<PAGE>
April 20, 1995
Dear Stockholder:
We cordially invite you to attend your Company's Annual Meeting of
Stockholders to be held on Wednesday, May 24, 1995. Enclosed are a proxy
statement and a form of proxy. Please note that the meeting will commence at
8:30 a.m. at the Renaissance Hotel, 13869 Park Center Road, Herndon, Virginia.
At this meeting we will ask the Stockholders to elect four Class I
Directors to serve until the 1997 Annual Meeting, one Class II Director to serve
until the 1996 Annual Meeting, and to ratify the selection of KPMG Peat Marwick
LLP as WorldCorp's independent public accountants for the year ending December
31, 1995.
We value your participation by voting your shares on matters that come
before the meeting. This year, we are pleased to be one of the first companies
to offer our shareholders the opportunity to record their proxies electronically
through Prox-E-Voice/tm/, an automated voice response system. Please follow the
instructions on the enclosed proxy to ensure representation of your shares at
the meeting.
Sincerely,
T. Coleman Andrews, III
Chief Executive Officer and President
<PAGE>
WORLDCORP, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 22071
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 24, 1995
To the Stockholder Addressed:
WorldCorp, Inc. will hold its Annual Meeting of Stockholders at 8:30 a.m.
at the Renaissance Hotel, 13869 Park Center Road, Herndon, Virginia, on May 24,
1995, for the following purposes:
1. To elect four Class I Directors and one Class II Director to
serve until the 1997 and 1996 Annual Meetings of Stockholders,
respectively, and until their successors have been duly elected
and qualified;
2. To ratify the selection of KPMG Peat Marwick LLP as independent
certified public accountants for the Company for the year ending
December 31, 1995;
3. To act upon such other matters as may properly come before the
meeting.
The record date for the determination of stockholders entitled to vote at
the meeting is March 27, 1995, and only stockholders of record at the close of
business on that date will be entitled to vote at this meeting and any
adjournment thereof.
Whether or not you plan to attend the stockholders' meeting, please follow
the instructions on the enclosed proxy to ensure representation of your shares
at the meeting. You may revoke your proxy at any time prior to the time it is
voted.
Herndon, Virginia By Order of the Board of Directors,
April 20, 1995
Andrew M. Paalborg
Vice President and General Counsel
<PAGE>
WORLDCORP, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 22071
PROXY STATEMENT
This proxy statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of WorldCorp, Inc.
("WorldCorp" or the "Company") for use at the Annual Meeting of Stockholders to
be held on Wednesday, May 24, 1995, and any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders
and described in detail herein. The meeting will be held at 8:30 a.m. at the
Renaissance Hotel, 13869 Park Center Road, Herndon, Virginia.
All properly executed proxies will be voted in accordance with the
instructions contained thereon, and if no choice is specified, the proxies will
be voted for the election of all Class I Directors and the Class II Director
named elsewhere in this proxy statement and in favor of the appointment of KPMG
Peat Marwick LLP as independent auditors. Any proxy may be revoked by the
stockholder at any time before it is exercised by giving written notice to that
effect to the Secretary of the Company or by signing a later-dated proxy.
Stockholders who attend the meeting may revoke any proxy previously granted and
vote in person.
This proxy statement and the accompanying proxy are being mailed to the
stockholders on or about April 20, 1995.
PURPOSE OF MEETING
At the meeting, the Board of Directors will ask stockholders to (1) elect
four Class I Directors to serve until the 1997 Annual Meeting of Stockholders
and to elect one Class II Director to serve until the 1996 Annual Meeting of
Stockholders, and until their successors are duly elected and qualified, and (2)
ratify the selection of KPMG Peat Marwick LLP as independent certified public
accountants for the Company for the year ending December 31, 1995. In addition,
the stockholders will act upon such other matters as may properly come before
the meeting.
VOTING
General
- -------
Only holders of record of the Company's Common Stock, par value $1.00 per
share ("Common Stock"), at the close of business on March 27, 1995, will be
entitled to vote at the meeting. On March 31, 1995, 15,811,243 shares of Common
Stock were outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote.
<PAGE>
Shares of Common Stock represented by proxies received through PROX-E-
VOICE/TM/ or in the accompanying form that are properly executed and returned to
the Company will be voted at the Annual Meeting of Stockholders in accordance
with the stockholders' instructions contained in such proxies. Where no such
instructions are given, proxy holders will vote such shares in accordance with
the recommendations of the Board of Directors. The proxy holders will also vote
such shares at their discretion with respect to such other matters as may
properly come before the meeting.
A quorum at the Annual Meeting will consist of the presence, in person or
by proxy, of at least a majority of the shares of Common Stock outstanding on
the record date and entitled to vote at the Annual Meeting. Each stockholder
may cast one vote per share owned by such stockholder for each of four nominees
for Class I Director and one nominee for Class II Director. The five nominees
receiving the greatest number of votes will be elected. In calculating the
vote, broker non-votes will be disregarded and will have no effect on the
outcome of the vote. The affirmative vote of a majority of shares voting at the
meeting is required to ratify the selection of KPMG Peat Marwick LLP. In
determining whether KPMG Peat Marwick LLP has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as a vote against KPMG Peat Marwick LLP. The Company does
not know of any matters to be acted upon at the meeting other than the two items
described in this Proxy Statement. Any stockholder has the power to revoke a
proxy at any time before it is voted.
THE COMPANY
WorldCorp owns a majority position in World Airways, an air transportation
company, and in US Order, an interactive information and transaction processing
company.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS
Principal Stockholders
- ----------------------
The following are the only persons known to the Company who are
beneficial owners of more than five percent of the Company's Common Stock as of
December 31, 1994 (except as otherwise noted). With respect to the information
set forth below, the Company has relied upon Schedule 13D or Schedule 13G
filings and information received from the persons listed.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Address of of Beneficial Percent
Owner Beneficial Owner Ownership/1/ of Class/1/
- --------------------------- ---------------- ------------------ ------------
<S> <C> <C> <C>
Morgan Stanley 1251 Avenue of 2,090,200/2/ 13.5%
Group, Inc. the Americas
New York, NY
10020
Ganz Capital 2875 N.E. 191st 1,427,186/3/ 9.2%
Management, Inc. Street
Penthouse I
North Miami
Beach, FL 33180
Dawson-Samberg Capital 354 Pequot 829,300/4/ 5.2%
Management, Inc. Avenue
Southport, CT
06490
McCullough, Andrews 101 California 818,083/5/ 5.0%
& Cappiello, Inc. Street
Suite 4250
San Francisco,
CA 94111
</TABLE>
- -------------------------
Footnotes
/1/ Beneficial ownership as reported in the table has been determined in
accordance with Securities and Exchange Commission ("SEC") regulations and
includes shares of the Company's Common Stock which may be acquired within
60 days of December 31, 1994, upon the exercise of outstanding stock
options and warrants and the conversion of the Company's 7% Convertible
Subordinated Debentures due May 15, 2004 (the "Debentures"). In accordance
with Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange
Act"), shares of Common Stock issuable upon the exercise of such options
and warrants and upon conversion of such Debentures are deemed outstanding
for purposes of computing the percentage of Common Stock of the Company
owned by the beneficial owner thereof listed in the table, but are not
deemed outstanding for purposes of computing the percentage of outstanding
Common Stock of the Company owned by any other stockholder. Except as
otherwise stated below, the named persons have sole voting and investment
power with regard to the shares shown as owned by such person. Calculation
of the Percent of Class is based on 15,429,114 shares of the Company's
Common Stock outstanding as of December 31, 1994.
3
<PAGE>
/2/ Based on the Schedule 13G of the Morgan Stanley Group, Inc. ("MS Group"),
dated January 30, 1995. Consists of indirect beneficial ownership of
2,090,200 shares of Common Stock held by its subsidiary, Morgan Stanley
Asset Management Limited ("MSAM") which holds the 2,090,200 shares of
Common Stock directly.
/3/ Based on Amendment No. 4 to the Schedule 13D of Ganz Capital Management,
Inc. ("GCM"), dated November 15, 1993. GCM is the beneficial owner of (i)
1,159,558 shares of Common Stock; and (ii) 2,960 Debentures convertible
into 267,628 shares of Common Stock. By virtue of his direction and
control over GCM, Charles B. Ganz, President of GCM, may be deemed to be
the beneficial owner of these securities.
/4/ Based on Amendment No. 2 to the Schedule 13D of Dawson-Samberg Capital
Management In. ("Dawson-Samberg") dated as of February 17, 1995. Consists
of (i) direct beneficial ownership of 256,400 shares of Common Stock and
(ii) indirect beneficial ownership of 572,900 shares of Common Stock owned
directly by affiliates of Dawson-Samberg.
/5/ Based on the Schedule 13G of McCullough, Andrews & Cappiello, Inc.
("McCullough"), dated February 14, 1995. McCullough is the beneficial
holder of 9,048 debentures convertible into 818,083 shares of the Company's
Common Stock. By virtue of their direction and control over McCullough,
Robert F. McCullough, David H. Andrews and Frank A. Cappiello, Jr.,
shareholders of McCullough, may each be deemed to be the beneficial owners
of these securities.
4
<PAGE>
Security Ownership of Directors and Executive Officers
- ------------------------------------------------------
The following table sets forth information concerning the beneficial
ownership of WorldCorp's Common Stock ("WC C.S.") and the common stock of US
Order ("USO C.S.") as of March 31, 1995, for (a) each director and nominee for
director; (b) each executive officer; and (c) directors and executive officers
as a group.
<TABLE>
<CAPTION>
Amount and Nature of Title of Percent of
Name of Beneficial Owner Beneficial Ownership/1/ Class Class/1/
- -------------------------- ----------------------- ---------- ----------
<S> <C> <C> <C>
William F. Gorog 765,256/2/ WC C.S. 4.8
455,857/3/ USO C.S. 8.1
T. Coleman Andrews, III 518,685/4/ WC C.S. 3.2
11,500/5/ USO C.S. *
James E. Colburn 408,901/6/ WC C.S. 2.6
Juan C. O'Callahan 386,401/7/ WC C.S. 2.4
Patrick F. Graham 32,292/8/ WC C.S. *
1,352/9/ USO C.S. *
John C. Backus 14,333/10/ WC C.S. *
227,005/11/ USO C.S. 4.2
Geoffrey S. Rehnert 12,500/12/ WC C.S. *
1,352/13/ USO C.S. *
Jack F. Kemp 0/14/ WC C.S. *
Charles W. Pollard 236,658/15/ WC C.S. 1.5
Andrew M. Paalborg 111,624/16/ WC C.S. *
Directors and Executive
Officers as a Group
WorldCorp (nine persons)
US Order (three persons) 1,763,848/17/ WC C.S. 10.4
673,139 USO C.S. 12.9
</TABLE>
* Individual is the beneficial owner of less than one percent (1%) of
WorldCorp's or US Order's outstanding Common Stock.
5
<PAGE>
- -------------------------
Footnotes
/1/ Beneficial ownership as reported in the table has been determined in
accordance with SEC regulations and includes shares of the Company's Common
Stock and US Order common stock which may be acquired within 60 days of
March 31, 1995, upon the exercise of outstanding stock options and
warrants. In accordance with Rule 13d-3 of the Exchange Act, shares of
Common Stock of either company issuable upon the exercise of such options
and warrants are deemed outstanding for purposes of computing the
percentage of Common Stock of each company owned by the beneficial owner
thereof listed in the table, but are not deemed outstanding for purposes of
computing the percentage of outstanding Common Stock of such company owned
by any other stockholder. Except as otherwise stated below, the named
persons have sole voting and dispositive power with regard to the shares
shown as owned by such person. The latest information available for the
WorldCorp Employee Savings and Stock Ownership Plan ("ESSOP") is as of the
end of the plan year, November 30, 1994. Calculation of the Percent of
Class is based on 15,811,243 shares of the Company's Common Stock
outstanding as of March 31, 1995; calculation of the Percent of Class of US
Order common stock is based on 5,198,039 shares of US Order Common Stock
outstanding as of March 31, 1995. For a discussion of considerations
relevant to calculating the beneficial ownership of the directors and
executive officers as a group, please see footnote 14.
/2/ Consists of (i) 175,000 shares of Common Stock issuable upon the exercise
of stock options granted under the 1988 Stock Option Plan, (ii) 228,855
shares of Common Stock held directly, and (iii) 361,401 shares of Common
Stock held by the ESSOP, as to which Mr. Gorog exercises shared voting and
investment power as one of the trustees of the ESSOP. Mr. Gorog disclaims
beneficial ownership of shares held by the ESSOP.
/3/ Consists of (i) 81,212 shares of US Order common stock owned directly and
(ii) 374,645 shares of US Order common stock issuable upon the exercise of
stock options granted under US Order's Stock Option Plan (the "US Order
Stock Option Plan").
/4/ Consists of (i) 500,000 shares of Common Stock issuable upon the exercise
of stock options granted under the 1988 Stock Option Plan, (ii) 4,139
shares of Common Stock owned directly, and (iii) 14,546 shares of Common
Stock allocated to Mr. Andrews' account under the ESSOP.
/5/ Consists of 11,500 shares of US Order common stock owned directly.
/6/ Consists of (i) 37,500 shares of Common Stock issuable upon the exercise
of stock options granted under the 1988 Stock Option Plan, (ii) 361,401
shares of Common Stock held by the ESSOP, as to which Mr. Colburn exercises
shared voting and investment power as one of the three trustees of the
ESSOP, and (iii) 10,000 shares of Common Stock held directly. Mr. Colburn
disclaims beneficial ownership of shares held by the ESSOP.
/7/ Consists of (i) 25,000 shares of Common Stock issuable upon the exercise
of stock options granted under the 1988 Stock Option Plan and (ii) 361,401
shares of Common Stock held by the ESSOP, as to which Mr. O'Callahan
exercises shared voting and investment power as one of the trustees of the
ESSOP. Mr. O'Callahan disclaims beneficial ownership of shares held by the
ESSOP. Mr. O'Callahan will retire as a director of the Company at the end
of his term in May 1995.
6
<PAGE>
/8/ Consists of 32,292 shares of Common Stock issuable upon the exercise of
stock options granted under the 1988 Stock Option Plan.
/9/ Consists of 1,352 shares of US Order Common Stock issuable upon the
exercise of stock options granted to each non-employee/non-affiliate
director.
/10/ Consists of 14,333 shares of Common Stock issuable upon the exercise of
stock options granted under the 1988 Stock Option Plan.
/11/ Consists of 227,005 shares of US Order common stock issuable upon the
exercise of stock options granted under the US Order Stock Option Plan.
/12/ Consists of 12,500 shares of Common Stock issuable upon the exercise of
stock options granted under the 1988 Stock Option Plan.
/13/ Consists of 1,352 shares of US Order Common Stock issuable upon the
exercise of stock options granted to each non-employee/non-affiliate
director.
/14/ After his election to the Board of Directors at the Annual Meeting on May
24, 1995, Mr. Kemp will be granted 25,000 stock options under the 1988
Stock Option Plan, which options shall vest in equal monthly installments
over a two year period.
/15/ Consists of (i) 90,000 shares of Common Stock issuable upon the exercise
of stock options granted under the 1988 Stock Option Plan, (ii) 130,000
shares of Common Stock issuable upon the exercise of warrants granted to
Mr. Pollard in 1989 expiring August 31, 1997, (iii) 15,658 shares of Common
Stock allocated to Mr. Pollard's account under the ESSOP, and (iv) 1,000
shares of Common Stock owned through an IRA account. Upon the execution of
Mr. Pollard's employment agreement, which is effective January 1, 1995, Mr.
Pollard has agreed to cancel 100,000 options to purchase WorldCorp common
stock at an exercise price of $9.64 in consideration for the grant to him
of 250,000 options to purchase the common stock of World Airways at an
exercise price of $11.00 per share. Please see "Contracts and Termination
of Employment and Change in Control Arrangements" below.
/16/ Consists of (i) 108,611 shares of Common Stock issuable upon the exercise
of stock options granted under the 1988 Stock Option Plan, and (ii) 3,013
shares of Common Stock allocated to Mr. Paalborg's account under the ESSOP.
/17/ The 361,401 shares of Common Stock held by the ESSOP are reflected in the
individual holdings of each of the ESSOP's three trustees: Messrs. Gorog,
Colburn and O'Callahan. These 361,401 shares of Common Stock held by the
ESSOP are only reflected once, however, in the aggregate beneficial
ownership of the directors and executive officers as a group.
Section 16(a) of the Exchange Act ("Section 16") requires the Company's
directors and officers, and persons who own more than 10% of its Common Stock,
to file with the SEC initial reports of ownership of the Company's equity
securities and to file subsequent reports when there are changes in such
ownership. Due to the complexity of the rules, the Company assists its officers
and directors in preparing and filing the required reports. During 1994 the
Company filed one untimely Form 3, Initial Statement of Beneficial Ownership of
Securities, as to Mr. Backus' appointment to the Board of Directors.
7
<PAGE>
BOARD OF DIRECTORS
The Board of Directors of the Company is responsible for establishing broad
corporate policies and for the overall performance of the Company. The Board
held a total of seven meetings during the year ended December 31, 1994; each
director attended each meeting. To manage the complex nature of the Company's
business effectively, the Board of Directors has delegated certain authority to
committees of the Board.
The Board has authorized its Executive Committee to exercise all of its
power and authority when the full Board is unable to meet, except for certain
fundamental responsibilities, such as the declaration of dividends, that are
reserved for the Board. The members of the Executive Committee are William F.
Gorog (Chairman), T. Coleman Andrews, III, and Patrick F. Graham. The Executive
Committee did not meet during 1994.
The Audit Committee recommends to the Board of Directors the auditing firm
to be selected each year as independent auditors of the Company's financial
statements and to perform services related to the completion of such audit. The
Audit Committee also has responsibility for (i) reviewing the scope and results
of the audit with the independent auditors, (ii) reviewing the Company's
financial condition and results of operations with management and the
independent auditors, (iii) considering the adequacy of the internal accounting
and control procedures of the Company, and (iv) reviewing any non-audit services
and special engagements to be performed by the independent auditors. The Audit
Committee also reviews, at least once each year, the terms of all material
transactions and arrangements between the Company and its affiliates. The
current members of the Audit Committee, none of whom is an employee of the
Company, are James E. Colburn (Chairman), and Patrick F. Graham. Juan C.
O'Callahan served as a member of the Audit Committee during 1994. The Audit
Committee met four times in 1994.
The Board has also assigned certain responsibilities relating to employee
compensation to the Compensation Committee. The principal duties of the
Compensation Committee are to review key employee compensation policies, plans,
and programs; to monitor performance and compensation of officers of the Company
and other key employees; to prepare recommendations and periodic reports to the
Board concerning such matters; and to administer the Company's management
incentive compensation plans, including its stock option plan. In 1994, the
members of the Compensation Committee, none of whom is an employee of the
Company, were James E. Colburn (Chairman), Patrick F. Graham, and Geoffrey S.
Rehnert. Messrs. Colburn and Rehnert are the current members of the Compensation
Committee. The Compensation Committee met four times in 1994.
Pursuant to the Amended and Restated WorldCorp, Inc., 1998 Stock Option
Plan (the "Plan"), each director of the Company who is not an executive of the
Company was granted options to purchase 25,000 shares of Common Stock of the
Company upon his election to the Board under the terms of the 1988 Stock Option
Plan. Accordingly, Mr. Kemp will be granted options to purchase up to 25,000
shares of Common Stock upon his election to the Board of Directors at the
Company's Annual Meeting on May 24, 1995. The Plan was further amended by the
Company's shareholders at a Special Meeting on August 19, 1994, to provide that
each non-employee Director upon election to subsequent two-year terms on the
Board would receive additional grants of options for 25,000 shares of Common
Stock upon each reelection. In 1995, the full Board of Directors determined to
amend the Plan to provide that non-employee Directors will only be granted
options under the Plan to purchase 25,000 shares of Common Stock of the Company
upon their initial election or appointment to the Board of Directors, and an
additional discretionary option grant may be made of up to 25,000 options. Under
the Plan, these options vest in equal monthly installments over a two year
period commencing on the date of a director's election or appointment to the
Board, and the exercise price for these options is set at the average closing
price on the New York Stock Exchange for the Company's Common Stock, par value
of $1.00 per share, for the thirty day period preceding the grant date of the
option. Additionally, each director who is not an executive of the Company
receives an annual fee of $25,000 for serving
8
<PAGE>
as a director of the Company. Directors are compensated at a daily rate of $750
for participating in committee meetings in excess of four meetings per year.
ITEM NO. 1 - ELECTION OF DIRECTORS
Class I Directors will be elected to serve until the 1997 Annual Meeting
and until their successors are duly elected and qualified. The Class II Director
(please see below for explanation) will be elected to serve until the 1996
Annual Meeting and until his successor is duly elected and qualified. Unless
directed to do otherwise, the proxy holders intend to vote all shares for which
they hold proxies for the nominees set forth below. Although it is not
contemplated that any nominee will decline or be unable to serve, if either
occurs prior to the Annual Meeting, the Board will select a substitute nominee.
On August 1, 1994, Mr. John C. Backus was appointed to fill a Class II
Director vacancy. Pursuant to the requirements of the Company's By-laws, Mr.
Backus is required to stand for election at the next annual meeting following
his appointment. Mr. Jack F. Kemp is a nominee for election as a Class I
Director with a term of office expiring at the 1997 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE WITH AUTHORITY FOR THE PROXY HOLDERS TO
VOTE FOR THE NOMINEES NAMED BELOW OR THEIR SUBSTITUTES AS SET FORTH HEREIN.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
Terms of Office Expiring at the 1997 Annual Meeting
Name and Age Past Five Years' Principal Occupation(s) and Other
- ------------ --------------------------------------------------
Directorships
-------------
T. Coleman
Andrews, III, 40 Mr. Andrews was elected Chief Executive Officer and a
director of World Airways in August 1986 and Chief Executive
Officer, President, and a director of WorldCorp in June
1987. He has served as a director and as chairman of the
executive committee of US Order since 1990. From 1978
through 1986, he was affiliated with Bain & Company, an
international strategy consulting firm. At Bain, he was
elected partner in 1982 and was a founding general partner
in 1984 of the Bain Capital Fund, a private venture capital
partnership. Prior to his experience with Bain, Mr. Andrews
served in several appointed positions in the Ford
Administration, including serving with Mr. Gorog in the
White House. Mr. Andrews received his B.A. from Dartmouth
College and his M.B.A. from Stanford University.
9
<PAGE>
William F.
Gorog, 69 Mr. Gorog is the founder of US Order and has served as its
chairman and chief executive officer since May 1, 1990. He
was elected a director of WorldCorp in April 1989 and was
elected Chairman of the WorldCorp Board of Directors in May
1993. From October, 1987 until founding US Order, he served
as Chairman of the Board of Arbor International, an
investment management firm. From 1982 to 1987, he served as
president and chief executive officer of the Magazine
Publishers of America, an association representing the
principal consumer publications in the United States. During
the Ford Administration, Mr. Gorog served as deputy
assistant to the President for Economic Affairs and
Executive Director of the Council on International Economic
Policy. Prior to that time, he founded and served as Chief
Executive Officer of Data Corporation, which developed the
LEXIS and NEXIS systems for legal and media research which
Mr. Gorog subsequently sold to the Mead Corporation in 1969.
Mr. Gorog also assisted VeriFone, Inc., a leading provider
of point-of-sale transaction systems, during its development
stage. Mr. Gorog formed a company that served as VeriFone's
east coast distributor and he served on its Board of
Directors from 1981 through 1993. He currently serves as a
director of NationsBank (Maryland), a bank holding company.
Mr. Gorog is a graduate of the United States Military
Academy and received an M.S. from Ohio State University.
Patrick F.
Graham, 55 Mr. Graham was appointed a director of WorldCorp in October
1992 and elected as a Class I Director at the 1993 Annual
Meeting held on May 12, 1993. Mr. Graham is a director of
Bain & Company, Inc., a management consulting firm co-
founded by Mr. Graham in 1973. In addition to his primary
responsibilities with Bain clients, he has served as Bain's
vice chairman and chief financial officer. Prior to founding
Bain, Mr. Graham was a group vice president with the Boston
Consulting Group.
Jack F. Kemp, 59 Mr. Kemp is Co-Director of Empower America, a public policy
organization established to advance social and economic
policies which empower people, not government bureaucracies,
and expand entrepreneurial capitalism here and around the
world. In addition to his role as Co-Director of Empower
America, Mr. Kemp also serves as a Distinguished Fellow at
the Heritage Foundation, a Visiting Fellow at the Hoover
Institute, and on the Boards of Howard University, Habitat
for Humanity, and Opportunities Industrialization Centers.
These recent endeavors follow a lengthy and distinguished
list of achievements in public service as HUD Secretary and
as a Member of Congress, as well as a notable career as a
professional football quarterback.
NOMINEE FOR ELECTION AS CLASS II DIRECTOR
Term of Office Expiring at the 1996 Annual Meeting
John C. Backus, 36 Mr. Backus was appointed a Director of WorldCorp in August,
1994. Mr. Backus has worked with US Order since its
inception in 1990 and has served as President, Chief
Operating Officer and a director of US Order since 1994.
10
<PAGE>
Prior to working with US Order, Mr. Backus worked for six
years at WorldCorp and its subsidiaries holding a variety of
executive positions including vice president of corporate
development, vice president of finance, and vice president
of sales and marketing at a Worldcorp subsidiary. Prior to
joining WorldCorp, Mr. Backus worked at Bain & Company,
Inc., a worldwide strategy consulting firm with
approximately 1,200 employees, in its consulting and venture
capital groups where he focused on consumer products and
services. Mr. Backus serves on the Board of Directors of US
Order and Visa Interactive. He received both his B.S. and
M.B.A. from Stanford University.
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
Class II Directors - Terms of Office Expiring at the 1996 Annual Meeting
James E.
Colburn, 71 Mr. Colburn served as a director of World Airways from 1985
to 1987 and has served as a director of WorldCorp since
1987. Mr. Colburn served as President of Aviation
Consulting, Inc. from October 1982 to July 1986 and is
currently retained by Aviation Consulting, Inc. as a
consultant. From 1979 to 1982 he was Vice President--
Operations and Maintenance of Wien Air Alaska.
Geoffrey S.
Rehnert, 37 Mr. Rehnert was elected a director of both WorldCorp and US
Order in 1994. Mr. Rehnert is a Managing Director of Bain
Capital, Inc., a private equity investment firm that manages
four different funds with over $500 million in capitol. Bain
Capital invests in both venture capital and management
buyout situations. Mr. Rehnert joined Bain Capital at its
inception in 1984 and became a partner in 1986. Prior to
joining Bain Capital, Mr. Rehnert worked as a consultant
with Bain & Company. He currently serves as a director of
Holson Burnes Group, Inc. and of ICON Health and Fitness,
Inc. Mr. Rehnert received an A.B. from Duke University and a
J.D. from Stanford University.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION REPORT
In 1994, the Compensation Committee of the Company was composed of three
independent, non-employee directors, Messrs. Colburn, Graham and Rehnert.
Messrs. Colburn and Rehnert are the current members of the Compensation
Committee. The Committee administers the Company's executive incentive plans,
reviews its compensation plans, programs, and policies, monitors the performance
and compensation of executive officers and other key employees, and makes
appropriate recommendations and reports to the Board concerning matters of
executive compensation.
Compensation Philosophy
- -----------------------
The Compensation Committee maintains compensation programs designed to
attract, motivate, develop, and retain highly capable executive leaders. The
fundamental philosophy of the Company's executive compensation program is to
relate the executive's total compensation closely to superior individual,
departmental and corporate performance, and through this performance to
shareholder value. The Company's philosophy discourages automatic annual salary
increases and favors variable incentive compensation tied to measurable results.
The Compensation Committee's executive compensation program consists of
three main components: (1) base salary; (2) the 1995 Management Incentive
Compensation Plan (the "Incentive Plan"); and (3) incentive stock options, all
of which are structured to encourage the achievement of superior results over
time and to link executive officer and shareholder interests. In addition, the
Company occasionally awards bonuses for extraordinary individual performance.
The decision to award bonuses for extraordinary individual performance is made
by the Compensation Committee upon the recommendation of the Company's Chief
Executive Officer.
The Compensation Committee determines the compensation for the Named
Executive Officers of WorldCorp. Compensation of other officers and management
of WorldCorp and its subsidiaries, World Airways and US Order, is based on the
Management Incentive Compensation Plan, which was separately adopted in 1995 by
the Board of Directors of each company for their respective organizations.
Components of Compensation
- --------------------------
(1) Base Salary
Base salaries for new management employees are determined initially by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for management
talent.
Through 1994, the Company had a merit-based system for determining base
salary increases for its executive officers. Annual base salary increases would
be awarded to executives based upon the performance ratings they received in
their annual performance review. The Management Incentive Plan discussed below
replaces entirely the system of annual merit increases for officers and managers
of the Company.
12
<PAGE>
Although the Incentive Plan replaces the system of annual merit increases,
the base salaries of executives may still be adjusted from time to time if the
Compensation Committee determines (after reference to comparable data) that an
executive's base salary is not competitive with the marketplace, or if there is
a substantial change in the duties and responsibilities of the executive.
The full Board of Directors is responsible for setting the base salary of
the Company's Chief Executive Officer taking into account the recommendations of
the Compensation Committee. Mr. Andrews recuses himself from these deliberations
and decisions. The Compensation Committee is responsible for setting the base
salaries of the other Named Executive Officers, based upon the recommendations
of the Chief Executive Officer.
(2) Management Incentive Plan
The Board intends in 1995 to implement at WorldCorp a Management Incentive
Plan for officers and managers of WorldCorp which is based upon the Management
Incentive Plan adopted by its US Order and World Airways subsidiaries. Employees
below the level of manager will continue to be covered by the existing merit pay
plan. There are minor differences in the formulas applied by each of the three
companies.
Target Awards
-------------
The Incentive Plan is a quantitative matrix consisting of three critical
components. First, it sets a target award (expressed as a percentage of base
salary) for each level of management. The target award is the level of incentive
compensation to be paid when individual performance requirements are
consistently met, departmental performance requirements are consistently met,
and Company results meet the Company's internal plan objectives.
Weighing
--------
Second, the Incentive Plan weighs individual results, departmental results
and company results differently for each level of management. Senior managers'
incentives are more heavily weighted towards department and Company performance;
other managers' incentives are more heavily weighted towards individual and
department performance. Under this approach, managers may receive awards for
strong individual or department performance even when Company results are below
plan. However, all managers nevertheless retain a significant stake in Company
results. The President of the Company is rated on individual performance
requirements and on Company results.
Adjustments
-----------
Third, the Incentive Plan adjusts the award up or down based on an
appraisal of individual results, department results and Company results. These
mechanics are expressed in a simple formula. Managers are encouraged to use the
formula to learn the range of potential incentive awards for different levels of
individual, department and Company performance.
The intent of the Incentive Plan is to provide greater compensation
"upside" to high performing managers than the 4-6% increase provided in the 1994
merit pay plan. For example, the target award for World Airways managers is 10%
and can be adjusted as high as 20%. In 1995, managers will not receive annual
salary adjustments under the merit pay plan (although the merit pay plan will
continue to cover non-management personnel). However, department heads will have
limited budget authority to adjust manager's salaries if two conditions are met:
first,
13
<PAGE>
the manager's base salary is below midpoint of the applicable salary range; and
second, adjustment is required to address a substantial salary inequity.
The Incentive Plan covers the calendar year 1995. Awards will be determined
twice during 1995. An award will be calculated in August 1995 for January
through June results. Forty percent (40%) of the annual award level will be used
for the August calculation. A second award will be calculated in March 1996
(after completion of the annual audit of the Company's financial results) for
full year 1995 results. Sixty percent (60%) of the annual award level will be
used for the March calculation.
(3) Incentive Stock Options
The Compensation Committee determines appropriate incentive stock option
awards for new employees by evaluating the responsibilities of the position held
and the experience of the individual, and by reference to the competitive
marketplace for management talent. The Compensation Committee bases decisions
concerning subsequent incentive stock option awards on recommendations made by
the Chief Executive Officer. The Compensation Committee determines whether to
accept or modify Mr. Andrews' proposals by evaluating the competitive
marketplace, the performance of the Company, the performance of the executive,
and any change in the responsibilities of the individuals. Individuals who
receive a promotion or who have maintained a high level of performance over a
long period often receive stock option awards. To promote mutual long-term
interests between the Company's officers and managers and the Company's
stockholders, each incentive option agreement provides for options which vest in
equal monthly installments over a three to five-year period. The Compensation
Committee approves all stock option awards.
In 1994, in connection with the signing of their employment agreements, (i)
grants of WorldCorp options were made to Mr. Andrews, CEO and President of the
Company, and Mr. Gorog, Chairman of the Board of Directors of the WorldCorp,
(ii) a grant of US Order options was made to Mr. Backus, President of US Order,
and (iii) grants of World Airways options will be made to Mr. Pollard, President
of World Airways.
Compensation of the Chief Executive Officer
- -------------------------------------------
As part of its ongoing review of the compensation of the Chief Executive
Officer, the Compensation Committee determined it was appropriate for the Chief
Executive Officer to be eligible to participate in the Company's 1988 Stock
Option Plan (as amended and restated through 1993, the "1988 Plan"). When the
1988 Plan was originally adopted in 1988 by the stockholders and amended in 1992
by the stockholders, the Chief Executive Officer was not an eligible participant
because he had otherwise received equity incentive compensation in the form of
warrants from the Company; the warrants served as the functional equivalent of
stock options for the Chief Executive Officer. The Compensation Committee was
aware that the vast majority of the warrants held by the Chief Executive Officer
directly or beneficially would expire worthless on May 24, 1994, and that he
would no longer hold any warrants or stock options of the Company.
The Compensation Committee believes that one important element of the
compensation of the Chief Executive Officer is incentive compensation. Upon the
expiration of the warrants, the Chief Executive Officer did not have, as part of
his compensation package, an incentive compensation component. The Compensation
Committee considered various alternative forms of incentive compensation for the
Chief Executive Officer, including warrants and stock appreciation rights. The
Compensation Committee considered the securities, tax, financial accounting and
other relevant issues presented by the different alternatives. To assist it, the
Compensation
14
<PAGE>
Committee retained the services of an independent compensation consultant. The
Compensation Committee reviewed compensation data for the Chief Executive
Officers of other public companies. Based on its review, the Compensation
Committee determined that it would be appropriate and in the stockholder's
interest for the 1988 Plan to be amended so that the Chief Executive Officer
could participate under that plan. Through this approach, the Compensation
Committee believed the Chief Executive Officer's interests and those of the
stockholders would be aligned.
Pursuant to the recommendation of the Compensation Committee, on August 19,
1994, at a Special Meeting the shareholders of the Company approved amendments
to the Company's 1988 Stock Option Plan which permitted the Company's Chief
Executive Officer to participate in the Stock Option Plan as part of a new
compensation arrangement, concluded on August 19, 1994. For further descriptions
of the employment agreements, the Stock Option Agreement, and related matters,
please see "Contracts and Termination of Employment and Change in Control
Arrangements" below.
The Compensation Committee
--------------------------
James E. Colburn (Chairman)
Patrick F. Graham
Geoffrey S. Rehnert
15
<PAGE>
STOCK PERFORMANCE GRAPH*
The following graph and chart compare the five year performance of the
Company's common stock to the Russell 2000 Index, the Dow Jones Airlines Index,
and the Dow Jones Air Freight/Couriers Index. Both the graph and the chart
assume that the value of the investment in the Company's common stock and each
index was $100 at December 31, 1989, and that all dividends were reinvested.
- ------------------------------
* The Dow Jones Airlines Index and Dow Jones Air Freight/Couriers Index
(collectively, the "Dow Jones Indices") have been used as industry peer group
indices because such peer group data is unavailable from the primary competitors
of the Company with respect to its air transportation services business (these
competitors, consisting of other chartered airline services, being foreign-owned
or privately-held). Although the Company has used the Dow Jones Indices as peer
group indices, differences between the companies which comprise these indices
and the Company reduce the comparability of stock price performance and other
performance indicators. The Dow Jones Airlines Index consists of the major,
scheduled, domestic airline carriers whereas World Airways is a smaller, non-
scheduled airline carrier. The Dow Jones Air Freight/Couriers Index consists of
large freight/courier companies such as Federal Express which have freight and
courier operations significantly larger than World Airways' cargo operations. In
addition, comparability is affected by the non-air transport-related components
of the Company's business. If, and to the extent that, air transportation
services become a smaller component of the Company's total operations in future
years, different industry peer group indices may be used by the Company at that
time.
16
<PAGE>
PERFORMANCE GRAPH INDEX
Dec. 1989 to Dec. 1994
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG
WORLDCORP INC., RUSSELL 2000, DOW JONES AIR FREIGHT/COURIERS
INDEX AND DOW JONES AIRLINES INDEX
<CAPTION>
DOW JONES AIR
FREIGHT/ DOW JONES
Measurement period WORLDCORP RUSSELL COURIERS AIRLINES
(Fiscal Year Covered) INC. 2000 INDEX INDEX
- --------------------- --------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Dec-89 $ 100 $ 100 $ 100 $ 100
Dec-90 $ 33 $ 80 $ 78 $ 72
Dec-91 $ 81 $ 118 $ 100 $ 96
Dec-92 $ 50 $ 139 $ 124 $ 94
Dec-93 $ 42 $ 166 $ 163 $ 114
Dec-94 $ 55 $ 163 $ 143 $ 80
</TABLE>
17
<PAGE>
WorldCorp is a New York Stock Exchange company that owns majority positions
in two subsidiaries: World Airways, Inc., and US Order, Inc. Each of the
following tables includes aggregate compensation information for each Named
Executive Officer received from WorldCorp and one or more of the subsidiaries.
The compensation of Messrs. Andrews and Paalborg is paid entirely by WorldCorp,
including options to purchase WorldCorp common stock. Mr. Gorog's annual
compensation is paid by US Order, Inc., but his long term equity compensation
consists of options to purchase common stock of WorldCorp and of US Order; Mr.
Gorog will be compensated by WorldCorp in 1995 for his service as Chairman of
the Board of Directors of WorldCorp. Mr. Pollard's annual compensation is paid
entirely by World Airways, Inc., but his long term equity compensation consists
of options and warrants to purchase WorldCorp common stock and, upon the
execution of his employment agreement, options to purchase World Airways common
stock. Mr. Backus' annual compensation is paid entirely by US Order, Inc., and
his long term equity compensation consists primarily of options to purchase
common stock of US Order, but Mr. Backus still holds options to purchase common
stock of WorldCorp originally granted in 1990.
SUMMARY COMPENSATION TABLE/1/
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- ------------
Awards
------------
Securities
Underlying All Other
Options/ Compen-
Name and Principal Year Salary/3/ Bonus SARs/4/ sation/5/
Position/2/ ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
T. Coleman Andrews, III 1994 350,000 --- 800,000/6/ 49,240/9/
President/CEO 1993 335,058/7/ --- --- 215,281 1/10/
WorldCorp 1992 357,280/7/ --- --- 4,403
William F. Gorog 1994 220,805 --- 250,000/8/ ---
Chairman/CEO 1993 187,646 --- --- ---
US Order 1992 110,365 --- --- ---
Charles W. Pollard 1994 176,539 --- ---/11/ 8,134
President 1993 172,316/7/ --- --- 14,960
World Airways 1992 165,891/7/ --- 100,000 8,958
John C. Backus 1994 190,192 4,000 850,000/12/ 875,000/13/
President 1993 --- --- --- ---
US Order 1992 --- --- --- ---
Andrew M. Paalborg 1994 160,000 25,000 --- 3,080
VP & General Counsel 1993 160,485 25,000 100,000 10,480
WorldCorp 1992 146,308 --- 100,000 3,997
</TABLE>
____________________
Footnotes
18
<PAGE>
/1/ Does not include thirty-seven cockpit crew members each of whose
compensation exceeded $100,000 in 1994.
/2/ The compensation of Messrs. Andrews and Paalborg is paid entirely by the
Company, including options to purchase common stock of the Company. Mr.
Gorog's annual compensation is paid by US Order, Inc., but his long term
equity compensation consists of options to purchase common stock of
WorldCorp and US Order. Mr. Gorog will be compensated by WorldCorp in 1995
for his service as Chairman of the Board of Directors of WorldCorp. Mr.
Pollard's annual compensation is paid entirely by World Airways, Inc., but
his long term equity compensation consists of options and warrants to
purchase common stock of WorldCorp and, upon the execution of his
employment agreement, options to purchase World Airways common stock. Mr.
Backus' annual compensation is paid entirely by US Order, Inc., and his
long term equity compensation consists primarily of options to purchase
common stock of US Order, but Mr. Backus still holds options to purchase
common stock of WorldCorp originally granted in 1990.
/3/ Includes compensation deferred under the Company's ESSOP, which is also
available to employees of World Airways, Inc., and compensation deferred
under US Order's 401(k) plan.
/4/ Includes options granted in 1994, 1993, and 1992 under (i) WorldCorp's
Amended and Restated 1988 Stock Option Plan, and (ii) the US Order Employee
Stock Option Plan (please see footnote 2, above). No warrants or SARs were
granted in 1994, 1993, or 1992.
/5/ Amount includes value of WorldCorp contributions to the WorldCorp ESSOP.
WorldCorp's contributions to the WorldCorp ESSOP are made in WorldCorp
Common Stock and are valued using closing prices for the year in which the
contributions were made. US Order's 401(k) Plan does not provide for
company contributions to employee accounts.
/6/ Mr. Andrews was granted options to purchase WorldCorp common stock pursuant
to the terms of his new WorldCorp employment agreement dated August 19,
1995. The terms and conditions of the employment agreement and the stock
option agreement are set forth below in detail; please see "Contracts and
Termination of Employment and Change in Control Arrangements."
/7/ Due to the prolonged global airline recession and its adverse effects on
WorldCorp's financial performance, Messrs. Andrews and Pollard elected to
reduce their salaries by 10% for the period beginning October 23, 1992, and
ending June 1, 1993.
/8/ Mr. Gorog was granted options to purchase WorldCorp common stock as partial
compensation for his services as Chairman of the Board of Directors of
WorldCorp. The terms and conditions of the employment agreement are set
forth below in detail; please see "Contracts and Termination of Employment
and Change in Control Arrangements."
/9/ Consists of (i) $9,240 of WorldCorp contributions to the WorldCorp ESSOP,
and (ii) $40,000 paid in connection with the modification of Mr. Andrews'
Supplemental Incentive Compensation Agreement. Please see "Contracts and
Termination of Employment and Change in Control Arrangements" below.
/10/ Consists of (i) $14,451 of WorldCorp contributions to the WorldCorp ESSOP,
and (ii) $200,830 paid in connection with the modification of Mr. Andrews'
Supplemental Incentive Compensation Agreement. Please see, "Contracts and
Termination of Employment and Change in Control Arrangements" below.
/11/ Upon the execution of his employment agreement with World Airways, Mr.
Pollard will be granted options to purchase World Airways common stock.
Please see, "Contracts and Termination of Employment and Change in Control
Arrangements" below.
19
<PAGE>
/12/ Mr. Backus was granted options to purchase US Order common stock pursuant
to the terms of his new US Order employment agreement dated August 1, 1994.
Please see, "Contracts and Termination of Employment and Change in Control
Arrangements" below.
/13/ As part of the August 1, 1994 purchase of US Order's bill pay operations,
Visa required that all US Order employees of Visa Interactive, Visa's newly
formed bill pay subsidiary, cancel their outstanding vested options to
eliminate any potential conflicts of interest. As a result, US Order's
shareholders and Board of Directors agreed to pay all active and full-time
US Order employees (excluding William F. Gorog) for the cancellation of
their outstanding and vested options. This payment to Mr. Backus was for
cancellation of the majority of his outstanding and vested options.
- --------------------
The following tables list option grants to the Company's Named Executive
Officers in 1994. While the grants to Messrs. Andrews and Gorog consist of
options to purchase common stock of WorldCorp, Mr. Backus' grant consists of
options to purchase common stock of US Order. The tables also set forth the
hypothetical value of the options at the date of grant. The actual value, if
any, that an executive may realize will depend on the spread between the market
price and the exercise price on the date the options are exercised.
WORLDCORP OPTION GRANTS IN 1994
INDIVIDUAL GRANTS/1/
<TABLE>
<CAPTION>
Number of % of
Securities Securities Grant
Underlying Underlying Market Date
Options Options Price on Present
Name Granted Granted Exercise Date of Expiration Value/3/
(#) (#) Price/2/ Grant Date ($)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
T. Coleman Andrews, III 800,000/4/ 76% $4.50 $6.87 Aug. 19, 2004 $4,356,000
William F. Gorog 250,000/4/ 24% $4.50 $5.25 Aug. 25, 2004 $ 987,750
Charles W. Pollard /1/ --- --- --- ---
Andrew M. Paalborg --- --- --- ---
- --------------------------------------------------------------------------------------------------
</TABLE>
/1/ The options listed in the above table were granted to Messrs. Andrews and
Gorog by WorldCorp, Inc. Upon the execution of his employment agreement
with World Airways, Mr. Pollard will be granted options to purchase the
common stock of World Airways (please see "Contracts and Termination of
Employment and Change in Control Arrangements", below).
/2/ The exercise price for the grants to Messrs. Andrews and Gorog reflected in
this table was set at the average closing price on the New York Stock
Exchange of the Common Stock for the thirty days prior to and including the
date on which the Compensation Committee and Messrs. Andrews and Gorog
reached agreement on the principal terms and conditions of their new
employment agreements.
/3/ The Black-Scholes option valuation model was chosen to estimate the grant
date present value of Messrs. Andrews' and Gorog's options set forth in
this table. The Company's use of this model should not be construed as an
endorsement of its accuracy at valuing options. All stock option valuation
models, including the Black-Scholes model, require a prediction about the
future movement of the stock price. The real value of the options in this
table depends upon the actual performance of the Company's stock during the
applicable period. For calculation under the Black-Scholes model, the
volatility was assumed to be 60%, and the risk-free rate of return was
assumed to be the Treasury Bill rate of 4.65% and 4.48% for Mr. Andrews and
Mr. Gorog, respectively. The exercise price of $4.50 for the 10 year term
of the option was used.
20
<PAGE>
/4/ These options become exercisable ten years less 90 days from the original
date of grant, but such vesting may be accelerated if certain targets are
achieved with respect to the Company's stock price. For further
descriptions of the Stock Option agreements, please see "Contracts and
Termination of Employment and Change in Control Arrangements" below.
- -----------------
This table sets forth hypothetical gains that would exist for the options based
on assumed rates of annual compounded growth in the stock price of 0%, 5% and
10% from the date the options were granted over the full option term.
US ORDER OPTION GRANTS IN 1994
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of % of
Securities Securities Potential Realizable Value at As-
Underlying Underlying sumed Annual Rates of Stock
Options Options Price Appreciation for Option
Granted Granted Exercise Expiration Term
Name (#) (#) Price/1/ Date ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0% 5% 10%
--- -- ---
John C.Backus 850,000 65% $7.135 Aug. 1, 2002 $0 $ 851,064 $2,038,447
& Aug. 1, 2004 0 2,690,411 6,818,030
- -------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The exercise price for the grants to Mr. Backus of US Order common stock is
based on the last value set at December 21, 1993, upon the conclusion of a
private placement of US Order common stock.
/2/ Consists of (i) a grant of options to purchase 250,000 shares of the Common
Stock of US Order, Inc., which expires on August 1, 2002, and (ii) a grant
of options to purchase 600,000 shares of Common Stock of US Order, Inc.,
which expire on August 1, 2004, both of which become exercisable ten years
less 90 days from the original date of grant, but vesting may be
accelerated if certain targets are achieved with respect to US Order's
stock price. For further description of this Stock Option agreement, please
see "Contracts and Termination of Employment and Change in Control
Arrangements" below.
- ---------------
The following table lists aggregated option exercises in 1994. Mr. Backus holds
options for both WorldCorp and US Order; please see footnote number 5 for a
description of his holdings.
21
<PAGE>
AGGREGATED OPTION EXERCISES IN 1994
AND YEAR-END OPTION VALUES/1/
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at FY-End
Shares FY-End (#) ($)
Acquired Value
on Realized (Exercisable/ (Exercisable/
Names Exercise $ Unexercisable) Unexercisable)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T. Coleman Andrews, III 0 0 400,000/400,000/2/ 1,100,000/1,100,000
William F. Gorog 0 0 150,000/100,000/3/ 412,500/275,000
John C. Backus/4/ 11,000/4/ 78,430/4/ 269,527/816,530/4/ 23,291/0/4/
Andrew M. Paalborg 10,000 42,800 140,611/128,889/5/ 114,061/161,639
Charles W. Pollard 0 0 281,667/48,333/6/ 325,000/0
- ---------------------------------------------------------------------------------------------
</TABLE>
/1/ The information set forth in this table includes the aggregate amount of
all options granted to the Named Executive Officers by WorldCorp and one or
more of its subsidiaries. The calculations in this table are based upon a
December 30, 1994, closing price of $7.25 of WorldCorp's Common Stock on
the New York Stock Exchange.
/2/ Consists of options to purchase 800,000 shares of common stock granted to
Mr. Andrews pursuant to the employment agreement and stock option agreement
between Mr. Andrews and the Company dated August 19, 1994. See "Contracts
and Termination of Employment and Change in Control Arrangements" below.
/3/ Consists of options to purchase 250,000 shares of common stock granted to
Mr. Gorog pursuant to the employment agreement and stock option agreement
between Mr. Gorog and the Company dated August 1, 1994. See "Contracts and
Termination of Employment and Change in Control Arrangements" below.
/4/ Consists of options to purchase (i) 1,071,724 shares of common stock of US
Order granted to Mr. Backus in January, 1992 and August, 1994 pursuant to
the US Order Employee Stock Option Plan and (ii) 14,333 shares of common
stock of the Company granted to Mr. Backus in 1990 pursuant to the 1988
Stock Option Plan. Because US Order, Inc., is a private, high technology
Company, a market value for the shares does not exist. The value used for
the US Order, Inc., 850,000 shares of common stock underlying the two
option grants is $7.13, or the last value assigned based on a private
placement of US Order's stock which was concluded on December 21, 1993.
/5/ Consists of (i) 500 warrants transferred to Mr. Paalborg in 1993, and (ii)
options to purchase 279,000 shares of Common Stock granted to Mr. Paalborg
between 1990 and 1993. At year end, after the exercise of his option to
acquire 10,000 shares of common stock of the Company and subsequent sale by
Mr. Paalborg of the 10,000 shares of common stock, options to purchase
140,111 shares of Common Stock and warrants with respect to 500 shares of
Common Stock were exercisable.
/6/ Consists of (i) 130,000 warrants issued to Mr. Pollard in 1989, and (ii)
options to purchase 200,000 shares of Common Stock granted to Mr. Pollard
between 1988 and 1992. At year end, options to purchase 151,667 shares of
Common Stock and warrants with respect to 130,000 shares of Common Stock
were exercisable. In connection with the employment agreement currently
being negotiated between Mr. Pollard and World Airways, the parties have
agreed that 100,000 of Mr. Pollard's 200,000 options, with an exercise
price of $9.64 per share, will be cancelled upon the grant of a new option
to purchase up to 250,000 shares of World Airways. Please see "Contracts
and Termination of Employment and Change in Control Arrangements," below.
22
<PAGE>
CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements
- ---------------------
The Company has entered into employment agreements with each of Messrs.
Andrews, Gorog, and Paalborg. The terms and conditions of each agreement are
more fully discussed below. US Order recently entered into an employment
agreement with Mr. Backus, and World Airways expects to complete negotiations
and sign an employment agreement with Mr. Pollard in the near future. Following
the analysis and research completed by the Compensation Committee of the Board
of Directors in concluding its agreement with the Chief Executive Officer of the
Company, the principles included in that agreement have generally been applied
to the employment agreements of each of the other Named Executive Officers.
T. Coleman Andrews, III
-----------------------
The Company and T. Coleman Andrews, III, entered into an employment
agreement and a stock option agreement on August 19, 1994, upon obtaining
shareholder approval at a special meeting of amendments to the Company's 1988
Stock Option Plan (the "Plan") permitting Mr. Andrews to participate in the Plan
as part of a new employment agreement with the Company.
The principal terms of the new agreement are as follows: (i) Mr. Andrews
will receive a minimum salary of $350,000 per year beginning on the date of the
executed contract; (ii) the term of the agreement expires on December 31, 1997,
subject to a renewal and extension provision described below; (iii) Mr. Andrews
is eligible to receive bonuses pursuant to the Company's new Management
Incentive Compensation Plan; (iv) Mr. Andrews received a grant of options to
purchase 800,000 shares of Common Stock; (v) Mr. Andrews has agreed to hold a
substantial number of shares of the Company's Common Stock and (vi) the Company
will maintain a $5 million life insurance policy, the proceeds of which, in the
event of Mr. Andrews' death are payable to Mr. Andrews' estate.
If, as of December 31, 1996, Andrews and WorldCorp have not executed a new
employment agreement, or neither party has given written notice to the other
that they intend to allow this agreement to expire at the end of its term on
December 31, 1997, then and in that event Mr. Andrews' employment agreement will
be automatically extended for an additional period of eighteen (18) months
through June 30, 1998, with all economic provisions extended on a pro rata
basis.
The following terms were retained from the previous employment agreement.
Mr. Andrews may terminate his employment in the event (i) the Company relocates
its headquarters outside of the Washington, D.C. area, (ii) his duties are
diminished in a manner materially altering his responsibilities, or (iii) the
Board determines that the Company should be liquidated or dissolved during the
term of the employment agreement. In the event Mr. Andrews exercises this
termination right, or, in the event the Company terminates Mr. Andrews'
employment with the Company other than for Cause (as defined in the Agreement),
the Company is obligated to pay Mr. Andrews the undiscounted remainder of his
base salary then in effect, any deferred salary and/or bonus compensation
payable, and all granted but unexercisable stock options under Mr. Andrews'
stock option agreement shall become immediately exercisable for a period of one
year following the date of termination, and any federal or state taxes imposed
upon this termination payment.
To align Mr. Andrews' interests with those of the Company's shareholders,
Mr. Andrews has agreed to hold the following amounts of Company common stock for
the balance of the term of his employment agreement (and for any renewals or
extensions thereof), from the earlier to occur of: (1) Mr. Andrews' exercise of
-------
options
23
<PAGE>
in the amounts set forth below; or (2) the dates indicated below. For purposes
of Mr. Andrews' employment agreement, any shares of Company common stock owned
by members of Mr. Andrews' immediate family (i.e., spouse, sons or daughters)
shall be counted toward Mr. Andrews' stock ownership holding requirements:
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- --------------- ---------------
<C> <S> <C>
300,000 April 1, 1995 20,000
400,000 April 1, 1996 30,000
500,000 April 1, 1997 40,000
600,000 --- 50,000
700,000 --- 60,000
800,000 --- 70,000
</TABLE>
Mr. Andrews was granted options to purchase 800,000 shares of the Company's
common stock, 200,000 of which were immediately exercisable upon the grant on
August 19, 1994. The remaining 600,000 options become exercisable ten years less
90 days from the original grant date of August 19, 1994, provided, however, the
exercise date will be accelerated with respect to these 600,000 shares if
certain targets are achieved with respect to the Company's stock price. Pursuant
to this provision, Mr. Andrews will be entitled to exercise options to purchase
100,000 shares of Common Stock, at the $4.50 exercise price, each time that
WorldCorp stock trades at a price that is an increase of 25% over the preceding
eligibility level for twenty trading days, up to the maximum of 600,000 shares.
Thus, Mr. Andrews will be entitled to exercise options for 100,000 shares, at
the exercise price of $4.50 per share, if WorldCorp stock trades at or above
$5.63 for twenty trading days (that is, a 25% increase in the price of the stock
above the preceding option grant price of $4.50). The same entitlement would
arise for five additional grants of options for 100,000 shares each, at the
exercise price of $4.50 per share, if WorldCorp stock trades at or above $7.03,
$8.79, $10.99, $13.74, and $17.17, for twenty trading days each (each of these
trading prices is 25% above the price of the stock at the earlier tier).
The options expire at the earlier of (i) the end of ten years, or (ii) one
year after Mr. Andrews ceases to provide any services, including services as a
member of the board of directors, to the Company, World Airways, US Order, the
Company's other affiliates, or any other entity in which the Company has both
any equity or debt investment and representation on the board of directors
thereof. In the event Mr. Andrews is no longer employed as Chief Executive
Officer of the Company, options that have not become exercisable by such time
will not thereafter become exercisable.
The Company and Mr. Andrews in 1989 entered into a Supplemental Incentive
Compensation Agreement (the "Incentive Agreement") in lieu of the Company's
granting additional equity to Mr. Andrews. Under the Incentive Agreement, the
Company agreed to pay Mr. Andrews the amount of $1,300,000, plus interest, on
the expiration of his employment agreement if certain conditions were met,
including Mr. Andrews being an employee at that time. In December, 1993, the
Company and Mr. Andrews agreed to modify the Incentive Agreement by terminating
it and entering into a new agreement. In connection with the new agreement, the
Company paid Mr. Andrews in December, 1993, (approximately seven months early)
$200,830 due him under the Incentive Agreement. The new agreement delays payment
to Mr. Andrews of the balance due under the Incentive Agreement and provides
that the Company will make four annual installment payments, of $420,000,
including interest, between 1995 and 1998.
24
<PAGE>
In 1989, concurrent with execution of the Incentive Agreement, the Company
loaned Mr. Andrews $1,300,000 under a full recourse promissory note that bore
interest at the same rate as the interest rate set forth in the Incentive
Agreement. The Company and Mr. Andrews agreed, in December 1993, to cancel the
earlier note and to substitute a new, full recourse promissory note due in
installments between January 1994 and February 1998; the new note bears interest
at the same rate as in the amount of $1,763,000 set forth in the new Incentive
Agreement. Mr. Andrews reduced the principal balance of his obligation to the
Company by $280,000 as of March 31, 1995.
William F. Gorog
----------------
The Company and US Order entered into a one year employment agreement and a
stock option agreement with Mr. Gorog dated August 1, 1994. Under the terms of
Mr. Gorog's employment agreement, US Order pays Mr. Gorog an annual salary of
$250,000 as compensation for serving as Chairman of the Board and Chief
Executive Officer of US Order. The Company pays Mr. Gorog an annual salary of
$50,000 as compensation for serving as the Chairman of the Board of Directors of
the Company.
Mr. Gorog has agreed to hold the following amounts of Company common stock
for the balance of the term of his employment agreement (and for any renewals or
extensions thereof), from the earlier to occur of: (1) Mr. Gorog's exercise of
-------
options in the amounts set forth below, or (2) the dates indicated below. As is
the case with Mr. Andrews, for purposes of Mr. Gorog's employment agreement, any
shares of Company common stock owned by members of Mr. Gorog's immediate family
shall be counted toward Mr. Gorog's stock ownership and holding requirements:
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- ---- ---------------
<C> <S> <C>
125,000 April 1, 1995 8,500
150,000 April 1, 1996 12,500
175,000 April 1, 1997 16,500
</TABLE>
As additional compensation to Mr. Gorog for serving as the Chairman of the
Board of Directors of the Company, Mr. Gorog was granted options to purchase
250,000 shares of the Company's common stock, 100,000 of which were immediately
exercisable upon the grant on August 1, 1994. The remaining 150,000 options
become exercisable ten years less 90 days from the original grant date of August
1, 1994, provided, however, the exercise date will be accelerated with respect
to these 150,000 shares if the same targets are achieved with respect to the
Company's stock price as are set forth in Mr. Andrews' stock option agreement.
Mr. Gorog's stock options expire under the same terms and conditions that govern
the expiration of Mr. Andrews' options.
Andrew M. Paalborg
------------------
On February 1, 1995, the Company and Mr. Paalborg entered into an
employment agreement. The principal terms of the new agreement are as follows:
(i) Mr. Paalborg will receive a base salary of $180,000 per year effective
February 1, 1995; (ii) the term of the agreement expires on February 1, 1998,
subject to a renewal and extension provision similar to that set forth in Mr.
Andrews' agreement; (iii) Mr. Paalborg is eligible to receive bonuses pursuant
to the Company's Management Incentive Compensation Plan; and (iv) Mr. Paalborg
agrees to hold the following amounts of Company common stock for the balance of
the term of his employment agreement (and for any renewals or extensions
thereof), from the earlier to occur of: (1) Mr. Paalborg's exercise of options
-------
in the amounts set forth below; or (2) the dates indicated below. As is the case
with Messrs. Andrews and Gorog,
25
<PAGE>
Company common stock owned by members of Mr. Paalborg's immediate family shall
be counted toward Mr. Paalborg's stock ownership and holding requirements:
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
- ----------------- --------------- ---------------
<C> <S> <C>
112,500 April 1, 1996 7,500
150,000 April 1, 1997 11,250
187,500 April 1, 1998 15,000
225,000 --- 18,750
262,500 --- 22,500
300,000 --- 26,250
</TABLE>
John C. Backus
--------------
US Order, Inc., and Mr. Backus entered into an employment agreement,
effective August 1, 1994, that provides that Mr. Backus will serve as President
and Chief Operating Officer of US Order until July 31, 1997, a term which
automatically extends until December 31, 1997 unless terminated earlier. Mr.
Backus is entitled to (i) a base salary of $250,000 per year, (ii) a bonus of
between 0 and 75% of his base salary pursuant to the terms of US Order's
Management Incentive Compensation Plan, (iii) the right to participate in all
bonus and incentive compensation plans or arrangements made available to other
US Order officers and directors and (iv) certain other benefits, including a $5
million life insurance policy. Mr. Backus is entitled to receive performance
stock options in accordance with the Company's 1991 Stock Option Plan. US Order
may terminate the agreement upon Mr. Backus' death, disability or upon the
affirmative vote of the majority of the Board of Directors. If the Board
terminates Mr. Backus without cause, Mr. Backus is entitled to receive the
remainder of the base salary due under the agreement and all options granted to
Mr. Backus but unexercisable under the US Order Stock Option Plan shall become
immediately exercisable for a period of one year. Mr. Backus may terminate the
agreement upon 30 days notice under certain circumstances, including a
diminution of responsibilities and a change of control of US Order. Upon
termination by Mr. Backus he is entitled to receive the reminder of his base
salary due under the employment agreement and all options granted but
unexercisable shall immediately vest.
As part of his employment agreement, Mr. Backus has agreed to hold the
following amounts of US Order common stock for the balance of the term of his
employment agreement (and for any renewals or extensions thereof), from the
earlier to occur of: (1) Mr. Backus' exercise of options in the amounts set
- -------
forth below; or (2) the dates indicated below. For purposes of Mr. Backus'
employment agreement, any shares of Company common stock owned by members of Mr.
Backus' immediate family (i.e., spouse, sons or daughters) shall be counted
toward Mr. Backus' stock ownership holding requirements:
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
------------------- ----- ---------------
<S> <C> <C>
100,000 April 1, 1996 10,000
200,000 April 1, 1997 15,000
300,000 April 1, 1998 20,000
</TABLE>
26
<PAGE>
Mr. Backus was granted options to purchase 600,00 shares of common stock of
US Order at an exercise price of $7.13 per share. The options for 600,000 shares
will become exercisable on May 1, 2004; however, the exercise date will be
accelerated with respect to increments of 100,000 shares if certain targets are
achieved regarding US Order's stock price. Pursuant to this provision, Mr.
Backus will be entitled to exercise options to purchase 100,000 shares of common
stock of US Order, at the $7.13 exercise price, each time that US Order stock
trades at a price that is an increase of 25% over the preceding eligibility
level for twenty trading days. Thus, Mr. Backus will first be entitled to
exercise options for 100,000 shares if the common stock of US Order trades at or
above $8.91 for twenty consecutive trading days. The same entitlement would
arise for five additional blocks of 100,000 options, at the exercise price of
$7.13 per share, if US Order stock traded at or above, $11.14, $13.93, $17.41,
$21.76, and $27.20 for twenty trading days each (each of these trading prices is
25% above the price of the stock at the earlier tier). The options expire at the
earlier of (i) the end of ten years, or (ii) one year after Mr. Backus ceases
employment with US Order as President and Chief Operating Officer, unless he
continues to provide services as a member of the board of directors of the
Company or US Order, or any of US Order's or the Company's other affiliates, or
any other entity in which the Company or US Order has both any equity or debt
investment and representation on the board of directors thereof. In the event
Mr. Backus is no longer employed as President and Chief Operating Officer of the
Company and has not left his employment for Good Reason (as defined), options
that have not become exercisable by such time will not thereafter become
exercisable.
Charles W. Pollard
------------------
The Company and Mr. Pollard are currently engaged in negotiations
concerning an employment agreement. These negotiations, although not yet reduced
to a written agreement, have produced understandings between the Company and Mr.
Pollard as to the principal terms of an employment agreement, expected to be
concluded on substantially the same terms as those included in the employment
and stock option agreements of the other Named Executive Officers.
The principal terms of the new agreement are as follows: (i) Mr. Pollard
will receive a minimum salary of $225,000 per year beginning as of January 1,
1995; (ii) the term of the agreement expires on October 31, 1997, subject to a
renewal and extension provision described below; (iii) Mr. Pollard is eligible
to receive bonuses pursuant to World Airways' new Management Incentive
Compensation Plan; (iv) Mr. Pollard will receive a grant of options to purchase
250,000 shares of common stock of World Airways, Inc.; (v) Mr. Pollard has
agreed to hold a certain number of shares of the Company's Common Stock and/or
the common stock of World Airways; (vi) World Airways will maintain a $2 million
life insurance policy, the proceeds of which, in the event of Mr. Pollard's
death, are payable to Mr. Pollard's estate; and (vii) World Airways will provide
Mr. Pollard retirement benefits, consisting of an annual retirement income of
$50,000 per year structure to eliminate certain risks and to be fully funded at
the completion of ten years of service, which will vest at the earlier of ten
years of service or the termination of Mr. Pollard's employment for Good Reason
or by the Board of Directors for other than Cause.
If, as of October 31, 1996, Pollard and World Airways have not executed a
new employment agreement, or neither party has given written notice to the other
that they intend to allow this agreement to expire at the end of its term on
October 31, 1997, then and in that event Mr. Pollard's employment agreement will
be automatically extended for an additional period of eighteen (18) months
through April 30, 1998, with all economic provisions extended on a pro rata
basis. Mr. Pollard may terminate his employment in the event (i) World Airways
relocates its headquarters outside of the Washington, D.C. area, (11) his duties
are diminished in a manner materially altering his responsibilities, or (iii)
the Board determines that World Airways should be liquidated or dissolved during
the term of the employment agreement. In the event Mr. Pollard exercises this
termination right, or, in the event World Airways terminates Mr. Pollard's
employment other than for Cause (as defined in the Agreement), World Airways is
obligated to pay Mr. Pollard the undiscounted remainder of his base salary then
in effect, any deferred salary and/or bonus compensation payable, and all
granted but unexercisable stock options under Mr. Pollard's stock option
agreement shall become immediately exercisable for a period of one year
following the date of termination, and any federal or state taxes imposed upon
this termination payment.
27
<PAGE>
To align Mr. Pollard's interests with those of World Airways' shareholders,
Mr. Pollard has agreed to hold the following amounts of World Airways common
stock for the balance of the term of his employment agreement (and for any
renewals or extensions thereof), from the earlier to occur of: (1) the
-------
effectiveness of a registration statement on Form S-1 registering the common
stock of World Airways; or (2) the dates indicated below. For purposes of Mr.
Pollard's employment agreement, any shares of WorldCorp and/or World Airways
common stock owned by members of Mr. Pollard's immediate family (i.e., spouse,
sons or daughters) shall be counted toward Pollard's stock ownership holding
requirements:
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
- ----------------- ---- ---------------
<C> <S> <C>
93,750 April 1, 1996 6,250
125,000 April 1, 1997 9,375
156,250 April 1, 1998 12,500
187,500 --- 15,625
218,750 --- 18,750
250,000 --- 21,875
</TABLE>
As part of his employment agreement Mr. Pollard will be granted options to
purchase 250,000 shares of World Airways' common stock, 100,000 of which will be
immediately exercisable upon the grant, effective as of January 1, 1995. The
remaining 150,000 options become exercisable ten years less 90 days from the
original grant date of January 1, 1995, provided, however, the exercise date
will be accelerated with respect to these 150,000 shares if certain targets are
achieved with respect to World Airways' stock price. Pursuant to this provision,
Mr. Pollard will be entitled to exercise options to purchase 25,000 shares of
World Airways common stock, at an $11.00 exercise price, each time that World
Airways stock trades at a price that is an increase of 25% over the preceding
eligibility level for twenty trading days, up to the maximum of 150,000 shares.
The options expire at the earlier of (i) the end of ten years, or (ii) one
year after Mr. Pollard ceases to provide any services, including services as a
member of the board of directors, to WorldCorp or World Airways, WorldCorp's
other affiliates, or any other entity in which World Airways has both any equity
or debt investment and representation on the board of directors thereof. In the
event Mr. Pollard is no longer employed as President of the Company, options
that have not become exercisable by such time will not thereafter become
exercisable.
Change in Control Agreements
- ----------------------------
It is the policy of the Board of Directors, originally determined on
November 20, 1989, after receiving the report of an independent compensation
consultant, that the Company should take steps to ensure the retention of
certain executives in the event of circumstances presenting the possibility of a
change of control. The employment agreements described above between the
Company, or one of its majority owned subsidiaries, as applicable, and the Named
Executive Officers, generally provide that in the event of termination of the
executive officer's employment by the Company without Cause (as defined) or by
the executive officer for Good Reason (as defined) within two years after a
Change of Control (as defined) the Company will pay the executive officer the
undiscounted remainder of his base salary, any deferred salary and/or bonus
compensation payable, all granted but unexercisable stock options under the
option agreements shall become immediately exercisable, and continuation of
health, life, accident, and disability insurance at the Company's expense
following termination for one year for each year of service or until comparable
coverage is obtained.
28
<PAGE>
The Company has issued stock options to each of the Company's Named
Executive Officers. Certain of the options issued to executive officers under
the Company's 1988 Stock Option Plan prior to May 13, 1992, provided that upon a
Change of Control (as defined) the executive officer's option shall become
immediately exercisable as of the date of the Change of Control for up to double
the number of shares of Common Stock for which the option is otherwise
exercisable as of the date of the Change of Control (not to exceed the total
number of Option Shares, as defined). Other options issued to executive officers
under the 1988 Stock Option Plan prior to May 13, 1992, provided that in the
event of termination of the executive officer's employment by the Company
without Cause (as defined) or by the executive officer for Good Reason (as
defined) within two years after a Change of Control (as defined) the executive
officer's stock options shall become fully vested and exercisable. In 1992, the
Company amended and restated its 1988 Stock Option Plan. The Company's
stockholders approved the amended and restated 1988 Stock Option Plan on May 13,
1992. Options issued to executive officers under the 1988 Stock Option Plan as
amended and restated provide that in the event of termination of the executive
officer's employment by the Company without Cause (as defined) or by the
executive officer for Good Reason (as defined) within two years after a Change
of Control (as defined) the executive officer's stock options shall become fully
vested and exercisable.
Pursuant to the terms of the option agreements between the Company and
Messrs. Andrews, Gorog and Paalborg, in the event of the termination of their
employment by the Company without Cause (as defined) or by the executive officer
for Good Reason (as defined) within two years after a Change of Control (as
defined) the executive officer's stock options shall become immediately
exercisable. Pursuant to the terms of the option agreement between US Order and
Mr.Backus, in the event of the termination of Mr. Backus' employment by US Order
without Cause (as defined) or by the executive officer for good Reason (as
defined) within two years after a Change of Control (as defined) Mr. Backus' US
Order stock options shall become immediately exercisable. The current
understanding between World Airways and Mr. Pollard includes a similar provision
relating to his World Airways' options.
CERTAIN TRANSACTIONS
William F. Gorog
- ----------------
Mr. William F. Gorog is Chief Executive Officer and Chairman of the Board
of US Order, and Mr. Gorog, together with certain members of his immediate
family (referred to collectively herein as the "Founders"), owned 43% of US
Order prior to WorldCorp's exercise of the option described below, completed in
February, 1995.
On September 10, 1990, the Board of Directors of the Company unanimously
authorized the Company to enter into and consummate a Stock Purchase Agreement
dated as of September 14, 1990 (the "Stock Purchase Agreement"), under which the
Company agreed to purchase 1,250,000 shares of Series A Preferred Stock issued
by US Order ("Series A Preferred Stock"). The Company entered into a related
Stock Restriction Agreement dated as of September 14, 1990 (the "Stock
Restriction Agreement"). The Board of Directors of the Company authorized the
purchase of US Order common stock as part of the Company's continuing efforts to
diversify its interests. The Stock Purchase Agreement also gave the Company the
option to purchase an additional 3,954,082 shares of Series A Preferred Stock.
On July 1, 1992, the Company purchased an incremental 6% of the Series A
Preferred Stock for $1.0 million which increased the Company's ownership in US
Order to 51%. As of December 31, 1994, the Company had purchased for an
aggregate amount of $5,325,000 a total of 5,204,082 shares of Series A Preferred
Stock, which are convertible into Common Stock.
During 1992, the Company loaned $1,750,000 to US Order for working capital
purposes. Effective December 31, 1992, the Company converted these borrowings to
1,750 shares of nonvoting Series B Preferred Stock, $1,000 liquidation
preference per share, redeemable at the end of five years for cash with a 7.5%
per annum
29
<PAGE>
dividend payable in cash quarterly ("Series B Preferred Stock"). In 1992 and
early 1993 the Company advanced US Order an additional $2,800,000. The Company
converted these borrowings to an additional 2,800 shares of Series B Preferred
Stock. As of March 31, 1993, the Company had advanced an additional $2,551,000
to US Order. On April 1, 1993, the Company converted this borrowing into 2,551
shares of Series B Preferred Stock. During 1993, the Company also purchased an
additional 449 shares of Series B Preferred Stock for $449,000. In June 1993,
the Company advanced $3,500,000 to US Order in the form of a note due in
December 1995 with a variable interest rate (15.5 percent at December 31, 1993).
On February 28, 1994, the interest rate on the note was reduced to a fixed
annual rate of 14 percent.
In December 1993, US Order completed a private equity placement for $12.0
million with financial and strategic partners. The Company invested $1.7 million
in this equity offering in return for Series C Preferred Stock. The Company and
the financial and strategic partners of US Order own stock that carries
liquidation preferences pursuant to which WorldCorp is currently entitled to
64.29% of any distribution of the assets and funds of US Order made pursuant to
a liquidation.
In February 1995, pursuant to the terms of the Stock Restriction Agreement,
the Company completed the purchase of 4,757,679 shares of the common stock of US
Order, par value $.001 per share. Consideration for this purchase paid by the
Company consisted of cash, promissory notes and 302,282 shares of WorldCorp
common stock which were registered with the Securities and Exchange Commission
in an S-3 filing declared effective January 19, 1995. Upon completion of this
transaction the Company owned 89% of the voting stock of US Order.
In summary, WorldCorp's interest in US Order consists of: (i) $3.9 million
invested in return for common stock, (ii) $5.3 million invested in return for
Series A Preferred Stock, (iii) $4.3 million invested in return for Series B
Preferred Stock, (iv) $1.7 million invested in return for Series C Preferred
Stock, and (v) $3.5 million invested in the form of a 14 percent note due in
December 1995.
The Company provides certain business services to US Order, including the
sublease of office space to US Order. The Company bills US Order for the costs
of these services. In 1994, US Order paid approximately $195,000 to the Company
and owed $64,744 to the Company for these services as of December 31, 1994.
T. Coleman Andrews, III
- -----------------------
Mr. T. Coleman Andrews, III, has served as Chief Executive Officer of the
Company since June of 1987. The Company and Mr. Andrews in 1989 entered into a
Supplemental Incentive Compensation Agreement (the "Incentive Agreement") in
lieu of the Company's granting additional equity to Mr. Andrews. Under the
Incentive Agreement, the Company agreed to pay Mr. Andrews the amount of
$1,300,000, plus interest, on the expiration of his employment agreement if
certain conditions were met, including Mr. Andrews being an employee at that
time. In December, 1993, the Company and Mr. Andrews agreed to modify the
Incentive Agreement by terminating it and entering into a new agreement. In
connection with the new agreement, the Company paid Mr. Andrews in December,
1993, (approximately seven months early) $200,830 due him under the Incentive
Agreement. The new agreement delays payment to Mr. Andrews of the balance due
under the Incentive Agreement and provides that the Company will make four
annual installment payments of $420,000, including interest, between 1995 and
1998.
In 1989, concurrent with execution of the Incentive Agreement, the Company
loaned Mr. Andrews $1,300,000 under a full recourse, interest-bearing promissory
note that bore interest at the same rate as the interest rate set forth in the
Incentive Agreement. The Company and Mr. Andrews agreed, in December 1993, to
cancel the earlier note and to substitute a new, full recourse promissory note
due in installments between January 1994 and February 1998 for the principal
amount of $1,763,320; the new note bears interest at the same rate as the
interest rate set forth in the new Incentive Agreement. Mr. Andrews reduced the
principal balance of his obligation to the Company by $280,000 as of March 31,
1995.
30
<PAGE>
ITEM NO. 2 -- RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP served as independent certified public
accountants for the Company in 1994 and is expected to be represented at the
Annual Meeting. A representative of KPMG Peat Marwick LLP will have an
opportunity to make a statement if the representative so desires and will be
available to respond to appropriate questions.
As of this date, the Board of Directors desires to have KPMG Peat Marwick
LLP continue as accountants for the Company for the year ending December 31,
1995. Accordingly, the Company is presenting a resolution to the meeting to
ratify the appointment by the Board of Directors. If the stockholders do not
approve the proposal, the Board of Directors will reconsider its action with
respect to the appointment of accountants. Approval of the resolution, however,
will in no way limit the Board's authority to terminate or otherwise change the
engagement of KPMG Peat Marwick LLP during the year ending December 31, 1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 Annual Meeting
of Stockholders must be received by the Company's Secretary no later than
December 1, 1995, to be included in the Company's 1996 proxy materials.
Proposals intended for inclusion in next year's proxy statement should be
sent to the Secretary of the Company at WorldCorp, Inc., The Hallmark Building,
13873 Park Center Road, Herndon, Virginia 22071.
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by the
Chief Executive Officer and a general discussion period during which
stockholders will have an opportunity to ask questions about the business.
The Company does not intend to bring any other matter before the meeting
and does not know of any other matter which is proposed to be brought before the
meeting. However, should any other matter properly come before the meeting, the
persons named in the enclosed proxy will have discretionary authority to vote
all proxies in accordance with their judgment on such matter.
ANNUAL REPORT
A copy of the Annual Report is being mailed to each stockholder entitled to
vote at the Annual Meeting of Stockholders. A copy of the Company's Form 10-K is
available at no charge to all stockholders. For a copy write to: Andrew M.
Paalborg, Vice President and General Counsel, WorldCorp, Inc., The Hallmark
Building, 13873 Park Center Road, Herndon, Virginia 22071.
31
<PAGE>
OTHER INFORMATION
This solicitation of proxies is made by the Board of Directors, and the
Company will bear the costs of solicitation. In addition to solicitation by
mail, proxies may also be solicited by directors, officers, and employees of the
Company, who will not receive additional compensation for such solicitation.
Brokerage firms and other custodians, nominees and fiduciaries will be
reimbursed by the Company for their reasonable expenses incurred in sending
proxy material to beneficial owners of the Common Stock. The address of
WorldCorp's principal executive offices is The Hallmark Building, 13873 Park
Center Road, Herndon, Virginia 22071, and its telephone number is (703) 834-
9200. The above notice and proxy statement are sent by order of the Board of
Directors.
Dated: April 20, 1995
By Order of the Board of Directors,
Andrew M. Paalborg
Vice President & General Counsel
32
<PAGE>
WORLDCORP, INC.
Proxy for Annual Meeting of Stockholders to be held May 24, 1995
This Proxy is Solicited on Behalf of the Board of Directors
The stockholder and recipient of the enclosed WorldCorp, Inc. 1995 Proxy
Voting Card (the "Card Recipient"), having received the Notice of Annual Meeting
and the Board of Directors' Proxy Statement, hereby appoint(s) T. Coleman
Andrews, III, William F. Gorog and Andrew M. Paalborg, and each of them, proxies
(the "Proxies") of the Card Recipient (with full power of substitution) to
attend the above Annual Meeting to be held at the Renaissance Hotel in Herndon,
Virginia on May 24, 1995, at 8:30 A.M. and all adjournments thereof (the
"Meeting") and there to vote all shares of Common Stock of WorldCorp, Inc. that
the Card Recipient would be entitled to vote, if personally present, in regard
to all matters which may come before the Meeting, and especially to vote on the
matters set forth below.
This Proxy, when properly executed through the Automated Voice Response
System, will be voted in the manner specified by the Card Recipient therein. If
any nominee is not available to serve this Proxy may be voted for a substitute
or for a lesser number of Directors.
1. a) The election of four Class I Directors to serve for the ensuing two
years, T. Coleman Andrews, III FOR (press 1) AGAINST (press 2);
William F. Gorog FOR (press 1) AGAINST (press 2); Patrick F. Graham FOR
(press 1) AGAINST (press 2); Jack F. Kemp FOR (press 1) AGAINST (press 2)
2. b) The election of one Class II Director to serve until the 1996 Annual
Meeting of Stockholders, John C. Backus FOR (press 1) AGAINST (press 2)
3. The ratification of the selection by the Board of Directors of KPMG Peat
Marwick LLP as the Company's independent accountants for the current fiscal
year, FOR (press 1) AGAINST (press 2) ABSTAIN (press 3)
4. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
As a WorldCorp, Inc. shareholder, you'll be pleased to know that you are
taking part in a landmark event. You will be one of the first shareholders to
grant your proxy using an automated voice response system. WorldCorp, Inc. is
introducing this user-friendly, interactive proxy voting system, provided by
PROX-E-VOICE(TM) to its shareholders as an alternative to traditional proxy
cards. We're excited about it because it gives us an opportunity to demonstrate
one of the advantages of interactive technology.
From a Touch Tone phone, just dial 1-800-867-7631. You'll be connected to
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the proxy system. A voice prompt will guide you through the voting process.
You'll need to enter your WorldCorp Account Number, followed by the PIN number
printed on the plastic card you received with these proxy materials, so please
have this information available before you place your call.
If you make a mistake or wish to
change your vote, just press the star
key (*) at any time. You'll be
returned to the beginning of the
prompt and you may start over again.
If you need further instruction or
have any questions, please contact
Linda Poland in Investor Relations, by
calling (703) 834-9385 from 9 a.m. to
6 p.m. EST. Monday through Friday.
We're proud to be able to bring
this voting option to you first
through PROX-E-VOICE(TM) technology.
And, we're proud that our shareholders
are able to join us in making this
endeavor a reality.
Thank you for your vote.
