stock of WorldCorp.
Cash payments to be made on the effective date of the Original
Reorganization Plan were to be funded from the proceeds of a loan from RRF to
Acquisition, which was to transfer the funds to WorldCorp by purchasing
InteliData stock from WorldCorp. Holders of WorldCorp Debentures and general
unsecured creditors were to be offered the right to participate in the making of
that loan. As part of the consideration for making the loan, RRF and any
participating lenders were to be allowed to purchase from WorldCorp a number of
InteliData Shares equal to 10% of the loan amount at a price of $.01 per share.
Payments due on the RRF Loan and other obligations of WorldCorp and Acquisition
after emergence from bankruptcy were to be made out of monies received from
Atlas and its subsidiaries pursuant to an intercompany tax-sharing agreement,
and if necessary from the proceeds of sale of InteliData stock.
-- THE DISPUTE WITH SENIOR NOTE HOLDERS
During the prepetition negotiations that resulted in the formulation of
the Original Reorganization Plan, WorldCorp and RRF had discussions with various
creditor constituencies, including counsel for the Senior Notes Trustee and
individuals who purported to represent holders of the Senior Notes. Based upon
these discussions, the parties to the plan negotiations settled on a structure
that provided for WorldCorp to pay to the Senior Note holders in cash on the
effective date the amount of their unpaid principal plus all prepetition
interest at the non-default rate of 10%. WorldCorp understood that this
structure was acceptable to the Senior Note holders, and it was embodied in the
Original Reorganization Plan. The Original Reorganization Plan proposed to treat
the Senior Note holders as unimpaired.
After the filing of WorldCorp's Chapter 11 Case, however, purported
representatives of the Senior Note holders took the position that the Senior
Notes were entitled to prepetition interest at the default rate and to
post-petition interest and fees under the terms of the Indenture. In the course
of evaluating how to respond to these contentions, the plan proponents concluded
that (a) while the Senior Note holders' claims were unsecured and therefore not
entitled to postpetition interest or fees as a matter of bankruptcy law, they
were entitled under the intercreditor subordination provisions of the Debenture
Indenture to be paid in full (including postpetition interest, fees and
expenses) from distributions that would otherwise be made to the Debenture
holders; (b) because the plan did not provide for payment of postpetition
interest, fees and expenses on the Senior Notes, the holders were impaired by
the Original Reorganization Plan and were entitled to vote; but (c) the amount
of cash available to the Debtor on the effective date would not be sufficient to
make even the cash payments to the Senior Note holders that had been
contemplated by the Original Plan, let alone the additional cash payments they
were demanding. Accordingly, the proponents concluded that they needed to amend
the Original Reorganization Plan.
-- THE FIRST AMENDED REORGANIZATION PLAN
On March 23, 1999, the Debtors and RRF filed an amended plan of
reorganization in an effort to address the objections of the Senior Note
holders. (the "First Amended Reorganization Plan") The First Amended
Reorganization Plan was similar to the Original Reorganization Plan except for
its treatment of the Senior Notes, which changed in the following ways:
- The First Amended Reorganization Plan divided the Senior Notes
claims into two classes, both of which were treated as
impaired and therefore entitled to vote on the First Amended
Reorganization Plan.
- Holders of Senior Notes who voted to accept the First Amended
Reorganization Plan could elect to receive distributions of
cash on the effective date. The distributions would be made
from a pool of up to $5.0 million in cash to be funded by the
loan from RRF to Acquisition. If fewer than all holders
elected to participate in the pool, the funds would be
sufficient to pay their claims in full. If all holders elected
to participate, they would receive pro rata distributions from
the pool.
- Holders who voted to reject the First Amended Reorganization
Plan or who voted to accept but did not elect to participate
in the cash-distribution pool would receive modified Senior
Notes in an aggregate principal amount equal to the amounts
they were owed under the Senior Notes Indenture. The modified
Senior Notes would be secured and would have priority over the
modified Debentures to be issued under the First Amended
Reorganization Plan.
-- RRF'S PURCHASE OF THE SENIOR NOTES
The First Amended Reorganization Plan was abandoned shortly after it
was filed because the Senior Note Holders opposed it and were unwilling to agree
to a settlement of the Senior Notes Claims in an amount that RRF was willing to
fund. RRF, which had purchased $250,000 principal amount of the Senior Notes on
February 22, 1999, then began negotiating to purchase the remaining $4.75
million of Senior Notes from the objecting holders. That purchase was
consummated on May 7, 1999. As a result of these purchases, RRF now holds 100%
of the Senior Notes in addition to approximately 40% of the Debentures.
-- SALES OF INTELIDATA SHARES
Between the time the First Amended Reorganization Plan was abandoned
and the time that RRF purchased the Senior Notes, the market value of
WorldCorp's stock in InteliData increased dramatically. The price of the stock,
which had traded below $1.00 per share when the First Amended Reorganization
Plan was filed, rose above $5.00 per share briefly and traded for several months
at prices in the range of $3.00 to $4.00 per share. This increase presented
WorldCorp with the opportunity to raise the cash necessary to fund a plan of
reorganization by selling InteliData Shares into the market rather than by
borrowing from RRF, as contemplated by the Original Reorganization Plan and the
First Amended Reorganization Plan. WorldCorp pursued this opportunity by
obtaining authority to sell InteliData Shares free and clear of liens of
secured creditors, with those creditors receiving replacement liens on proceeds
of sale. Subsequently, all liens of secured creditors were eliminated by the
Debtors by payment or litigation and settlement of secured claims. In addition,
the price of InteliData stock rose above $7.00 per share in early 2000. The
Debtors, in consultation with the Committee, have taken advantage of these
favorable developments by selling InteliData shares in broker transactions under
Rule 144 of the Securities Act of 1933, as amended (the "Securities Act").
Between February 12, 1999, when the WorldCorp Case was filed, and March 13,
2000, WorldCorp sold all of its InteliData Shares under Rule 144. As of March
14, 2000, the Debtors held approximately $59 million of cash consisting of
proceeds of these sales and funds received from other sources in the course of
the Chapter 11 cases. In addition, as of March 14, 2000, the Debtors held
2,483,861 World Airways Shares. As discussed elsewhere in this Disclosure
Statement, the Airways Shares are thinly traded, making it difficult to plan for
sales. The Debtors also are discussing a possible sale of the Airways Shares to
a group of accredited investors in a private sale that would be exempt from
registration requirements under the so-called "4(1 1/2)" exemption of the
Securities Act. The Debtors expect to file a motion to approve that sale in the
near future, subject to higher and better competing bids, with the sale to close
on or before the Effective Date. No assurance can be given, however, that any
such sale will occur.
-- SETTLEMENT OF THE PATRICK F. GRAHAM EMPLOYMENT CONTRACT
On July 17, 1999, the Court approved a settlement among WorldCorp, RRF
and Patrick F. Graham, who was then the President and Chief Executive Officer
and a director of WorldCorp and the sole officer and director of Acquisition.
Pursuant to the terms of this settlement, which was negotiated by RRF and agreed
to by the Debtors, (i) Mr. Graham resigned as an officer and director of each
Debtor; (ii) Mr. Graham received payment for his unpaid wages and expenses
through the date of the settlement; (iii) Mr. Graham became entitled to receive,
upon confirmation of a plan of reorganization for WorldCorp, a bonus in the
amount of $85,000, of which the first $50,000 was to be applied to the repayment
of a $50,000 loan from Atlas to Mr. Graham; (iv) Mr. Graham retained 58,333
vested options to buy shares of InteliData stock from WorldCorp at an exercise
price of $2.98 per share, but relinquished all unvested options; and (v) the
parties agreed that Mr. Graham would be entitled to assert a general unsecured
claim of $25,000 for a prebankruptcy loan in that amount from Mr. Graham to
WorldCorp, assuming that adequate documentation of such loan was provided and
that Mr. Graham made the $50,000 repayment of the Atlas loan.
Mr. Graham exercised his 58,333 InteliData options in a cashless
exercise based upon the trading price of InteliData Shares on February 11, 2000.
In this transaction, which was carried out by WorldCorp with the approval of the
Committee, WorldCorp paid to or for the account of Mr. Graham cash equal to
$228,965.89, which is equal to the difference between the average price of
$6.905152 that WorldCorp received for the InteliData Shares that it sold on
February 11, 2000 and the option exercise price of $2.98 per share multiplied by
58,333 shares. The transaction was memorialized in an Option Exercise Agreement
dated February 18, 2000. This transaction eliminated Mr. Graham's options at a
much lower cost to the Debtors and the estates than the alternative of rejecting
the options as executory contract obligations. Arthur Andersen LLP estimated
that the damage claim for rejection of the options would equal 97% of the stock
price under standard Black-Scholes methodology for valuing options, or
$390,714.28 based on the February 11, 2000 trading price. Moreover, because the
options were included in the settlement approved by the Bankruptcy Court, the
damage claim would have been entitled to payment in full as an Administrative
Claim. Accordingly, the cashless exercise benefited the creditors and the
estates to the extent of more than $160,000 based on the February 11, 2000
trading price. As of the close of trading on March 13, 2000, the price of
InteliData Shares was over $18 per share. Accordingly, the benefit to the estate
of Mr. Graham's cashless exercise is a multiple of that amount today.
-- THE WORLD AIRWAYS SETTLEMENT
Approximately a year before WorldCorp's Chapter 11 filing, World
Airways loaned WorldCorp a total of $2.0 million ("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. After
WorldCorp failed to make the required payment on April 28, 1998, the World
Airways Secured Loan was restructured to increase the interest rate to 12% per
annum and substitute 1,860,396 InteliData Shares for 500,000 of the 1,000,000
World Airways Shares previously held as collateral. On June 25, 1998, World
Airways redeemed 150,000 of the remaining pledged World Airways Shares 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 July 31, 1999, the World Airways Secured Loan had an outstanding
balance of $1,431,939.95, consisting of $ 1,217,850.22 of principal and $
213,989.73 of unpaid accrued interest and fees. The World Airways Secured Loan
was secured by a pledge of 350,000 shares of World Airways common stock and
1,615,396 shares of InteliData common stock. Because the value of that
collateral was substantially greater than the outstanding balance of the loan,
the amount of interest and attorney's fees for which WorldCorp was liable under
the terms of the World Airways secured loan continued to increase even after
WorldCorp filed its Chapter 11 petition. World Airways also had an unsecured
intercompany claim in the amount of $465,143.49 in connection with various
prepetition services provided to WorldCorp or advances and payments made on its
behalf.
Beginning in May 1999, the Debtors negotiated with World Airways to
resolve the outstanding claims. World Airways was interested in reaching a
settlement that would repay its outstanding receivables from WorldCorp and
reduce or eliminate WorldCorp's ownership interest in World Airways, which
represented about 50% of the outstanding World Airways shares. The Debtors were
interested in eliminating the World Airways claims without having to pay them in
cash, which needed to be conserved for other purposes under any Chapter 11 plan.
As part of the negotiation, the Debtors were willing to settle a potential
fraudulent conveyance claim against World Airways related to its purchase of a
computer system from WorldCorp in December 1998. In early July, the Debtors and
World Airways agreed on the principal terms of a comprehensive settlement.
Because the settlement contemplated the transfer of World Airways shares that
were owned by Acquisition and were subject to liens in favor of the Atlas
Stockholders, WorldCorp determined that it was necessary to commence a Chapter
11 case for Acquisition in order to implement the settlement. Acquisition filed
its Chapter 11 petition on July 2, 1999.
On August 13, 1999, the Debtors consummated the settlement with World
Airways, which had been approved by the Bankruptcy Court by order entered August
6, 1999. The World Airways settlement represented a global resolution of all
open matters between WorldCorp and World Airways. These matters fell into three
categories:
- World Airways' Secured Loan to WorldCorp, which had an
outstanding balance of approximately $1.4 million and was
secured by collateral worth many times that amount, was paid
at par in the form of World Airways Shares valued at $1.56225
per share (the "Transfer Price"). The Transfer Price was equal
to the average of the closing prices of World Airways Shares
for the 30-day period from June 17, 1999 through July 16,
1999. Because of a general decline in the trading price of
World Airways Shares throughout the measurement period and
thereafter, the Transfer Price represented a premium of almost
50% above the market price of the shares at the time the
settlement was consummated.
- World Airways' unsecured claim against WorldCorp, which had an
outstanding balance of about $465,000 and arose out of
prebankruptcy intercompany advances, services and office
expenses payable by WorldCorp, was paid at a nominal value of
50 cents on the dollar in the form of World Airways Shares
valued at the Transfer Price. Because the Shares were priced
at the Transfer Price, which represented a premium of almost
50% over market, the actual recovery on World Airways'
unsecured claim was around 33 cents on the dollar.
- WorldCorp's potential claims against World Airways,
principally related to WorldCorp's prepetition sale of its
computer system to World Airways, were settled in return for a
$75,000 cash payment by World Airways to WorldCorp.
The settlement originally contemplated the sale by Acquisition of
additional World Airways Shares to World Airways or its designated purchaser for
cash at the Transfer Price of $1.56225 per share. Both RRF and the Atlas
Stockholders objected to that element of the settlement, and the World Airways
Settlement as consummated dealt only with resolution of outstanding claims.
As part of the World Airways Settlement, World Airways released its
liens on 1,328,996 InteliData Shares and approximately $815,000 of cash
collateral attributable to sales of InteliData Shares that had been sold free
and clear of World Airways' liens. The release of the liens on the InteliData
Shares enabled WorldCorp to sell them into the market from time to time in order
to raise cash as discussed above. The cash collateral that had been released by
World Airways was transferred to Acquisition along with other funds to
compensate Acquisition for the World Airways shares it had relinquished as part
of the settlement. Following the consummation of the World Airways settlement,
Acquisition held a total of approximately $1,118,000 in cash, $546,787.50 of
which was held free and clear of liens and the balance of which was cash
collateral securing the Atlas Stockholder Notes and Earn-Out.
-- APPOINTMENT OF THE COMMITTEE
On March 1, 1999, shortly after the commencement of the WorldCorp Case,
the United States Trustee convened a meeting of the holders of the 20 largest
unsecured claims against WorldCorp for the purpose of determining whether to
form an official committee to represent the interests of the unsecured creditors
in the case. Based upon the status of the case at that time and the lack of
sufficient interest on the part of the creditors attending that meeting, the
United States Trustee declined to appoint an official committee but left open
the possibility that a committee could be appointed later in the case if
circumstances warranted. As the cases progressed, the Debtors concluded that the
appointment of an official committee would facilitate the Chapter 11 process.
Accordingly, in June 1999, the Debtors cooperated with and supported a request
by three Debenture holders for the United States Trustee to appoint an official
committee to represent the interests of all the unsecured creditors. The United
States Trustee responded on August 17, 1999 by appointing an official committee
of unsecured creditors (the "Committee") consisting of RRF, the Senior Notes
Trustee, the Debenture Trustee, and two Debenture holders. While the Committee
decided not to retain counsel or other professionals in these cases, it has
considered and expressed its views about administrative matters, dispositions of
assets, and issues related to the plan of liquidation. In particular, the
Debtors have consulted members of the Committee in connection with sales of
InteliData Shares, and have revised portions of the Plan and this Disclosure
Statement in response to comments from the Committee and counsel for individual
Committee members.
-- THE ATLAS LITIGATION AND SETTLEMENT
As the price of InteliData shares began to rise, the Debtors were
forced to compare the speculative appeal of building a business through
acquisitions where its equity would trade on the basis of earnings against the
possibility of rescinding the Atlas transaction and distributing the Debtors'
assets to creditors in a liquidation. The Original Reorganization Plan and the
First Amended Reorganization Plan had been premised on the notion that growth of
Atlas through future acquisitions would increase its income and the value of the
Debtors' investment to the point that they would be able to pay off the Atlas
Stockholder Note and Earn-Out and generate positive returns for the Debtors and
their other creditors. Based upon extensive analysis performed by Arthur
Andersen LLP, however, the Debtors concluded that (i) Acquisition's total
liability to the Atlas Stockholders under the Atlas Stockholder Notes and
Earn-Out would be significantly greater than the value of Atlas under any
reasonable scenario, (ii) Acquisition would default under the Atlas Stockholder
Notes and Earn-Out when they came due, (iii) the Atlas Stockholders could be
expected to foreclose their liens on the assets of Acquisition and WorldCorp in
order to satisfy the Atlas Stockholder Notes and Earn-Out, and (iv) this result
was foreseeable based upon contemporaneous projections at the time of the Paper
Transaction. The unfairness of the operation of the Earn-Out was confirmed by
analyses, including models of hypothetical transactions, prepared by Arthur
Anderson at the Debtors' request for use in litigation. Arthur Andersen's
analysis also indicated that the modifications of the Atlas Stockholder Notes
and Earn-Out contemplated by the Original Reorganization Plan and the First
Amended Reorganization Plan would not have changed this result. Ultimately, the
Debtors concluded, the very substantial value represented by the InteliData
Shares -- shares that WorldCorp had owned free and clear before the Paper
Transaction -- would flow almost entirely to the Atlas Stockholders, with little
recovery for the other creditors.
In an effort to negotiate a more equitable resolution, the Debtors met
with counsel for the Atlas Stockholders and counsel for RRF on June 16, 1999 to
open a dialogue based upon the Debtors' economic analysis of the Paper
Transaction. At that meeting and afterwards, however, counsel for the Atlas
Stockholders indicated that they did not intend to negotiate with the Debtors
about a revised plan. Instead, the Atlas Stockholders elected to deal only with
RRF, which at that time was in favor of pursuing a restructuring of the Paper
Transaction rather than a rescission. Further, counsel for the Atlas
Stockholders advised counsel for RRF that they would not respond to the Debtors'
economic analysis except in a litigation context. On July 9, 1999, after several
weeks had passed without producing a settlement proposal that the Debtors could
support, the Debtors filed suit against the Atlas Stockholders to set aside the
Paper Transaction as a fraudulent conveyance.
After a period of procedural sparring in the fraudulent conveyance
action and litigation over the terms of the World Airways settlement and
WorldCorp's efforts to assert control over Atlas, the Debtors and the Atlas
Stockholders entered into negotiations looking toward a comprehensive settlement
of their disputes. These negotiations resulted in a settlement agreement that
was filed with the Bankruptcy Court on October 26, 1999, approved by order
entered November 18, 1999, and consummated on November 29, 1999.
The Atlas settlement was a global resolution of all matters between the
Debtors on one hand and the Atlas Stockholders and their related parties on the
other. The settlement included the following elements:
- Acquisition transferred its shares of Atlas to the Atlas
Stockholders, and they transferred their shares of Acquisition
to WorldCorp. As a result of these transfers, Acquisition
became a wholly owned subsidiary of WorldCorp and the Debtors
relinquished their interest in Atlas.
- The Atlas Stockholder Notes and Earn-Out were canceled, and
WorldCorp's guarantee of those obligations was released.
Cancellation of these obligations eliminated over $31 million
of secured debt, leaving Acquisition essentially debt-free and
WorldCorp with no secured debt.
- The Atlas Stockholders' liens on the Debtors stock in World
Airways, InteliData and Acquisition, as well as the cash
collateral that had been deposited under the World Airways
settlement, were released. As a result of the release of these
liens, the Debtors now hold all of their assets free and clear
of liens, claims and encumbrances.8/
- The Atlas fraudulent conveyance litigation was dismissed with
prejudice, and all other obligations and claims between the
Debtors on one hand and the Atlas Stockholders and related
parties on the other were released.9/ In consideration for the
release and the other elements of the settlement, the Debtors
paid $280,000 to the Atlas Stockholders.
- --------
8/ The creditors have derived very significant benefits from the release of
their liens because of the rising market for InteliData Shares.
9/ As part of the closing of the Atlas settlement, the Atlas Stockholders also
exchanged limited releases with RRF and Rothschild Inc. The Debtors were
not parties to the release of RRF and Rothschild.
- --------
- The Debtors agreed, subject to satisfaction of certain
conditions, to file consolidated tax returns that included
Atlas and its subsidiaries for the portion of 1999 ending on
the closing date. (The Debtors had previously filed
consolidated tax returns for 1998.) The conditions to the
filing include receipt of an acceptable opinion from counsel
for Atlas with respect to the propriety of tax consolidation.
Because Atlas would bear the cost of any additional taxes that
resulted from disallowance of deductions or other audit
adjustments, the settlement gives Atlas the right in good
faith to control any audit and handle negotiations with the
Internal Revenue Service.
- Assuming a consolidated return for 1999 is filed, which the
Debtors believe will occur well before the Effective Date, the
settlement provides for Atlas to make tax-sharing payments to
Acquisition in an amount equal to the tax liability that Atlas
and its consolidated subsidiaries would bear if they were not
consolidated for tax purposes with the Debtors. These payments
are to be allocated 2/3 to the Atlas Stockholders and 1/3 to
the Debtors. Final payments due from Atlas and Acquisition
when the 1999 consolidated return is filed are to be adjusted
to give credit for the $200,000 preliminary tax-sharing
payment made by Atlas to Acquisition and the payments of
$110,000 and $90,000 made by Acquisition to the Atlas
Stockholders and WorldCorp, respectively, in April 1999.
- Contemporaneously with the closing of the Atlas settlement,
the Debtors' representative on the Atlas board of directors
and the Atlas Stockholders' representative on the World
Airways board of directors resigned those positions.
-- THE ANDREWS LITIGATION AND PROPOSED SETTLEMENT
On July 14, 1999, the Debtors filed an adversary proceeding in the
Bankruptcy Court against T. Coleman Andrews, III, WorldCorp's former Chairman
and Chief Executive Officer. The complaint alleges that, in the course of
severing his employment relationship with WorldCorp, Andrews received
preferential or fraudulent transfers that are voidable under the Bankruptcy
Code, and engaged in common law negligent misrepresentation, breach of contract,
intentional and negligent misconduct, spoliation, and conversion. These claims
arise out of, among other things, the negotiation and execution of a General
Release and Severance Agreement, the forgiveness of the balance owed on a
promissory note owed by Andrews to WorldCorp, the sale of WorldCorp's shares of
stock in Strategic Weather Services to Andrews, the tax classification of
Andrews' annual bonus, and the alleged removal by Andrews of property belonging
to WorldCorp and Airways. Andrews filed an answer and counterclaim to the
complaint generally denying the allegations of the complaint and asserting
various affirmative defenses. Andrews also asserted a counterclaim, one count
seeking indemnification pursuant to WorldCorp's articles of incorporation and
Section 145 of the Delaware General Corporation Law for liability and expenses
in connection with claims arising out of his service as an officer and director
of WorldCorp, and another count alleging that WorldCorp interfered with Andrews'
ability to exercise his vested options to purchase 50,000 shares of InteliData
stock from WorldCorp at $3.00 per share.
On February 28, 2000, WorldCorp and Andrews entered into a settlement
agreement that resolves both the pending litigation and Andrews' InteliData
options. The settlement, which is subject to Bankruptcy Court approval, provides
for the parties to dismiss the litigation with prejudice and exchange mutual
releases and for the cancellation of Andrews' InteliData options in return for a
cash payment to Andrews of $135,720.75 (the "Option Payment"). The Option
Payment is equal to 55% of the difference between (i) the total value of 50,000
InteliData Shares as of February 18, 2000 (valued at the average net price of
$7.9353 per share that WorldCorp received for InteliData Shares it sold on that
date) and (ii) the total exercise price for 50,000 InteliData Shares (at $3.00
per share).
The cancellation of Andrews' vested options to purchase 50,000
InteliData Shares from WorldCorp has both practical and monetary benefits for
the creditors and the estates. It would not be practicable to set aside these
shares for future exercise of Andrews' options in the context of a complete
liquidation of WorldCorp. Absent the settlement, WorldCorp would have rejected
the options as prepetition contract rights under Section 365 of the Bankruptcy
Code, and Andrews would have been able to assert a prepetition general unsecured
claim for damages equal to the value of the options. Arthur Andersen LLP
estimated that the damage claim could total $380,000 or more, depending on the
trading price of the InteliData Stock at the time of the rejection. That claim
would be worth at least 55 cents on the dollar under the Plan, and could be more
if distributions to creditors increase. Under the terms of the proposed
settlement, Andrews agrees to the cancellation of his InteliData Options in
return for a payment equal to 55% of $246,765 (the difference between the $3.00
per share exercise price and the $7.9353 per share average net price WorldCorp
received for InteliData Shares it sold on February 18, 2000, the day the parties
agreed in principle to settle the litigation). The 55% figure is fixed, and
Andrews will not be entitled to additional payments even if the ultimate
distribution to general unsecured creditors is greater. Thus, the settlement
fixes the cost of eliminating the InteliData Options at an amount considerably
below the value of the potential damage claim that could have resulted from
rejection of the options.
By contrast, the benefits of continuing the litigation are uncertain.
Based upon information that came to light in the course of discovery, the
Debtors have concluded that there is no factual basis for the claims set forth
in the complaint other than those concerning transfers possibly avoidable in
bankruptcy. While the Debtors continue to believe there was a reasonable
likelihood of success on certain of the avoidance claims, no litigation is
without risk and there is no guarantee that the Debtors would prevail. Moreover,
continued prosecution of the lawsuit was likely to be an expensive venture that
could complicate and delay the conclusion of these Cases. Because the Andrews
litigation would not be tried until after the Plan's Effective Date, the Debtors
would need to establish a separate liquidating entity to continue the
litigation, fund a substantial litigation reserve, pay for continued insurance
coverage and administrative costs, and incur additional expenses for filing tax
returns and ultimately winding up the affairs of the liquidating entity at the
conclusion of the litigation. These steps may be unnecessary in light of the
settlement.
Moreover, the settlement eliminates Andrews' indemnity claim against
WorldCorp. Andrews has asserted a counterclaim alleging that, as a former
director who has been sued with respect to matters relating to his service, he
is entitled to indemnity under WorldCorp's bylaws and Delaware law. In
particular, he asserts that he is entitled to indemnity for fees and expenses
incurred in defending this action. While Andrews' indemnity claim is subject to
various requirements and defenses and is, in any event, a prepetition general
unsecured claim, allowance of that claim would have significantly diminished or
eliminated any net benefit to the creditors and the estates of pursuing the
litigation to a successful conclusion.
The Debtors have filed a motion for approval of the Andrews settlement,
which is to be considered by the Bankruptcy Court on March 24, 2000. Assuming
the settlement is approved, the consummation of the settlement will occur before
the Plan becomes effective.
-- OTHER POTENTIAL OBJECTIONS AND CLAIMS
The Debtors intend to file, before the Confirmation Date, objections to
various claims that were filed or scheduled in the WorldCorp Case. Most of these
are claims filed by WorldCorp stockholders, claims naming debtors other than
WorldCorp, claims that should be directed against World Airways, or claims filed
by individual holders of Debentures that duplicate the claim filed by the
Debenture Trustee on behalf of all the Debenture holders. The Debtors do not
intend to object to the claims filed by the Debenture Trustee and the Senior
Notes Trustee, which are to be paid as provided in the Plan.
The Debtors have considered the possibility of asserting claims against
professionals and other parties in connection with the Paper Transaction but
have decided not to do so given the rescission of that transaction and the
difficulty, expense and uncertain outcome of any such effort. The Debtors also
investigated possible bases for objecting to claims that RRF purchased before
the WorldCorp Petition Date or during the Chapter 11 period, but have concluded
that no objection is warranted under the circumstances of these Cases.
-- THE LIQUIDATING PLAN OF REORGANIZATION
The World Airways and Atlas settlements cleared the way for an orderly
liquidation and distribution of the Debtors' remaining assets. The elimination
of all secured claims has left the Debtors with three main categories of
prepetition debt: general unsecured claims, the Senior Notes, and the
Debentures. Furthermore, the release of the liens that had secured the World
Airways Loan and the Atlas Stockholder Notes and Earn-out means that all assets
are now free and clear of all liens, claims and encumbrances. The problems that
remained were how to maximize the value of the remaining World Airways and
InteliData shares held by the Debtors and how to distribute that value in a way
that is both fair and equitable and gives effect to the intercreditor
subordination provisions of the Debenture Indenture.
In early October 1999, while the Atlas settlement was still under
negotiation, the Debtors and the Committee began discussing the terms of a
liquidating plan of reorganization that would deal with these issues. While
negotiations over the plan were continuing, the Debtors accumulated enough cash
from sales of InteliData Shares to be able to pay off the Senior Notes in full,
thereby eliminating most of the basis for disagreement about how to implement
the intercreditor subordination provisions of the Debenture Indenture.
In the course of these negotiations, the parties settled on a strategy
of selling enough InteliData Shares to fund all of the expenses of the Chapter
11 cases and pay off the Senior Notes in full, and distributing the remaining
InteliData Shares to the creditors under a plan of liquidation. Because this
strategy required registration of the remaining InteliData Shares under the
Securities Act of 1933, the Bankruptcy Court extended the period for filing a
plan and the Debtors entered into negotiations with InteliData for registration
of the shares. At the request of the Committee, however, the Debtors terminated
these negotiations, modified the terms of the plan that was then being drafted,
and have pursued a strategy of continuing to sell InteliData Shares in broker
transactions under Rule 144 as and when favorable selling opportunities are
presented rather than registering the shares for distribution to creditors under
the Plan. On March 13, 2000, the Debtors sold the last of their InteliData
Shares. As a result of these sales, the Debtors hold over $59 million in cash as
of March 14, 2000.
On January 10, 2000, the Debtors filed their proposed Joint Liquidating
Plan of Reorganization of WorldCorp, Inc. and WorldCorp Acquisition Corp. and an
accompanying proposed disclosure statement. Thereafter, the Debtors made certain
modifications to the proposed plan and disclosure statement in response to
comments from the Committee. On March 14, 2000, the Debtors filed the Plan,
which is an amended version of the January 10, 2000 plan, and this Disclosure
Statement, which is an amended version of the January 10, 2000 proposed
disclosure statement. The information contained in this Disclosure Statement is
believed to be current as of March 14, 2000 but does not reflect events
occurring after that date.
-- EXPECTED ADMINISTRATIVE CLAIM OF RRF. RRF has advised the Debtors
and the Committee that it intends to file a claim pursuant to Sections
503(b)(3)(D) and 503(b)(4) of the Bankruptcy Code for reimbursement of fees and
expenses incurred in connection with the Cases. Section 503(b)(3)(D) allows a
creditor to recover its "actual, necessary expenses" incurred "in making a
substantial contribution in a case under . . . chapter 11" of the Bankruptcy
Code. Section 503(b)(4) provides for "reasonable compensation for professional
services rendered by an attorney or an accountant" for a creditor that qualifies
for reimbursement under Section 503(b)(3)(D). All such claims are subject to
review and approval by the Bankruptcy Court after notice and a hearing. The
Debtors cannot predict what position they will take with respect to RRF's claim
if and when it is filed. The Plan provides that the Liquidating Agent will
reserve Cash equal to the full amount of any claims that are filed under Section
503(b) and have not been allowed or disallowed by the Effective Date. To the
extent RRF's claim under Section 503(b) of the Bankruptcy Code is allowed by the
Bankruptcy Court, it will be paid in full as an administrative expense of the
Cases.
VI. DESCRIPTION OF THE DEBTORS' REMAINING ASSETS AND LIABILITIES
The following section provides an overview of the Debtors' remaining
assets and liabilities, all of which are dealt with by the Plan. 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 the financial results and Management's Discussion and Analysis of
World Airways and InteliData, see the reports filed with the SEC on Forms 10-K
and 10-Q. WorldCorp has not filed any periodic SEC reports since filing a Form
10-Q on May 20, 1998 for the quarter ending March 31, 1998.
As stated above, WorldCorp and Acquisition are holding companies with
no operations of their own. As such, they obtain all of their funds through
their ownership of stock in InteliData and Airways, neither of which is likely
to pay dividends in the foreseeable future. Accordingly, the recovery that
creditors collectively will realize under the Plan depends primarily upon the
amount of cash on hand and the value of the World Airways Shares and InteliData
Shares and the performance of those companies.
A. Cash
As of March 14, 2000, the Debtors held cash and cash equivalents in the
amount of approximately $59 million. The Plan calls for the assets and
liabilities of WorldCorp and Acquisition to be combined through substantive
consolidation for purposes of making distributions under the Plan, so the cash
held by Acquisition will be available under the Plan for payment of expenses and
distribution to creditors of WorldCorp. As a result of the Atlas Settlement
discussed above, Acquisition has essentially no creditors of its own. The amount
of cash on hand may increase or decrease before the Effective Date under the
Plan as a result of receipt of tax-sharing payments from Atlas, sales of Airways
Shares, or payments of administrative expenses in the ordinary course of
business or pursuant to an order of the Bankruptcy Court.
B. Investment in World Airways
1. Ownership of World Airways Stock
The Debtors own approximately 38% of the outstanding common stock of
World Airways, a global provider of long-range passenger and cargo air
transportation outsourcing services to major international airlines under fixed
rate contracts. 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 above, in
April 1998 WorldCorp transferred 3,702,586 of its shares in World Airways to its
newly organized subsidiary, Acquisition. Subsequently, the Debtors transferred
1,065,394 shares of World Airways stock to World Airways pursuant to a
settlement dated July 9, 1999. As of March 3, 2000, the Debtors owned a total of
2,483,861 Airways Shares, representing approximately 38% of the outstanding
stock of World Airways.
World Airways' stock is thinly traded and has experienced a general
decline in trading price over the past year. During 1999, the stock traded at
prices ranging from $0.78 per share to $1.78 per share. During the month of
December 1999, the stock traded at prices that averaged less than $1.00 per
share on volumes that averaged less than 25,000 shares per day.
While the stock of World Airways is publicly traded, the Debtors'
ability to sell Airways Shares into the public market may be extremely limited.
As affiliates of World Airways for purposes of the securities laws, the Debtors
are subject to the volume limitations of Rule 144 of the Securities Act. This
rule permits sales or other dispositions by affiliates during any three-month
period in an amount up to the greater of one percent of the total number of
shares outstanding or the average weekly trading volume for the four weeks
immediately preceding the week in which the holder gives notice of its intent to
sell. Given the facts that the Debtors own approximately 38% of the outstanding
shares of World Airways and that average weekly trading volumes for World
Airways shares have been well below 5% of the outstanding shares, Rule 144 does
not offer a realistic means of disposing of all of the World Airways shares
promptly. Furthermore, because World Airways is neither a debtor nor a
co-proponent of the Plan, the securities law exemption of Bankruptcy Code
Section 1145 is not applicable to the sale or distribution of World Airways
shares under the proposed Plan.
In order to liquidate the Airways Shares, the Debtors must either sell
them in a private transaction that is exempt from the registration requirements
of the Securities Act or arrange for them to be registered so that they can be
offered to creditors. The Debtors have explored and are continuing to explore
both of these alternatives. The Debtors have received an offer from a group of
accredited investors that includes members of Airways management to purchase the
Airways Shares in an exempt private transaction at a price of $.50 per share,
but no purchase agreement has been signed and the Debtors cannot predict whether
or when the offer will result in a sale of the shares.
The Debtors also have discussed with Airways the possibility of
registering the shares, but Airways has no obligation to do so and, in any
event, no registration is currently in effect. Accordingly, the Debtors are not
able to propose a distribution of the Airways Shares to creditors under the
Plan. If the Debtors' Airways Shares have been registered under the Securities
Act of 1933 before the Plan becomes effective, the Debtors may offer, in
accordance with applicable securities laws, to holders of Class 4 Debentures
Claims and holders of Class 5 General Unsecured Claims the opportunity to
receive distributions of the Airways Shares allocated to their claims when the
Plan becomes effective. The decision whether to make such an offer will be made
in consultation with the Committee in light of circumstances at the time any
such registration statement becomes effective. If the Airways Shares are
registered after the Plan becomes effective, any such offer may be made by the
Liquidating Agent.
The Debtors intend to continue their efforts to sell the Airways Shares
to the Airways management group in a private transaction that is exempt from
registration requirements under the so-called "4(1 1/2)" exemption of the
Securities Act, but no assurance can be given that the Debtors will be
successful in this endeavor. Accordingly, the Plan provides that, if the Airways
Shares have not been sold or distributed by the Effective Date, they will be
held by the Liquidating Agent for future sale or other disposition in accordance
with applicable securities laws.
On March 15, 1999, Mark M. Feldman, WorldCorp's President and Chief
Restructuring Officer; Wilbur Ross, a principal of Rothschild Recovery Fund L.P.
("RRF"), WorldCorp's largest creditor; and Rodger Krouse, a principal of Sun
Capital, an affiliate of the Atlas Stockholders, were appointed to the World
Airways Board of Directors to replace Patrick F. Graham, WorldCorp's former
President and Chief Executive Officer, as representatives of WorldCorp.10/ Mr.
Graham resigned as a Director of World Airways effective February 16, 1999.
Pursuant to the Atlas settlement, Mr. Krouse resigned as a Director of World
Airways effective November 29, 1999. Messrs. Feldman and Ross continue to serve
as directors of World Airways. On January 10, 2000, Gordon McCormick, a holder
of Debentures and a member of the Creditors Committee, was appointed to the
World Airways Board to replace Mr. Krouse.
- --------
10/ Mr. Feldman agreed to serve as a director of Airways on an interim basis
during the pendency of the WorldCorp case, but made clear at the time of
his appointment that he does not intend to continue in that role once
the Plan becomes effective.
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2. Description of World Airways
The following description is taken from World Airways' annual report on
SEC Form 10-K for the year ended December 31, 1998 and its quarterly report on
SEC Form 10-Q for the quarter ended September 30, 1999:
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 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 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 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 has sought to increase 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
six months of 1999, World Airways' business relied heavily on its contracts with
the U.S. Air Force's ("USAF") Air Mobility Command ("AMC") and Malaysian Airline
System Berhad ("Malaysian Airlines"). In 1999 these customers provided
approximately 49.3% and 13.7%, respectively, of World Airways' revenues and
34.6% and 12.8%, respectively, of block hours flown. In 1998 these customers
provided approximately 39.2% and 19.7%, respectively, of World Airways' revenues
and 26.0% and 19.7%, respectively, of block hours flown.
As a result of its contracts with the USAF, Malaysia and other
customers, World Airways had an overall contract backlog at June 30, 1999 of
$148.0 million, compared to $226.9 million at June 30, 1998. Approximately $88.7
million of the backlog relates to operations during the remainder of 1999.
Approximately 20.1% of the backlog relates to its contracts with the USAF
and 18.7% relates to its contracts with Malaysian Airlines.
3. Description of World Airways' Results of Operations
for the Nine Months Ended September 30, 1999 Compared
to Nine Months Ended September 30, 1998.
The following description is taken from World Airways' quarterly report
on SEC Form 10-Q for the quarter ended September 30, 1999:
Total block hours decreased 1,470 hours, or 5.4%, to 25,957 hours in
the first nine months of 1999 from 27,427 hours in 1998, with an average of 11.2
available aircraft in 1999 and 12.0 available aircraft in 1998. Average daily
utilization (block hours flown per day per aircraft) was 8.5 hours in 1999 and
8.4 hours in 1998. In 1999 wet lease, or ACMI, contracts accounted for 60% of
the block hours, a decrease from 70% in 1998. The decrease in ACMI hours
reflects a decrease in passenger flying partially offset by an increase in cargo
flying. Passenger ACMI flying decreased principally due to the end of a contract
with Philippine Air Lines ("PAL") in the first quarter of 1998 and a reduction
in Hadj flying in 1999. Cargo ACMI flying increased as a result of the efforts
initiated in 1998 to increase cargo business. In 1999 full service flying
accounted for 38% of the block hours, an increase from 28% in 1998, primarily
because of more flying for the USAF.
Operating Revenues. Revenues from flight operations decreased $8.2
million, or 3.9%, to $199.7 million in 1999 from $207.9 million in 1998. This
decrease is primarily due to the 5.4% decrease in block hours flown in 1999 that
was partially offset by an increase in the average yield, or average revenue per
block hour, due to an increase in full service flying.
Operating Expenses. Total operating expenses decreased $4.1 million,
or 1.9%, in 1999 to $206.2 million from $210.3 million in 1998.
Flight operations expenses increased $5.3 million, or 9.9%, in 1999.
This increase resulted primarily from an increase in full service flying which
necessitated the employment of additional flight attendants that increased costs
by approximately $4.5 million. A reduction in the number of pilots generated
cost reductions of approximately $2.5 million. Increased full service flying
resulted in increased costs for passenger food, air to ground communications and
aircraft handling.
Maintenance expenses increased $5.5 million, or 12.4%, in 1999. This
decrease principally reflects the 5.4% decrease in block hours flown and an
additional maintenance accrual of $1.4 million relating to an engine overhaul in
the first half of 1998.
Aircraft rent and insurance costs decreased $6.0 million, or 9.4%, in
1999. This decrease resulted primarily from decreases in rent expense for World
Airways' MD-11 aircraft negotiated with the aircraft lessors in 1998 as well as
the reduction in the average number of aircraft available.
Fuel expenses increased $3.1 million, or 21.3%, in 1999 due to a 26.8%
increase in the number of gallons of fuel consumed that more than offset a 5.4%
reduction in the average cost of fuel per gallon.
Commissions decreased $1.6 million in 1999, or 21.9%, principally as a
result of commissions being paid for Hadj flying and PAL flying in 1998 that
were not paid in 1999.
Non-operating income and expense, net improved by $2.5 million
in 1999 primarily because of a $1.0 million gain on the sale of a portion of
World Airways' interest in an industry-owned organization, a $0.8 million
reduction in interest expense because of lower average debt outstanding in 1999
and the $0.5 million charge recorded for assets held for sale in 1998.
4. World Airways Legal and Administrative Proceedings.
The following description is taken from World Airways' quarterly report
on SEC Form 10-Q for the quarter ended September 30, 1999:
World Airways has periodically received correspondence from the Federal
Aviation Administration ("FAA") with respect to minor noncompliance matters. 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. 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.
World Airways faces arbitration and a demand for yet to be determined
damages resulting from threatened legal action by a foreign company alleging
that World Airways improperly terminated an aircraft services agreement with the
foreign company. World Airways also has agreed to mediation, but faces
arbitration as a result of a continuing dispute over the cancellation of a
charter program with another company. World Airways has stated that it does not
believe the resolution of these matters will have a material adverse effect on
World Airways' financial condition or results of operations.
World Airways' flight attendants have filed a grievance challenging the
use of foreign flight attendant crews on wet leased flights performed during the
1999 Hadj. The issue is likely to be submitted to an arbitrator whose decision
could have a material adverse impact on the financial condition or results of
operations of World Airways.
As of December 31, 1998 the FAA had issued two modification
requirements. The first requirement provides that the lower cargo compartments
of aircraft have fire suppression systems installed by March 2001. The estimated
cost of modifying each of World Airways' aircraft is $1.1 million. The second
requirement provides that all aircraft have expanded recording capabilities by
August 2001. The estimated cost of such installation is approximately $65,000
per aircraft.
The Federal Aviation Administration ("FAA") has issued a notice of
proposed rulemaking concerning an Airworthiness Directive ("AD") that will
require the replacement of insulation blankets in the Company's fleet of
aircraft. It is expected the FAA will issue a final AD early in 2000 that will
require the replacement of the blankets to be accomplished within four
years. The Company presently estimates that the costs of the replacements,
including material, labor and out-of-service costs will total approximately $4.9
million per aircraft. The Company has not yet determined how the cost of
replacing the blankets will be financed, however, the ultimate resolution of
this matter could have a material adverse effect on the Company's financial
condition and results of operations.
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.
5. World Airways Business and Economic Risk Factors
The following is a general description of the business and economic
risk factors that may affect the business operations of World Airways and the
most recently available results of operations. For a complete description of the
risk factors, see the Form 10-K for the year ended December 31, 1998 filed with
the SEC on March 31, 1999, and the Quarterly Report on Form 10-Q for the
quarters ended June 30, 1999 and September 30, 1999 filed with the SEC on August
16, 1999 and November 12, 1999.
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 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.
World Airways is highly leveraged. It has incurred substantial debt and
lease commitments in connection with its acquisition of MD-11 aircraft. In
addition, World Airways has significant future long-term obligations relating to
operating leases for aircraft and spare engines. As is common in the air
transportation industry, World Airways has relatively high fixed aircraft costs.
World Airways operates a fleet of wide-body aircraft. In 1998, World Airways
began to dedicate more resources to expanding its cargo business. In 1999, World
Airways will be looking at opportunities to convert some of its passenger
aircraft to freighters. Achieving high average daily utilization of its 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 in its ACMI contracts, 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. In 1998, 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.
6. Foreign Ownership Restrictions Applicable to Airways
Shares
As a United States airline, World Airways is subject to federal
restrictions on foreign ownership and control. These restrictions, which are
administered by the United States Department of Transportation, prohibit
non-U.S. persons from owning more than 25% of the voting stock of World Airways
or having effective control over World Airways. Foreign persons or entities and
domestic investment partnerships that are controlled by foreign persons or that
include any foreign investors are treated as non-U.S. persons for purposes of
these rules. World Airways' organizational documents provide that, to the extent
shares of World Airways common stock are acquired by non-U.S. persons in excess
of the 25% limit, the shares most recently acquired by non-U.S. persons
automatically become non-voting until they are transferred to U.S. holders, at
which point they automatically become voting shares again. Approximately 20% of
World Airways' outstanding shares are currently held by Naluri Berhad, a
Malaysian aviation company. This means that non-U.S. persons that purchase or
receive distributions of World Airways shares currently owned by Acquisition
will not be able to vote shares they receive in excess of approximately 5% of
the total outstanding stock of World Airways. This fact may make the World
Airways shares less valuable to them, and may limit to some extent the market
for sales of the shares.
C. Former Investment in InteliData
As stated above, WorldCorp sold all of its shares of InteliData stock
during the course of the Chapter 11 case. This section is included solely to
provide background information about InteliData.
InteliData develops and markets products and services to assist
financial institutions in providing online banking services. Until 1996,
WorldCorp 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. merged to create a
new public company, InteliData. As a result of the merger, WorldCorp's shares in
U.S. Order were converted into shares of InteliData. WorldCorp reported its
proportionate share of InteliData's financial results using the equity method of
accounting. As of the Petition Date WorldCorp owned 8,734,273 shares of
InteliData, or an ownership interest of approximately 29.2% of the capital stock
of InteliData. During the Chapter 11 case, WorldCorp sold all of these shares to
raise cash to pay administrative expenses and fund the Plan.
InteliData's shares are listed on NASDAQ's national market system. The
stock is highly volatile. During 1999, shares of InteliData traded at prices as
low as $1.09 per share and as high as $7.25 per share. During the same period,
daily trading volumes ranged from 143,200 shares to over 2,000,000 shares. On
March 14, 2000 the stock closed at $18.50 per share on daily trading volume of
1,875,700 shares.
Until the week of February 7, 2000, WorldCorp owned more than 10
percent of the stock of InteliData and the Chairman of InteliData was a director
of WorldCorp. Accordingly, WorldCorp was considered an affiliate of InteliData
for purposes of federal securities laws. While WorldCorp's affiliate status
ended on February 11, 2000, all of its dispositions of InteliData shares were
subject to the volume limitations under Rule 144 of the Securities Act. 11/ In
order to raise cash to fund the Plan and pay administrative expenses, WorldCorp
sold its shares of InteliData in market transactions pursuant to Rule 144.
During the period from February 12, 1999, when the WorldCorp Case was filed, to
March 13, 2000, WorldCorp sold all of its InteliData Shares. In the process,
WorldCorp raised over $59 million of cash. As a result of these sales, creditors
are projected to recover about 70% of the allowed amounts of their claims under
the Plan.
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11/ On February 9, 2000, WorldCorp's holdings of InteliData Shares fell below
10% of the total outstanding Common Stock of InteliData. On February 11,
2000, William F. Gorog, who is the Chairman and Chief Executive Officer of
InteliData and had been a director of WorldCorp, resigned from the
WorldCorp board so that WorldCorp would cease to be an affiliate of
InteliData for securities law purposes. Under Rule 144, however, volume
limitations continue to apply to former affiliates for three months after
they cease to be affiliates.
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D. The Debtors' Remaining Liabilities
WorldCorp's outstanding indebtedness totals approximately $77.5 million
and falls into three main categories: Senior Notes due September 1, 2000 with an
outstanding principal amount of $5.0 million, 7% convertible subordinated
Debentures due 2004 with an outstanding principal amount of $65.0 million, and
general unsecured claims in the aggregate amount of approximately $1.0 million.
Acquisition has essentially no outstanding indebtedness.
As discussed above under the heading HISTORY OF THE CHAPTER 11 CASES,
when WorldCorp filed its Chapter 11 petition on February 12, 1999, it also had
outstanding secured and unsecured indebtedness to World Airways in the total
amount of approximately $1.8 million and had guaranteed and secured $16 million
of promissory notes and an earn-out worth more than $15.0 million issued by
Acquisition as part of its 1998 acquisition of The Atlas Companies, Inc. The
obligations to World Airways were paid by transfer of World Airways shares in
August 1999 as part of an overall settlement with World Airways, and the
obligations of Acquisition were released on November 29, 1999 as part of a
settlement in which the 1998 acquisition of Atlas was effectively rescinded. As
a result of these settlements, Acquisition has no debt and both WorldCorp and
Acquisition hold all of their assets free and clear of creditor liens. Details
about WorldCorp's remaining indebtedness are presented below.
1. Senior Notes
WorldCorp has outstanding 10% Senior Notes in the aggregate principal
amount of $5.0 million plus accrued interest, fees and expenses. The Senior
Notes were issued under a Senior Notes Indenture dated September 30, 1996
between WorldCorp and Norwest Bank Minnesota, National Association, as Senior
Notes Trustee. A total of $10.0 million principal amount of Senior Notes were
originally issued under the Senior Notes Indenture. The proceeds of the Senior
Notes were used to refinance a portion of a $25.0 million bridge loan extended
by a financial institution on August 29, 1996 that WorldCorp had used to retire
its then existing 13- 7/8% Subordinate Notes in the same principal amount. (The
remaining $15.0 million of the bridge loan was repaid in September 1997.)
WorldCorp prepaid $5.0 million of the Senior Notes in March, 1998 pursuant to
the mandatory prepayment provisions of the Senior Notes Indenture.
The Senior Notes provide for semi-annual interest payments at 10% per
annum on March 31 and September 30 of each year. Interest and principal not paid
when due accrues interest at 12% per annum. The Senior Notes mature and become
payable in full on September 30, 2000. The Senior Notes Indenture requires
WorldCorp to prepay a portion of the Senior Notes if the value of WorldCorp's
assets falls below specified levels, and to make sinking fund payments and
corresponding mandatory redemptions of Senior Notes on September 30, 1998 and
September 30, 1999.
WorldCorp has made no interest payments under the Senior Notes since
March 31, 1998, and has made no sinking fund payments. In addition, the Senior
Notes Trustee contends that declines in the value of WorldCorp's assets required
WorldCorp to redeem a portion of the Senior Notes on May 31, 1998. The Senior
Notes Trustee has filed a proof of claim in the WorldCorp Case asserting that
the total amount outstanding under the Senior Note Indenture as of February 12,
1999 was $5,553,895, consisting of $5.0 million of principal, $499,958.34 of
accrued and unpaid interest, and $53,936.66 of fees and costs for which
WorldCorp is liable under the Secured Notes Indenture.
All of the Senior Notes are now held by Rothschild Recovery Fund L.P.
("RRF"), an investment fund that also holds the largest amount of the
Debentures. RRF was a co-proponent of the proposed Original Plan that WorldCorp
filed simultaneously with its Chapter 11 petition on February 12, 1999, and of
the proposed First Amended Reorganization Plan that WorldCorp filed on March 23,
1999. As discussed more fully below under the heading "HISTORY OF THE CHAPTER 11
CASES," both of these proposed plans provided for RRF to fund a loan that would
have enabled WorldCorp to make cash payments to the holders of the Senior Notes
when the plan became effective in an aggregate amount equal to the principal of
the Senior Notes plus, in the case of the Original Plan, accrued and unpaid
prepetition interest on the Senior Notes. When the Original Plan was filed, the
Debtors and RRF believed the holders of the Senior Notes had agreed to accept
such payments as full satisfaction of their claims. Subsequently, however, the
holders of the Senior Notes objected that the amount of these proposed cash
payments was inadequate. RRF and the Debtors were unable to persuade the holders
of the Senior Notes to reduce their demands for cash to a level that RRF was
willing to fund, causing the First Amended Reorganization Plan to become
unfeasible. RRF than purchased the Senior Notes for cash equal to approximately
108% of the total outstanding principal amount. This transaction was consummated
on or about May 10, 1999.
While the Senior Notes are unsecured and therefore not entitled to
recover postpetition interest as an allowed claim in the WorldCorp Case, the
Senior Notes are entitled to the benefit of the intercreditor subordination
provisions of the Debenture Indenture, which are discussed below. The Plan
assumes that the enforceability of these intercreditor subordination provisions
is preserved by Section 510(a) of the Bankruptcy Code notwithstanding
WorldCorp's Chapter 11 filing and that the holders of the Senior Notes are
entitled to recover, from property that would otherwise be distributed to the
holders of Debentures, amounts they are owed under the terms of the Senior Notes
Indenture that are not paid directly by the Debtors. The Plan gives effect to
these intercreditor subordination provisions by distributing to holders of
Senior Notes cash that would otherwise be distributed to holders of Debentures
in an amount sufficient to pay the Senior Notes in full with pre- and
post-petition interest at 10% through the Effective Date.
The Plan provides that, if the Effective Date has not occurred within
10 days after the Confirmation Order becomes final and non-appealable, then,
subject to Bankruptcy Court approval in the Confirmation Order, the Debtors will
make an advance distribution of cash to pay off the Class 3 Senior Notes Claims
prior to the Effective Date in order to prevent the accrual of additional
interest and fees in connection with those Claims. This provision of the Plan
was included at the express request of the Committee. If the Bankruptcy Court
declines to approve the advance distribution, payment of the Class 3 Senior
Notes Claims will occur when the Plan becomes Effective.
2. Debentures and Intercreditor Subordination Provisions
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 of each year. WorldCorp did not make
the interest payments due May 15, 1998 and thereafter, which constituted Events
of Default under the Debenture Indenture. According to proofs of claim filed by
the Debenture Trustee, the total amount outstanding under the Senior Notes
Indenture as of February 12, 1999 was $70,811,885.41, consisting of $65.0
million of principal, $5,806,179.16 of accrued and unpaid interest, and
$5,706.25 of trustee's fees and expenses. Because the Debentures are unsecured,
the holders are not entitled to claim postpetition interest and fees. 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.
The Debenture Indenture provides that the Debentures are subordinated
in right of payment to the prior payment in full of "Senior Indebtedness."
Senior Indebtedness is defined to include all of WorldCorp's debt for borrowed
money incurred after May 15, 1992 that, by its terms, is not expressly
subordinate to or PARI PASSU with the Debentures. The Senior Notes constitute
Senior Indebtedness under this definition. The Senior Notes Indenture confirms
this fact by defining "Subordinated Indebtedness" (i.e., debt that is
subordinated to the Senior Notes) to include "the Company's 7% Convertible
Subordinated Debentures due 2004...." In addition, "Indebtedness" is defined
in the Debenture Indenture to include "...the principal of, premium, if any,
interest (including, without limitation, any post-petition interest whether or
not constituting an allowed claim) on and all other amounts owing with respect
to any indebtedness...." Accordingly, payments due on the Debentures are
expressly subordinated in right of payment to the Senior Notes, including
payment of post-petition interest.12/ By contrast, debt incurred by WorldCorp
"in connection with the purchase of assets, materials or services in the
ordinary course of business or representing amounts recorded as accounts payable
in the books of [WorldCorp]" does not constitute Senior Indebtedness under the
Debenture Indenture. This means the Debentures are not subordinated to
WorldCorp's General Unsecured Claims.
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12/ However, the fees and expenses of the Debenture Trustee accruing under the
Debenture Indenture are not subordinated to the right of payment of the
Senior Notes. In addition, the Debenture Trustee has a lien prior to the
Debentures on all payments it receives with respect to the Debentures for
payment of its fees and expenses payable under the Debenture Indenture.
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The subordination provisions of the Debenture Indenture may be
summarized as follows: Section 10.02 of the Debenture Indenture provides that,
"upon any distribution to creditors of [WorldCorp] in a liquidation or
dissolution of [WorldCorp] or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to [WorldCorp] or its property:
(1) holders of Senior [Notes] shall be entitled to receive
payment in full in cash to the date of payment of all amounts owing
with respect to the Senior [Notes] before [holders of Debentures] shall
be entitled to receive any payment in cash with respect to the
[Debentures]; and
(2) until the Senior [Notes are] paid in full, any
distribution to which [holders of Debentures] would be entitled but for
this Article shall be made to holders of Senior [Notes] as their
interests may appear, except the [holders of Debentures] may receive
securities that are subordinated to Senior [Notes] to at least the same
extent as the [Debentures]."
Section 10.03 of the Debenture Indenture prohibits WorldCorp from
making payments with respect to the Debentures during a payment default with
respect to the Senior Notes. Section 10.05 of the Debenture Indenture requires
the Debenture Trustee to hold in trust and pay over to the Senior Notes Trustee
any payment made by WorldCorp with respect to the Debentures in violation of the
subordination provisions in the Debenture Indenture. Section 10.09 of the
Debenture Indenture provides that the rights of the holders of Senior Notes
under the subordination provisions of the Debenture Indenture cannot be impaired
by any action or inaction of WorldCorp.
The Plan gives effect to these intercreditor subordination rights. It
provides for an initial allocation of distributable assets on a pro rata basis
between the Class 5 General Unsecured Claims on one hand and the Class 3 Senior
Notes Claims and the Class 4 Debenture Claims on the other hand. Because the
Class 5 General Unsecured Claims are not affected by or entitled to the benefit
of the intercreditor subordination provisions of the Debenture Indenture, the
distributions they receive under the Plan are simply their pro rata share of
distributable assets, without adjustment. With respect to the other two classes,
however, the Plan provides for cash to be distributed to the Senior Notes
Trustee and the holders of Class 3 Senior Notes in an amount sufficient to pay
amounts due under the Senior Notes Indenture in full, and to the Debenture
Trustee in an amount sufficient to pay its fees and expenses in full, with all
remaining assets to be distributed to or held for the account of the holders of
Class 4 Debenture Claims
3. General Unsecured Debt
WorldCorp has outstanding general unsecured debt in the amount of
approximately $650,000. Acquisition has no outstanding general unsecured debt.
4. Administrative Expenses of the Chapter 11 Cases
Allowed expenses of administering the Chapter 11 Cases will be paid in
full under the Plan. Administrative expenses include, but are not limited to,
fees and expenses of the Debtors' professionals, claims for reimbursement of
fees and expenses incurred by creditors in making a substantial contribution to
the Chapter 11 Cases, confirmation bonuses, and other expenses incurred by the
Debtors during the Chapter 11 Cases that are not paid in the ordinary course of
business before the Effective Date. Requests for payment of the Debtors'
professional fees and expenses or for reimbursement of fees and expenses
incurred by a creditor in making a substantial contribution are subject to
review and allowance or disallowance, in whole or in part, by the Bankruptcy
Court after notice and a hearing. The Liquidation Analysis contained in this
Disclosure Statement sets forth the Debtors' current projections of
administrative expenses. No assurance can be given, however, that actual
administrative expenses will conform to the projections set forth in the
Liquidation Analysis.
E. Income Taxes
As of December 31, 1998, WorldCorp had net operating loss carryforwards
("NOLs") for federal income tax purposes of approximately $61.8 million. The
NOLs are subject to examination by the Internal Revenue Service ("IRS") and
thus, are subject to adjustment or disallowance resulting from any such IRS
examination.
WorldCorp filed consolidated income tax returns for 1998 that include
Acquisition, Atlas and various subsidiaries of Atlas. The 1998 Consolidated
federal return shows no tax due for 1998. As part of the settlement with the
Atlas Stockholders described above, WorldCorp has agreed, subject to certain
conditions, to file consolidated income tax returns that include Atlas and its
subsidiaries for the portion of 1999 ending on the closing date of the
settlement. Atlas will have the right to control and defend any audit or related
proceeding with respect to the consolidated returns, including any negotiations
with the IRS. Neither InteliData or World Airways is consolidated with WorldCorp
for income tax purposes. Instead, WorldCorp accounts for its investments in
those companies as equity interests.
On August 3, 1999, before WorldCorp filed its consolidated tax returns
for 1998, the Internal Revenue Service filed a proof of claim asserting an
unsecured priority tax claim in the amount of $409,779 for the 1998 tax year.
The proof of claim states that it is based upon the IRS' estimate of WorldCorp's
tax liability. As stated above, the actual tax liability shown on WorldCorp's
1998 return is zero. The IRS proof of claim was withdrawn voluntarily after the
filing of WorldCorp's consolidated 1998 tax return. WorldCorp has not yet filed
its consolidated income tax return for 1999, but currently expects that its NOLs
will be available to offset most or all of its taxable income for 1999.
Upon consummation of the Plan and dissolution of the Debtors, any
unused NOLs will be canceled.
VII. THE LIQUIDATING 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 DEBTORS OR THE LIQUIDATING ASSETS.
A. Overall Structure of the Plan
- The Plan provides for all of the property of the Debtors,
consisting primarily of cash and shares of World Airways, to
be sold or distributed over time to holders of Allowed Claims.
Holders of Interests will receive no distribution under the
plan and their Interests will be cancelled.
- The Plan becomes effective when the Bankruptcy Court has
entered a Confirmation Order, the Confirmation Order has
become final and non-appealable, and all other conditions to
consummation have been satisfied. Provided other conditions to
consummation have been satisfied, the Debtors, with the
consent of the Committee, can elect to allow the Plan to
become effective while the Confirmation Order is still subject
to appeal as long as no stay pending appeal has been issued.
- If the Plan has not become effective within 10 days after the
Confirmation Order is entered, then, subject to Bankruptcy
Court approval in the Confirmation Order and provided the
Confirmation Order is then in effect and has not been stayed,
the Debtors will make an advance distribution of cash to pay
off the Class 3 Senior Notes Claims in order to prevent the
continued accrual of additional interest and fees in
connection with those Claims. If the Bankruptcy Court declines
to approve a distribution to holders of Class 3 Senior Notes
Claims before the Plan becomes effective, payment of the Class
3 Senior Notes Claims will occur when the Plan becomes
effective.
- It is a condition to the effectiveness of the Plan that the
Bankruptcy Court has granted or denied all pending motions
filed by the Debtors for authorization to sell Airways Shares
and has allowed or disallowed all Disputed Claims. The Debtors
anticipate that the Bankruptcy Court will rule on these
matters on or before April 26, 2000. Any motion to sell
Airways Shares will be subject to higher and better offers
from competing bidders. In the event of a disagreement between
the Debtors and the Committee as to which bid represents the
highest and best offer for the Airways Shares, the Committee's
decision will control. The Plan provides that, if this
condition to effectiveness of the Plan has not been satisfied
by April 27, 2000, it will be automatically waived unless the
Committee otherwise requests.
- Once the Plan becomes effective, the Liquidating Agent will
use the Debtors' cash to pay or provide for the future payment
of Administrative Claims, Priority Tax Claims, operating and
liquidation expenses, and Claims in Classes 1 and 2.
- The Debtors' remaining cash and any Airways Shares, which are
referred to in the Plan as the Effective Date Remaining
Assets, will then be allocated on a pro rata basis between
Class 5 General Unsecured Claims on one hand and Class 3
Senior Notes Claims and Class 4 Debentures Claims on the other
hand. If there has been an advance distribution of cash to pay
off the Senior Notes Claims as discussed below, this
allocation will be made as if that advance distribution had
not occurred.
- If the Debtors' Airways Shares have been registered under the
Securities Act of 1933 before the Plan becomes effective, the
Debtors may offer, in accordance with applicable securities
laws, to holders of Class 4 Debentures Claims and holders of
Class 5 General Unsecured Claims the opportunity to receive
distributions of the Airways Shares allocated to their claims
when the Plan becomes effective. The decision whether to make
such an offer will be made in consultation with the Committee
in light of circumstances at the time any such registration
statement becomes effective. If the Airways Shares are
registered after the Plan becomes effective, any such offer
will be made by the Liquidating Agent.
- The cash allocated to the Class 5 General Unsecured Claims
will be distributed to those creditors as soon as the Plan
becomes effective, and any Airways Shares allocated to them
that are not distributed will be held for future sale or other
disposition for their benefit.
- The Liquidating Agent will use the cash allocated to the Class
3 Senior Notes Claims and the Class 4 Debenture Claims to pay
the Senior Notes Claims in full, including pre- and
post-petition interest at 10% on the Senior Notes and fees of
the Senior Notes Trustee accruing through the Effective Date.
- The fees and expenses of the Debentures Trustee will be paid
in cash.
- All remaining cash allocated to the Class 3 Senior Notes
Claims and the Class 4 Debentures Claims will be distributed
to the holders of Class 4 Debenture Claims. Any Airways Shares
that were allocated to the Class 3 Senior Notes Claims and the
Class 4 Debenture Claims and are not distributed to holders of
Class 4 Debenture Claims will be held for future sale or other
disposition for their benefit.
- Any assets that are not distributed to creditors when the Plan
becomes effective will be held by the Liquidating Entity. The
Liquidating Entity may be either the Debtors or a newly formed
limited liability company named WorldCorp LLC, but the Plan
provides that the Debtors will serve as the Liquidating Entity
unless the Debtors and the Committee agree to form WorldCorp
LLC for that purpose.
- The liquidation of any remaining assets and final
distributions to creditors after the Effective Date will be
handled by a Liquidating Agent supervised by three creditor
representatives comprising the Liquidating Committee. The
Liquidating Agent will administer the operating and claims
reserves created under the Plan, have the power to sell or
distribute any Airways Shares that are assets of the
Liquidating Entity, prosecute or settle any pending legal
claims, and make a final distribution to creditors in
accordance with their interests. The Liquidating Agent will
also manage WorldCorp LLC if it is formed, file final tax
returns, provide for storage of records, dissolve the Debtors
and WorldCorp LLC if it is formed, and file a final report
with the Bankruptcy Court.
B. Substantive Consolidation
The Plan is predicated upon, and it is a condition precedent to
confirmation of the Plan that the Court provides in the Confirmation Order for,
substantive consolidation of the Chapter 11 cases of the Debtors into a single
Chapter 11 case for purposes of the Plan and the distributions thereunder.
Pursuant to such final order, (i) all assets and liabilities of the Debtors will
be merged, (ii) any obligations executed by either of the Debtors will be deemed
to be one obligation of the Debtors, (iii) any claims filed or to be filed in
connection with any such obligation will be deemed one claim against the
Debtors, (iv) each Claim filed in the Chapter 11 case of either Debtor will be
deemed filed against the Debtors in the consolidated Chapter 11 case, in
accordance with the substantive consolidation of the assets and liabilities of
the Debtors and, and (v) all transfers, disbursements and distributions made by
either Debtor will be deemed to be made by both of the Debtors. Holders of
Allowed Claims in each Class shall be entitled to their Pro Rata share of assets
available for distribution to such Class without regard to which Debtor was
originally liable for such Claim.
C. Classification 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 Debtors believe that the Plan complies 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.
The Plan divides Claims against and interests in the Debtors into six
classes as follows:
Class 1 consists of all Other Priority Claims, which are claims
entitled to priority pursuant to section 507(a) of the Bankruptcy Code other
than a Priority Tax Claim or an Administrative Claim.
Class 2 consists of all Administrative Convenience Claims, which are
Claims (other than Claims of holders of Debentures) against the Debtors that
otherwise would be classified as Class 5 General Unsecured Claims that are for
$500 or less.
Class 3 consists of all Senior Notes Claims.
Class 4 consists of all Debentures Claims.
Class 5 consists of all General Unsecured Claims.
Class 6 consists of all Interests and Subordinated Securities Claims.
Interests are the rights of any current or former holder or owner of any shares
of common stock or any other equity securities of WorldCorp authorized and
issued prior to the Confirmation Date. Subordinated Securities Claims are claims
subject to subordination under section 510(b) of the Bankruptcy Code arising
from rescission of, or for damages, reimbursement or contribution with respect
to, a purchase or sale of WorldCorp Common Stock or other equity securities of
WorldCorp prior to the Petition Date. The Debtors do not believe any
Subordinated Securities Claims exist, but the Plan provides for any such claims
to be included in Class 6 in compliance with the priority specified in section
510(b).
A Claim or Interest is placed in a 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.
Administrative Claims include, but are 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, directors
fees, 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. A Priority Tax Claim
is a Claim of a governmental Entity of a kind specified in Section 507(a)(8) of
the Bankruptcy Code, including but not limited to income taxes, real property
taxes, sales taxes and use taxes.
D. Treatment of Claims and Interests Under the Plan
The Plan provides for the following treatment of Claims and Interests:
Administrative Claims: On the Effective Date, or as soon thereafter as
practicable, each holder of an Allowed Administrative Claim shall be entitled to
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 Debtors and such holder shall have agreed upon in writing; provided,
however, that Allowed Administrative Claims with respect to liabilities incurred
by the Debtors in the ordinary course of business during the Chapter 11 Cases
shall, at the option of the Debtors, be paid in the ordinary course of business
in accordance with the terms and conditions of any agreements relating thereto.
Each Administrative Claim that becomes an Allowed Administrative Claim after the
Effective Date shall be paid in Cash by the Liquidating Agent from the
Administrative Claims Reserve and, to the extent the Administrative Claims
Reserve is inadequate for such purposes from other Cash of the Liquidating
Entity within five (5) Business Days after such claim becomes an Allowed
Administrative Claim.
Priority Tax Claims. With respect to each Allowed Priority Tax Claim,
at the sole option of the Debtors, 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 Debtors or the Liquidating Agent, provided such treatment is on
more favorable terms to the Debtors or the Liquidating Agent, as the case may
be, than the treatment set forth in clause (a) hereof, or (c) payment in full in
cash on the later of the Effective Date or within five (5) Business Days after
such Claims become an Allowed Claim.
Class 1 (Other Priority Claims). On the Effective Date, each holder of
an Allowed Class 1 Other Priority Claim, if any, 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 (Administrative Convenience Claims). On the Effective Date,
each holder of an Allowed Class 2 Administrative Convenience Claim, if any,
shall receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Class 2 Administrative Convenience Claim, Cash equal to the
amount of such Allowed Claim.
Class 3 (Senior Notes Claims). On the Effective Date, the Senior Notes
Trustee Fees shall be paid in Cash, and each other holder of an Allowed Class 3
Senior Notes Claim shall receive Cash in an aggregate amount equal to such
holder's Senior Note Claim Recovery Amount. All distributions to holders of
Class 3 Senior Notes Claims shall be made from the Class 3/4 Effective Date
Assets.
Class 4 (Debentures Claims). On the Effective Date, the Debenture
Trustee Fees shall be paid in Cash from the Class 3/4 Effective Date Assets.
Each holder of an Allowed Class 4 Debenture Claim other than the Debenture
Trustee shall receive, (a) on the Effective Date, (i) a Pro Rata distribution of
the remaining Cash included in the Class 3/4 Effective Date Assets; and (ii) if
such holder is offered the opportunity to receive a distribution of Airways
Shares and such holder so elects, a Pro Rata distribution of the Airways Shares
included in the Class 3/4 Effective Date Assets; and (b) on the Termination
Date, the distributions provided in Section 8.4 of the Plan. Any Airways Shares
included in the Class 3/4 Effective Date Assets that are not distributed to
holders of Allowed Class 4 Debenture Claims on the Effective Date will be held
by the Liquidating Entity for sale or other disposition for the benefit of
holders of Allowed Class 4 Debentures Claims as their interests may appear.
Class 5 (General Unsecured Claims). Each holder of an Allowed Class 5
General Unsecured Claim shall receive, (a) on the Effective Date, (i) a Pro Rata
distribution of the Cash included in the Class 5 Effective Date Assets; and (ii)
if such holder is offered the opportunity to receive a distribution of Airways
Shares and such holder so elects, a Pro Rata distribution of the Airways Shares
included in the Class 5 Effective Date Assets; and (b) on the Termination Date,
the distributions provided in Section 8.4 of the Plan. Any Airways Shares
included in the Class 5 Effective Date Assets that are not distributed to
holders of Allowed Class 5 General Unsecured Claims on the Effective Date will
be held by the Liquidating Entity for sale or other disposition for the benefit
of holders of Allowed Class 5 General Unsecured Claims as their interests may
appear.
Class 6 (Interests) Holders of Interests and Subordinated Securities in
Class 6 shall receive no distribution under the Plan. On the first Business Day
after the Effective Date, all outstanding shares of WorldCorp Common Stock and
all other interests in the Debtors shall be cancelled without further action of
any party and the Debtors shall be dissolved.
E. Procedures for Implementation of the Plan
This section describes the procedures to be followed for purposes of
implementing the Plan. Capitalized terms that are used but not defined in this
section or elsewhere in this Disclosure Statement have the meanings assigned to
them in the Plan.
1. Allocation of Assets.
On the Effective Date, prior to making any distribution, the
Liquidating Agent shall allocate the assets of the Debtors as follows:
(a) Cash shall be allocated: first to the Allowed
Administrative Claims; second, to the Administrative
Claims Reserve; third, to the Liquidation Reserve;
fourth, to the Allowed Priority Tax Claims; fifth, to
the Allowed Class 1 Other Priority Claims; sixth, to
the Allowed Class 2 Administrative Convenience
Claims; and seventh, on a pari passu basis, to the
Class 5 Effective Date Distributable Assets in
accordance with the Class 5 Percentage and to the
Class 3/4 Effective Date Distributable Assets to the
extent of the remaining Cash; and
(b) Airways Shares, if any, shall be allocated, on a PARI
PASSU basis, to the Class 5 Effective Date
Distributable Assets in accordance with the Class 5
Percentage and to the Class 3/4 Effective Date
Distributable Assets to the extent of the remaining
Airways Shares.
2. Initial Distribution of Assets
Subject to Section 12.2 of the Plan, on the Effective Date, the
Liquidating Agent will:
(a) pay (i) the Allowed Administrative Claims, (ii)
subject to Section 3.2, the Allowed Priority Tax
Claims, (iii) the Allowed Class 1 Other Priority
Claims, and (iv) the Allowed Class 2 Administrative
Convenience Claims in Cash;
(b) deposit in the Administrative Claims Reserve Cash in
an amount equal to the sum of all Administrative
Claims (including claims for compensation and
expenses incurred in making a substantial
contribution and estimated fees and expenses of
professionals through the Effective Date) not paid in
full on the Effective Date;
(c) deposit in the Liquidation Reserve Cash in an amount
specified in the budget attached to the Confirmation
Order;
(d) (i) distribute the Class 5 Effective Date Assets
consisting of Cash to the holders of Allowed Class 5
General Unsecured Claims; (ii) if holders of Allowed
Class 5 General Unsecured Claims have been offered
the opportunity to receive a distribution of Airways
Shares, distribute to each holder that so elects a
Pro Rata portion of the Airways Shares included in
the Class 5 Effective Date Assets; and (iii) deliver
any Airways Shares included in the Class 5 Effective
Date Assets that are not distributed to holders of
Allowed Class 5 General Unsecured Claims on the
Effective Date to the Liquidating Entity to be held
by the Liquidating Entity for sale or other
disposition for the benefit of holders of Allowed
Class 5 General Unsecured Claims as their interests
may appear;
(e) distribute to the Senior Notes Trustee, from the
Class 3/4 Effective Date Assets, (i) Cash in an
amount equal to the Senior Notes Trustee Fees and,
(ii) for the account of the holders of Allowed Class
3 Senior Notes Claims, Cash equal to each holder's
Senior Note Claim Recovery Amount;
(f) distribute to the Debenture Trustee, from the Class
3/4 Effective Date Assets, Cash in an amount equal to
the Debenture Trustee Fees; and
(g) from the Class 3/4 Effective Date Assets that remain
after the distributions with respect to the Senior
Notes Trustee Fees, the Debenture Trustee Fees and
the Class 3 Senior Notes Claims, (i) distribute to
the Debenture Trustee for the account of the holders
of Allowed Class 4 Debenture Claims, the remaining
Cash included in the Class 3/4 Effective Date Assets;
(ii) if holders of Allowed Class 3/4 Debenture Claims
have been offered the opportunity to receive a
distribution of Airways Shares, distribute to each
holder that so elects a Pro Rata portion of the
Airways Shares included in the Class 3/4 Effective
Date Assets; and (iii) deliver any Airways Shares
included in the Class 3/4 Effective Date Assets that
are not distributed to holders of Allowed Class 4
Debenture Claims on the Effective Date to the
Liquidating Entity to be held by the Liquidating
Entity for sale or other disposition for the benefit
of Allowed Class 4 Debenture Claims as their
interests may appear.
3. Distribution Procedures
(a) TIME OF DISTRIBUTIONS. The Initial Distribution to
holders of Allowed Claims entitled to receive a
distribution under the Plan shall be made on the
Effective Date. Notwithstanding the foregoing, if the
Effective Date does not occur within 10 days after
the Confirmation Order is entered, then, subject to
Bankruptcy Court approval in the Confirmation Order,
and provided the Confirmation Order is then in effect
and has not been stayed, on the first business day
after the tenth day after the Confirmation Order is
entered, the Liquidating Agent shall make the Initial
Distribution to holders of Allowed Class 3 Senior
Notes Claims. If the Bankruptcy Court declines to
approve a distribution to holders of Class 3 Senior
Notes Claims before the Effective Date, the Initial
Distribution to holders of Allowed Class 3 Senior
Notes Claims will occur on the Effective Date or as
promptly thereafter as possible.
(b) 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. For federal income tax purposes and
to the extent allowable under applicable Treasury
Regulations, a distribution will be allocated to the
principal amount of an Allowed Claim first and then,
to the extent the distribution exceeds the principal
amount of the Allowed Claim, to the portions of the
Allowed Claim representing accrued but unpaid
prepetition or postpetition interest.
(c) LIQUIDATING AGENT. Subject to Section 12.2, the
Liquidating Agent shall make all distributions
required to be made under this Plan on the Effective
Date. Distributions of assets to holders of Allowed
Class 3 Senior Notes Claims shall be deposited with
the Senior Notes Trustee, or to the extent directed
in writing by the Senior Note Trustee, distributed
directly to the beneficial holders of the Senior
Notes. Distributions of assets to holders of Allowed
Class 4 Debentures Claims shall be deposited with the
Debenture Trustee. Distributions of assets to holders
of Allowed Class 5 General Unsecured Claims shall be
made directly to such holders. Any Airways Shares
that are not distributed to holders of Allowed Class
4 Debenture Claims or Allowed Class 5 General
Unsecured Claims shall be held by the Liquidating
Entity for sale or other disposition for the benefit
of such holders. The Senior Notes Trustee and the
Debenture Trustee shall deliver distributions
deposited with them to the holders of such Claims in
accordance with the provisions of this Plan;
provided, however, that if the Senior Notes Trustee
and the Debenture Trustee, respectively, are unable
to make such distributions, the Liquidating Agent,
with the cooperation of the Senior Notes Trustee and
the Debenture Trustee, shall make such distributions.
(d) SURRENDER OF SECURITIES OR INSTRUMENTS. On or before
the Effective Date, or as soon as practicable
thereafter, each holder of an instrument evidencing a
Claim on account of a Senior Note or a Debenture (a
"Certificate") shall surrender such Certificate to
the Senior Notes Trustee or the Debenture Trustee, as
the case may be, 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 Senior
Notes Trustee or the Debenture Trustee, as the case
may be, or the unavailability of such Certificate is
reasonably established to the satisfaction of the
Senior Notes Trustee or the Debenture Trustee, as the
case may be, by delivery of an affidavit of loss that
includes an undertaking to indemnify the Senior Notes
Trustee or the Debenture Trustee, as the case may be,
against liability with respect to such lost
certificate.
(e) SERVICES OF INDENTURE TRUSTEES, AGENTS AND SERVICERS.
The fees and expenses, 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 paid
as provided in Section 8.2(e) and (f) of the Plan.
Fees and expenses of the Debenture Trustee accruing
after the Effective Date with respect to its role as
distribution agent for holders of the Allowed Class 4
Debenture Claims shall be paid in full as an
Administrative Claim as and when the same shall
become due.
(f) RECORD DATE FOR DISTRIBUTIONS TO HOLDERS OF SENIOR
NOTES AND DEBENTURES. At the close of business on the
Distribution Record Date, the transfer ledgers of the
Senior Notes Trustee and the Debenture Trustee shall
be closed, and there shall be no further changes in
the record holders of the Senior Notes or the
Debentures. The Debtors, the Senior Notes Trustee,
the Debenture Trustee and the Liquidating Agent shall
have no obligation to recognize any transfer of such
Senior Notes or Debentures occurring after the
Distribution 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 Distribution Record Date.
(g) DELIVERY OF DISTRIBUTIONS. Distributions to holders
of Allowed Claims shall be made by the Liquidating
Agent, Senior Notes Trustee or the Debenture 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 Liquidating 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 Liquidating Agent has not received
a written notice of a change of address, (d) in the
cases of the holders of an Allowed Class 3 Senior
Note Claim, at the addresses contained in the
official records of the Senior Notes Trustee, or (e)
in the case of the holder of an Allowed Class 4
Debentures Claim, at the addresses contained in the
official records of the Debenture Trustee. Unclaimed
Distributions to holders of Allowed Class 3 Senior
Notes Claims or holders of Allowed Class 4 Debentures
claims shall be retained and administered by the
Senior Notes Trustee or the Debentures Trustee, as
applicable, in accordance with the terms of the
Senior Notes Indenture or the Debenture Indenture, as
applicable. Any other Unclaimed Distributions shall
be transferred to the Liquidating Entity to be placed
in the Unclaimed Distributions Reserve. All claims
for Unclaimed Distributions shall be made before the
first (1st) anniversary of the Effective Date, or the
Termination Date, whichever is sooner. On such date,
all Unclaimed Distributions shall revert to the
Liquidating Entity and the holders of the Claims
entitled to such Unclaimed Distributions shall be
forever barred from receiving such Unclaimed
Distributions, which shall be distributed as part of
the Final Distribution in accordance with Section
8.4.
(h) PROCEDURES FOR TREATING AND RESOLVING DISPUTED AND
CONTINGENT CLAIMS.
(i) NO DISTRIBUTIONS PENDING ALLOWANCE. No
payments or distributions will 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.
(ii) DISPUTED CLAIMS RESERVE. All distributions
with respect to Disputed Claims shall be
deposited in the Disputed Claims Reserve.
The Debtor will request estimation for every
Disputed Claim that is contingent or
unliquidated, and the Liquidating Agent will
deposit distributions with respect to such
Claims in the Disputed Claims Reserve based
upon the estimated amount of each such Claim
as set forth in a Final Order.
(i) FRACTIONAL SECURITIES; DE MINIMUS DISTRIBUTIONS. Any
other provision of the Plan notwithstanding, payments
of fractions of shares constituting distributable
assets shall not be made. Whenever any payment of a
fraction of a share 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.
4. The Liquidating Entity; Duties of the Liquidating
Agent.
(a) IDENTITY AND MANAGEMENT OF LIQUIDATING
ENTITY. Identity and Management of
Liquidating Entity. The Debtors shall be the
Liquidating Entity unless the Debtors and
the Committee agree prior to the Effective
Date that WorldCorp LLC should be formed to
be the Liquidating Entity. The Liquidating
Entity shall be managed by the Liquidating
Agent under the supervision of the
Liquidating Committee.
(b) ASSETS OF THE LIQUIDATING ENTITY. The
Liquidating Entity will hold and administer
the following assets: (i) the Administrative
Claims Reserve; (ii) the Liquidation
Reserve; (iii) the Disputed Claims Reserve;
(iv) all Pending Debtor Claims, if any; (v)
any Airways Shares owned by the Debtors as
of the Effective Date that are not
distributed to holders of Allowed Class 4
Debentures Claims and holders of Allowed
Class 5 General Unsecured Claims pursuant to
Section 12.2; (vi) any tax-sharing
receivable from The Atlas Companies, Inc.;
and (vii) any other assets of the Debtors
that are neither abandoned nor distributed
on the Effective Date. If WorldCorp LLC is
the Liquidating Entity, the Liquidating
Agent, on behalf of the Debtors, will
transfer and assign the foregoing assets to
WorldCorp LLC on the Effective Date. Office
equipment and supplies shall be sold by the
Liquidating Agent for Cash equal to the
Value of such equipment and supplies, and
the net proceeds of such sales shall be
administered by the Liquidating Entity.
(c) OPERATIONS OF THE LIQUIDATING ENTITY. The
Liquidating Entity shall perform its stated
purposes in a manner consistent with the
nature of the assets to be administered,
obligations to be satisfied, claims to be
disputed, and causes of action to be
pursued. During the term of its existence,
the Liquidating Entity will comply with all
of its obligations, including, but not
limited to, obligations arising by operation
of law or pursuant to the terms of the Plan.
(d) POWERS AND DUTIES OF LIQUIDATING AGENT.
Subject to the consent of the Liquidating
Committee, the Liquidating Agent shall have
all duties, powers, and standing and
authority necessary to implement the Plan
and to administer and liquidate the Reserved
Assets and any other assets of the
Liquidating Entity for the benefit of
holders of Allowed Claims. The Liquidating
Agent's powers shall include, without
limitation, the following:
(i) Administration of the Administrative
Claims Reserve;
(ii) Administration of the Liquidation
Reserve;
(iii) Administration of the Unclaimed
Distributions Reserve;
(iv) Investing any cash of the
Liquidating Entity;
(v) Selling or otherwise transferring
for value any Airways Shares or
other assets that are included in
the Reserved Assets;
(vi) Filing with the Bankruptcy Court the
reports required by the Plan;
(vii) Preparing and filing of tax and
informational returns for the
Liquidating Entity;
(viii) Retaining such Professionals as the
Liquidating Agent may in its
discretion deem necessary for the
operation and management of the
Liquidating Entity;
(ix) Compromising or settling any Claims
against the Debtors;
(x) Setting off amounts owed to the
Debtors against any and all amounts
otherwise due to be distributed to
the holder of a Claim under the
Plan;
(xi) Abandoning any Reserved Assets that
cannot be sold or otherwise disposed
of for Value and whose distribution
to holders of Allowed Claims would
not be feasible or cost-effective in
the reasonable judgment of the
Liquidating Agent;
(xii) The Liquidating Agent shall also
administer the Disputed Claims
Reserve, which shall be maintained
as a separate, segregated fund as
described in Section 8.7. The
Liquidating Agent's services as
manager of the Liquidating Entity
and administrator of the Disputed
Claims Reserve shall be considered
as being provided in separate
capacities. The Liquidating Entity
shall indemnify the Liquidating
Agent for its actions as
administrator of the Disputed Claims
Reserve to the fullest extent
allowed by law; and
(xiii) The Liquidating Agent shall be
deemed the representative of the
estate under ss. 1123(b)(3)(B) of
the Bankruptcy Code with all rights
to pursue or settle, in the
Liquidating Agent's discretion, any
and all Pending Debtor Claims held
by the Liquidating Entity. Any
recoveries therefrom shall be
distributed in accordance with the
provisions of the Plan.
(xiv) The Liquidating Agent may increase
or decrease the amount of the
Liquidation Reserve as it may in its
discretion deem necessary upon
thirty (30) days prior written
notice to the Debenture Trustee. If
excess funds remain in the
Liquidation Reserve, such excess
funds shall distributed as part of
the Final Distribution.
(e) TAX VALUATION OF ASSETS. As soon as
possible after the Effective Date, but in no
event later than thirty (30) days
thereafter, the Liquidating Agent shall
determine, in good faith, the value of the
assets (other than Cash) distributed to
holders of Allowed Claims and, if
applicable, transferred to WorldCorp LLC
under the Plan. The value determined by the
Liquidating Agent shall be conclusive absent
manifest error. All parties (including,
without limitation, the Debtors, the
Liquidating Agent, the holders of Allowed
Claims and the members of WorldCorp LLC)
shall use this valuation for all federal
income tax purposes. This valuation shall be
made available by the Liquidating Agent upon
written request of the parties or their
assigns.
(f) DISTRIBUTIONS BY THE LIQUIDATING AGENT.
Subject to the consent of the Liquidating
Committee, the Liquidating Agent will be
empowered to make both periodic
distributions and a final distribution.
(i) OFFER TO DISTRIBUTE AIRWAYS SHARES.
If Airways Shares held by the
Liquidating Entity are registered
for public distribution on Form S-3
under the Securities Act of 1933,
then, within ten (10) days after
such registration becomes effective,
the Liquidating Agent shall offer,
in accordance with applicable
securities laws, to each holder of
an Allowed Class 4 Debenture Claim
and to each holder of an Allowed
Class 5 General Unsecured Claim, the
opportunity to elect to receive any
unsold Airways Shares allocated to
such Allowed Claim under this Plan.
The Liquidating Agent shall (A)
distribute to holders of Allowed
Class 4 Debentures Claims or Allowed
Class 5 Debentures Claims that elect
to receive distributions of Airways
Shares, the Airways Shares that are
allocated to their Allowed Claims;
and (B) hold any remaining Airways
Shares for sale or other disposition
for the benefit of holders of
Allowed Class 4 Debentures Claims or
Allowed Class 5 General Unsecured
Claims that have not elected to
receive distributions of Airways
Shares. The beneficial interests of
creditors in the Liquidating Entity
shall be adjusted as necessary to
take account of any such
distributions to creditors.
Notwithstanding the foregoing, the
Liquidating Agent shall not be
required to make de minimus
distributions of Airways Shares.
(ii) SALES OR OTHER DISPOSITIONS OF
UNDISTRIBUTED AIRWAYS SHARES. The
Liquidating Agent shall have the
right to sell, or otherwise dispose
of, any Airways Shares held by the
Liquidating Entity that are not
distributed to creditors under the
Plan at a price and in a manner
that, in the judgment of the
Liquidating Agent, will maximize the
value of such shares. Upon a sale of
Airways Shares, the Liquidating
Agent shall distribute all net
proceeds of the sale of such shares
to the holders of Allowed Class 4
and 5 Claims, as their interests
dictate; provided, however, that the
Liquidating Agent will not be
required to make de minimus
distributions.
(iii) TAX-SHARING RECEIVABLES, AVOIDANCE
ACTIONS AND OTHER CAUSES OF ACTIONS.
Net proceeds received under the
tax-sharing arrangements with The
Atlas Companies, Inc. or as a result
of Pending Debtor Claims will be
distributed on an interim basis, or
as a part of the Final Distribution;
provided, however, that the
Liquidating Agent will not be
required to make de minimus
distributions.
(iv) FINAL DISTRIBUTION. On the
Termination Date, the Liquidating
Agent shall
(A) establish the Wind-Up
Reserve;
(B) distribute to holders of
Allowed Class 5 General
Unsecured Claims, in
accordance with their
interests, the Final
Distribution Assets held
for their account;
provided, however, that the
Liquidating Agent will not
be required to make de
minimus distributions; and
(C) distribute to the Debenture
Trustee for the account of
holders of Allowed Class 4
Debenture Claims, in
accordance with their
interests, the Final
Distribution Assets
remaining after the
distribution to holders of
Allowed Class 5 General
Unsecured
Claims.
(v) REMAINING FUNDS. If funds remain in
the Wind-Up Reserve after the
Liquidating Agent has performed all
of his responsibilities under the
Plan, such excess funds shall be
delivered to the Debenture Trustee
for supplemental distribution to
holders of Allowed Class 4 Debenture
Claims; provided, however, that the
Debenture Trustee shall not be
required to make DE MINIMUS
distributions. The Debenture Trustee
shall be entitled to deduct from any
such supplemental distribution its
fees and expenses for making such
supplemental distribution.
(g) TIMING OF FINAL DISTRIBUTION. Subject to
the consent of the Liquidating Committee,
the Liquidating Agent shall make the Final
Distribution when, (i) in the reasonable
judgment of the Liquidating Agent there are
no sources of potential Available Cash for
distribution; and (ii) there remain no
Disputed Claims; and (iii) the Liquidating
Agent is in a position to make the Final
Distribution in accordance with applicable
law, but in any event the Liquidating Agent
shall make the Final Distribution no later
than two (2) years after the Effective Date
or as soon thereafter as the Liquidating
Agent is in a position to make the Final
Distribution in accordance with applicable
law. The date on which the Final
Distribution is made is referred to as the
"Termination Date."
(h) DISCHARGE OF LIQUIDATING AGENT. After making
the Final Distribution, the Liquidating
Agent shall file in the Bankruptcy Court a
final report of distributions, whereupon the
Liquidating Agent shall have no further
duties under the Plan.
(i) COMPENSATION OF LIQUIDATING AGENT. The
compensation of the Liquidating Agent shall
be determined by agreement between the
Liquidating Agent and the Committee prior to
the Confirmation Date and shall be paid by
the Liquidating Entity. The Liquidating
Agent shall also be entitled to
reimbursement of his reasonable expenses.
5. Establishment and Operation of WorldCorp LLC.
If WorldCorp LLC is to be the Liquidating Entity under the Plan, the
following provisions shall apply.
(a) FORMATION OF WORLDCORP LLC. WorldCorp LLC shall be
formed on the Effective Date pursuant to the LLC
Operating Agreement. To the extent necessary or
appropriate, the Liquidating Agent and the Debtors
shall execute the LLC Operating Agreement. The
Liquidating Agent shall thereupon be authorized to
take all other steps necessary to complete the
formation of WorldCorp LLC.
(b) TAX TREATMENT OF TRANSFER OF ASSETS TO WORLDCORP LLC.
If WorldCorp LLC is the Liquidating Entity under the
Plan, then, for all federal income tax purposes, all
parties (including, without limitation, the Debtors,
the Liquidating Agent, and the holders of membership
interests in WorldCorp LLC) shall treat the transfer
of assets to WorldCorp LLC in accordance with the
terms of the Plan as a transfer by the Debtors to the
holders of Allowed Claims in Classes 4 and 5,
followed by a transfer by such holders to WorldCorp
LLC. If WorldCorp LLC is the Liquidating Entity under
the Plan, it shall be deemed not to be the same legal
entity as the Debtors, but only the assignee of the
Debtors' assets.
(c) MEMBERSHIP INTERESTS IN WORLDCORP LLC. If WorldCorp
LLC is the Liquidating Entity under the Plan, then,
on the Effective Date, each holder of an Allowed
Class 4 Claim or an Allowed Class 5 Claim shall, by
operation of the Plan, (i) be admitted to WorldCorp
LLC as a member of WorldCorp LLC, (ii) become bound
by the LLC Operating Agreement, and (iii) receive an
uncertificated membership interest in WorldCorp LLC
in the same proportion as the Face Amount of its
Allowed Claim bears to the aggregate Face Amount of
all Claims in Classes 4 and 5, as adjusted pursuant
to Section 8.4(f)(i). Membership interests with
respect to Disputed Claims shall be held by the
Liquidating Agent in the Disputed Claims Reserve
pending allowance or disallowance of such Claims. No
other entity, including the Debtors or Debtors in
Possession, shall have any interest, legal,
beneficial, or otherwise, in WorldCorp LLC or the
Reserved Assets or Causes of Action upon their
assignment and transfer to WorldCorp LLC. The
Liquidating Agent shall maintain a registry of the
membership interests in WorldCorp LLC.
(d) NON-TRANSFERABILITY OF MEMBERSHIP INTERESTS IN
WORLDCORP LLC. If issued, membership interests in
WorldCorp LLC will be non-transferable, except with
respect to the following transfers: (a) distributions
of membership interests in WorldCorp LLC from the
Disputed Claims Reserve; (b) transfers under the laws
of descent, including transfers from an estate or
testamentary trust; (c) transfers between certain
designated family members; (d) transfers involving
distributions from certain qualifying retirement
plans; (e) transfers in which the tax basis of the
WorldCorp LLC membership interest in the hands of the
transferee is determined in whole or in part with
reference to its basis in the hands of the
transferor; and (f) "block transfers" as defined in
section 1.7704- 1(e)(2) of the Treasury Regulations.
In the case of transfers described in (b) through
(f), the Liquidating Agent shall have the right to
receive written notice thirty days prior to the
proposed transfer, including all pertinent facts and,
if applicable, documents relating to the transfer; to
approve or disapprove the transfer and impose any
conditions with respect to the transfer that the
Liquidating Agent deems necessary or advisable in its
sole discretion; to require from the transferor or
obtain from counsel to WorldCorp LLC (at the
Liquidating Agent's option) an opinion in form and
substance satisfactory to the Liquidating Agent that
the transfer will not cause WorldCorp LLC to be
taxable as a corporation for federal income tax
purposes; and to require the transferor to reimburse
WorldCorp LLC for any expenses incurred in connection
with the proposed transfer, whether or not approved.
Any transfer not approved by the Liquidating Agent
pursuant to these procedures will be null and void.
(e) TERMINATION OF WORLDCORP LLC. As promptly as possible
after the Final Distribution, the Liquidating Agent
shall wind up the affairs of WorldCorp LLC, file
final tax returns, arrange for storage of its records
for a period of not less than three years, and
dissolve it pursuant to applicable law.
6. Wind-Up and Dissolution of WorldCorp and Acquisition.
The Liquidating Agent shall be responsible for winding up the affairs
of WorldCorp and Acquisition after the Effective Date, including but not limited
to preparing and filing final tax returns for the Debtors, paying any franchise
taxes and other fees that are due in connection with the dissolution of the
Debtors, filing dissolution documents pursuant to Del. Code Ann. tit. 8, ss. 303
and taking any other actions that are necessary to wind up the Debtors' affairs.
If WorldCorp LLC is the Liquidating Entity under the Plan, the Liquidating Agent
shall complete such wind-up and file such dissolution documents as promptly as
possible after the Effective Date. If the Debtors are the Liquidating Entity
under the Plan, the Liquidating Agent shall file such dissolution documents
promptly after the Liquidating Agent makes the Final Distribution. The costs and
expenses of completing the wind-up and dissolution of the Debtors shall be paid
by the Liquidating Entity.
7. Operation of the Disputed Claims Reserve.
(a) GENERAL. The Liquidating Agent shall set aside,
segregate and hold in escrow for the benefit of
holders of Disputed Claims, the property included in
the Disputed Claims Reserve, including any membership
interests in WorldCorp LLC (and any cash
distributable on account thereof) deposited in the
Disputed Claims Reserve pursuant to Section 8.5(c) of
the Plan.
(b) DISTRIBUTIONS AFTER ALLOWANCE OF DISPUTED CLAIMS.
Payments and distributions from the Disputed Claims
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
Liquidating Agent will distribute to the holder of
such Claim any Cash and other property in the
Disputed Claims Reserve that would have been
distributed on the Effective Date had such Allowed
Claim been an Allowed Claim on the Effective Date. To
the extent that the holder of such Claim would have
received a membership interest in WorldCorp LLC had
such Claim been an Allowed Claim as of the Effective
Date, (i) such holder shall be admitted to the LLC as
a member; (ii) such holder shall become bound by the
LLC Operating Agreement; and (iii) the Liquidating
Agent shall distribute to the holder of such Allowed
Claim the uncertificated membership interests in
WorldCorp LLC to which such holder would have been
entitled under the Plan had such claim been allowed
as of the Effective Date, together with any cash and
earnings attributable thereto, after reduction for
all costs and expenses attributable to such
membership interest, cash and earnings (including
without limitation, attorneys' fees and any taxes
imposed on the Disputed Claims Reserve).
(c) ADDITIONS TO DISPUTED CLAIMS RESERVE. The
Liquidating Agent will add to the Disputed Claims
Reserve any dividends, payments or other
distributions made on account of, as well as any
obligations arising from, the property withheld as
the Disputed Claims Reserve, to the extent that such
property continues to be withheld as the Disputed
Claims Reserve at the time such distributions are
made or such obligations arise. If practicable, the
Liquidating Agent will invest any Cash that is
withheld in the Disputed Claims Reserve. Nothing in
the Plan or Disclosure Statement will be deemed to
entitle the holder of a Disputed Claim to
post-petition interest on such Claim.
(d) DISTRIBUTION OF AMOUNTS RESERVED FOR DISALLOWED
CLAIMS. To the extent a Disputed Claim is disallowed,
the amount reserved for that claim (including, if
applicable, membership interests in WorldCorp LLC)
will be paid out to other creditors on a Pro Rata
basis, provided however that the Liquidating Agent
will not be required to make de minimus distributions
from the Disputed Claims Reserve.
(e) PAYMENT OF TAX ATTRIBUTABLE TO TAXABLE INCOME OF
WORLDCORP LLC. In the event, and to the extent, the
Disputed Claims Reserve has insufficient funds to pay
taxes attributable to any membership interests held
therein, the necessary funds to pay such taxes shall
be advanced to the Disputed Claims Reserve by the
Liquidating Entity and the Disputed Claims Reserve
shall reimburse the Liquidating Entity therefore from
future distributions and disbursements to or for the
benefit of the Disputed Claims Reserve.
(f) TAX TREATMENT OF DISPUTED CLAIMS RESERVE. Subject to
definitive guidance from the Internal Revenue Service
or a court of competent jurisdiction to the contrary
(including the receipt by the Liquidating Agent of a
private letter ruling if the Liquidating Agent so
requests one, or receipt of an adverse determination
on audit if not contested by the Liquidating Agent),
the Liquidating Agent shall (i) treat the Disputed
Claims Reserve (A) if the Liquidating Entity is
WorldCorp LLC, as a discrete trust for federal income
tax purposes, consisting of separate and independent
shares to be established in respect of each Disputed
Claim, in accordance with the trust provisions of the
Code, or (B) if the Liquidating Entity is the
Debtors, as a grantor trust for federal income tax
purposes, of which the Debtors are the grantors, in
accordance with the grantor trust provisions of the
Code; and (ii) to the extent permitted by applicable
law, report consistently with the foregoing for state
and local income tax purposes. All holders of Allowed
and Disputed Claims shall report, for tax purposes,
consistently with the foregoing.
8. The Administrative Claims Reserve.
If the aggregate amount of Allowed Administrative Claims exceeds the
amount of the Administrative Claims Reserve, the Liquidating Agent shall satisfy
the excess Allowed Administrative Claims from other assets of the Liquidating
Entity before making any further distributions with respect to Allowed Claims.
If excess funds remain in the Administrative Claims Reserve after all Allowed
Administrative Claims have been paid, such excess funds shall be distributed as
part of the Final Distribution.
9. The Unclaimed Distributions Reserve.
Unclaimed Distributions to holders of Allowed Class 3 Senior Notes
Claims or holders of Allowed Class 4 Debentures claims shall be retained and
administered by the Senior Notes Trustee or the Debenture Trustee, as
applicable. Unclaimed Distributions to holders of other claims shall be held by
the Liquidating Agent in the Unclaimed Distributions Reserve. If the Creditor to
whom an Unclaimed Distribution was payable makes a claim for such distribution
before the Termination Date, the Senior Notes Trustee, Debenture Trustee, or
Liquidating Agent, as applicable, shall deliver such Unclaimed Distribution to
such Creditor upon proof of such Creditor's entitlement thereto. Unclaimed
Distributions that remain unclaimed as of the Termination Date shall be
redistributed to other creditors in the same Class as part of the Final
Distribution, and the Creditors originally entitled to receive such Unclaimed
Distributions shall have no further right thereto.
10. Miscellaneous Implementation Provisions.
(a) REPORTS OF DISTRIBUTIONS BY THE LIQUIDATING ENTITY.
Every 90 days after the Effective Date, the
Liquidating Agent shall file with the Court a report
detailing the calculation of Available Cash for the
immediately preceding ninety day period (including a
summary of costs incurred pursuant to Section 8.4 of
the Plan and, if applicable, the WorldCorp LLC
Operating Agreement, any receipts of the Liquidating
Entity, and a summary of disbursements from, or
increases in the amount of, any Reserve). The report
shall also detail the number of hours the Liquidating
Agent has devoted to the operation and management of
the Liquidating Entity during the immediately
preceding 90-day period, provide a summary of the
duties and operations so performed, and be
accompanied by copies of receipts for any expense in
excess of one hundred dollars ($100.00) for which the
Liquidating Agent is reimbursed by the Liquidating
Entity.
(b) PRESERVATION OF PENDING DEBTOR CLAIMS. In accordance
with section 1123(b)(3) of the Bankruptcy Code and
except as otherwise provided in the Plan, the
Liquidating Entity shall retain all Pending Debtor
Claims against any entity. Subject to the consent of
the Liquidating Committee, the Liquidating Agent, in
the exercise of its business judgment, will determine
whether to pursue such Pending Debtor Claims in
accordance with the best interests of the
beneficiaries of the Liquidating Entity. All Causes
of Action and Avoidance Claims that the Debtors may
have against any Person as of the Effective Date that
are not Pending Debtor Claims shall be deemed waived
and released as of the Effective Date.
(c) SUBSTANTIAL CONTRIBUTION COMPENSATION AND EXPENSES
BAR DATE. Any person or entity who requests
compensation or expense reimbursement pursuant to
section 503(b)(3), (4), and (5) of the Bankruptcy
Code for making a substantial contribution in the
Chapter 11 Case must file an application with the
Clerk of the Bankruptcy Court, and serve such
application on counsel for the Debtors and as
otherwise required by the Bankruptcy Court and the
Bankruptcy Code so as to be received by the earlier
of (i) 30 days after the Confirmation Date or (ii)
five (5) days before the Effective Date. Claims for
substantial contribution that are not filed and
served within the foregoing limitations period shall
be forever barred. Timely filed claims for
substantial contribution that have not been Allowed
or Disallowed as of the Effective Date shall be
included in calculating the Administrative Claims
Reserve.
(d) INVESTMENTS BY THE LIQUIDATING AGENT. Except with
respect to Airways Shares held by the Liquidating
Entity under the Plan or securities received in
exchange for or with respect to such shares, the
investment power of the Liquidating Agent shall be
limited to investments in cash, money market funds
and treasury bills.
(e) CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS.
On the Effective Date, except as otherwise provided
for herein, (i) the Existing Securities and any other
security, note, bond, indenture, or other instrument
or document evidencing or creating any indebtedness
or obligation of the Debtors, shall be canceled, and
(ii) the obligations of, and/or Claims against, the
Debtors under, relating or pertaining to any
agreements, indentures or certificates of
designations governing the Existing Securities; any
other security, note, bond, indenture or other
instrument or document evidencing or creating any
indebtedness or obligation of the Debtors, as the
case may be; and intercompany debts shall be released
and discharged. As of the Effective Date, the Senior
Notes Trustee and the Debenture Trustee shall be
released from their obligations under the Senior
Notes Indenture and the Debenture Indenture,
respectively, except for their obligations to deliver
to holders of Allowed Class 3 Senior Notes Claims and
Allowed Class 4 Debenture Claims the distributions
made under the Plan.
(f) EXCLUSIVITY PERIOD. The Debtors, with the consent of
the Committee, which shall not be unreasonably
withheld, shall retain the exclusive right to amend
or modify the Plan and to solicit acceptances of any
amendments to or modifications of the Plan, through
and until the Effective Date.
(g) EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS. The
Chairman of the Board of Directors, the Chief
Executive Officer, any other executive officer of
either of the Debtors, and the Liquidating Agent
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 either of the Debtors, or the
Liquidating Agent shall be authorized to certify or
attest to any of the foregoing actions.
11. Tax Reporting.
(a) TAX RETURNS AND REPORTS. The Liquidating Agent shall
be responsible for filing tax returns on behalf of
the Liquidating Entity.
(b) TAX TREATMENT OF WORLDCORP LLC. If WorldCorp LLC is
formed to be the Liquidating Entity under the Plan,
the following provisions shall be applicable.
(i) PARTNERSHIP TAX STATUS. WorldCorp LLC shall
be treated as a partnership for federal tax
purposes and, to the extent permitted under
applicable law, for state and local income
tax purposes. The Liquidating Agent shall be
responsible for distributing information
statements to the holders of the membership
interests in WorldCorp LLC, setting forth
each member's allocable share of the income,
loss, deduction or credit of WorldCorp LLC.
(ii) ALLOCATION OF WORLDCORP LLC TAXABLE INCOME,
LOSS, DEDUCTIONS AND CREDITS. For federal
income tax purposes, WorldCorp LLC's taxable
income, loss, deductions and credits shall
be allocated among the members of WorldCorp
LLC in a manner consistent with applicable
Treasury Regulations taking into account
each holder's relative economic interest in
WorldCorp LLC. Each holder of a membership
interest in WorldCorp LLC will be required
to take into account the holder's allocable
share of the income, loss deduction or
credit of WorldCorp LLC in determining the
holder's taxable income for federal income
tax purposes.
(c) OTHER REPORTS. The Liquidating Agent shall file (or
cause to be filed) any other statements, returns or
disclosures relating to the Liquidating Entity that
are required by any governmental unit or applicable
law.
(d) EXPEDITED TAX DETERMINATIONS. The Liquidating Agent
is authorized to request an expedited determination
under section 505(b) of the Bankruptcy Code for all
tax returns filed for or on behalf of the Liquidating
Entity for all taxable periods through the
termination of the Liquidating Entity.
(e) EXEMPTION FROM TRANSFER TAXES. Pursuant to section
1146(c) of the Bankruptcy Code, the issuance,
transfer, or exchange of notes or equity securities
under the Plan or the making or delivery of any deed
or other instrument or transfer under, in furtherance
of, or in connection with the Plan, including without
express or implied limitation, any transfers to or by
the Liquidating Entity shall not be subject to any
transfer, sales or other similar tax.
VIII. CERTAIN FACTORS TO BE CONSIDERED
THE HOLDER OF A CLAIM AGAINST OR INTEREST IN THE DEBTORS 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. Disclaimer Concerning Financial Information
Although the Debtors have used their best efforts to ensure the
accuracy of the financial information provided in this Disclosure Statement, the
financial information contained in this Disclosure Statement has not been
audited and is based upon an analysis of data available at the time of the
preparation of the Plan and Disclosure Statement. While the Debtors believe that
such financial information fairly reflects the finances of the Debtors, the
Debtors are unable to warrant or represent that the information contained herein
and attached hereto is without inaccuracies.
B. 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 Debtors. Certain Claims and Interests
receive no distributions pursuant to the Plan. See Section VI.C, "TREATMENT OF
CLAIMS AND INTERESTS UNDER THE PLAN," herein.
C. Certain Bankruptcy Considerations
1. General Risk of Non-Confirmation of the Plan
If the Plan is not confirmed and consummated, there can be no assurance
that the Chapter 11 Cases will continue rather than be converted to a
liquidation under Chapter 7 of the Bankruptcy Code or that any alternative plan
of liquidation would be on terms as favorable to the holders of the Impaired
Claims as the terms of the Plan. If a Chapter 7 liquidation or protracted
reorganization were to occur, there is a substantial risk that the holders of
unsecured Claims in Classes 3, 4 and 5 would receive materially less than they
will receive under the Plan.
2. Non-Consensual Confirmation
Pursuant to the "cramdown" provisions of Section 1129(b) of the
Bankruptcy Code, the Bankruptcy Court can grant Confirmation at the Debtor's
request if at least one other Impaired Class has accepted the Plan (with such
acceptance being determined without including the acceptance of any Insider in
such Class), and as to each Impaired Class which has not accepted the Plan, the
Bankruptcy Court determines that the Plan "does not discriminate unfairly" and
is "fair and equitable" with respect to Impaired Classes. In accordance with
Subsection 1129(a)(8) of the Bankruptcy Code, the Debtors may request
Confirmation without the acceptance of all Impaired Classes entitled to vote in
accordance with Subsection 1129(b) of the Bankruptcy Code.
3. Possible Adverse Effects from Delays of Confirmation
And/Or Effective Date
Any delays of either Confirmation or effectiveness of the Plan could
result in, among other things, (a) increased Professional Fee Claims and/or (b)
adverse effects on the liquidation value of the Debtor's Assets. Either of these
or any other negative effects of delays of either Confirmation or effectiveness
of the Plan could endanger the ultimate approval of the Plan by the Bankruptcy
Court. In addition, if the Bankruptcy Court does not approve, in the
Confirmation Order, the provision of the Plan that permits the Debtors to make
an advance distribution to pay off the Allowed Class 3 Senior Notes Claims if
the effective date of the Plan is delayed, interest on the Senior Notes will
continue to accrue at the rate of 10% per annum until the Plan becomes
effective, which will reduce the amount of cash available for distribution to
holders of Class 4 Debentures Claims.
The Debtors also reserve the right to modify the terms of the Plan, as
necessary to obtain Confirmation without the acceptance of all Impaired Classes.
Such modifications could result in a less favorable treatment of any
non-accepting Class or Classes, as well as of any Classes junior to such
non-accepting Classes, than the treatment currently provided in the Plan.
D. Liquidation of Assets
Except to the extent that the Assets of the Debtor have already been
reduced to cash, the Debtors' ability to make the Distributions described in the
Plan depends upon the liquidation of the Debtors' Assets. Although the Debtors
will endeavor to liquidate the Assets as expeditiously as possible, and in such
a manner as to maximize the Cash realized from their disposition, the Debtors
cannot warrant either the timing or the amount of Distributions under the Plan.
E. Financial Risk Factor
The contemplated plan structure involves the disposition of a
significant portion of the overall capital stock of World Airways. This
disposition may adversely affect the stock price of World Airways. If so, the
value of the payment to the classes of creditors may be diminished.
F. Alternatives to the Plan
After careful review of the Debtors' current business operations,
estimated recoveries in a Chapter 7 liquidation scenario, difficulties inherent
in prosecuting certain alleged claims and prospects as an ongoing business, the
Debtors have concluded that the recovery to creditors will be maximized by the
Debtors' proposed plan of liquidation.
According to the liquidation analysis prepared by the Debtors with the
assistance of its financial advisors, distributions to creditors 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
distributions to creditors would be delayed and would be materially reduced by
the additional fees and other costs associated with a Chapter 7 liquidation.
Accordingly, the Debtors believe that the Plan offers the best
prospects of recovery for the holders of Claims against the Debtors and
recommend that you vote to accept the Plan.
IX. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain U.S. federal income tax
consequences of the Plan to the Debtors and to certain holders of Claims. 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 Debtors 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 (i) will either be satisfied in full or
are otherwise unimpaired under the Plan (I.E., Allowed Class 1, Class 2 and
Class 3 Claims), or (ii) will not receive any recovery under the Plan (I.E.,
Class 6 Interests).
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 Debtors have 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 Debtors with respect thereto.
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.
A. Consequences to the Debtors
It is anticipated that the consummation of the Plan will not result in
any federal income tax liability on the part of the Debtors other than the
potential application of alternative minimum tax ("AMT") described below. Debtor
WorldCorp is the parent of a group of affiliated corporations filing a
consolidated tax return for federal income tax purposes (the "WorldCorp Tax
Group"). WorldCorp has reported substantial consolidated net operating loss
("NOL") carryforwards for federal income tax purposes for its taxable year ended
December 31, 1998. It is anticipated that WorldCorp's NOL carryforwards will
substantially offset the taxable income of the WorldCorp Tax Group for 1999 and
2000 and any taxable income that might result from implementation of the Plan.
In addition, based on the information currently available to them, the Debtors
expect to take the position that no limitations impair the Debtors' ability to
utilize WorldCorp's NOL carryforwards to offset any taxable income for 1999 and
2000 and that might result from the implementation of the Plan. Nevertheless,
the amount of such NOL carryforwards, and the potential application of any
limitations with respect to such NOL carryforwards, remain subject to
examination by the IRS. As discussed below, any consolidated NOL carryforwards
or other tax attributes remaining after taking into account the transfers of the
Debtors' assets pursuant to the Plan may be reduced, eliminated or otherwise
subject to limitation.
1. Cancellation of Debt
The Code provides that a debtor in a bankruptcy case must reduce
certain of its tax attributes (such as NOL carryforwards, current year NOLs, tax
credits and, subject to certain limitations, tax basis in assets) by the amount
of any cancellation of debt income ("COD"). COD is the amount by which the
indebtedness discharged exceeds any consideration given in exchange therefor.
Certain statutory or judicial exceptions can apply to limit the amount of COD
and attribute reduction (such as where the payment of the canceled debt would
have given rise to a tax deduction). In addition, to the extent the amount of
COD exceeds the tax attributes available for reduction, the remaining COD is
simply forgiven. Although not free from doubt, based on existing authorities, it
appears that any reduction in tax attributes generally should occur on a
separate company basis, even though the Debtor files a consolidated federal
income tax return. In addition, any reduction in tax attributes is treated as
occurring the first day of the taxable year following the taxable year in which
the COD is incurred.
As a result of the discharge and satisfaction of Claims pursuant to the
Plan, the Debtors will incur significant COD and potential attribute reduction.
However, because any reduction in tax attributes does not occur until the first
day of the taxable year following the taxable year in which the COD is incurred,
the resulting COD will not impair the Debtors' ability to use its tax attributes
(to the extent otherwise available) to reduce the tax liability, if any,
resulting from the implementation of the Plan.
2. Transfer of Assets
Pursuant to the Plan, substantially all of the Debtors' assets will be
transferred directly or indirectly to holders of Claims in complete liquidation
of the Debtors. Some or all of the Debtors' assets will be transferred directly
to holders of Allowed Claims. Certain other assets may be transferred to
WorldCorp LLC. If WorldCorp LLC is formed pursuant to the Plan, the Debtors will
not retain a beneficial interest in WorldCorp LLC; instead the membership
interests in WorldCorp LLC will be distributed to holders of Allowed Claims in
Classes 4 and 5 in respect of all or part of such holders' Claims. WorldCorp LLC
thereafter will be treated as a partnership for federal income tax purposes.
The Debtors' transfer of their assets pursuant to the Plan will
constitute a taxable disposition of such assets. Due to the substantial amount
of WorldCorp's NOL carryforwards available to Debtors, it is anticipated that
the transfer of the Debtors' assets will not result in any federal income tax
liability other than the potential application of the AMT described below.
3. Liquidation of the Debtors
The complete liquidation of the Debtors pursuant to the Plan will
terminate the WorldCorp Tax Group, and cause the Debtors' taxable years to
close. Moreover, the complete liquidation of the Debtors will eliminate the
portion of any remaining NOLs of the WorldCorp Tax Group attributable to the
Debtors (after taking into effect the implementation of the Plan).
4. 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
Debtors were considered to undergo an ownership change, there could be
limitations on the extent to which the Debtors' NOLs could be used to offset
taxable income arising after the ownership change.
5. Alternative Minimum Tax
In general, the AMT is imposed on a corporation's alternative minimum
taxable income ("AMTI") at a 20% rate to the extent that such tax exceeds the
corporation's regular federal income tax. Certain tax deductions and other
beneficial allowances are either modified or eliminated in determining the
corporation's AMTI. In particular, even though a corporation otherwise might be
able to offset all of its taxable income for regular tax purposes by available
NOL carryforwards, only 90% of a corporation's AMTI may be offset by available
NOL carryforwards (as computed for AMT purposes). 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 Debtors are otherwise able to fully offset their
income with NOLs, they will be subject to current taxation to the extent that,
in a given year, they have positive net pre-NOL AMTI.
B. Consequences to Holders of Allowed Claims
Pursuant to the Plan, the Debtors will transfer either or both (i)
assets of the Debtors or (ii) membership interests in WorldCorp LLC, to holders
of Allowed Claims in satisfaction and discharge of such Claims.
In general, each holder of an Allowed Claim will recognize gain or loss
in an amount equal to the difference between (i) the "amount realized" by such
holder in satisfaction of its Claim (other than any Claim for accrued but unpaid
interest) and (ii) such holder's adjusted tax basis in such Claim (other than
any Claim for accrued but unpaid interest).
In general, the "amount realized" by a holder of a Claim will equal the
aggregate fair market value of assets received by such holder pursuant to the
Plan. If WorldCorp LLC is formed, then, for federal income tax purposes, the
transfer of assets to WorldCorp LLC in accordance with the terms of the Plan is
required to be treated as a transfer of the underlying assets to holders of
Allowed Claims in Classes 4 and 5, followed by such holders' contribution of
such assets to WorldCorp LLC. Any amounts a holder subsequently receives as a
distribution from WorldCorp LLC should not be included in the holder's amount
realized in respect of its Claim for federal income tax purposes, but should be
separately treated.
Where gain or loss is recognized by a holder on receipt of assets or,
if applicable, membership interests in WorldCorp LLC, the character of such gain
or loss (I.E., long-term or short-term capital, or ordinary) will be determined
by a number of factors, including the tax status of the holder, whether the
Claim in respect of which such assets or membership interests were received
constituted a capital asset in the hands of the holder and how long it had been
held, whether such Claim was acquired at a market discount and whether and to
what extent the holder had previously claimed a bad debt deduction in respect of
such Claim. A holder that purchased its Claim from a prior holder at a market
discount may be subject to the market discount rules of the Code. Under those
rules, assuming that the holder had not made an election to amortize the market
discount into income on a current basis with respect to any market discount
instrument, any gain recognized on the exchange of such Claim (subject to a de
minims rule) would generally be characterized as ordinary income to the extent
of the accrued market discount on such Claim as of the date of the exchange.
A holder's aggregate tax basis in any membership interests in WorldCorp
LLC received will equal the fair market of such holder's share of assets
transferred to WorldCorp LLC pursuant to the Plan, and the holding period for
such interests will generally begin on the Effective Date.
1. Distribution in Discharge of Accrued Unpaid Interest
Pursuant to the Plan, a distribution received in respect of Allowed
Claims will be allocated first to the principal amount of such Claims, with any
excess allocated to unpaid accrued interest. However, there is no assurance that
the IRS would respect such allocation for federal income tax purposes. In
general, to the extent that an amount received (whether stock, cash or other
property) by a holder of debt is received in satisfaction of interest that
accrued during its holding period, such amount will be taxable to the holder as
interest income if not previously included in the holder's gross income.
Conversely, a holder generally recognizes a deductible loss to the extent that
it does not receive payment of interest that has previously been included in its
income. Holders of Claims are urged to consult their tax advisors regarding the
allocation of consideration and the deductibility of unpaid interest for tax
purposes.
2. Information Reporting and Withholding
All distributions to holders of Allowed Claims under the Plan are
subject to any applicable withholding tax requirements. Under federal income tax
law, interest, dividends, and other reportable payments, may, under certain
circumstances, be subject to "backup withholding" at a rate of 31%. Backup
withholding generally applies if the holder (a) fails to furnish its social
security number or other taxpayer identification number ("TIN"), (b) furnishes
an incorrect TIN, (c) fails properly to report interest or dividends, or (d)
under certain circumstances, fails to provide a certified statement, signed
under penalty of perjury, that the TIN provided is its correct number and that
it is not subject to backup withholding. Backup withholding is not an additional
tax but merely an advance payment, which may be refunded to the extent it
results in an overpayment of tax. Certain persons are exempt from backup
withholding, including, in certain circumstances, corporations and financial
institutions.
C. Treatment of WorldCorp LLC and Interests in WorldCorp LLC
If WorldCorp LLC is formed pursuant to the Plan, WorldCorp LLC will be
treated as a partnership for federal income tax purposes and, to the extent
allowed under applicable law, for state and local purposes.
An entity classified as a partnership for federal income tax purposes
generally is not a taxable entity and incurs no federal income tax liability.
Pursuant to the Plan, taxable income or loss of WorldCorp LLC will be allocated
among the holders of interests in WorldCorp LLC consistent with applicable
Treasury Regulations taking into account the relative economic interests of such
holders in WorldCorp LLC. Each holder of membership interests in WorldCorp LLC
will be required to take into account its allocable share of WorldCorp LLC's
income, gain, loss, deduction or credit in determining its taxable income for
federal income tax purposes. The Liquidating Agent will be responsible for
filing information returns on behalf of WorldCorp LLC and distributing
information statements to the holders of membership interests, setting forth
each holder's allocable share of WorldCorp LLC's income, loss, deduction or
credit. Holders will be taxed on their allocable shares of WorldCorp LLC's
income for the taxable year regardless of the amount, if any, distributed by
WorldCorp LLC to such holders in such taxable year. Distributions by WorldCorp
LLC to a holder are generally not taxable to the holder unless the amount of
such distributions exceeds the holder's adjusted basis in its membership
interests.
The Liquidating Agent will be authorized to collect such tax and other
information from holders of membership interests in WorldCorp LLC (including,
without limitation, social security numbers and/or other TINs) as it in its sole
discretion deems necessary to effectuate the Plan, and the Confirmation Order
will expressly provide this authority. The failure of a holder of membership
interests to furnish this information in a timely fashion may result in the
suspension or waiver of any distributions on account of such holder's membership
interests until the requisite information is supplied.
D. Treatment of Disputed Claims Reserve
Pursuant to the Plan, any property allocable to Disputed Claims,
including any membership interests in WorldCorp LLC and any cash distributed
with respect to such interests, shall be held in the Disputed Claims Reserve by
the Liquidating Agent until such Disputed Claims are determined to be either
Allowed or Disallowed. The Disputed Claims Reserve shall be held as a separate,
segregated fund.
Under Section 468B(g) of the Code, amounts earned by an escrow agent,
settlement fund or similar fund must be subject to current tax. Although certain
Treasury Regulations have been issued under this section, no Treasury
Regulations have as yet been promulgated to address the tax treatment of such
accounts in a bankruptcy setting. Thus, depending on the facts, such accounts
possibly could be treated as a separately taxable trust, as a grantor trust, or
otherwise. On February 1, 1999, the IRS issued proposed Treasury Regulations
that would establish, if finalized in their current form, the tax treatment of
escrows of the type here involved that are established after the date such
Treasury Regulations become final. In general, such Treasury Regulations would
tax such an escrow in a manner similar to a corporation. As to previously
established escrows, such Treasury Regulations would provide that the IRS would
not challenge any reasonably, consistently applied method of taxation for income
earned by the escrow or account, and any reasonable, consistently applied method
for reporting such income.
Absent definitive guidance from the IRS or a court of competent
jurisdiction to the contrary (including the issuance of applicable Treasury
Regulations, the receipt by the Liquidating Agent of a private letter ruling if
the Liquidating Agent so requests one, or the receipt of an adverse
determination by the IRS upon audit if not contested by the Liquidating Agent),
the Liquidating Agent shall (i) if WorldCorp LLC is formed, treat the Disputed
Claims Reserve as a discrete trust for federal income tax purposes, consisting
of separate and independent shares to be established in respect of each Disputed
Claim, in accordance with the trust provisions of the Code (Sections 641 et
seq.) and (ii) if WorldCorp LLC is not formed, as a grantor trust for federal
income tax purposes, of which the Debtors are the grantors in accordance with
the grantor trust provisions of the Code (Section 671 et seq.). To the extent
permitted by applicable law, the Liquidating Agent shall report consistently
with the foregoing characterization for state and local income tax purposes.
Pursuant to the Plan, all holders of Claims are required to report consistently
with such treatment.
Accordingly, if WorldCorp LLC is formed, and subject to issuance of
definitive guidance, the Liquidating Agent will report as subject to a separate
entity level tax any amounts earned by the Disputed Claims Reserve and any
taxable income of WorldCorp LLC allocable to the Disputed Claims Reserve, except
to the extent such earnings or income are distributed by the Liquidating Agent
during the same taxable year. Any amount earned by the Disputed Claims Reserve,
and any taxable income of WorldCorp LLC allocated to the Disputed Claims
Reserve, that is distributed to a holder during the same taxable year will be
includable in such holder's gross income. If there are insufficient funds in the
Disputed Claims Reserve to pay the separate entity level tax, WorldCorp LLC will
advance to the Disputed Claims Reserve funds necessary to pay such tax, with
such advances deducted from future amounts otherwise receivable by the Disputed
Claims Reserve from WorldCorp LLC.
Distributions from the Disputed Claims Reserve will be made to holders
of Disputed Claims to the extent such Claims are subsequently Allowed and to
holders of previously Allowed Claims (whether such Claims were Allowed on or
after the Effective Date) to the extent any Disputed Claims are subsequently
Disallowed.
AS INDICATED ABOVE, THE FOREGOING IS INTENDED TO BE A SUMMARY ONLY AND
NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE TAX
CONSEQUENCES OF THE PLAN ARE COMPLEX AND, IN SOME CASES, UNCERTAIN. ACCORDINGLY,
EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT WITH HIS OWN TAX
ADVISOR REGARDING THE TAX CONSEQUENCES OF THIS PLAN.
X. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS
In order to confirm the Plan, the Bankruptcy Code requires that the
Bankruptcy Court 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 Debtors proposed the Plan in good faith, and (d) the
Debtors' 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 Debtors in connection with the Plan. The Debtors believe 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 Debtors will be able to perform their obligations
under the Plan and continue to operate their 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 Debtors 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 Debtors' 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 Debtors
believe that the Plan meets the classification requirements of the Bankruptcy
Code.
B. Voting
1. Impaired Classes
As a condition to confirmation, the Bankruptcy Code requires that each
Impaired Class of Claims or Interests accept the Plan. A class that is not
Impaired under a plan of reorganization is deemed to have accepted such plan
and, therefore, solicitation of acceptance with respect to such class is not
required. A class is Impaired unless the plan: (i) leaves unaltered the legal,
equitable and contractual rights to which the claim or interest entitles the
holder of such claim or interest; (ii) cures any default and reinstates the
original terms of the obligation; or (iii) provides that on the effective date,
the holder of the claim or interest receives cash equal to the allowed amount of
such claim or, with respect to any interest, any fixed liquidation preference to
which the interest holder is entitled or any fixed price at which the debtor may
redeem the security. 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. Holders of Claims who fail to vote are not counted as either
accepting or rejecting the plan. Holders of Claims and Interests included in
Class 3 (Senior Notes Claims), Class 4 (Debentures Claims), Class 5 (General
Unsecured Claims), and Class 6 (Interests) 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."
2. 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 in Class 1 (Other Priority Claims) and
Class 2 (Administrative Convenience Claims) 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.
3. Interests
Claims in Class 6 (Interests) 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.
Accordingly, the Debtors will not solicit votes from these holders.
C. Best Interests Test
Before the Plan may receive Confirmation, the Bankruptcy Court must
find (with certain exceptions) that the Plan provides, with respect to each
Class, that each Holder of a Claim or Interest in such Class either (i) has
accepted the Plan or (ii) will receive or retain under the Plan property of a
value, as of the Effective Date, that is not less than the value of the
distribution that such Entity would receive or retain if the Debtor were
liquidated under Chapter 7 of the Bankruptcy Code on the Effective Date. The
Debtors believe that the Plan meets the "best interests" test.
In Chapter 7 liquidation cases, unsecured creditors and interest
holders of a debtor are paid from available assets generally in the following
order, with no lower priority class receiving any payments until all amounts due
to senior priority classes have been paid fully or payment provided for:
1. Secured creditors (to the extent of the value of their collateral).
2. Priority creditors.
3. Unsecured creditors.
4. Debt expressly subordinated by its terms or by order of the bankruptcy
court.
5. Equity interest holders.
The Debtor believes that the value of any distributions in a Chapter 7
liquidation would be less than the value of Distributions under the Plan for the
following reasons. Such distributions in a Chapter 7 case may not occur for a
substantial period of time, thereby reducing the present value of such
distributions. In this regard, it is possible that distribution of the proceeds
of a liquidation in a Chapter 7 case could be delayed in order to resolve the
claims and prepare for distributions. In the event litigation were necessary to
resolve claims asserted in a Chapter 7 case, the delay could be further
prolonged and assets available for distribution could be substantially reduced.
Moreover, if the Debtor were liquidated under Chapter 7, a Chapter 7
trustee would mandatorily be appointed to take possession of the estate and
conduct the liquidation. It would be necessary for the trustee and its counsel
and other professionals to become familiar with the Debtors prior to the
commencement of such liquidations. Such a process could further delay
distributions to creditors. The trustee and its counsel and other professionals
would be entitled to fees and expenses for their services; such fees would be
deducted from Assets of the estates otherwise available for distribution. For
these reasons, the Debtors believe that the Plan significantly reduces the risk
of delay with respect to Distributions to Creditors.
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 Debtors
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 Chapter 11 Liquidation Value" and
"Estimated Chapter 7 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 Debtors,
are inherently subject to significant economic uncertainties and contingencies
beyond the control of the Debtors, and assumptions with respect to liquidation
decisions that are subject to change. Accordingly, there can be no assurance
that the values shown for Estimated Chapter 11 Liquidation Value will in fact be
realized if the Plan is confirmed and becomes effective, or that the values
shown for Estimated Chapter 7 Liquidation Value would be realized if the Debtors
were, in fact, to undergo such a Chapter 7 liquidation.
1. Chapter 7 Liquidation Scenario
The Chapter 7 liquidation scenario assumes that the Debtors' Chapter 11
case is converted to a liquidation under Chapter 7 and a trustee is appointed on
May 31, 2000 (the "Conversion Date"), and that the investment assets of the
Debtors are liquidated for cash during the period ending May 31, 2001 (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 Debtors have 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.
Administrative Expenses. In addition to Chapter 11 administrative
expenses, which are assumed to be incurred during the period before the case is
converted, the Chapter 7 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 7 professional fees) of $200,000.
2. Chapter 11 Liquidation Scenario
The Chapter 11 liquidation scenario assumes that the Plan is confirmed
and become effective on May 31, 2000. Distributions under the Plan, other than
with respect to Disputed Claims, are assumed to be made on the Effective Date.
Administrative Expenses. Amounts shown for Chapter 11 administrative
expenses include interim fees and expenses of Wilmer, Cutler & Pickering and
Arthur Andersen LLP authorized by the Bankruptcy Court for the period through
July 31, 1999. While these interim fees and expenses have already been paid,
they remain subject to final approval by the Bankruptcy Court. Accordingly,
these interim fees and expenses are shown as liabilities and the payments made
by the Debtors with respect to these fees and expenses are shown as assets in
the liquidation analysis. Allowed Chapter 11 fees and expenses of Wilmer, Cutler
& Pickering and Arthur Andersen LLP for the period after July 31, 1999, as well
as all other allowed Chapter 11 fees and expenses, will be paid from cash on
hand in the Debtors' accounts.
Unsecured Claims. The Plan contemplates that Administrative Convenience
Creditors, Senior Notes Claims and all Indenture Trustee fees and expenses will
be paid in full on the Effective Date from cash on hand.
[Insert liquidation analysis]
[Insert liquidation analysis]
<PAGE>
NOTES FOR WORLDCORP PLAN LIQUIDATION ANALYSIS
(a) Consists of $478,203 paid to Wilmer, Cutler & Pickering and $252,776
paid to Arthur Andersen LLP on an interim basis as compensation and
reimbursement of expenses for the period through July 31, 1999. See
Note (d) below.
(b) Consists of a $50,000 prepetition retainer held by Young Conaway
Stargatt & Taylor LLP.
(c) Represents fees and expenses of Wilmer, Cutler & Pickering for the
period through July 31, 1999. These fees and expenses have been paid by
the Debtors under authority of an order of the Bankruptcy Court
allowing interim compensation. Because interim compensation is subject
to review and adjustment at the end of the case, this liquidation
analysis shows the amount of the interim payment as an asset and the
amounts paid as liabilities.
(d) Fees and expenses of Young Conaway Stargatt & Taylor LLP will be paid
in part from a $50,000 prepetition retainer, which is shown as an asset
in this liquidation analysis.
(e) Represents fees and expenses of Arthur Andersen LLP for the period
through July 31, 1999. These fees and expenses have been paid by the
Debtors under authority of an order of the Bankruptcy Court allowing
interim compensation. Because interim compensation is subject to review
and adjustment at the end of the case, this liquidation analysis shows
the amount of the interim payment as an asset and the amounts paid as
liabilities.
(f) Represents the projected claim of RRF for reimbursement of fees and
expenses pursuant to Section 503(b) of the Bankruptcy Code.
(g) Represents monthly salaries and expense reimbursements for officers
through May 31, 2000.
(h) Chapter 11 liquidation scenario: Represents fees and costs payable to
Logan & Co. through Plan confirmation. Chapter 7 liquidation scenario:
Represents Chapter 11 notice costs plus $10,000 for Chapter 7 notices.
(i) Represents a cash bonus payable to Patrick F. Graham upon Plan
confirmation pursuant to a settlement approved by the Bankruptcy Court
on June 17, 1999.
(j) Represents amounts payable to T. Coleman Andrews, III pursuant to the
terms of the proposed settlement discussed under the heading HISTORY OF
THE CHAPTER 11 CASES -- THE ANDREWS LITIGATION AND PROPOSED SETTLEMENT.
(k) Represents fees payable to William F. Gorog for services as a director
of WorldCorp during the Chapter 11 period.
(l) Represents a Chapter 7 trustee's fee equal to 3% of Asset value plus
Chapter 7 administrative expenses of $200,000.
(m) Cash reserved on the Effective Date to fund the costs of post-Effective
Date liquidation activities, including administering reserves,
liquidating assets, making a final distribution to creditors, filing
tax returns, and winding up and dissolving the Debtors. The amount
shown is an estimate; the actual amount will be determined pursuant to
a budget to be attached to the Confirmation Order.
(n) Unsecured claims consist of prepetition trade payables, professional
fees and loans from WorldCorp's directors.
(o) Senior Notes Claim consists of the following amounts:
Principal $5,000,000
Interest (incl. int. on
prepetition int.) @ 10% 1,101,585
---------
Total: $6,101,585
(p) Debenture Claims consist of the following amounts:
Principal $65,000,000
Prepetition Interest on Principal @ 7% 5,649,583
Prepetition Interest on Interest @ 7% 156,595
-----------
Total: $70,806,178
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 Debtors believe that the
Liquidating Entity will be able to perform its duties without requiring further
financial reorganization.
F. Confirmation without Acceptance by All Impaired Classes
Section 1129(b) of the Bankruptcy Code allows a bankruptcy court to
confirm a plan, even if such plan has not been accepted by all impaired classes
entitled to vote on such plan, provided that such plan has been accepted by at
least one impaired class. The Plan provides that Class 6 (Interests) will
receive no distribution. Accordingly, they are deemed to reject the Plan.
It is also possible that another Class will reject the Plan.
Section 1129(b) of the Bankruptcy Code states that notwithstanding the
failure of an impaired class to accept a plan of reorganization, such plan shall
be confirmed, on request of the proponent of the plan, in a procedure commonly
known as a "cramdown," so long as the plan does not "discriminate unfairly," and
is "fair and equitable" with respect to each class of claims or interests that
is impaired under and has not accepted the plan.
The condition that a plan be "fair and equitable" with respect to a
non-accepting class of unsecured claims includes the requirement that either:
(i) such class receive or retain under the plan property of a value as of the
effective date of the plan equal to the allowed amount of such claim or (ii) if
the class does not receive such amount, no class junior to the non-accepting
class may receive a distribution under the plan.
The condition that a plan be "fair and equitable" with respect to a
non-accepting class of interests includes the requirements that either: (a) the
plan provides that each holder of an interest in such class receive or retain
under the plan, on account of such interest, property of a value, as of the
effective date of the plan, equal to the greatest of (i) the allowed amount of
any fixed liquidation preference to which such holder is entitled; (ii) any
fixed redemption price to which such holder is entitled; or (iii) the value of
such interest, or (b) if the class does not receive such amount, no class of
interests junior to the non-accepting class may receive a distribution under the
plan.
The Debtors believe that they will be able to obtain Confirmation in
accordance with Section 1129(b) of the Bankruptcy Code.
<PAGE>
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 14, 2000
WorldCorp, Inc., and WorldCorp
Acquisition Corp.
Debtors
By: ________________________________
Name: Mark M. Feldman
Title: President and CEO
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF PLAN.................................................................
I. Business Overview......................................................
II. Debt Obligations.......................................................
III. Treatment of Claims and Interests under the Plan.......................
IV. Implementation of the Plan.............................................
A. Overall Structure of the Plan.................................
B. Bankruptcy Procedures.........................................
V. Recovery Analysis......................................................
DISCLOSURE STATEMENT WITH RESPECT TO JOINT PLAN OF
REORGANIZATION OF WORLDCORP, INC. AND WORLDCORP
ACQUISITION CORP.......................................................
I. INTRODUCTION...........................................................
II. THE BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES.................
A. Definitions...................................................
B. Notice to Holders of Claims and Holders of Interests..........
C. Solicitation Package..........................................
D. Voting Procedures, Ballots and Voting Deadline................
E. Confirmation Hearing and Deadline for Objections to
Confirmation..................................................
III. BACKGROUND OF THE DEBTORS..............................................
A. General Corporate Structure...................................
B. Management of WorldCorp.......................................
C. Management of Acquisition.....................................
IV. HISTORY OF WORLDCORP AND ACQUISITION PRIOR TO
WORLDCORP'S CHAPTER 11 BANKRUPTCY FILING...............................
V. HISTORY OF THE CHAPTER 11 CASES........................................
VI. DESCRIPTION OF THE DEBTORS' REMAINING ASSETS AND
LIABILITIES............................................................
A. Cash..........................................................
B. Investment in World Airways...................................
C. Former Investment in InteliData...............................
D. The Debtors' Remaining Liabilities............................
E. Income Taxes..................................................
VII. THE LIQUIDATING PLAN OF REORGANIZATION.................................
A. Overall Structure of the Plan.................................
B. Substantive Consolidation.....................................
C. Classification of Claims and Interests........................
D. Treatment of Claims and Interests Under the Plan..............
E. Procedures for Implementation of the Plan.....................
VIII. CERTAIN FACTORS TO BE CONSIDERED.......................................
A. Disclaimer Concerning Financial Information...................
B. General Considerations........................................
C. Certain Bankruptcy Considerations.............................
D. Liquidation of Assets.........................................
E. Financial Risk Factor.........................................
F. Alternatives to the Plan......................................
IX. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN............................
A. Consequences to the Debtors...................................
B. Consequences to Holders of Allowed Claims.....................
C. Treatment of WorldCorp LLC and Interests in WorldCorp LLC.....
D. Treatment of Disputed Claims Reserve..........................
X. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS........................
A. Classification of Claims and Interests........................
B. Voting........................................................
C. Best Interests Test...........................................
D. Liquidation Analysis..........................................
E. Feasibility...................................................
F. Confirmation without Acceptance by All Impaired Classes.......
CONCLUSION......................................................................
THIS WARRANT AGREEMENT is entered into as of March ____ , 2000 by and between
The Boeing Corporation, a Delaware corporation ("Boeing" or the "Holder"), and
World Airways, Inc., a Delaware corporation (the "Company").
In furtherance of that certain Letter Agreement between Boeing and the Company
dated as of August 4, 1999 (the "Letter Agreement"), the Company agrees to grant
Boeing warrants (the "Warrants") to purchase 1,000,000 shares of the Company's
common stock, par value $.001 per share ("Common Stock"), on the terms and
conditions stated herein. Each Warrant shall entitle the Holder thereof to
purchase upon the exercise thereof one share of the Company's Common Stock;
provided, however that such number of shares may be adjusted from time to time
pursuant to Section 9 below (the shares of Common Stock issuable upon exercise
of the Warrants being referred to herein as "Warrant Shares").
NOW THEREFORE, in consideration of the premises and the mutual agreements herein
and for other good and valuable consideration, the parties hereto agree as
follows:
1. ISSUANCE AND EXERCISABILITY OF WARRANTS: FORM OF WARRANT CERTIFICATES. Boeing
is hereby granted 1,000,000 Warrants, which Warrants will be exercisable as of
the date hereof through the Expiration Date as hereinafter defined, at a
purchase price of $.01 for the warrant on each share totaling $10,000.00. The
Company will issue and deliver to Boeing a warrant certificate or warrant
certificates (individually a "Warrant Certificate" and collectively the "Warrant
Certificates") for the 1,000,000 warrants, promptly upon payment of the
$10,000.00 purchase price. The text of the Warrant Certificate shall be
substantially as set forth in Exhibit A hereto. The form of election to purchase
shares shall be substantially as set forth in Exhibit B hereto.
2. WARRANT REGISTER. The Warrant Certificates shall be numbered and shall be
registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant Certificate on the
Warrant Register (the "Holder") as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrant Certificates which are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with knowledge of such
facts that its participation therein amounts to bad faith. The Warrant
Certificates to be issued to Boeing hereunder shall be registered initially in
the name of "The Boeing Company".
3. EXCHANGE OF WARRANT CERTIFICATE. Subject to any restriction upon transfer set
forth in this Warrant Agreement, each Warrant Certificate may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. Any Holder desiring to
exchange a Warrant Certificate or Warrant Certificates shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
Warrant Certificate or Warrant Certificates to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
4. TRANSFER OF WARRANTS. Subject to compliance with state and federal securities
laws and the terms and conditions hereof, Boeing shall have the right to sell,
transfer, negotiate, assign or grant participation in all or any part of
Boeing's rights and obligations under this Warrant Agreement or under any
Warrant Certificate. The Warrant Certificates shall be transferable on the books
of the Company (the "Warrant Register") only upon delivery thereof duly endorsed
by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Company in its discretion. Upon any registration of transfer, the Company shall
deliver a new Warrant Certificate or Warrant Certificates to the person entitled
thereto. Notwithstanding the foregoing, the Company shall have no obligation to
cause Warrant Certificates to be transferred on its books to any person unless
the Holder of such Warrant Certificates shall furnish to the Company evidence of
compliance with the Securities Act of 1933, as amended (the "Act"), in
accordance with the provisions of Section 11 of this Warrant Agreement. The text
of each new Warrant Certificate issued under Sections 3 or 4 and of the form of
election to purchase shares shall be as set forth in Exhibits A and B hereto and
shall be exchanged and transferred and subject to adjustment in the same manner
as if such new Warrant Certificate were the original Warrant Certificate issued
to the Holder. Any Holder who transfers Warrants shall be responsible for and
pay all costs and expenses associated with such transfer of Warrants to its
transferee.
5. TERM AND COMPLIANCE WITH GOVERNMENT REGULATIONS.
5.1 TERM OF WARRANTS: EXERCISE OF WARRANTS.
(a) Each Warrant entitles the registered Holder thereof to purchase
one share of Common Stock at any time until 5:00 pm Washington, DC time, August
____, 2004 (the "Warrant Expiration Date"), at a purchase price of $2.50 per
share, as such number of shares and purchase price per share may be adjusted
from time to time pursuant to Section 9 of this Warrant Agreement (such purchase
price per share, as adjusted, being referred to herein as the "Warrant Price").
(b) Subject to the provisions of this Warrant Agreement, each
registered Holder of Warrant Certificates shall have the right, which may be
exercised as expressed in such Warrant Certificates, to purchase from the
Company (and the Company shall issue and sell to such registered Holder) the
number of fully paid and nonassessable shares of Common Stock specified in such
Warrant Certificates, upon surrender to the Company, or its duly authorized
agent, of such Warrant Certificates, with the form of election to purchase duly
filled in and signed, and upon payment to the Company of the Warrant Price for
the number of shares in respect of which such Warrants are then exercised.
Payment of such Warrant Price may be made in cash or by certified or cashier's
check. No adjustment shall be made for any dividends on any shares of stock
issuable upon exercise of a Warrant.
(c) Upon such surrender of Warrant Certificates, and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the registered
Holder of such Warrant Certificates and (subject to receipt of evidence of
compliance with the Act in accordance with the provisions of Section 11 of this
Warrant Agreement) in such name or names as such registered Holder may
designate, a certificate or certificates for the number of full shares of stock
so purchased upon the exercise of such Warrants.
(d) If permitted by applicable law, such share certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares as of the date of the surrender of such Warrant Certificates and payment
of the Warrant Price as aforesaid. The rights of purchase represented by the
Warrant Certificates shall be exercisable, at the election of registered Holders
thereof, either as an entirety or from time to time for part only of the shares
specified therein and, in the event that any Warrant is exercised in respect of
less than all of the shares specified therein at any time prior to the date of
expiration of the Warrants, a new Warrant Certificate or Warrant Certificates
will be issued for the remaining whole number of shares specified in the Warrant
so surrendered.
5.2 COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants that if
any shares of Common Stock required to be reserved for purposes of exercise of
Warrants require, under any Federal or state law or applicable governing rule or
regulations of any national securities exchange, registration with or approval
of any governmental authority, or listing on any such national securities
exchange before such shares may be issued upon exercise, the Company will as
expeditiously as possible endeavor to cause such shares to be duly registered,
approved or listed on the relevant national securities exchange, as the case may
be.
6. PAYMENT OF TAXES. The Company will pay all taxes (other than any income taxes
or other similar taxes), if any, attributable to the initial issuance of the
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any other issuance or delivery
of any Warrants or the issuance of certificates for Warrant Shares, or the
transfer thereof; and, provided further, that no such issuance, delivery or
transfer shall be made unless and until the person requesting such issuance or
transfer has paid to the Company the amount of any such tax, or has established,
to the reasonable satisfaction of the Company, that no such tax is payable or
such tax has been paid.
7. MUTILATED OR MISSING WARRANTS. In case any of the Warrant Certificates shall
be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and indemnity or bond, if requested, also reasonably satisfactory to
the Company. An applicant for such substitute Warrant Certificate shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
8. RESERVATION OF WARRANT SHARES. There has been reserved out of the authorized
and unissued shares of Common Stock, and the Company shall at all times keep
reserved out of its authorized and unissued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the transfer agent for the Common Stock
("Transfer Agent") and every subsequent Transfer Agent for any shares of the
Company's Common Stock issuable upon the exercise of any of the rights of
purchase aforesaid are hereby irrevocably authorized and directed at all times
until the Expiration Date to reserve such number of authorized and unissued
shares as shall be requisite for such purpose. Concurrently with any corporate
action that might result in an increase in the number of shares for which any
Warrant may be exercised pursuant to Section 9 below, the Company shall reserve
out of its authorized and unissued Common Stock the maximum number of additional
shares that would be needed to provide for exercise of all outstanding Warrants
after any such increase. The Company will keep a copy of this Warrant Agreement
on file with the Transfer Agent and with every subsequent Transfer Agent for any
shares of the Company's Common Stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Company will supply such Transfer
Agent with duly executed stock certificates for such purpose. The Company will
furnish to such Transfer Agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Holder pursuant to Section
9.13 hereof. All Warrant Certificates surrendered in the exercise of the rights
thereby evidenced shall be canceled.
9. ADJUSTMENTS. The number and kind of securities purchasable upon the exercise
of each Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the happening of certain events, as hereinafter described.
9.1 DEFINITIONS.
(a) "Common Equity Securities" means any class or series of Common
Stock of the Company;
(b) "Convertible Security" means any evidence of indebtedness of the
Company, any share of stock of the Company (other than Common Stock), or any
other security of the Company that is convertible into Common Stock;
(c) "Option" means, subject to Section 9.12 hereof, any right, option
or warrant to purchase either Common Stock or Convertible Securities;
(d) "Other Security" means (i) any security of the Company (other
than Common Stock), (ii) any other security of the Company or any successor
entity which the Holder of a Warrant shall be entitled to purchase at any time,
or shall have purchased, upon exercise thereof in lieu of or in addition to
Common Stock, or (iii) any other security of the Company which at any time shall
be issuable or shall be issued in exchange for, or as a distribution with
respect to, Common Stock or other securities of the Company; and
(e) "Additional Shares of Common Stock" means all shares of Common
Stock (or Other Securities) issued (or, pursuant to Section 9.3 below, deemed to
be issued) by the Company after the date hereof.
9.2 ADJUSTMENTS OF WARRANT PRICE AND NUMBER OF WARRANT SHARES IN GENERAL.
Upon the occurrence of any of the events described in this Section 9, subject to
Sections 9.11 and 9.12 hereof, the Warrant Price shall be adjusted in the manner
and as of the time set forth in this Section 9. Upon each adjustment of such
Warrant Price pursuant to this Section 9, the Holder of each Warrant shall
thereafter prior to the Expiration Date thereof be entitled to purchase, at the
Warrant Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Warrant Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of such
Warrant immediately prior to such adjustment and dividing the product thereof by
the Warrant Price resulting from such adjustment.
9.3 ISSUE OF ADDITIONAL SHARES OF COMMON STOCK: ACTUAL AND DEEMED.
(a) Whenever the Company issues Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
subsection 9.3(b) below) without consideration or for a consideration per share
less than the Closing Price on the date of such issuance, the Warrant Price
shall be reduced, concurrently with such issuance, to a price (calculated to the
nearest cent) determined by multiplying the Warrant Price by the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issuance
and (ii) the consideration, if any, received or receivable by the Company upon
such issue or sale divided by the Closing Price as determined at the time of
such issue or sale, and dividing the result by the number of shares of Common
Stock outstanding immediately after such issuance. For purposes of this
calculation, all shares of Common Stock issuable upon conversion of outstanding
Convertible Securities shall be deemed to be outstanding, and immediately after
any Additional Shares of Common Stock are deemed issued pursuant to subsection
9.3(b) below, such Additional Shares of Common Stock shall be deemed to be
outstanding.
(b) In the event that the Company, after the date hereof, issues any
Options or Convertible Securities, subject to Section 9.12 hereof, then the
maximum number of shares (as set forth in the instrument governing such Options
or Convertible Securities, without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefore, such number of shares of Common Stock into which such Convertible
Securities may be converted, shall be deemed to be Additional Shares of Common
Stock issued as of the time of issuance, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to subsection 9.5(a) below) of such Additional
Shares of Common Stock would be less than the Closing Price on the date of such
issuance. Throughout this Section 9, the terms "issue" and "issuance" and all
related forms thereof, when used in reference to issuance of Additional Shares
of Common Stock, include reference to deemed issuance under this subsection
9.3(b), except where the context requires otherwise.
9.4 READJUSTMENT In any case in which Additional Shares of Common Stock are
deemed or have been deemed issued in connection with the issuance of Options or
Convertible Securities, certain subsequent events shall require further
adjustment of the Warrant Price as set forth in this Section 9.4.
(a) No further adjustment in the Warrant Price shall be made as a
result of the subsequent issuance of any share of Common Stock upon the exercise
of any such Options or the conversion of any such Convertible Securities.
(b) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any decrease in the consideration
payable to the Company, or increase in the number of shares of Common Stock
issuable upon the exercise, conversion, or exchange thereof, the Warrant Price
computed upon the original issuance thereof, and any subsequent adjustments
based thereon, shall, upon any such decrease or increase becoming effective, be
recomputed to reflect such decrease or increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities. Notwithstanding any provision to the contrary in any instrument
governing such Options or Convertible Securities, however, there shall be no
such decrease or increase as a result of any recomputation of the Warrant Price
pursuant to this subsection 9.4(b).
(c) Upon the expiration of any Options or rights of conversion or
exchange under any Convertible Securities, if any thereof shall not have been
exercised, the Warrant Price shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) as if (A)
the only shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such Options or conversions or
exchange rights under such Convertible Securities and (B) such shares of Common
Stock, if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the aggregated consideration, if any,
actually received by the Company for the issuance, sale or grant of all of such
Options or conversion or exchange rights under such Convertible Securities
whether or not exercised, provided, further that no such readjustment shall have
the effect of increasing the Warrant Price by an amount in excess of the amount
of the adjustment initially made, in respect to the issuance, sale or grant of
such Options, or conversion or exchange rights under such Convertible
Securities.
9.5 DETERMINATION OF CONSIDERATION. For purposes of this Section 9, the
consideration received or deemed to be received by the Company for the issuance
or deemed issuance of any Additional Shares of Common Stock shall be determined
according to this Section 9.5, but shall not include interest accrued and unpaid
on Convertible Securities.
(a) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to subsection 9.3(b) relating to Options and Convertible
Securities shall be determined by dividing
(x) the total amount, if any, received by the Company as consideration for
the issuance of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon the exercise of such Options or the conversion of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion of such Convertible Securities.
(b) Stock Dividends and Stock Subdivisions. Any additional shares of Common
Stock issued or deemed to have been issued pursuant to any stock dividend or
stock subdivision shall be deemed to have been issued for no consideration.
9.6 STOCK DIVIDENDS AND STOCK SPLITS.
(a) In the event the Company at any time or from time to time on or
after the date hereof shall, subject to Section 9.12 hereof, pay any dividend on
securities payable in Common Stock, or effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares, Additional Shares of
Common Stock shall be deemed to have been issued for no consideration:
(i) in the case of any such dividend, immediately after the close of
business on the record date for determining the holders of any class
of securities entitled to received such dividend, or
(ii) in the case of any such subdivision, at the close of business on
the date immediately prior to the date upon which such corporate
action becomes effective.
In either case the number of Additional Shares of Common Stock deemed
to have been issued shall be the difference between the number of outstanding
shares of Common Stock immediately before such dividend or subdivision and the
number of shares of Common Stock outstanding immediately thereafter.
(b) In the event the Company at any time or from time to time after
the date hereof shall pay any dividend on securities payable in Convertible
Securities or other securities, an adjustment shall be made as if such dividend
were an issuance, for no consideration, of the total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of the Convertible
Securities or other securities distributed in such dividend.
9.7 ADJUSTMENTS FOR COMBINATIONS OR CONSOLIDATION OF COMMON STOCK. In the
event the outstanding shares of Common Stock shall be combined or consolidated
into a lesser number of shares of Common Stock, the Warrant Price in effect
immediately prior to such combination or consolidation, concurrently with the
effectiveness of such combination or consolidation, shall be proportionately
increased. But in no event to greater than the aggregate Warrant Price of all
Warrant shares in effect on the date hereof, and the number of Warrant Shares
purchaseable hereunder shall be proportionately reduced.
9.8 ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
consolidation, merger, or business combination of the Company with or into
another corporation or the conveyance of all or substantially all of the assets
of the Company to another corporation, each Warrant hereunder, without any
further act or the execution of any further instrument whatsoever, shall become
a warrant to purchase or receive, at the Warrant Price, such shares of stock or
other securities or property as a holder of the number of Warrant Shares
purchasable upon exercise of such Warrant immediately prior thereto would have
been entitled to upon such consolidation, merger, business combination, sale or
conveyance, and appropriate adjustment (as reasonably determined by the Board of
Directors of the Company or the surviving corporation, as the case may be) shall
be made in the application of the provisions herein set forth with respect to
the rights of the holder of such Warrant, to the end that such provisions
(including provisions with respect to changes in and other adjustments of the
Warrant Price) shall thereafter be applicable, as nearly as reasonably may be,
in relation to any shares of stock or other property thereafter deliverable upon
exercise of such Warrant. The Company shall not effect any such consolidation,
merger, business combination, sale or conveyance unless prior to the
consummation thereof the successor (if other than the Company) resulting there
from, or the transferee of the assets, as the case may be, shall have assumed by
written instrument the obligation to deliver to each holder of a Warrant such
shares of stock or other securities or property as, in accordance with the
foregoing provisions and the provision of each Warrant, such holder may be
entitled to purchase or receive.
9.9 ADJUSTMENTS FOR CERTAIN DISTRIBUTIONS. In the event the Company shall
distribute to all holders of its Common Stock shares of its capital stock (other
than shares of Common Stock), evidences of indebtedness of the Company or assets
of the Company (excluding cash dividends or distributions out of earned surplus)
or rights or warrants to subscribe for securities of the Company (excluding
those referred to in Section 9.12), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to the record date mentioned below by a fraction, of which the
numerator shall be the Closing Price per share on the record date for
determination of shareholders entitled to receive such distribution, less the
fair market value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or warrants which are
applicable to one share of Common Stock, and of which the denominator shall be
the Closing Price per share.
9.10 ADJUSTMENT OF WARRANT PRICE UPON ISSUANCE OF OTHER SECURITIES. In the
event Other Securities shall be issued or shall become subject to issuance upon
the conversion of any shares (or Other Securities) of the Company for a
consideration such as to diminish the aggregate fair market value of the Warrant
Shares purchasable upon exercise of any Warrant, adjustments of the Warrant
Price shall be made as nearly as possible in the manner provided in this Section
9 so as to maintain the aggregate fair market value of such Warrant Shares to
the extent reasonably possible.
9.11 MINIMUM ADJUSTMENT Notwithstanding anything in this Section 9 to the
contrary, the Company shall not be required to give effect to any adjustment in
the Warrant Price unless and until the cumulative effect of one or more
adjustments, determined as above provided, shall have required a change in the
Warrant Price by at least one cent ($.01), but when the cumulative effect of one
or more adjustments so determined shall be to change the Warrant Price by at
least one cent ($.01) such cumulative change in the Warrant Price shall
thereupon be given effect.
9.12 NO ADJUSTMENT. No adjustment in the Warrant Price shall be made:
(a) for a change in the par value of the Warrant Shares; or
(b) in the case of the Warrants issued pursuant hereto; or
(c) as a result of shares of Common Stock or Convertible Securities
being issued upon conversion or exchange of any Options, warrants, or
Convertible Securities of the Company outstanding on the date hereof; or
(d) solely on account of any warrants issued or deemed to be issued
in connection with an adjustment pursuant to the antidilution provisions of any
outstanding warrants of the Company on the date hereof; or
(e) in the case of shares of Common Stock or Convertible Securities
pursuant to any employee or director incentive or benefit plan or stock
ownership plan, agreement or arrangement, including any employment, severance or
consulting agreement of the Company or any subsidiary or affiliate of the
Company heretofore or hereafter adopted or approved, as the case may be, and any
modifications to, or amendments of, any such plans, agreements or arrangements.
For the purpose of any computation under this Section 9, the term "Closing
Price" shall mean the average of the daily sales price regular way for the
preceding ten (10) Trading Days before such day or, on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices of the Common Stock in
the over-the-counter market as reported by Nasdaq or any comparable system for
the preceding ten (10) Trading Days before such day or, in the absence of one or
more such quotations, the average of the closing bid and asked prices for the
preceding ten (10) Trading Days before such day as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for this
purpose. The term "Trading Day" shall mean a date on which the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading, Nasdaq (or any
successor to such exchange) is open for the transaction of business.
9.13 TREASURY SHARES. The number of shares of Common Stock outstanding at
any time shall not include shares owned or held by or for the account of the
Company or any of its subsidiaries, and the disposition (but not the
cancellation) of any such shares in tranches greater than 10,000 shall be
considered an issue or sale of the Common Stock for the purposes of Section 9.
9.14 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall promptly mail
by first class, postage prepaid, to each Holder notice of such adjustment or
adjustments and a certificate of a firm of independent certified public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company) setting forth the number of Warrant
Shares purchasable upon the exercise of each Warrant and the Warrant Price of
such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment, setting forth the computation by which such
adjustment was made, and confirming that such adjustments and calculations have
been made in accordance with the terms hereof.
9.15 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments in
the Warrant Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrant Certificates theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrant Certificates initially issuable pursuant to this Warrant
Agreement.
10. NO FRACTIONAL INTERESTS. No fractional Warrant Shares, or cash or other
property in lieu thereof, shall be issued upon the exercise of Warrants. The
Company shall make a payment in cash in respect of any fractional shares which
might otherwise be issuable upon exercise of these Warrants, calculated by
multiplying the fractional share amount by the Closing Bid price of the
Company's Common Stock on the date of exercise; provided that the exercise of
multiple Warrants shall be aggregated so that a cash payment in respect of
fractional shares pursuant to this Section 10 shall not be made as to a total
number greater than one for any single exercise.
11. REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND REGISTRATION RIGHTS.
Boeing represents and warrants to the Company that Boeing will not dispose of
any of its Warrants or Warrant Shares except pursuant to (i) an effective
registration statement under the Act, (ii) Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of securities), or (iii)
an opinion of counsel that an exemption from such registration is available.
12. CERTIFICATES TO BEAR LEGENDS. The Warrants shall be subject to a
stop-transfer order and the Warrant Certificates therefor shall bear the
following legend by which each Holder shall be bound:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
(OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The Warrant Shares (or Other Securities) issued upon exercise of the
Warrants shall be subject to a stop-transfer order and the Stock Certificate or
Stock Certificates evidencing any such Warrant Shares (or Other Securities)
shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The Company covenants that it shall issue a new Warrant Certificate or
Warrant Certificates without the legends referred to above, evidencing the
Warrants or the Warrant Shares or Other Securities issued upon exercise of the
Warrants, in exchange for a Warrant Certificate or Warrant Certificates
evidencing such Warrants, Warrant Shares or Other Securities, and will remove
the stop-transfer order, in the event the Holder of such Warrants, Warrant
Shares or Other Securities shall deliver to the Company an opinion of counsel
reasonably satisfactory to the Company that an exemption from registration under
the Act is available with respect to such Warrants, Warrant Shares or Other
Securities.
13. REGISTRATION RIGHTS. The Company and Boeing agree that their respective
rights and obligations with respect to registration of the Warrants and Warrant
Shares under the Act are as hereinafter set forth.
13.1 REGISTRATION OF WARRANTS AND WARRANT SHARES.
(a) Boeing or a majority of the Holders of the Warrants shall have
the right, at any time to make written request to the Company to register under
the Act any of its or their Common Stock issued under the Warrant. Promptly upon
receipt of such request, the Company shall file with the Securities and Exchange
Commission a registration statement on the applicable form for the registration
of such Common Stock and shall use its best efforts to cause such registration
statement to become effective as soon as practicable to permit or facilitate the
sale and distribution of such Common Stock. Immediately upon receipt of a
request for registration pursuant to this Section 13.1(a), the Company shall
notify each of the other Holders of such request. The Company is obligated to
effect only one such registration pursuant to this Section 13.1(a).
(b) If the Company at any time proposes to register any of its Common
Stock under the Act for its own account or for the account of any Holder or any
other person (other than (i) any registration of an offering solely to employees
of the Company or its subsidiaries or (ii) any registration relating to a merger
or other business combination transaction), it shall promptly give written
notice to the Holder of its intention to do so, and the Company shall include in
such registration, subject to Section 13.2 hereof, all Warrant Shares that the
Holder shall specify in a written notice delivered to the Company within 30 days
after its receipt of the Company's notice of the proposed filing of the
registration statement, provided that the Company shall not be required to
include in such registration any Warrant Shares that a Holder shall so specify
if in the unqualified opinion of counsel to the Company reasonably acceptable to
the Holder so specifying, registration under the Act is not required for the
transfer of such Warrant Shares in the manner requested by such Holder or that a
post-effective amendment to an existing registration statement would be legally
sufficient for such transfer and the Company shall have obtained such a
post-effective amendment.
13.2 EXCLUSION. If the proposed registration pursuant to Section 13.1(b) is
to be underwritten (whether on a "best efforts" or a "firm commitment" basis),
the managing underwriter shall have the right to exclude all or any part of the
Warrant Shares of the Holder if the underwriter advises the Company in writing
that it reasonably believes that the inclusion of the Warrant Shares would
impair the success of the proposed offering. Any exclusion of Warrant Shares
shall be made pro rata among the Holder and all other persons (other than the
Company) participating in the registration in proportion to the respective
number of Warrant Shares or other securities for which such Holder and each such
other person have requested registration.
13.3 FURTHER OBLIGATIONS AND CONDITIONS RELATING TO REGISTRATION OF SHARES.
Registration of Warrant Shares pursuant to Section 13.1 shall be subject to the
following:
(i) Information, Documents, Assignments, etc. The Holder shall
furnish to the Company such material information as the Company may
reasonably request concerning the Holder and its holdings of
securities of the Company and the proposed method of sale or other
disposition of the Warrant Shares and such other information as shall
be required in connection with any registration, qualification or
compliance referred to herein. The Company shall permit counsel for
the Holder to participate in meetings in connection with the
preparation of any registration statement prepared pursuant to
Section 13.1 (but the Holder shall be under no obligation to
participate in any such meetings and shall incur no liability for its
failure to so participate). Before filing any such registration
statement or amendment or supplement thereto, the Company shall
furnish to the Holder copies of all such documents proposed to be
filed. The Company shall promptly deliver to the Holder copies of
each such registration statement and each amendment or supplement
thereto as filed with the Securities and Exchange Commission ("SEC").
The Company shall furnish to the Holder the number of prospectuses,
offering circulars or other documents, and all amendments or
supplements thereto, incident to each registration, qualification or
compliance as from time to time the Holder may reasonably request.
(ii) Underwriting Agreement. The Company and the Holder shall enter
into an underwriting agreement in customary form with respect to the
registration of Warrant Shares pursuant to Section 13.1 hereof with
the underwriter or underwriters selected for such underwriting by the
Company, which underwriting agreement shall provide for the
completion of the offering within 90 days of the effective date of
the registration statement, provided, however, that such underwriting
agreement shall not require any Holder to indemnify the underwriter
for any losses, claims, damages, liabilities or actions except those
arising out of or based on an untrue statement or omission made in
reliance upon and in conformity with written information furnished to
the underwriter by such Holder for specific use in the registration
statement, prospectus, preliminary prospectus, amendment or
supplement.
(iii) Filing of Amendments. The Company shall file such amendments
and supplements to the registration statement and the related
prospectus and take such other action as may be necessary to keep the
registration statement effective and to comply with the Act for such
period, not exceeding 90 days from the original effective date of the
registration statement.
(iv) Blue Sky. The Company shall do any and all acts and things which
may be necessary or advisable to enable the Holder to consummate the
sale, transfer or other disposition of Warrant Shares and take such
action under the securities laws of such states as the Holder shall
reasonably request, provided, however, that the Company shall not be
required to file any general consent to service of process, to
qualify to do business as a foreign corporation, or to otherwise
subject itself to taxation in connection with any such action, in any
state.
(v) Expenses. The Company shall pay all of the costs of registration
and all related blue sky costs, including, but not limited to,
printing expenses, registration and filing fees, and fees and
disbursements of counsel and accountants for the Company (subject,
however, to subsection (vi) below), except that the Holder shall pay
the fees and selling commissions applicable to its Warrant Shares and
the Company (or others) shall pay the fees and selling commissions
applicable to all other shares of Common Stock being sold. Such
sharing shall be in the proportion that the number of Warrant Shares
being registered for the Holders bears to the total number of other
shares of Common Stock being so registered.
(vi) Audits. The Company shall not be required to furnish any audited
financial statements at the request of the Holder other than those
statements customarily prepared at the end of its fiscal year, unless
the Holder shall agree to reimburse the Company of the out-of-pocket
costs incurred by the Company in the preparation of such other
audited financial statements. The Company shall, however, furnish,
without charge, copies of all such unaudited financial statements as
the Holder shall reasonably request.
(vii) Indemnification. The Company shall indemnify and hold harmless
the Holder, each person who under the Act is deemed a controlling
person of the Holder, each underwriter for the Holder and the
officers, directors, agents and employees of the foregoing against
any losses, claims, damages, costs, actions or liabilities to which
the Holder, controlling person, underwriter or any officers,
directors, agents or employees of the foregoing may become subject
under the Act or otherwise, insofar as such losses, claims, damages,
costs, actions or liabilities (or actions in respect thereof) shall
arise out of or be based upon any untrue or allegedly untrue
statement of any material fact contained in the registration
statement, upon any related prospectus or preliminary prospectus or
any amendment or supplement to the registration statement or any
prospectus or preliminary prospectus or upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and shall reimburse any legal or other expenses reasonably incurred
by each such indemnified person in connection with investigating or
defending against any such loss, claim, damage, liability, cost or
action; provided, however, that the Company shall not be liable to a
Holder, controlling person or underwriter for any losses, claims,
damages, liabilities, costs or actions insofar as the same shall
arise out of or be based upon any such untrue statement or omission
made in reliance upon and in conformity with written information
furnished by that person seeking indemnification hereunder to the
Company specifically for use in the registration statement,
prospectus, preliminary prospectus, amendment or supplement. The
Holder and each underwriter for the Holder shall similarly indemnify
and hold harmless the Company, and its controlling persons and
underwriters and the officers, directors, agents and employees of the
foregoing against any such losses, claims, damages, liabilities,
costs or actions but only insofar as the same shall arise out of or
be based upon any untrue statement or omission made in reliance upon
and in conformity with written information furnished by such
indemnifying person to the Company for use in the registration
statement, prospectus, preliminary prospectus, amendment or
supplement.
13.4 CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in Section 13.3 above
is due in accordance with its terms but is not permitted by applicable law, the
Company, the underwriters and each Holder shall contribute to the aggregate
losses, claims, damages, costs and liabilities (or actions in respect thereof)
to which any Holder, the underwriter or the Company may be subject in such
proportion as is appropriate to reflect the relative fault committed in
connection with the statements or omissions which resulted in such losses,
claims, damages, costs or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company the underwriter or the Holder and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. In no event, however, shall the
indemnifying party be required to contribute to any losses, claims, damages,
costs or liabilities that arise solely out of or are based upon written
information furnished by such indemnitee for specific use in the registration
statement, prospectus, preliminary prospectus, amendment or supplement.
13.5 CHANGE IN SEC PROCEDURES OR FORMS. If the SEC adopts new procedures or
forms for public resales of restricted securities, the Company shall take such
action as may be demanded by the Holder in order to permit public resales of the
Warrants and/or Warrant Shares pursuant to such new procedures or forms so long
as the economic or other burden of compliance is not materially greater than the
burden contemplated by Sections 13.1 to 13.4 above.
13.6 TRANSFER OF REGISTRATION RIGHTS. It is expressly understood and agreed
that Boeing may transfer all or any portion of its registration rights hereunder
to any person or enter into any agreement providing for the joint exercise of
the registration rights granted hereunder, provided, that Boeing shall notify
the Company of any such transfer and any transferee of Holder, shall, if such
transferee Holder desires to exercise registration rights hereunder, agree to be
bound with respect to such registration rights by the terms of this Warrant
Agreement.
14. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS. Nothing contained in this
Warrant Agreement or in any of the Warrants shall be construed as conferring
upon the Holders or their transferees the right to vote or to receive dividends
or to consent to or receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. The Company shall
provide to the Holders all information it provides to shareholders, including,
without limitation, notices, proxy statements and financial statements. If,
however, at any time prior to the Expiration Date and prior to the exercise of
the Warrants, any of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities upon
its shares of Common Stock or make any distribution (other than a cash dividend
in the ordinary course) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common Stock
any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe to or purchase
any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger, sale or transfer or lease of all or
substantially all of its property, assets, and business as an entirety) shall be
proposed; then in any one or more of said events the Company shall (i) give
notice in writing of such event to the Holders as provided in Section 15 hereof
and (ii) if there are more than 100 Holders, cause notice of such event to be
published once in The Wall Street Journal (national edition), such giving of
notice and publication to be completed at least 20 days (or 10 days in any case
specified in paragraphs (a) and (b) above) prior to the date fixed as a record
date or the date of closing and transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights, or
for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be.
15. NOTICES. Any notice pursuant to this Warrant Agreement to be given or made
by the registered Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
If to the Company:
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
Attention: President and Chief Operating Officer
If to Boeing:
Notices or demands authorized by this Warrant Agreement to be given or made by
the Company to or on any registered Holder of any Warrant shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by first-class mail, postage prepaid, addressed to such Holder at the address of
such Holder as shown on the Warrant Register. Each party hereto may from time to
time change the address to which notices to it are delivered or mailed hereunder
by notice in writing to the other party.
16. SUPPLEMENTS AND AMENDMENTS. The Company and all of the Holders may from time
to time supplement or amend this Warrant Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Holders may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interests of the Holders.
17. SUCCESSORS. All the covenants and provisions of this Warrant Agreement by or
for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
18. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant Agreement shall
be construed to give to any person or corporation other than the Company and the
Holders, any legal or equitable right, remedy or claim under this Warrant
Agreement, but this Warrant Agreement shall be for the sole and exclusive
benefit of the Company and the Holders of the Warrants and Warrant Shares.
19. CAPTIONS. The captions of the Sections and subsections of this Warrant
Agreement have been inserted for convenience only and shall not affect the
construction hereof.
20. COUNTERPARTS. This Warrant Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
21. CONSTRUCTION. This Agreement incorporates the entire understanding of the
parties and supersedes all previous agreements and shall be governed by, and
construed in accordance with, the laws of the State of New York as applied to
contracts made and performed in such State, without giving effect to principles
of conflict of law. The Company hereby irrevocably submits the exclusive
jurisdiction of the Federal and New York State courts located in the City of New
York in connection with any suit, action or proceeding related to this Agreement
or any of the matters contemplated hereby, irrevocably waive any defense of lack
of personal jurisdiction and irrevocably agree that all claims in respect of any
such suit, action or proceeding may be heard and determined in any such court.
The Company irrevocably waives, to the fullest extent they may effectively do so
under applicable law, any objection which they may now or hereafter have to the
laying of venue of any such suit, action or proceeding brought in any such court
and any claim that any such suite, action or proceeding brought in any such
court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
duly executed on the date first set forth above.
WORLD AIRWAYS, INC.
By: ____________________________________
Title: ____________________________________
THE BOEING COMPANY
By: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT A
TO
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT REFERRED TO HEREIN.
NO. ____ ____________ WARRANTS
VOID AFTER 5:00 PM WASHINGTON, DC TIME
March ___, 2005
WORLD AIRWAYS, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received_________ the registered holder hereof or
registered assigns (the "Holder"), is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase at any time
after issuance until 5:00 PM, Washington, DC time on March ____, 2005, one fully
paid and nonassessable share of the common stock (the "Common Stock"), $.001 par
value per share, of World Airways, Inc. (the "Company"), as such number of
shares may be adjusted pursuant to the Warrant Agreement referred to below at
the purchase price of $2.50 per share (the "Warrant Price"), as such Warrant
Price may be adjusted pursuant to the Warrant Agreement.
This Warrant Certificate is subject to, and entitled to the benefits of all of
the terms, provisions and conditions of a warrant agreement dated as of March
___, 2000 (the "Warrant Agreement") by and between the Company and The Boeing
Company ("Boeing"), and which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Company and the Holders of
the Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company.
The Holder hereof may be treated by the Company and all other persons dealing
with this Warrant Certificate as the absolute owner hereof for any purpose and
as the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
The Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder shall be entitled to receive
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of whole Warrants not exercised.
No fractional shares of Common Stock shall be issued upon the exercise of any
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant.
No Holder shall be entitled to vote or receive dividends or be deemed the holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon such Holder, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, or to receive dividends or subscription rights or otherwise, until
the Warrant or Warrants evidenced by this Warrant Certificate shall have been
exercised and the shares of Common Stock purchasable upon the exercise thereof
shall have become deliverable as provided in the Warrant Agreement.
IN WITNESS WHEREOF, World Airways, Inc. has caused the manual or facsimile
signature of its President and Chief Operating Officer or Chairman of the Board
of Directors to be printed hereon, under its corporate seal, affixed or in
facsimile, attested by the manual or facsimile signature of the Secretary or an
Assistant Secretary of the Company.
DATE: __________________ WORLD AIRWAYS, INC.
By: ______________________________
[SEAL] Title: ______________________________
Attest:
By: ______________________________
Title: ______________________________
<PAGE>
EXHIBIT B
PURCHASE FORM
[To be executed upon exercise of Warrant]
To World Airways, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the Warrant Certificate(s) within for, and to purchase
thereunder, __________ shares of Common Stock as provided for therein.
Please issue a certificate or certificates for such shares of Common Stock
in the name of _________________________________ .
PLEASE INSERT SOCIAL SECURITY Name
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE ____________________________________
Address
------------------------------------
Signature
------------------------------------
NOTE: The above signature
should correspond exactly
with the name on the face
of this Warrant Certificate
or with the name of
assignee appearing in the
assignment form below.
AND, if said number of Shares shall not be all the Shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance of the whole number of Shares
purchasable thereunder.
Dated: _______________
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _____________________, a _____________________ corporation
("Assignor") hereby sells, assigns and transfers unto
____________________________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Date: _____________
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT REFERRED TO HEREIN.
NO. 1 1,000,000 WARRANTS
VOID AFTER 5:00 PM WASHINGTON, DC TIME
March ____, 2005
WORLD AIRWAYS, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received The Boeing Company, a Delaware
corporation ("Boeing"), the registered holder hereof or registered assigns (the
"Holder"), is the owner of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase at any time after issuance until 5:00 pm,
Washington, DC time on March ____, 2005, one fully paid and nonassessable share
of the common stock (the "Common Stock"), $.001 par value per share, of World
Airways, Inc. (the "Company"), as such number of shares may be adjusted pursuant
to the Warrant Agreement referred to below at the purchase price of $2.50 per
share (the "Warrant Price"), as such Warrant Price may be adjusted pursuant to
the Warrant Agreement referred to below.
This Warrant Certificate is subject to, and entitled to the benefits of, all of
the terms, provisions and conditions of a warrant agreement dated as of March
___, 2000 (the "Warrant Agreement") by and between the Company and Boeing, and
which Warrant Agreement is hereby incorporated herein by reference and made a
part hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Company and the Holders of the Warrant Certificates.
Copies of the Warrant Agreement are on file at the principal office of the
Company.
The Holder hereof way be treated by the Company and all other persons dealing
with this Warrant Certificate as the absolute owner hereof for any purpose and
as the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
The Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder shall be entitled to receive
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of whole Warrants not exercised.
No fractional shares of Common Stock shall be issued upon the exercise of any
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant.
No Holder shall be entitled to vote or receive dividends or be deemed the holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon such Holder, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, or to receive dividends or subscription rights or otherwise, until
the Warrant or Warrants evidenced by this Warrant Certificate shall have been
exercised and the shares of Common Stock purchasable upon the exercise thereof
shall have become deliverable as provided in the Warrant Agreement.
IN WITNESS WHEREOF, World Airways, Inc. has caused the manual or facsimile
signature of its President and Chief Operating Officer or Chairman of the Board
of Directors to be printed hereon, under its corporate seal, affixed or in
facsimile, attested by the manual or facsimile signature of the Secretary or an
Assistant Secretary of the Company.
DATE: March ____, 2000 WORLD AIRWAYS, INC.
By: ____________________________________
Title: ____________________________________
[SEAL]
Attest:
By: ____________________________________
Title: ____________________________________
THIS WARRANT AGREEMENT is entered into as of March ____ , 2000 by and between
The Boeing Corporation, a Delaware corporation ("Boeing" or the "Holder"), and
World Airways, Inc., a Delaware corporation (the "Company").
In furtherance of that certain Letter Agreement between Boeing and the Company
dated as of August 4, 1999 (the "Letter Agreement"), the Company agrees to grant
Boeing warrants (the "Warrants") to purchase 1,000,000 shares of the Company's
common stock, par value $.001 per share ("Common Stock"), on the terms and
conditions stated herein. Each Warrant shall entitle the Holder thereof to
purchase upon the exercise thereof one share of the Company's Common Stock;
provided, however that such number of shares may be adjusted from time to time
pursuant to Section 9 below (the shares of Common Stock issuable upon exercise
of the Warrants being referred to herein as "Warrant Shares").
NOW THEREFORE, in consideration of the premises and the mutual agreements herein
and for other good and valuable consideration, the parties hereto agree as
follows:
1. ISSUANCE AND EXERCISABILITY OF WARRANTS: FORM OF WARRANT CERTIFICATES. Boeing
is hereby granted 1,000,000 Warrants, which Warrants will be exercisable as of
the date hereof through the Expiration Date as hereinafter defined, at a
purchase price of $.01 for the warrant on each share totaling $10,000.00. The
Company will issue and deliver to Boeing a warrant certificate or warrant
certificates (individually a "Warrant Certificate" and collectively the "Warrant
Certificates") for the 1,000,000 warrants, promptly upon payment of the
$10,000.00 purchase price. The text of the Warrant Certificate shall be
substantially as set forth in Exhibit A hereto. The form of election to purchase
shares shall be substantially as set forth in Exhibit B hereto.
2. WARRANT REGISTER. The Warrant Certificates shall be numbered and shall be
registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Warrant Certificate on the
Warrant Register (the "Holder") as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrant Certificates which are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with knowledge of such
facts that its participation therein amounts to bad faith. The Warrant
Certificates to be issued to Boeing hereunder shall be registered initially in
the name of "The Boeing Company".
3. EXCHANGE OF WARRANT CERTIFICATE. Subject to any restriction upon transfer set
forth in this Warrant Agreement, each Warrant Certificate may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. Any Holder desiring to
exchange a Warrant Certificate or Warrant Certificates shall make such request
in writing delivered to the Company, and shall surrender, properly endorsed, the
Warrant Certificate or Warrant Certificates to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
4. TRANSFER OF WARRANTS. Subject to compliance with state and federal securities
laws and the terms and conditions hereof, Boeing shall have the right to sell,
transfer, negotiate, assign or grant participation in all or any part of
Boeing's rights and obligations under this Warrant Agreement or under any
Warrant Certificate. The Warrant Certificates shall be transferable on the books
of the Company (the "Warrant Register") only upon delivery thereof duly endorsed
by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Company in its discretion. Upon any registration of transfer, the Company shall
deliver a new Warrant Certificate or Warrant Certificates to the person entitled
thereto. Notwithstanding the foregoing, the Company shall have no obligation to
cause Warrant Certificates to be transferred on its books to any person unless
the Holder of such Warrant Certificates shall furnish to the Company evidence of
compliance with the Securities Act of 1933, as amended (the "Act"), in
accordance with the provisions of Section 11 of this Warrant Agreement. The text
of each new Warrant Certificate issued under Sections 3 or 4 and of the form of
election to purchase shares shall be as set forth in Exhibits A and B hereto and
shall be exchanged and transferred and subject to adjustment in the same manner
as if such new Warrant Certificate were the original Warrant Certificate issued
to the Holder. Any Holder who transfers Warrants shall be responsible for and
pay all costs and expenses associated with such transfer of Warrants to its
transferee.
5. TERM AND COMPLIANCE WITH GOVERNMENT REGULATIONS.
5.1 TERM OF WARRANTS: EXERCISE OF WARRANTS.
(a) Each Warrant entitles the registered Holder thereof to purchase
one share of Common Stock at any time until 5:00 pm Washington, DC time, August
____, 2004 (the "Warrant Expiration Date"), at a purchase price of $2.50 per
share, as such number of shares and purchase price per share may be adjusted
from time to time pursuant to Section 9 of this Warrant Agreement (such purchase
price per share, as adjusted, being referred to herein as the "Warrant Price").
(b) Subject to the provisions of this Warrant Agreement, each
registered Holder of Warrant Certificates shall have the right, which may be
exercised as expressed in such Warrant Certificates, to purchase from the
Company (and the Company shall issue and sell to such registered Holder) the
number of fully paid and nonassessable shares of Common Stock specified in such
Warrant Certificates, upon surrender to the Company, or its duly authorized
agent, of such Warrant Certificates, with the form of election to purchase duly
filled in and signed, and upon payment to the Company of the Warrant Price for
the number of shares in respect of which such Warrants are then exercised.
Payment of such Warrant Price may be made in cash or by certified or cashier's
check. No adjustment shall be made for any dividends on any shares of stock
issuable upon exercise of a Warrant.
(c) Upon such surrender of Warrant Certificates, and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the registered
Holder of such Warrant Certificates and (subject to receipt of evidence of
compliance with the Act in accordance with the provisions of Section 11 of this
Warrant Agreement) in such name or names as such registered Holder may
designate, a certificate or certificates for the number of full shares of stock
so purchased upon the exercise of such Warrants.
(d) If permitted by applicable law, such share certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares as of the date of the surrender of such Warrant Certificates and payment
of the Warrant Price as aforesaid. The rights of purchase represented by the
Warrant Certificates shall be exercisable, at the election of registered Holders
thereof, either as an entirety or from time to time for part only of the shares
specified therein and, in the event that any Warrant is exercised in respect of
less than all of the shares specified therein at any time prior to the date of
expiration of the Warrants, a new Warrant Certificate or Warrant Certificates
will be issued for the remaining whole number of shares specified in the Warrant
so surrendered.
5.2 COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants that if
any shares of Common Stock required to be reserved for purposes of exercise of
Warrants require, under any Federal or state law or applicable governing rule or
regulations of any national securities exchange, registration with or approval
of any governmental authority, or listing on any such national securities
exchange before such shares may be issued upon exercise, the Company will as
expeditiously as possible endeavor to cause such shares to be duly registered,
approved or listed on the relevant national securities exchange, as the case may
be.
6. PAYMENT OF TAXES. The Company will pay all taxes (other than any income taxes
or other similar taxes), if any, attributable to the initial issuance of the
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any other issuance or delivery
of any Warrants or the issuance of certificates for Warrant Shares, or the
transfer thereof; and, provided further, that no such issuance, delivery or
transfer shall be made unless and until the person requesting such issuance or
transfer has paid to the Company the amount of any such tax, or has established,
to the reasonable satisfaction of the Company, that no such tax is payable or
such tax has been paid.
7. MUTILATED OR MISSING WARRANTS. In case any of the Warrant Certificates shall
be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate and indemnity or bond, if requested, also reasonably satisfactory to
the Company. An applicant for such substitute Warrant Certificate shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
8. RESERVATION OF WARRANT SHARES. There has been reserved out of the authorized
and unissued shares of Common Stock, and the Company shall at all times keep
reserved out of its authorized and unissued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the transfer agent for the Common Stock
("Transfer Agent") and every subsequent Transfer Agent for any shares of the
Company's Common Stock issuable upon the exercise of any of the rights of
purchase aforesaid are hereby irrevocably authorized and directed at all times
until the Expiration Date to reserve such number of authorized and unissued
shares as shall be requisite for such purpose. Concurrently with any corporate
action that might result in an increase in the number of shares for which any
Warrant may be exercised pursuant to Section 9 below, the Company shall reserve
out of its authorized and unissued Common Stock the maximum number of additional
shares that would be needed to provide for exercise of all outstanding Warrants
after any such increase. The Company will keep a copy of this Warrant Agreement
on file with the Transfer Agent and with every subsequent Transfer Agent for any
shares of the Company's Common Stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Company will supply such Transfer
Agent with duly executed stock certificates for such purpose. The Company will
furnish to such Transfer Agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Holder pursuant to Section
9.13 hereof. All Warrant Certificates surrendered in the exercise of the rights
thereby evidenced shall be canceled.
9. ADJUSTMENTS. The number and kind of securities purchasable upon the exercise
of each Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the happening of certain events, as hereinafter described.
9.1 DEFINITIONS.
(a) "Common Equity Securities" means any class or series of Common
Stock of the Company;
(b) "Convertible Security" means any evidence of indebtedness of the
Company, any share of stock of the Company (other than Common Stock), or any
other security of the Company that is convertible into Common Stock;
(c) "Option" means, subject to Section 9.12 hereof, any right, option
or warrant to purchase either Common Stock or Convertible Securities;
(d) "Other Security" means (i) any security of the Company (other
than Common Stock), (ii) any other security of the Company or any successor
entity which the Holder of a Warrant shall be entitled to purchase at any time,
or shall have purchased, upon exercise thereof in lieu of or in addition to
Common Stock, or (iii) any other security of the Company which at any time shall
be issuable or shall be issued in exchange for, or as a distribution with
respect to, Common Stock or other securities of the Company; and
(e) "Additional Shares of Common Stock" means all shares of Common
Stock (or Other Securities) issued (or, pursuant to Section 9.3 below, deemed to
be issued) by the Company after the date hereof.
9.2 ADJUSTMENTS OF WARRANT PRICE AND NUMBER OF WARRANT SHARES IN GENERAL.
Upon the occurrence of any of the events described in this Section 9, subject to
Sections 9.11 and 9.12 hereof, the Warrant Price shall be adjusted in the manner
and as of the time set forth in this Section 9. Upon each adjustment of such
Warrant Price pursuant to this Section 9, the Holder of each Warrant shall
thereafter prior to the Expiration Date thereof be entitled to purchase, at the
Warrant Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Warrant Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of such
Warrant immediately prior to such adjustment and dividing the product thereof by
the Warrant Price resulting from such adjustment.
9.3 ISSUE OF ADDITIONAL SHARES OF COMMON STOCK: ACTUAL AND DEEMED.
(a) Whenever the Company issues Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
subsection 9.3(b) below) without consideration or for a consideration per share
less than the Closing Price on the date of such issuance, the Warrant Price
shall be reduced, concurrently with such issuance, to a price (calculated to the
nearest cent) determined by multiplying the Warrant Price by the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issuance
and (ii) the consideration, if any, received or receivable by the Company upon
such issue or sale divided by the Closing Price as determined at the time of
such issue or sale, and dividing the result by the number of shares of Common
Stock outstanding immediately after such issuance. For purposes of this
calculation, all shares of Common Stock issuable upon conversion of outstanding
Convertible Securities shall be deemed to be outstanding, and immediately after
any Additional Shares of Common Stock are deemed issued pursuant to subsection
9.3(b) below, such Additional Shares of Common Stock shall be deemed to be
outstanding.
(b) In the event that the Company, after the date hereof, issues any
Options or Convertible Securities, subject to Section 9.12 hereof, then the
maximum number of shares (as set forth in the instrument governing such Options
or Convertible Securities, without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefore, such number of shares of Common Stock into which such Convertible
Securities may be converted, shall be deemed to be Additional Shares of Common
Stock issued as of the time of issuance, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to subsection 9.5(a) below) of such Additional
Shares of Common Stock would be less than the Closing Price on the date of such
issuance. Throughout this Section 9, the terms "issue" and "issuance" and all
related forms thereof, when used in reference to issuance of Additional Shares
of Common Stock, include reference to deemed issuance under this subsection
9.3(b), except where the context requires otherwise.
9.4 READJUSTMENT In any case in which Additional Shares of Common Stock are
deemed or have been deemed issued in connection with the issuance of Options or
Convertible Securities, certain subsequent events shall require further
adjustment of the Warrant Price as set forth in this Section 9.4.
(a) No further adjustment in the Warrant Price shall be made as a
result of the subsequent issuance of any share of Common Stock upon the exercise
of any such Options or the conversion of any such Convertible Securities.
(b) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any decrease in the consideration
payable to the Company, or increase in the number of shares of Common Stock
issuable upon the exercise, conversion, or exchange thereof, the Warrant Price
computed upon the original issuance thereof, and any subsequent adjustments
based thereon, shall, upon any such decrease or increase becoming effective, be
recomputed to reflect such decrease or increase insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities. Notwithstanding any provision to the contrary in any instrument
governing such Options or Convertible Securities, however, there shall be no
such decrease or increase as a result of any recomputation of the Warrant Price
pursuant to this subsection 9.4(b).
(c) Upon the expiration of any Options or rights of conversion or
exchange under any Convertible Securities, if any thereof shall not have been
exercised, the Warrant Price shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) as if (A)
the only shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such Options or conversions or
exchange rights under such Convertible Securities and (B) such shares of Common
Stock, if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the aggregated consideration, if any,
actually received by the Company for the issuance, sale or grant of all of such
Options or conversion or exchange rights under such Convertible Securities
whether or not exercised, provided, further that no such readjustment shall have
the effect of increasing the Warrant Price by an amount in excess of the amount
of the adjustment initially made, in respect to the issuance, sale or grant of
such Options, or conversion or exchange rights under such Convertible
Securities.
9.5 DETERMINATION OF CONSIDERATION. For purposes of this Section 9, the
consideration received or deemed to be received by the Company for the issuance
or deemed issuance of any Additional Shares of Common Stock shall be determined
according to this Section 9.5, but shall not include interest accrued and unpaid
on Convertible Securities.
(a) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to subsection 9.3(b) relating to Options and Convertible
Securities shall be determined by dividing
(x) the total amount, if any, received by the Company as consideration for
the issuance of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon the exercise of such Options or the conversion of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion of such Convertible Securities.
(b) Stock Dividends and Stock Subdivisions. Any additional shares of Common
Stock issued or deemed to have been issued pursuant to any stock dividend or
stock subdivision shall be deemed to have been issued for no consideration.
9.6 STOCK DIVIDENDS AND STOCK SPLITS.
(a) In the event the Company at any time or from time to time on or
after the date hereof shall, subject to Section 9.12 hereof, pay any dividend on
securities payable in Common Stock, or effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares, Additional Shares of
Common Stock shall be deemed to have been issued for no consideration:
(i) in the case of any such dividend, immediately after the close of
business on the record date for determining the holders of any class
of securities entitled to received such dividend, or
(ii) in the case of any such subdivision, at the close of business on
the date immediately prior to the date upon which such corporate
action becomes effective.
In either case the number of Additional Shares of Common Stock deemed
to have been issued shall be the difference between the number of outstanding
shares of Common Stock immediately before such dividend or subdivision and the
number of shares of Common Stock outstanding immediately thereafter.
(b) In the event the Company at any time or from time to time after
the date hereof shall pay any dividend on securities payable in Convertible
Securities or other securities, an adjustment shall be made as if such dividend
were an issuance, for no consideration, of the total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of the Convertible
Securities or other securities distributed in such dividend.
9.7 ADJUSTMENTS FOR COMBINATIONS OR CONSOLIDATION OF COMMON STOCK. In the
event the outstanding shares of Common Stock shall be combined or consolidated
into a lesser number of shares of Common Stock, the Warrant Price in effect
immediately prior to such combination or consolidation, concurrently with the
effectiveness of such combination or consolidation, shall be proportionately
increased. But in no event to greater than the aggregate Warrant Price of all
Warrant shares in effect on the date hereof, and the number of Warrant Shares
purchaseable hereunder shall be proportionately reduced.
9.8 ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
consolidation, merger, or business combination of the Company with or into
another corporation or the conveyance of all or substantially all of the assets
of the Company to another corporation, each Warrant hereunder, without any
further act or the execution of any further instrument whatsoever, shall become
a warrant to purchase or receive, at the Warrant Price, such shares of stock or
other securities or property as a holder of the number of Warrant Shares
purchasable upon exercise of such Warrant immediately prior thereto would have
been entitled to upon such consolidation, merger, business combination, sale or
conveyance, and appropriate adjustment (as reasonably determined by the Board of
Directors of the Company or the surviving corporation, as the case may be) shall
be made in the application of the provisions herein set forth with respect to
the rights of the holder of such Warrant, to the end that such provisions
(including provisions with respect to changes in and other adjustments of the
Warrant Price) shall thereafter be applicable, as nearly as reasonably may be,
in relation to any shares of stock or other property thereafter deliverable upon
exercise of such Warrant. The Company shall not effect any such consolidation,
merger, business combination, sale or conveyance unless prior to the
consummation thereof the successor (if other than the Company) resulting there
from, or the transferee of the assets, as the case may be, shall have assumed by
written instrument the obligation to deliver to each holder of a Warrant such
shares of stock or other securities or property as, in accordance with the
foregoing provisions and the provision of each Warrant, such holder may be
entitled to purchase or receive.
9.9 ADJUSTMENTS FOR CERTAIN DISTRIBUTIONS. In the event the Company shall
distribute to all holders of its Common Stock shares of its capital stock (other
than shares of Common Stock), evidences of indebtedness of the Company or assets
of the Company (excluding cash dividends or distributions out of earned surplus)
or rights or warrants to subscribe for securities of the Company (excluding
those referred to in Section 9.12), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to the record date mentioned below by a fraction, of which the
numerator shall be the Closing Price per share on the record date for
determination of shareholders entitled to receive such distribution, less the
fair market value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or warrants which are
applicable to one share of Common Stock, and of which the denominator shall be
the Closing Price per share.
9.10 ADJUSTMENT OF WARRANT PRICE UPON ISSUANCE OF OTHER SECURITIES. In the
event Other Securities shall be issued or shall become subject to issuance upon
the conversion of any shares (or Other Securities) of the Company for a
consideration such as to diminish the aggregate fair market value of the Warrant
Shares purchasable upon exercise of any Warrant, adjustments of the Warrant
Price shall be made as nearly as possible in the manner provided in this Section
9 so as to maintain the aggregate fair market value of such Warrant Shares to
the extent reasonably possible.
9.11 MINIMUM ADJUSTMENT Notwithstanding anything in this Section 9 to the
contrary, the Company shall not be required to give effect to any adjustment in
the Warrant Price unless and until the cumulative effect of one or more
adjustments, determined as above provided, shall have required a change in the
Warrant Price by at least one cent ($.01), but when the cumulative effect of one
or more adjustments so determined shall be to change the Warrant Price by at
least one cent ($.01) such cumulative change in the Warrant Price shall
thereupon be given effect.
9.12 NO ADJUSTMENT. No adjustment in the Warrant Price shall be made:
(a) for a change in the par value of the Warrant Shares; or
(b) in the case of the Warrants issued pursuant hereto; or
(c) as a result of shares of Common Stock or Convertible Securities
being issued upon conversion or exchange of any Options, warrants, or
Convertible Securities of the Company outstanding on the date hereof; or
(d) solely on account of any warrants issued or deemed to be issued
in connection with an adjustment pursuant to the antidilution provisions of any
outstanding warrants of the Company on the date hereof; or
(e) in the case of shares of Common Stock or Convertible Securities
pursuant to any employee or director incentive or benefit plan or stock
ownership plan, agreement or arrangement, including any employment, severance or
consulting agreement of the Company or any subsidiary or affiliate of the
Company heretofore or hereafter adopted or approved, as the case may be, and any
modifications to, or amendments of, any such plans, agreements or arrangements.
For the purpose of any computation under this Section 9, the term "Closing
Price" shall mean the average of the daily sales price regular way for the
preceding ten (10) Trading Days before such day or, on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices of the Common Stock in
the over-the-counter market as reported by Nasdaq or any comparable system for
the preceding ten (10) Trading Days before such day or, in the absence of one or
more such quotations, the average of the closing bid and asked prices for the
preceding ten (10) Trading Days before such day as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for this
purpose. The term "Trading Day" shall mean a date on which the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading, Nasdaq (or any
successor to such exchange) is open for the transaction of business.
9.13 TREASURY SHARES. The number of shares of Common Stock outstanding at
any time shall not include shares owned or held by or for the account of the
Company or any of its subsidiaries, and the disposition (but not the
cancellation) of any such shares in tranches greater than 10,000 shall be
considered an issue or sale of the Common Stock for the purposes of Section 9.
9.14 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall promptly mail
by first class, postage prepaid, to each Holder notice of such adjustment or
adjustments and a certificate of a firm of independent certified public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company) setting forth the number of Warrant
Shares purchasable upon the exercise of each Warrant and the Warrant Price of
such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment, setting forth the computation by which such
adjustment was made, and confirming that such adjustments and calculations have
been made in accordance with the terms hereof.
9.15 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments in
the Warrant Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrant Certificates theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrant Certificates initially issuable pursuant to this Warrant
Agreement.
10. NO FRACTIONAL INTERESTS. No fractional Warrant Shares, or cash or other
property in lieu thereof, shall be issued upon the exercise of Warrants. The
Company shall make a payment in cash in respect of any fractional shares which
might otherwise be issuable upon exercise of these Warrants, calculated by
multiplying the fractional share amount by the Closing Bid price of the
Company's Common Stock on the date of exercise; provided that the exercise of
multiple Warrants shall be aggregated so that a cash payment in respect of
fractional shares pursuant to this Section 10 shall not be made as to a total
number greater than one for any single exercise.
11. REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND REGISTRATION RIGHTS.
Boeing represents and warrants to the Company that Boeing will not dispose of
any of its Warrants or Warrant Shares except pursuant to (i) an effective
registration statement under the Act, (ii) Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of securities), or (iii)
an opinion of counsel that an exemption from such registration is available.
12. CERTIFICATES TO BEAR LEGENDS. The Warrants shall be subject to a
stop-transfer order and the Warrant Certificates therefor shall bear the
following legend by which each Holder shall be bound:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
(OR OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The Warrant Shares (or Other Securities) issued upon exercise of the
Warrants shall be subject to a stop-transfer order and the Stock Certificate or
Stock Certificates evidencing any such Warrant Shares (or Other Securities)
shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
The Company covenants that it shall issue a new Warrant Certificate or
Warrant Certificates without the legends referred to above, evidencing the
Warrants or the Warrant Shares or Other Securities issued upon exercise of the
Warrants, in exchange for a Warrant Certificate or Warrant Certificates
evidencing such Warrants, Warrant Shares or Other Securities, and will remove
the stop-transfer order, in the event the Holder of such Warrants, Warrant
Shares or Other Securities shall deliver to the Company an opinion of counsel
reasonably satisfactory to the Company that an exemption from registration under
the Act is available with respect to such Warrants, Warrant Shares or Other
Securities.
13. REGISTRATION RIGHTS. The Company and Boeing agree that their respective
rights and obligations with respect to registration of the Warrants and Warrant
Shares under the Act are as hereinafter set forth.
13.1 REGISTRATION OF WARRANTS AND WARRANT SHARES.
(a) Boeing or a majority of the Holders of the Warrants shall have
the right, at any time to make written request to the Company to register under
the Act any of its or their Common Stock issued under the Warrant. Promptly upon
receipt of such request, the Company shall file with the Securities and Exchange
Commission a registration statement on the applicable form for the registration
of such Common Stock and shall use its best efforts to cause such registration
statement to become effective as soon as practicable to permit or facilitate the
sale and distribution of such Common Stock. Immediately upon receipt of a
request for registration pursuant to this Section 13.1(a), the Company shall
notify each of the other Holders of such request. The Company is obligated to
effect only one such registration pursuant to this Section 13.1(a).
(b) If the Company at any time proposes to register any of its Common
Stock under the Act for its own account or for the account of any Holder or any
other person (other than (i) any registration of an offering solely to employees
of the Company or its subsidiaries or (ii) any registration relating to a merger
or other business combination transaction), it shall promptly give written
notice to the Holder of its intention to do so, and the Company shall include in
such registration, subject to Section 13.2 hereof, all Warrant Shares that the
Holder shall specify in a written notice delivered to the Company within 30 days
after its receipt of the Company's notice of the proposed filing of the
registration statement, provided that the Company shall not be required to
include in such registration any Warrant Shares that a Holder shall so specify
if in the unqualified opinion of counsel to the Company reasonably acceptable to
the Holder so specifying, registration under the Act is not required for the
transfer of such Warrant Shares in the manner requested by such Holder or that a
post-effective amendment to an existing registration statement would be legally
sufficient for such transfer and the Company shall have obtained such a
post-effective amendment.
13.2 EXCLUSION. If the proposed registration pursuant to Section 13.1(b) is
to be underwritten (whether on a "best efforts" or a "firm commitment" basis),
the managing underwriter shall have the right to exclude all or any part of the
Warrant Shares of the Holder if the underwriter advises the Company in writing
that it reasonably believes that the inclusion of the Warrant Shares would
impair the success of the proposed offering. Any exclusion of Warrant Shares
shall be made pro rata among the Holder and all other persons (other than the
Company) participating in the registration in proportion to the respective
number of Warrant Shares or other securities for which such Holder and each such
other person have requested registration.
13.3 FURTHER OBLIGATIONS AND CONDITIONS RELATING TO REGISTRATION OF SHARES.
Registration of Warrant Shares pursuant to Section 13.1 shall be subject to the
following:
(i) Information, Documents, Assignments, etc. The Holder shall
furnish to the Company such material information as the Company may
reasonably request concerning the Holder and its holdings of
securities of the Company and the proposed method of sale or other
disposition of the Warrant Shares and such other information as shall
be required in connection with any registration, qualification or
compliance referred to herein. The Company shall permit counsel for
the Holder to participate in meetings in connection with the
preparation of any registration statement prepared pursuant to
Section 13.1 (but the Holder shall be under no obligation to
participate in any such meetings and shall incur no liability for its
failure to so participate). Before filing any such registration
statement or amendment or supplement thereto, the Company shall
furnish to the Holder copies of all such documents proposed to be
filed. The Company shall promptly deliver to the Holder copies of
each such registration statement and each amendment or supplement
thereto as filed with the Securities and Exchange Commission ("SEC").
The Company shall furnish to the Holder the number of prospectuses,
offering circulars or other documents, and all amendments or
supplements thereto, incident to each registration, qualification or
compliance as from time to time the Holder may reasonably request.
(ii) Underwriting Agreement. The Company and the Holder shall enter
into an underwriting agreement in customary form with respect to the
registration of Warrant Shares pursuant to Section 13.1 hereof with
the underwriter or underwriters selected for such underwriting by the
Company, which underwriting agreement shall provide for the
completion of the offering within 90 days of the effective date of
the registration statement, provided, however, that such underwriting
agreement shall not require any Holder to indemnify the underwriter
for any losses, claims, damages, liabilities or actions except those
arising out of or based on an untrue statement or omission made in
reliance upon and in conformity with written information furnished to
the underwriter by such Holder for specific use in the registration
statement, prospectus, preliminary prospectus, amendment or
supplement.
(iii) Filing of Amendments. The Company shall file such amendments
and supplements to the registration statement and the related
prospectus and take such other action as may be necessary to keep the
registration statement effective and to comply with the Act for such
period, not exceeding 90 days from the original effective date of the
registration statement.
(iv) Blue Sky. The Company shall do any and all acts and things which
may be necessary or advisable to enable the Holder to consummate the
sale, transfer or other disposition of Warrant Shares and take such
action under the securities laws of such states as the Holder shall
reasonably request, provided, however, that the Company shall not be
required to file any general consent to service of process, to
qualify to do business as a foreign corporation, or to otherwise
subject itself to taxation in connection with any such action, in any
state.
(v) Expenses. The Company shall pay all of the costs of registration
and all related blue sky costs, including, but not limited to,
printing expenses, registration and filing fees, and fees and
disbursements of counsel and accountants for the Company (subject,
however, to subsection (vi) below), except that the Holder shall pay
the fees and selling commissions applicable to its Warrant Shares and
the Company (or others) shall pay the fees and selling commissions
applicable to all other shares of Common Stock being sold. Such
sharing shall be in the proportion that the number of Warrant Shares
being registered for the Holders bears to the total number of other
shares of Common Stock being so registered.
(vi) Audits. The Company shall not be required to furnish any audited
financial statements at the request of the Holder other than those
statements customarily prepared at the end of its fiscal year, unless
the Holder shall agree to reimburse the Company of the out-of-pocket
costs incurred by the Company in the preparation of such other
audited financial statements. The Company shall, however, furnish,
without charge, copies of all such unaudited financial statements as
the Holder shall reasonably request.
(vii) Indemnification. The Company shall indemnify and hold harmless
the Holder, each person who under the Act is deemed a controlling
person of the Holder, each underwriter for the Holder and the
officers, directors, agents and employees of the foregoing against
any losses, claims, damages, costs, actions or liabilities to which
the Holder, controlling person, underwriter or any officers,
directors, agents or employees of the foregoing may become subject
under the Act or otherwise, insofar as such losses, claims, damages,
costs, actions or liabilities (or actions in respect thereof) shall
arise out of or be based upon any untrue or allegedly untrue
statement of any material fact contained in the registration
statement, upon any related prospectus or preliminary prospectus or
any amendment or supplement to the registration statement or any
prospectus or preliminary prospectus or upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and shall reimburse any legal or other expenses reasonably incurred
by each such indemnified person in connection with investigating or
defending against any such loss, claim, damage, liability, cost or
action; provided, however, that the Company shall not be liable to a
Holder, controlling person or underwriter for any losses, claims,
damages, liabilities, costs or actions insofar as the same shall
arise out of or be based upon any such untrue statement or omission
made in reliance upon and in conformity with written information
furnished by that person seeking indemnification hereunder to the
Company specifically for use in the registration statement,
prospectus, preliminary prospectus, amendment or supplement. The
Holder and each underwriter for the Holder shall similarly indemnify
and hold harmless the Company, and its controlling persons and
underwriters and the officers, directors, agents and employees of the
foregoing against any such losses, claims, damages, liabilities,
costs or actions but only insofar as the same shall arise out of or
be based upon any untrue statement or omission made in reliance upon
and in conformity with written information furnished by such
indemnifying person to the Company for use in the registration
statement, prospectus, preliminary prospectus, amendment or
supplement.
13.4 CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in Section 13.3 above
is due in accordance with its terms but is not permitted by applicable law, the
Company, the underwriters and each Holder shall contribute to the aggregate
losses, claims, damages, costs and liabilities (or actions in respect thereof)
to which any Holder, the underwriter or the Company may be subject in such
proportion as is appropriate to reflect the relative fault committed in
connection with the statements or omissions which resulted in such losses,
claims, damages, costs or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company the underwriter or the Holder and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. In no event, however, shall the
indemnifying party be required to contribute to any losses, claims, damages,
costs or liabilities that arise solely out of or are based upon written
information furnished by such indemnitee for specific use in the registration
statement, prospectus, preliminary prospectus, amendment or supplement.
13.5 CHANGE IN SEC PROCEDURES OR FORMS. If the SEC adopts new procedures or
forms for public resales of restricted securities, the Company shall take such
action as may be demanded by the Holder in order to permit public resales of the
Warrants and/or Warrant Shares pursuant to such new procedures or forms so long
as the economic or other burden of compliance is not materially greater than the
burden contemplated by Sections 13.1 to 13.4 above.
13.6 TRANSFER OF REGISTRATION RIGHTS. It is expressly understood and agreed
that Boeing may transfer all or any portion of its registration rights hereunder
to any person or enter into any agreement providing for the joint exercise of
the registration rights granted hereunder, provided, that Boeing shall notify
the Company of any such transfer and any transferee of Holder, shall, if such
transferee Holder desires to exercise registration rights hereunder, agree to be
bound with respect to such registration rights by the terms of this Warrant
Agreement.
14. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS. Nothing contained in this
Warrant Agreement or in any of the Warrants shall be construed as conferring
upon the Holders or their transferees the right to vote or to receive dividends
or to consent to or receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. The Company shall
provide to the Holders all information it provides to shareholders, including,
without limitation, notices, proxy statements and financial statements. If,
however, at any time prior to the Expiration Date and prior to the exercise of
the Warrants, any of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities upon
its shares of Common Stock or make any distribution (other than a cash dividend
in the ordinary course) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common Stock
any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe to or purchase
any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger, sale or transfer or lease of all or
substantially all of its property, assets, and business as an entirety) shall be
proposed; then in any one or more of said events the Company shall (i) give
notice in writing of such event to the Holders as provided in Section 15 hereof
and (ii) if there are more than 100 Holders, cause notice of such event to be
published once in The Wall Street Journal (national edition), such giving of
notice and publication to be completed at least 20 days (or 10 days in any case
specified in paragraphs (a) and (b) above) prior to the date fixed as a record
date or the date of closing and transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights, or
for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be.
15. NOTICES. Any notice pursuant to this Warrant Agreement to be given or made
by the registered Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
If to the Company:
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
Attention: President and Chief Operating Officer
If to Boeing:
Notices or demands authorized by this Warrant Agreement to be given or made by
the Company to or on any registered Holder of any Warrant shall be sufficiently
given or made (except as otherwise provided in this Warrant Agreement) if sent
by first-class mail, postage prepaid, addressed to such Holder at the address of
such Holder as shown on the Warrant Register. Each party hereto may from time to
time change the address to which notices to it are delivered or mailed hereunder
by notice in writing to the other party.
16. SUPPLEMENTS AND AMENDMENTS. The Company and all of the Holders may from time
to time supplement or amend this Warrant Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Holders may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interests of the Holders.
17. SUCCESSORS. All the covenants and provisions of this Warrant Agreement by or
for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
18. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant Agreement shall
be construed to give to any person or corporation other than the Company and the
Holders, any legal or equitable right, remedy or claim under this Warrant
Agreement, but this Warrant Agreement shall be for the sole and exclusive
benefit of the Company and the Holders of the Warrants and Warrant Shares.
19. CAPTIONS. The captions of the Sections and subsections of this Warrant
Agreement have been inserted for convenience only and shall not affect the
construction hereof.
20. COUNTERPARTS. This Warrant Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
21. CONSTRUCTION. This Agreement incorporates the entire understanding of the
parties and supersedes all previous agreements and shall be governed by, and
construed in accordance with, the laws of the State of New York as applied to
contracts made and performed in such State, without giving effect to principles
of conflict of law. The Company hereby irrevocably submits the exclusive
jurisdiction of the Federal and New York State courts located in the City of New
York in connection with any suit, action or proceeding related to this Agreement
or any of the matters contemplated hereby, irrevocably waive any defense of lack
of personal jurisdiction and irrevocably agree that all claims in respect of any
such suit, action or proceeding may be heard and determined in any such court.
The Company irrevocably waives, to the fullest extent they may effectively do so
under applicable law, any objection which they may now or hereafter have to the
laying of venue of any such suit, action or proceeding brought in any such court
and any claim that any such suite, action or proceeding brought in any such
court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
duly executed on the date first set forth above.
WORLD AIRWAYS, INC.
By: ____________________________________
Title: ____________________________________
THE BOEING COMPANY
By: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT A
TO
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT REFERRED TO HEREIN.
NO. ____ ____________ WARRANTS
VOID AFTER 5:00 PM WASHINGTON, DC TIME
March ___, 2005
WORLD AIRWAYS, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received_________ the registered holder hereof or
registered assigns (the "Holder"), is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase at any time
after issuance until 5:00 PM, Washington, DC time on March ____, 2005, one fully
paid and nonassessable share of the common stock (the "Common Stock"), $.001 par
value per share, of World Airways, Inc. (the "Company"), as such number of
shares may be adjusted pursuant to the Warrant Agreement referred to below at
the purchase price of $2.50 per share (the "Warrant Price"), as such Warrant
Price may be adjusted pursuant to the Warrant Agreement.
This Warrant Certificate is subject to, and entitled to the benefits of all of
the terms, provisions and conditions of a warrant agreement dated as of March
___, 2000 (the "Warrant Agreement") by and between the Company and The Boeing
Company ("Boeing"), and which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Company and the Holders of
the Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company.
The Holder hereof may be treated by the Company and all other persons dealing
with this Warrant Certificate as the absolute owner hereof for any purpose and
as the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
The Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder shall be entitled to receive
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of whole Warrants not exercised.
No fractional shares of Common Stock shall be issued upon the exercise of any
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant.
No Holder shall be entitled to vote or receive dividends or be deemed the holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon such Holder, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, or to receive dividends or subscription rights or otherwise, until
the Warrant or Warrants evidenced by this Warrant Certificate shall have been
exercised and the shares of Common Stock purchasable upon the exercise thereof
shall have become deliverable as provided in the Warrant Agreement.
IN WITNESS WHEREOF, World Airways, Inc. has caused the manual or facsimile
signature of its President and Chief Operating Officer or Chairman of the Board
of Directors to be printed hereon, under its corporate seal, affixed or in
facsimile, attested by the manual or facsimile signature of the Secretary or an
Assistant Secretary of the Company.
DATE: __________________ WORLD AIRWAYS, INC.
By: ______________________________
[SEAL] Title: ______________________________
Attest:
By: ______________________________
Title: ______________________________
<PAGE>
EXHIBIT B
PURCHASE FORM
[To be executed upon exercise of Warrant]
To World Airways, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the Warrant Certificate(s) within for, and to purchase
thereunder, __________ shares of Common Stock as provided for therein.
Please issue a certificate or certificates for such shares of Common Stock
in the name of _________________________________ .
PLEASE INSERT SOCIAL SECURITY Name
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE ____________________________________
Address
------------------------------------
Signature
------------------------------------
NOTE: The above signature
should correspond exactly
with the name on the face
of this Warrant Certificate
or with the name of
assignee appearing in the
assignment form below.
AND, if said number of Shares shall not be all the Shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance of the whole number of Shares
purchasable thereunder.
Dated: _______________
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _____________________, a _____________________ corporation
("Assignor") hereby sells, assigns and transfers unto
____________________________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Date: _____________
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT REFERRED TO HEREIN.
NO. 1 1,000,000 WARRANTS
VOID AFTER 5:00 PM WASHINGTON, DC TIME
March ____, 2005
WORLD AIRWAYS, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received The Boeing Company, a Delaware
corporation ("Boeing"), the registered holder hereof or registered assigns (the
"Holder"), is the owner of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase at any time after issuance until 5:00 pm,
Washington, DC time on March ____, 2005, one fully paid and nonassessable share
of the common stock (the "Common Stock"), $.001 par value per share, of World
Airways, Inc. (the "Company"), as such number of shares may be adjusted pursuant
to the Warrant Agreement referred to below at the purchase price of $2.50 per
share (the "Warrant Price"), as such Warrant Price may be adjusted pursuant to
the Warrant Agreement referred to below.
This Warrant Certificate is subject to, and entitled to the benefits of, all of
the terms, provisions and conditions of a warrant agreement dated as of March
___, 2000 (the "Warrant Agreement") by and between the Company and Boeing, and
which Warrant Agreement is hereby incorporated herein by reference and made a
part hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Company and the Holders of the Warrant Certificates.
Copies of the Warrant Agreement are on file at the principal office of the
Company.
The Holder hereof way be treated by the Company and all other persons dealing
with this Warrant Certificate as the absolute owner hereof for any purpose and
as the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
The Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor and date evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder shall be entitled to receive
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of whole Warrants not exercised.
No fractional shares of Common Stock shall be issued upon the exercise of any
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant.
No Holder shall be entitled to vote or receive dividends or be deemed the holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon such Holder, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, or to receive dividends or subscription rights or otherwise, until
the Warrant or Warrants evidenced by this Warrant Certificate shall have been
exercised and the shares of Common Stock purchasable upon the exercise thereof
shall have become deliverable as provided in the Warrant Agreement.
IN WITNESS WHEREOF, World Airways, Inc. has caused the manual or facsimile
signature of its President and Chief Operating Officer or Chairman of the Board
of Directors to be printed hereon, under its corporate seal, affixed or in
facsimile, attested by the manual or facsimile signature of the Secretary or an
Assistant Secretary of the Company.
DATE: March ____, 2000 WORLD AIRWAYS, INC.
By: ____________________________________
Title: ____________________________________
[SEAL]
Attest:
By: ____________________________________
Title: ____________________________________
EXHIBIT 5.1
[Letterhead of Cathy Sigalas]
April 18, 2000
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
Ladies and Gentlemen:
You have requested my opinion with respect to certain matters in
connection with the filing by World Airways, Inc. (the "Company") of a Form S-3
registration statement (the "Registration Statement"), including a related
prospectus (the "Prospectus"), covering the registration of an aggregate of
4,201,351 shares of the $.001 par value common stock (the "Common Stock") of the
Company which are held or may be acquired by certain security holders (the
"Selling Security Holders") pursuant to certain stock purchase and warrant
agreements between the Company and the Selling Security Holders.
In connection with this opinion, I have examined the Registration
Statement and related Prospectus, your Certificate of Incorporation and Bylaws,
as amended, and such other documents, records, certificates, memoranda, and
instruments as I deem necessary as a basis for this opinion.
In rendering this opinion, I have assumed with your permission the
genuineness and authenticity of all signatures on original documents; the
authenticity of all documents submitted to me as originals; the conformity to
originals of all documents submitted to me as copies; the accuracy, completeness
and authenticity of certificates of public officials; and the due authorization,
execution and delivery of all documents by all of the parties thereto where due
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. I have also assumed that all individuals executing and
delivering documents had the legal capacity to so execute and deliver.
My opinion is expressed only with respect to the General Corporation
Law of the State of Delaware.
On the basis of the foregoing, in reliance thereon, and with the
foregoing qualifications, I am of the opinion that the Shares have been duly
authorized, and that the Shares which have been issued are, and the Shares which
may be acquired pursuant to the exercise of issued and outstanding warrants,
when issued for the consideration set forth in the warrant agreements will be,
validly issued, fully paid, and nonassessable.
I consent to the reference to me under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
This opinion is intended solely for your benefit and is not to be made
available to or to be relied upon by any other person, firm, or entity without
my prior written consent.
Very truly yours,
/s/ CATHY SIGALAS
Cathy Sigalas
General Counsel
Member of the Bar of the
Commonwealth of Virginia
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report incorporated by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
McLean, Virginia
April 18, 2000
