<PAGE>
As filed with the Securities and Exchange Commission on June 15, 1995
Registration No. 33-
======================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------
WORLDCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3040585
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
(703) 834-9200
(Name, address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
-------------------------------------
T. Coleman Andrews, III
Chief Executive Officer and President
WorldCorp, Inc.
13873 Park Center Road, Suite 490
Herndon, Virginia 22071
(703) 834-9200
(Address, including ZIP code, and telephone number,
including area code, of agent for service)
-----------------
Copies to:
ANDREW M. PAALBORG
Vice President and General Counsel
WORLDCORP, INC.
13873 Park Center Road, Suite 490
Herndon, Virginia 22071
(703) 834-9200
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend and
interest reinvestment plans, check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------
Proposed
Title of Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share /(1)/ Price /(1)/ Fee
- ---------- ---------- ----------- ---------- ------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $1.00 . . . 275,000/(2)/ $10.375 $2,825,625 $983.84
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee.
(2) 250,000 shares of the Common Stock registered hereby are issuable upon the
exercise of warrants (the "Warrants") issued to BNY Financial Corporation.
Pursuant to Rule 416, any shares of Common Stock issued under the
antidilution provisions of the Warrants are deemed to be registered here
with.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
<PAGE>
WORLDCORP
----------------------------
PROSPECTUS
-----------------------------
275,000 Shares of Common Stock ($1.00 par value)
This Prospectus relates to (i) 25,000 shares of common stock, par value
$1.00 per share (the "Common Stock"), of WorldCorp, Inc. ("WorldCorp" and,
together with its subsidiaries, the "Company"), issuable upon exercise of an
option (the "Option") dated as of April 1, 1995 (with an exercise price of $4.56
per share) granted Patrick F. Graham, a director of WorldCorp and (ii) 250,000
shares of Common Stock issuable upon exercise of 250,000 warrants ("Warrants")
issued to BNY Financial Corporation, a New York corporation ("BNYFC"), pursuant
to the Warrant Agreement (the "Warrant Agreement") dated as of December 7, 1993
between WorldCorp and BNYFC. Each Warrant is exercisable for one share of Common
Stock (a "Share") at an exercise price of $6.15 per share at any time until 5:00
p.m. on December 7, 1996, subject to adjustment as provided in the Warrant
Agreement. Mr. Graham and BNYFC are referred to herein as the "Selling
Shareholders".
WorldCorp will not receive any proceeds from the sale of the Shares by the
Selling Shareholders. The Shares are being offered for sale by the Selling
Shareholders, and may be offered and sold in negotiated transactions, or
otherwise, at market prices prevailing at the time of sale or at negotiated
prices. See "Selling Shareholders" and "Plan of Distribution."
-------------------------
SEE "RISK FACTORS" FOR A
DISCUSSION OF CERTAIN FACTORS THAT PROSPECTIVE
INVESTORS SHOULD CONSIDER.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Common Stock is listed on the New York Stock Exchange (Symbol: WOA), on
which the last reported sales price on June ______, 1995 was $______ per share.
The date of this Prospectus is June _________, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Shares offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description of the matters involved, and each such statement shall be
deemed qualified in its entirety by such reference. For further information with
respect to the Company and the Shares offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, which may be obtained
from the Commission's principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the fees prescribed by the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by the Company
and its predecessor, World Airways, can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511 and at 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can also be obtained from the Public
Reference Section of the Commission, at 450 Fifth Street, N.W., Washington, D.C.
20549 upon payment of prescribed rates. In addition, the Company's Common Stock
is listed on the New York Stock Exchange, Inc. ("NYSE") and reports, proxy
statements and other information concerning the Company can be inspected at the
NYSE at 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are hereby incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-5351) (the "1994 Form 10-K");
(ii) the Company's Proxy Statement dated April 20, 1995 in
connection with the Company's Annual Meeting of Shareholders held on May 24,
1995 (File No. 1-5351);
2
<PAGE>
(iii) the Company's Quarterly Report on Form 10-Q for the Quarter
ended March 31, 1995 (File No. 1-5351) (the "First Quarter 10-Q");
(iv) the Company's Form 8-K dated June 9, 1995 which includes the
Prospectus filed by US Order, Inc. pursuant to Rule 424(b) under the Securities
Act on June 5, 1995 (Registration No. 33-90978); and
--
(iv) the description of the Company's Common Stock in the
Registration Statement on Form 8-B filed June 9, 1987 under Section 12 of the
Exchange Act, including any amendment or report for the purpose of updating that
description (File No. 1-9591).
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a) and (c), 14 or 15(d) of the Exchange Act prior to the
filing of a post-effective amend ment which indicates that all securities
offered have been sold or which deregisters all securities then remaining unsold
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which is also incorpo rated by reference in this
Prospectus) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Upon written or oral request, the Company will provide without charge to
each person, including any beneficial owner, to whom a copy of this Prospectus
has been delivered a copy of such documents referred to above which have been
incorporated by reference in this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information incorporated by reference in this Prospectus). Requests for
information should be directed to Andrew M. Paalborg, Vice President and General
Counsel, WorldCorp, Inc., 13873 Park Center Road, Suite 490, Herndon, Virginia
22071 (telephone (703) 834-9200).
THE COMPANY
WorldCorp, a Delaware corporation, was organized in March 1987 to serve as
the holding company for World Airways, Inc,. a Delaware corporation ("World
Airways"), which was organized in March 1948 and is the predecessor to the
Company. WorldCorp currently
3
<PAGE>
owns majority positions in companies that operate in two distinct business
areas: air transpor tation (through World Airways) and transaction processing
(through US Order, Inc. ("US Order")). WorldCorp's air transportation
subsidiary, World Airways, is a leading worldwide provider of air transportation
for commercial and government customers. US Order designs and develops products
and services for two target markets: home banking and intelligent
telecommunications network services.
Pursuant to a Stock Purchase Agreement dated October 30, 1993, on February
28, 1994, WorldCorp sold 24.9% of its ownership in World Airways to MHS Berhad,
a Malaysian aviation company ("MHS") for $27 million. Effective December 31,
1994, the Company increased its ownership in World Airways to 80.1% through the
purchase of 5% of the World Airways common stock owned by MHS. On April 6, 1995
US Order filed a Registration Statement on Form S-1 under the 1933 Act
(Registration No. 33-90978) (the "Registration Statement") to register shares of
US Order common stock (the "US Order IPO"). The Registration Statement became
effective on June 1, 1995. Of the 4,427,500 shares registered pursuant to the
Registration Statement, 3,062,500 were issued and sold by US Order, and
1,365,000 shares were sold by WorldCorp. After the Offering WorldCorp received
net proceeds of approximately $18.6 million from the sale of a portion of its
ownership in US Order and approximately $10.2 million from US Order's repayment
of debt and accrued dividends. Subsequent to the US Order IPO, WorldCorp owns
8,832,844 shares of US Order common stock, with a beneficial ownership of 61% in
US Order.
The principal executive offices of WorldCorp are located at 13873 Park
Center Road, Suite 490, Herndon, Virginia 22071. WorldCorp's telephone number is
(703) 834-9200.
AIRLINE OPERATIONS
- ------------------
World Airways is a contract air carrier that generally charges customers
based on a block hour basis rather than a per seat or per pound basis. A
"block hour" is defined as the elapsed time computed from the moment the
aircraft moves at its point of origin to the time it comes to rest at its
destination. Fluctuations in flight revenues are not necessarily indicative of
true growth because of shifts in the mix between full service contracts and
basic contracts. Under the terms of full service contracts, World Airways is
responsible for all costs associated with operating these contracts and receives
a higher rate per hour. Under the terms of basic contracts, World Airways
provides only certain services associated with the contract including aircraft,
crews, insurance, and maintenance ("Basic Contracts"). World Airways typically
charges a lower rate per hour for Basic Contracts since the customer is
responsible for other operating costs. For this reason, it is important to
measure pure growth through block hours flown rather than actual revenues
earned. Typically, U.S. military contracts are full service
4
<PAGE>
contracts where the rate paid is set annually and consists of all flying costs,
including fuel and ground handling of the aircraft and cargo. World Airways
operates in four core markets: wet lease, cargo, passenger charter and
military. In addition, World Airways has obtained regulatory approval from the
Government of Israel to operate scheduled service between New York, New York and
Tel Aviv, Israel, commencing in July 1995. World Airways currently operates
eleven wide-body MD-11 and DC10-30 aircraft in long-range international
markets.
Airline operations accounted for 100% of the Company's operating revenue
and operating income in 1986 through 1991. In 1992 through 1994, revenue from
other business areas represented less than 1% of the Company's total operating
revenues.
US ORDER
- --------
Home banking allows consumers to pay bills, check account balances and
receive other bank information from their homes. Intelligent network services
allow consumers to send and receive text information from a smart telephone,
which is a telephone with a central processing unit, an integrated display
screen and memory. In the home banking market, US Order expects to generate
revenues from (i) royalties from Visa International Service Association
("Visa"), (ii) sales to banks of voice response systems with software that
supports touch-tone bill payment applications, and (iii) monthly fees for bank-
branded customer service supporting electronic bill payment customers. In the
intelligent network services market, US Order expects to generate revenues from
(i) royalties from sales to customers of its smart telephones through Colonial
Data Technologies Corp. ("Colonial Data") and (ii) sales of smart telephone-
based interactive application such as catalog shopping and national directory
assistance. US Order intends to introduce additional intelligent network
services on its new smart telephone, the Falcon, which US Order expects to
introduce at the end of 1995.
On June 8, 1995 US Order concluded the public offering of 4,427,500 shares
of common stock at a price of $14.75 per share. Of the common stock sold,
3,062,500 shares were sold by US Order and 1,365,000 shares were sold by
WorldCorp.
Proceeds to US Order from the offering were used to repay indebtedness, to
convert preferred stock into common stock and to redeem certain equity
securities, and will be used by US Order for general corporate purposes
including product development, working capital, the financing of operating
losses, capital expenditures, and possible international expansion.
5
<PAGE>
VISA TRANSACTION
In August 1994, US Order sold its bill payment operations and technology
(the "Visa-Bill-Pay System") to Visa for cash and the right to receive future
royalties generated by customers using the Visa-Bill-Pay System during a 72-
month period. US Order recognized a one-time non-operating gain of $14,523,217
from the sale. In addition, Visa designated US Order as a "preferred provider"
through the royalty period and as such will make its member banks aware that US
Order can provide certain of its interactive applications, customer support
services and smart telephones to Visa member banks, with Visa acting as a direct
marketer and reseller. As a result of the Visa transaction, US Order is in the
process of converting its current home banking customer base over to Visa member
banks and by the end of 1995 expects to be offering its services strictly on a
wholesale basis to Visa and other strategic partners. In January 1995, US Order
entered into a strategic alliance with a leading manufacturer of CallerID
units, Colonial Data, to jointly develop and distribute the Company's next
generation of smart telephones to the telecommunications industry.
US Order's primary source of revenue to date has been derived from the
monthly service fees which it charges its customers for the use of its smart
telephones and interactive applica tions. To date, US Order has generated
limited revenue. As a result of its new strategic relationships in the home
banking and telecommunications industries, US Order no longer offers its
services directly to the end user but, instead, markets its products and
services on a wholesale basis. This shift in strategy will reduce US Order's
overall cost structure, in particular its expenditures for advertising and
promotion, while improving its distribution channels.
As a result of the strategic change in US Order's business focus, it
anticipates that in the future it will generate revenue by selling its products
such as smart telephones and voice response systems as well as by generating
monthly fees for providing ongoing services, including interactive applications
and customer support services. In addition, commencing January 1, 1995, through
December 31, 2000, US Order will have the right to receive on a quarterly basis
from Visa $0.66 per month per active retail bill pay customer that uses the Visa
Bill-Pay System, subject to certain limitations (the "Royalty Period'). US Order
does not expect to receive any Visa royalty payments in 1995. See "Risk
---
Factors - US Order Risk Factors -- Reliance on Visa Royalty Payments." US
Order's strategy is to sell its smart telephones and voice response systems
pursuant to a market penetration pricing strategy designed to build an installed
based of subscribers who are potential sources of monthly fee revenue.
6
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following matters,
together with the other information contained or incorporated by reference in
this Prospectus, in evaluating the Company and its business before making an
investment decision.
SUBSTANTIAL FINANCIAL LEVERAGE AND COMMITMENTS; STOCKHOLDERS' DEFICIT
- ---------------------------------------------------------------------
The Company is highly leveraged, primarily due to losses sustained by World
Airways' scheduled operations between 1979 and 1986, debt restructurings in 1984
and 1987 and the losses the Company incurred in 1990, 1992 and 1993. In addition
the Company had operating losses of $18.7 million in 1994, and $5.6 million in
the first quarter of 1995. The losses are reflected in the Company's retained
common stockholders' deficiency, which was $88.2 million at December 31, 1994
and $95.4 million at March 31, 1995. At March 31, 1995, the Company had total
long-term indebtedness of approximately $107.7 million with notes payable and
current maturities of long term obligations of $27.6 million (see Notes 11 and
12 of the Company's Notes to Consolidated Financial Statement in the Company's
Annual Report on Form 10-K for the fiscal year ending December 31, 1994). World
Airways was not in compliance with its debt covenants under the revolving line
of credit at December 31, 1994, but obtained a waiver of these covenants from
the lender. In 1995, World Airways amended this agreement to adjust certain
covenants beginning in the first quarter of 1995. No assuranc es can be given
that the Company will meet these revised covenants or, if required, obtain the
required waivers.
World Airways has substantial long-term aircraft lease obligations. For a
discussion of such lease obligations, see the information set forth under the
heading "Operating Leases" in Note 12 of the Company's Notes to Consolidated
Financial Statement and under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations --
7
<PAGE>
Liquidity and Capital Resources" in the 1994 Form 10-K and the First Quarter 10-
Q. These leases, however, are not guaranteed by WorldCorp. At December 31, 1994,
the Company's working capital (current assets less current liabilities) was a
negative $34 million and the Company's current ratio (the ratio of current
assets to current liabilities) was less than one. At March 31, 1995, the
Company's working capital was a negative $47.4 million and the Company's current
ratio remained less than one.
In October 1992 and January 1993, World Airways signed a series of
agreements to lease seven new MD-11 aircraft for initial lease terms of two to
five years. As of March 31, 1995, World Airways has taken delivery of all seven
aircraft consisting of four passenger MD-11 aircraft, one freighter MD-11, and
two convertible MD-11s. As part of the lease agreements, World Airways was
assigned purchase options for four additional MD-11 aircraft. In 1992, World
Airways made non-refundable deposits toward four of the option aircraft. While
the option exercise dates expired on May 31, 1995, World Airways is discussing
with McDonnell Douglas transactions for the purchase or lease of aircraft in
which the deposits would be applied against World Airways' payment obligations.
If the aircraft are purchased, World Airways will require external financing for
any such purchase. World Airways has recently entered into two short-term DC10
aircraft leases with lease terms expiring June 1995 and August 1995, and one
DC10 aircraft lease expiring in September 1997. World Airways may choose to
lease additional DC10 aircraft to meet short-term peak demand requirements.
World Airways made $6.7 million and $3.6 million of capital expenditures
and cash deposits for MD-11 integration in 1994, and the first quarter of 1995,
respectively. World Airways estimates that its required capital expenditures for
MD-11 integration will be approximately $6.9 million for the remainder of 1995.
In addition, World Airways will require approximately $8.0 million to purchase a
spare engine in the fourth quarter of 1995. While World Airways is currently
seeking financing for the purchase of the engine and additional spare parts
relating to the MD-11 aircraft recently acquired, no assurances can be given
that it will obtain the necessary financing.
World Airways has obtained regulatory approval from the government of
Israel to operate a scheduled service commencing in July 1995. World Airways
anticipates working capital requirements of approximately $2 million in
connection with the start of scheduled service.
In 1995, WorldCorp has parent company repayment obligations totaling $16.5
million, consisting primarily of an $8.5 million (excluding interest thereon)
note payable to MHS due in December 1995 and approximately $8.1 million of
annual debt service on subordinated notes and debentures. WorldCorp intends to
satisfy these obligations by one or more of the follow ing: intercompany loans,
further sales of equity securities of its subsidiaries, and/or external
financing. After the closing of the US Order IP in June 1995, WorldCorp
received net
8
<PAGE>
proceeds of approximately $18.6 million from the sale of a portion of its
ownership in US Order and approximately $10.2 million from US Order's repayment
of debt and accrued dividends.
All of WorldCorp's funds are generated by its subsidiaries or through
periodic sales by WorldCorp of a portion of its stock ownership in such
subsidiaries, (such as the sale of 19.9% of World Airways to MHS and the US
Order IPO). The ability of WorldCorp and its subsid iaries to pay principal and
interest on their respective short and long-term obligations is substantially
dependent upon the payment to WorldCorp of dividends, interest or other charges
by its subsidiaries, upon funds generated by the operations of the subsidiaries,
secured borrowings and other financings from banks and other lenders or from
proceeds from sales of stock of its subsidiaries.
The degree to which the Company is leveraged could have important
consequences to holders of Common Stock, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may be impaired;
(ii) the Company's degree of leverage and related debt service obligations, as
well as its obligations under operating leases for aircraft, may make it more
vulnerable than some of its competitors in a prolonged economic downturn; and
(iii) the Company's financial position may restrict its ability to exploit new
business opportunities and limit its flexibility in responding to changing
business conditions. The Company's competitive position could also be affected
by the fact that it may be more highly leveraged than some of its competitors.
POSSIBLE EFFECTS OF LITIGATION AGAINST THE COMPANY
- --------------------------------------------------
On August 11, 1992, WorldCorp, World Airways, and certain other commercial
paper customers of Washington Bancorporation ("WBC") were served with a
complaint by WBC as debtor-in-possession by and through the Committee of
Unsecured Creditors of WBC (the "Committee"). The complaint arises from
investment proceeds totaling $6.8 million received by WorldCorp and World
Airways from WBC in May 1990 in connection with the maturity of WBC commercial
paper. The Committee seeks to recover this amount on the grounds that these
payments constituted voidable preferences and/or fraudulent conveyances under
the Federal Bankruptcy Code and under applicable state law. On June 9, 1993,
WorldCorp filed a motion to dismiss the litigation and intends to vigorously
contest the claim. No assurances can be given, however, of the eventual outcome
of this litigation.
The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the ultimate
disposition of these other
9
<PAGE>
matters will not have a material adverse effect on the Company's consolidated
financial position.
SHARES AVAILABLE FOR FUTURE SALE; SALES BY THE SELLING SHAREHOLDER
- ------------------------------------------------------------------
As of June 9, 1995, there were 15,905,961 Shares of Common Stock of
WorldCorp outstanding, including 302,278 Shares issued to the founders of US
Order in connection with the Company's 1995 increase in its US Order ownership
position. In addition, as of May 31, 1994, 361,401 Shares of Common Stock were
held for the account of Scott & Stringfellow, Inc., the pledgee of the Shares
under a loan to the WorldCorp Employee Savings and Stock Ownership Plan. As of
March 31, 1995, there were an additional 2,796,098 warrants and options
outstanding, principally to management of WorldCorp exercisable for shares of
Common Stock, of which 2,166,376 warrants and options had vested, at a weighted
average exercise price of $5.58 per share. In addition, a total of approximately
5,877,034 shares of Common Stock would be issued if all of the outstanding 7%
Convertible Debentures (as hereinafter defined) were converted.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, including sales available under this Prospectus or the
availability of shares for future sale (including shares issuable upon the
exercise of warrants, options, or the 7% Convertible Debentures), will have on
the market price of Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock or the perception that such sales may occur,
could adversely affect prevailing market prices for the Common Stock. See "Plan
of Distribution" and "Selling Shareholders."
AIRLINE RISK FACTORS
- --------------------
DEPENDENCE UPON MATERIAL CONTRACTS
The Company's business relies heavily on World Airways' contracts with U.S.
Air Mobility Command ("AMC"), Malaysia Airline Service Berhad ("MAS") and P.T.
Garuda Indonesia ("Garuda"), which provided approximately 22%, 19% and 24%,
respectively, of World Airway's consolidated revenues in 1994 and 14%, 23% and
20%, respectively, of total block hours in 1994. The AMC and MAS contracts
provided 12% and 44%, respectively, of consolidated revenues and 7% and 47%,
respectively, of total block hours during the first quarter of 1995. Operations
under the Garuda contract commenced in the second quarter. The loss of any of
these contracts or a substantial reduction in business from any of these
10
<PAGE>
sources, if not replaced, would have a material adverse effect on WorldCorp's
revenues and financial condition.
AMC has awarded contracts to World Airways since 1956. The minimum contract
amount for 1995 of $33.4 million is a 73% increase over 1994; the current
contract will expire in September 1995. While World Airways cannot determine how
any future cuts in military spending may affect future operations with AMC, the
minimum contract amount for 1996 is anticipated to be approximately $46 million,
a 38% increase over 1995.
World Airways has provided service to MAS since 1981, providing aircraft
for integra tion into MAS' scheduled passenger and cargo operations as well as
transporting passengers for the annual Hadj pilgrimage. MHS, which owns 19.9% of
World Airways effective December 31, 1994, acquired a 32% ownership interest in
MAS from the Malaysian govern ment during 1994. As a result of the strengthening
of the MHS/MAS relationship, World Airways recently entered into a series of
long-term contracts with MAS. World Airways has agreed to provide five aircraft
to MAS under long-term contracts with expirations ranging from March 1997 to
September 2000. The current MAS Hadj contract, which was entered into in 1992,
expires in 1996. In 1994, World Airways provided two aircraft for Hadj
operations. World Airways has provided three aircraft for the 1995 MAS Hadj
operations.
World Airways has provided service to Garuda since 1988 under an annual
contract. World Airways provided six aircraft for the 1994 Garuda Hadj operation
and has provided five aircraft for the 1995 operations. In addition, World
Airways has provided aircraft for Garuda's cargo operations in previous years.
The Company is subject to the risk that a customer which has contracted
with the Company will cancel or default on its contract or contracts and the
Company will be unable to obtain other business to cover the resulting loss of
revenues. If the size of the contract or contracts is significant enough, any
such default or cancellation could have a material adverse effect on the
Company.
EFFECTS OF SEASONALITY OF BUSINESS ON THE COMPANY
The Company's air carrier business is significantly affected by seasonal
factors. Typically, the Company experiences lower levels of utilization during
the first quarter as demand for passenger and cargo services are lower relative
to other times of the year. The Company generally experiences higher levels of
utilization in the second and third quarters due to demand for commercial
passenger service, including the annual Hadj pilgrimage. Fourth
11
<PAGE>
quarter utilization generally depends upon the overall world economic climate,
global trade patterns and the resulting demand for air cargo services. In
recent years, soft demand and weakening yields have adversely affected worldwide
cargo and passenger markets.
DEPENDENCE UPON AIR CARRIER BUSINESS
World Airways operates in a very challenging business environment. In
recent years the combination of a generally weak economy and the depressed state
of the airline industry has adversely affected the Company's operating
performance. Although there has been recent growth in demand within the industry
such that World Airways experienced a 13% increase in block hours flown in 1994
over 1993, yields generally remain low. Airline operations accounted for 100% of
the Company's operating revenue and operating income in 1986 through 1991. In
1992 through 1994, revenue from other business areas represented less than 1% of
the Company's total operating revenues.
AIRLINE COMPETITION
The airline industry is highly competitive and susceptible to price
discounting. The Company generally competes on the basis of price, quality of
service and convenience. Many of the airlines against which the Company competes
possess substantially greater financial resources and more extensive facilities
and equipment than those which are now, or will in the foreseeable future
become, available to the Company. Many of World Airways' competitors (both
scheduled and non-scheduled air carriers) compete for customers in a variety of
ways, including wholesaling to tour operators, discounting seats on scheduled
flights, promoting to travel agents, prepackaging tours for sale to retail
customers and selling discounted, excursion airfare-only products to the public.
During periods of dramatic fare cuts by World Airways' competitors, World
Airways may be forced to respond with reduced fares, which could have a material
adverse effect on World Airways' operating results.
World Airways competes directly against charter airlines, some of which are
substantially larger than it, and certain of which are affiliates of major
scheduled airlines or tour operators. As a result, in addition to greater access
to financial resources, these charter airlines may have greater distribution
capabilities, including exclusive or preferential relationships with affiliates
which are tour operators.
Under bilateral air services agreements between the United States and many
foreign countries, traffic rights in those countries are available to only a
limited number, and in some cases only one or two, U.S. carriers and are subject
to approval by the applicable foreign regulators. Consequently, World Airways'
ability to provide service in some foreign markets
12
<PAGE>
in the future may depend in part on the willingness of the Department of
Transportation (the "DOT") to allocate limited traffic rights to World Airways
rather than to competing US airlines, including major scheduled carriers capable
of carrying greater passenger traffic, and the approval of the applicable
foreign regulators. While World Airways generally has been able to obtain
traffic rights where it has sought them in the past, there can be no assurance
that it will be able to do so in the future.
There are relatively few barriers to entry into the airline business, apart
from the need for certain government licenses and the need for and availability
of financing, particularly for those seeking to operate on a small scale with
limited infrastructure and other support systems. As a result, World Airways may
face increased competition from start-up airlines in selected markets from time
to time. The commencement of service by new carriers on World Airways' routes
could negatively impact World Airways' operating results.
AVIATION FUEL
The Company's source of aviation fuel is primarily from major oil
companies, under annual delivery contracts, at often frequented commercial
locations, and from United States military organizations at military bases. The
Company's current fuel purchasing policy consists of the purchase of fuel within
seven days in advance of all flights based on current prices set by individual
suppliers. More than one supplier is under contract at several locations.
The Company purchases no fuel under long-term contracts nor does the
Company enter into futures or fuel swap contracts. Although the crisis in the
Persian Gulf resulted in substantially higher fuel prices during the third and
fourth quarters of 1990 and the first quarter of 1991, the Company has
experienced no difficulty purchasing fuel during the past four years and does
not expect availability to be a problem in the foreseeable future. The
availability and price of aviation fuels remain subject to the various
unpredictable economic and market factors that affect the supply of all
petroleum products.
The Company manages fuel price risk by making the Company's customers
responsible (in all of the Company's contracts) for potential fuel price
fluctuations in excess of five percent. Although rapidly escalating fuel costs
may cause a decrease in the overall level of activity in the industry, the
Company does not anticipate that any future industry-wide energy problems would
have a substantial adverse effect upon the profitability of Airline Operations.
EMPLOYEE RELATIONS
13
<PAGE>
Flight Attendants. On July 16, 1987, World Airways and the Teamsters
-----------------
executed a five-year agreement on behalf of the World Airways' flight
attendants, which was ratified on August 5, 1987. This contract also became
subject to renegotiation on July 1, 1992. The parties exchanged their opening
proposals in 1992 and have had numerous contract negotiation sessions. In
December 1994, the Company and the Teamsters jointly requested the assistance of
a federal mediator to facilitate negotiations.
Dispatchers. World Airways' aircraft dispatchers are represented by the
-----------
Transport Workers Union (the "TWU"). This contract became subject to
renegotiation on June 30, 1993. In May, 1995 the parties reached agreement in
principle with respect to a new four year contract which remains subject to
employee ratification. Less than a dozen World Airways employees are covered by
this collective bargaining agreement.
The outcome of the negotiations with flight attendants and dispatchers
cannot be deter mined at this time and therefore there can be no assurance that
the result of the negotiations will not have a material adverse effect on the
Company.
14
<PAGE>
US ORDER RISK FACTORS
- ---------------------
MINIMAL REVENUES; HISTORY OF LOSSES
US Order did not introduce its first commercial product until 1991 and
accordingly has a limited operating history. To date, US Order has generated
minimal operating revenues, has incurred significant losses and has experienced
a substantial negative cash flow. US Order had an accumulated deficit as of
March 31, 1995 of approximately $17.8 million, with operating losses of $6.6
million, $10.5 million and $10.2 million for the years ended December 31, 1992,
1993 and 1994, respectively, and an operating loss of $1.2 million for the three
months ended March 31, 1995. To date, US Order has generated limited revenues
from the sale of its products and services. US Order expects to incur operating
losses at least into 1996, at decreasing levels. There can be no assurance that
US Order will be able to achieve profitabili ty and, if achieved, sustain such
profitability, nor can there be any assurance as to when such profitability
might be achieved. US Order is subject to all of the risks inherent in the
establishment of a new business enterprise.
DEVELOPING MARKETPLACE
Home banking and intelligent network services are developing markets.
Consumer preferences in interactive technologies are difficult to predict. US
Order's future growth and profitability will depend, in part, upon consumer
acceptance of electronic home banking and smart telephone technologies and a
significant expansion in the consumer market for telephone-based interactive
applications technologies. Even if these markets experience substantial growth,
there can be no assurance that US Order's products and services will be
commercially successful or benefit from such growth. US Order commenced
operations in 1991 with an emphasis on grocery shopping applications. US Order
subsequently discontinued its grocery shopping applications and now focuses on
home banking and telecommunications.
EARLY STAGE PRODUCTS AND SERVICES
The continued development of the marketplace for US Order's products and
services will depend in part upon its ability to create and develop additional
interactive applications for its technologies. Many of US Order's interactive
products and services, including its smart telephones, are in the early stages
of development or marketing, and are subject to the risks inherent in the
development and marketing of new products and services. Many of US Order's
competitors, including Philips Home Services, Inc. ("Phillips") and Northern
Telecom Ltd. ("Northern Telecom"), have already introduced smart telephones
which include technological features incorporated in US Order's PhonePlus
product. US Order's Falcon product incorpo rates newer digital signal
processing technology. Although US Order is currently unaware of
15
<PAGE>
any efforts by its competitors to deploy digital signal processing technology in
their smart telephones, US Order expects that its competitors will attempt to
replicate the Falcon digital signal processing design if it is commercially
successful. US Order is discontinuing its ScanFone smart telephones in
anticipation of the introduction of its PhonePlus and Falcon smart telephones.
US Order has not completed the sale of a substantial number of PhonePlus smart
telephones and is still developing its fourth-generation smart telephone, the
Falcon. US Order's risks include competition from banks, electronics
manufacturers, telecommunications companies, computer software and data
processing companies and technology or service companies, failure of its
products to attain widespread acceptance in the marketplace, and the development
of unforeseen design or engineering problems with its products and applications.
There can be no assurance that these or other risks associated with new product
and service development will not occur. The occurrence of one or more of these
risks could have a material adverse effect on US Order's financial condition and
operating results.
DEPENDENCE ON STRATEGIC ALLIANCES
US Order's business strategy is to sell products and services that support
and enhance home banking and intelligent network services primarily through a
strategic alliance in each of these two marketplaces. Its success in each area
depends both on the ultimate success of these partners as well as on the ability
of its partners to successfully market US Order's products and interactive
applications. Therefore, US Order's success in home banking will depend not
only on growing consumer acceptance of home banking but also on the success of
Visa Interactive, Inc. ("Visa Interactive'), (the wholly-owned subsidiary of
Visa formed to partici pate in the home banking market), in having the Visa
Bill-Pay System become a widely accepted industry standard. Failure by US Order
to complete its strategic alliance strategy or failure of US Order's strategic
partners to successfully develop and sustain a market for US Order's products
and services would adversely affect US Order's overall performance.
Although US Order views its alliances as a key factor in the development
and commer cialization of its technologies, there can be no assurance that these
industry partners view their alliance with US Order as significant for their own
businesses or that they will not reassess their commitment to US Order at any
time in the future. Colonial Data, US Order's strategic ally in the
telecommunications industry, can terminate its agreement with US Order if US
Order's Falcon smart telephone is not available for commercial distribution by
April 1, 1996. Visa can also, under certain circumstances, abandon the Visa
Bill-Pay System (the use of which will generate royalties for US Order) in favor
of another bill payment system. The ability of the alliance members to
incorporate US Order's products and services into successful commercial ventures
will depend, in part, on US Order's ability to continue to successfully upgrade
and develop new technologies. There can be no assurance that US Order will be
able to comply with future specification and delivery schedule requirements
regarding its technol-
16
<PAGE>
ogies. US Order's inability to meet such requirements would delay the ongoing
development of services utilizing its technologies and could result in the
strategic alliance partners seeking alternative technologies for use in their
products and services, which would have a material adverse impact on US Order.
RELIANCE ON VISA ROYALTY PAYMENTS
US Order sold its electronic banking and bill payment operation to Visa on
August 1, 1994, for approximately $15 million in cash, the assumption of certain
liabilities and a 72-month royalty obligation commencing January 1, 1995 and
ending December 31, 2000 (the "Royalty Period"). Visa subsequently transferred
these assets to Visa Interactive. The royalty obligation is based on the number
of customers who use the Visa Bill-Pay System during the Royalty Period. The
royalty will apply only if the means by which a customer makes an electronic
bill payment involves the use of a significant portion of the Visa Bill-Pay
System.
Royalties to US Order are calculated and paid by Visa Interactive quarterly
during the Royalty Period. Because the amount of the royalties to US Order is
dependent upon the number of customers that use the Visa Bill-Pay System on a
monthly basis during the Royalty Period, US Order cannot provide any assurances
of the amount of royalties, if any, that will be payable by Visa Interactive to
US Order. The royalty payment will be reduced for each quarter through December
31, 1997 by an offset amount (the "Visa Offset") which is initially set at
$73,315. If the royalty payment that would otherwise be due in respect of a
quarter is smaller than the offset amount for the quarter, no royalty payment
will be made to US Order, and the difference between $73,315 and the royalty
otherwise due will increase the size of the Visa Offset for the next quarter.
The aggregate amount of the Visa Offset is $879,780. US Order does not expect
to receive any royalty revenues from Visa in 1995 due to the Visa Offset. In
addition, after a Visa member bank commits to use the Visa Bill-Pay System,
there can be an extended technical and marketing roll-out period before US Order
begins to earn royalty revenues. At present, only three banks have begun such a
technical and marketing roll-out in small limited markets. These banks have
successfully enrolled in their home banking program only 2,000 customers. These
banks have over a million customers in the aggregate, although the US Order
estimates that a substantial majority of them have not been solicited at this
time regarding this program. There can be no assurances as to the banks'
ultimate success with this program. Failure to receive significant royalties
from Visa Inter active during the Royalty Period would have a material adverse
effect upon US Order's future prospects, assets, financial condition and
liquidity. US Order does not expect to begin receiving royalties under the Visa
Bill Pay System until 1996.
In addition, under the terms of its agreement with Visa, Visa Interactive
is not obligated to pay royalties to US Order for active bank customers who
utilize home banking and bill
17
<PAGE>
payment technology independently developed by Visa Interactive. If Visa
Interactive indepen dently develops or acquires its own home banking and bill
payment technology which does not use or build upon US Order's technology, this
could have a material adverse effect on the amount of royalties payable by Visa
Interactive to US Order.
As a condition of Visa's acquisition of US Order's bill payment and banking
operation, US Order has agreed to work exclusively with Visa in certain areas
and to refrain from certain activities that are in competition with Visa and its
affiliates. These covenants may increase US Order's reliance upon Visa.
Although Visa must make its members aware of the preferred provider status
of US Order and its products and services, Visa is under no obligation to
guarantee any minimum purchases by it or any of its members of any such US Order
products and services. Because of US Order's status as a preferred provider,
Visa Interactive makes its customers aware of US Order's ability to provide
customer support services and US Order provides such services at predetermined
prices and established standards during the Royalty Period. US Order's depen
dence on Visa, and the terms of the agreement between the parties, may have a
material adverse effect on US Order.
COMPETITION
The market for interactive products and services is highly competitive and
subject to rapid innovation and technological change, shifting consumer
preferences and frequent new product introductions. In addition to competing
with other companies that provide smart tele phones, including Philips, Northern
Telecom and AT&T Corp., US Order also faces increas ing competition from other
emerging interactive applications delivered through personal computers and cable
television, including developing transactional services offered by Microsoft
Corp., Intuit, Inc., Electronic Data Systems, Inc. and other software companies.
US Order expects competition to increase in the future from existing and new
competitors, possibly including telecommunications companies. Established on-
line information services, including America Online Inc. and Prodigy Services
Company, offer competing home banking and other services delivered through home
computers. In addition, several banks including Citibank, N.A. and The
Huntington National Bank, have developed home banking products for their own
customers and, in the future, may offer these services to other banks. Most of
US Order's primary current and potential competitors in the market for its
products have substan tially greater financial, marketing and technical
resources than US Order. US Order believes that potential new competitors,
including large multimedia and information systems companies, are increasing
their focus on interactive transaction processing. Increased competition in the
market for US Order products and services could materially and adversely affect
US Order's results of operations through price reductions and loss of market
share. Additionally, US
18
<PAGE>
Order's customers, including its strategic partners, face competition from other
resellers of interactive applications. For example, MasterCard International,
Inc. offers Masterbanking home banking to compete with Visa Interactive. US
Order's success will depend in part upon the ability of its strategic partners
and customers to successfully compete in the retail interac tive applications
marketplace. There can be no assurance that US Order or its strategic partners
will be able to continue to compete successfully against its existing
competitors or new competitors.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; PROTECTION OF PROPRIETARY RIGHTS
US Order's success is heavily dependent upon its proprietary technology.
Having sold its sole patent to Visa, US Order holds no patents, and existing
copyright and trade secret laws afford only limited practical protection for US
Order's software. US Order sold a significant portion of its proprietary
technology to Visa, and Visa licensed back certain proprietary technology to US
Order. While this license agreement gives US Order a worldwide, royalty-free
license (exclusive in some cases and non-exclusive in others) to use the
transaction processing software owned by Visa, this license does contain certain
restrictions on the usage of the licensed technology, including certain
restrictions on US Order's sublicensing of such technology for banking
applications or financial services. No assurances can be given as to whether
any of such restrictions in the licensing agreement from Visa to US Order will
adversely affect the operations or business of US Order in the future or the
ability of US Order to enter into future strategic alliances.
US Order regards certain of its interactive applications technologies as
proprietary and attempts to protect such technologies and associated smart
telephones and transaction process ing software. US Order depends in part upon
its proprietary technology and know-how to differentiate its products and
services from those of its competitors. It relies on a combination of
contractual rights and trade secret laws to protect it proprietary technology,
and presently expects to seek patent protection for certain other proprietary
technologies. There can be no assurance that US Order will be able to protect
its technology or that third parties will not be able to independently develop
technologies that are substantially equivalent or superior to US Order's
technologies. Therefore, existing and potential competitors may be able to
develop products that are competitive with US Order's products, and such
competition could adversely affect US Order.
In addition, the laws of some foreign countries do not protect US Order's
proprietary rights to the same extent as do the laws of the United States and
Canada. Accordingly, US Order relies primarily on trade secret protection and
confidentiality and proprietary information agreements to protect its
intellectual property. The loss of any material trade secret, trade mark, trade
name or copyright could have a material adverse effect on US Order. There can
19
<PAGE>
be no assurance that US Order's efforts to protect its intellectual property
rights will be successful. Despite US Order's precautions, it may be possible
for unauthorized third parties to copy certain portions of US Order's products
and services or to obtain and use information that US Order regards as
proprietary.
From time to time, US Order receives communications from third parties
asserting that certain features or content of US Order's products infringe upon
the intellectual property rights held by such third parties. Although US Order
does not believe that its products and services infringe on the rights of third
parties, there can be no assurance that third parties will not assert
infringement claims against US Order in the future or that any such assertion
will not result in costly litigation or require US Order to cease using, or
obtain a license to use, intellectual property rights of such parties. In
addition, there can be no assurance that such licenses will be available to US
Order on reasonable terms.
TECHNOLOGICAL CONSIDERATIONS
US Order's business activities are concentrated in fields characterized by
rapid and significant technological advances. There can be no assurance that US
Order will remain competitive technologically or that US Order's products,
processes or services will continue to be reflective of such advances. Failure
to introduce new products or product enhancements that achieve market acceptance
on a timely basis could materially and adversely affect US Order's business,
operating results and financial condition. Many of US Order's competitors and
potential competitors have substantial experience and expertise in producing and
selling interactive products and services and have significantly greater
financial, technological, marketing and research and development resources than
US Order.
MANAGEMENT OF GROWTH
Certain of US Order's key employees have not had experience in managing
companies larger than US Order. US Order's ability to manage growth
successfully will require US Order to continue to improve its operational,
management and financial systems and controls. If US Order's management is
unable to manage growth effectively, US Order's business, results of operation
and financial condition could be materially and adversely affected.
DEPENDENCE ON KEY EMPLOYEES
US Order is highly dependent on certain key executive officers and
technical employees, the loss of any of whom could have an adverse impact on the
future operations of US Order. Given US Order's stage of development, US Order
is dependent on its ability to recruit, retain and motivate high quality
personnel. Competition for such personnel is intense, and the
20
<PAGE>
inability to attract and retain additional qualified employees or the loss of
current key employees could materially and adversely affect US Order's
business, operating results and financial condition. While US Order maintains
proprietary non-disclosure agreements with all of its key employees, it has an
employment agreement with only its President and Chief Operating Officer, John
C. Backus, Jr. Additionally, US Order does not maintain "key man" insurance
policies on any of its employees nor does it intend to secure such insurance.
DEPENDENCE ON FOREIGN PRODUCTION
US Order's telephone devices are manufactured or are contemplated to be
manufactured by manufacturers with facilities in Hong Kong, Taiwan and the
People's Republic of China. The availability or cost of these smart telephones
may be adversely affected by political, economic or labor conditions in Hong
Kong, including the 1997 return of Hong Kong to China, and by fluctuations in
currency exchange rates. In addition, a change in the tariff structure or other
trade policies of the United States or countries from which US Order imports
products could adversely affect US Order' foreign manufacturing strategies.
FLUCTUATIONS IN OPERATING RESULTS
US Order may experience fluctuations in quarterly operating results due to
the size and timing of customer orders or the royalty payments from Visa
Interactive, changes in US Order's pricing policies or those of its competitors,
new product introductions or enhancements by competitors, delays in the
introduction of new products or product enhancements by US Order or by its
competitors, customer order deferrals in anticipation of upgrades and new
products, market acceptance of new products, the timing and nature of sales and
marketing ex penses, research and development expenses, other changes in
operating expenses, personnel changes and general economic conditions.
USE OF PROCEEDS
The Company will not receive any proceeds resulting from the sale of the
Shares by the Selling Shareholders. See "Selling Shareholders." Upon exercise
of the Warrants, WorldCorp will receive aggregate consideration of $1,537,500.
Upon the exercise in full of Mr. Graham's option, the Company will receive
$114,000. There can be no assurance that such exercises will occur.
21
<PAGE>
SELLING SHAREHOLDERS
BNYFC is party to an Accounts Receivable Management and Security Agreement
and an Aircraft Parts Security Agreement (together, the "Loan Agreements") each
dated as of Decem ber 7, 1993, with World Airways. Pursuant to the Loan
Agreements, World Airways sold its receivables to BNYFC, and BNYFC agreed to
make revolving credit advances to World Airways. To secure such loans, World
Airways pledged its interest in certain aircraft parts to BNYFC and granted
BNYFC a security interest in such parts, spare parts and accounts receivable.
The Loan Agreement expires on January 7, 1998. In connection with the Loan
Agreement, WorldCorp entered into the Warrant Agreement with BNYFC.
In connection with his service as a director of WorldCorp, Mr. Graham was
issued the Option to purchase 25,000 Shares at an exercise price of $4.56 per
Share. The Option expires on April 1, 2003. The Option is presently
exercisable as to 7,291.36 Shares and becomes exercisable as to the balance in
17 monthly installments of 1041.68 Shares, the final monthly installment vesting
on October 28, 1996.
The following table sets forth the name of the Selling Shareholders who are
offering the Shares in this offering and the number of Shares of Common Stock
being offered in this offering by such Selling Shareholders.
<TABLE>
<CAPTION>
NAME OF SELLING SHARES AFTER
SHAREHOLDER PRIOR TO OFFERING/(/1/)(/2/) OFFERED/(/3/) OFFERING/(1)(3)/
----------------------- ----------------- ------- --------
SHARES PERCENT SHARES PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
BNY Financial Corporation 250,000/4/ 1.6% 250,000 0 0%
Patrick F. Graham 50,000/5/ * 25,000 25,000 *
</TABLE>
* Less than 1%
/1/ Any securities that are not issued and outstanding, but that can be
acquired by the Selling Shareholder through the exercise of options,
warrants or convertible securities, exercisable or convertible within
60 days, are deemed to be outstanding for the purposes of computing the
percentage of outstanding securities owned by shareholders holding such
options, warrants or convertible securities.
/2/ BNYFC will have sole voting and investment power with respect to its
shares following exercise of the Warrants. Mr. Graham will
22
<PAGE>
have sole voting and investment power with respect to his shares
following exercise of the Option.
/3/ Assumes the sale of all of the shares of Common Stock being registered
herein.
/4/ Represents 250,000 shares issuable upon exercise of the 250,000
Warrants issued to BNYFC pursuant to the Warrant Agreement.
/5/ 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) 25,000 shares of Common Stock issuable upon the exercise of stock
options expiring April 1, 2003.
23
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of up to 275,000 Shares which may be sold
following their issuance to the Selling Shareholders pursuant to the exercise of
the Warrants or the Option, as the case may be.
The Selling Shareholders have informed the Company they may sell the Shares
being offered hereby in one or more transactions effected on the NYSE or on any
other national exchange upon which the Shares may be listed in the future, in
the over-the-counter market, or in one or more negotiated transactions, or
through a combination of such methods of sale, in each case at market prices
prevailing at the time of sale, at prices relating to such prevailing market
prices, or at negotiated prices. The Shares will be listed on the NYSE.
If any of the Shares included in this Prospectus are sold through broker-
dealers, then the Selling Shareholders and any broker-dealers or other persons
who participate with them in the distribution of the securities being offered
hereby may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions and discounts received by such broker-dealers, and any
profit on the resale of the Shares by such broker-dealers, may be deemed to be
underwriting discounts and commissions under the Securities Act.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 60,000,000 shares of Common Stock, par
value $1.00 per share. Holders of Common Stock are entitled to one vote for
each share of Common Stock held. All outstanding shares of Common Stock are
fully paid and nonassess able.
Holders of Common Stock are entitled to receive such dividends as are
declared by the Board of Directors out of funds legally available therefor.
WorldCorp has never paid and does not intend to pay cash dividends in the
foreseeable future on its Common Stock. In the event of liquidation, holders of
the Common Stock are entitled to receive pro rata any assets distributable after
payment of liabilities and the liquidation preference of any shares of any
series of preferred stock then outstanding. There are no conversion, preemptive
or redemption rights of the Common Stock.
Under the terms of the Indenture dated as of August 1, 1987 between
WorldCorp and Norwest Bank of Minneapolis, N.A. (the "1987 Indenture"), pursuant
to which 13 7/8%
24
<PAGE>
Subordinated Notes due 1997 (the "13 7/8% Subordinated Notes") were issued, the
Company is generally restricted in its ability to pay dividends or make
distributions on its capital stock if: (i) a default or an event of default
exists under the 1987 Indenture and is continuing; or (ii) Adjusted
Stockholders' Equity (as defined in the 1987 Indenture) is not a positive
amount; or (iii) the aggregate amount expended for such purpose and certain
other purposes since June 30, 1987 exceeds the sum of (A) 50% of the Company's
Consolidated Net Income since June 30, 1987 (or if such aggregate is a loss,
minus 100% of such loss), plus (B) the aggregate net proceeds from certain
issuances of capital stock since June 30, 1987, plus (C) $10 million. As of
March 31, 1994, Adjusted Stockholders' Equity was not a positive amount.
In May 1992, the Company issued $65.0 million of Convertible Subordinated
Debentures due 2004 (the "7% Convertible Debentures") under an Indenture dated
May 15, 1992 between WorldCorp and The First National Bank of Boston (the "1992
Indenture"). The 7% Convertible Debentures are convertible into shares of
Common Stock at $11.06 per share, subject to adjustment in certain events, and
bear an annual interest rate of 7%. Semiannual interest payments are due on May
15 and November 15. During the second and third quarters of 1992, the Company
used $47.1 million of the proceeds from this borrowing to retire a portion of
its 13 7/8% Subordinated Notes. Under the terms of the 1992 Indenture, the
Company is precluded from paying dividends or making distributions on its
capital stock if a default or an event of default exists under the 1992
Indenture and is continuing. The Company is not currently in default under the
1992 Indenture. The 1992 Indenture provides that distributions and dividends
may in no event exceed the sum of (a) 50% of cumulative Consolidated Net Income
(as defined) after December 31, 1991: (b) the aggregate net proceeds, including
the fair market value of property other than cash, of certain issuances after
December 31, 1991 of its capital stock; and (c) $27,800,000. Pursuant to this
restriction, as of March 31, 1995, the Company could not make distribution or
dividend payments.
The foregoing summary does not purport to be complete and is qualified in
its entirety by reference to the text of WorldCorp's Certificate of
Incorporation and By-Laws, the 1987 Indenture and the 1992 Indenture, copies of
each of which are exhibits to the Registration Statement and are incorporated
herein by reference.
25
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be
passed upon by Andrew M. Paalborg, Vice President and General Counsel of the
Company.
EXPERTS
The consolidated financial statements of WorldCorp and its subsidiaries as
of December 31, 1994 and 1993 and for each of the years in the three-year period
ended December 31, 1994, and the related financial statement schedule have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
covering the 1994 consolidated financial statements of the Company refers to
changes in the methods of accounting for postretirement benefits other than
pensions and income taxes.
The financial statements of US Order, Inc. as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994, and
the related financial statement schedule incorporated by reference herein and in
the Registration Statement have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
26
<PAGE>
No person is authorized to give any information
or to make any representation not contained or
incorporated by reference in this Prospectus, and
any information or representations not contained or
incorporated by reference herein must not be
relied upon as having been authorized by the
Company or the Selling Shareholders. This
Prospectus does not constitute an offer of any
securities other than the registered securities to
which it relates or an offer to any person in any
jurisdiction where such offer would be unlawful.
Neither the delivery of this Prospectus nor any WORLDCORP, INC.
sales made hereunder shall, under any
circumstances, create any implication that there 275,000 Shares
has been no change in the affairs of the Company of Common Stock
since the date hereof.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
Available Information 1
Incorporation of Certain Documents
by Reference 1
The Company 2
Risk Factors 6 PROSPECTUS
Use of Proceeds 20
Selling Shareholders 21
Plan of Distribution 23
Description of Common Stock 23
Legal Matters 25
Experts 25
</TABLE>
June _____, 1995
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<S> <C>
Registration fees $ 983.84
Legal expenses $20,000.00
Accounting fees and expenses $ 7,500.00
Stock Exchange Listing fee $ 1,500.00
Total $
</TABLE>
All such expenses will be borne by the registrant.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
WorldCorp, a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law, subject to the procedures and limitations
stated therein, to indemnify any person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in the defense of any threatened, pending or completed action, suit or
proceeding in which such person is made a party by reason of his or her being or
having been a director or officer of WorldCorp. The statute provides that such
indemnification is not exclusive of other rights or indemnification to which a
person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Certificate of Incorporation and
Bylaws of WorldCorp provide that WorldCorp shall indemnify its directors and
officers to the full extent permitted by the Delaware General Corporation Law.
WorldCorp is also empowered by Section 102(b) of the Delaware General
Corporation Law to include a provision in its Certificate of Incorporation that
limits a director's liability to WorldCorp or its stockholders for monetary
damages for breaches of his or her fiduciary duty except for (i) a breach of the
director's duty of loyalty to WorldCorp or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) improper dividend payments, stock repurchases or
redemptions; and (iv) any transaction from which the director derived an
improper personal benefit. Article 10 of WorldCorp's Certificate of
Incorporation includes such a provision.
II-1
<PAGE>
Policies of insurance are maintained by the Company under which
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been directors or officers of the Company.
The Company has entered into indemnification agreements with its
officers and directors that indemnify such officers and directors to the full
extent permitted by law against all expenses, judgments, fines or settlement
amounts incurred or paid by them in any action or proceeding, including any
action by or in the right of the Company on account of their service as a
director or officer of the Company.
ITEM 16. EXHIBITS
--------
4.1 Indenture dated as of August 1, 1987 between WorldCorp, Inc. and
Norwest Bank of Minneapolis, N.A., as Trustee. Filed as Exhibit 4.1 to
Amendment No. 2 to WorldCorp, Inc.'s Form S-2 Registration Statement
(Commission File No. 33-1358276) filed August 13, 1987 and
incorporated herein by reference.
4.2 First Supplemental Indenture dated as of March 1, 1988 between
WorldCorp, Inc. and Norwest Bank of Minneapolis, N.A. Filed as
Exhibit 4.2 to WorldCorp, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1988 and incorporated herein by
reference.
4.3 Second Supplemental Indenture dated as of February 22, 1994 between
WorldCorp, Inc. and Norwest Bank Minnesota, National Association.
(filed herewith)
4.4 Third Supplemental Indenture dated as of March 15, 1995 between
WorldCorp, Inc. and Norwest Bank Minnesota, National Association.
(filed herewith)
4.5 Indenture dated as of May 15, 1992 between WorldCorp, Inc. and The
First Bank of Boston, as Trustee. Filed as Exhibit 4.2 to WorldCorp,
Inc.'s Current Report on Form 8-K filed on July 15, 1992 and
incorporated herein by reference.
II-2
<PAGE>
4.6 First Supplemental Indenture dated as of February 22, 1994 between
WorldCorp, Inc. and The First National Bank of Boston, as Trustee.
(filed herewith)
4.7 Warrant Agreement dated as of December 7, 1993 between BNY Financial
Corporation and WorldCorp, Inc. Filed as Exhibit 10.48 to WorldCorp,
Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December
31, 1993 and incorporated herein by reference.
4.8 Stock Option Agreement dated as of April 1, 1995 between WorldCorp,
Inc. and Patrick F. Graham. (filed herewith)
5.1 Opinion of Andrew M. Paalborg, Vice President and General Counsel of
WorldCorp, Inc. dated June 14, 1995. (filed herewith)
23.1 Consent of KPMG Peat Marwick LLP dated June 14, 1995. (filed herewith)
23.2 Consent of Andrew M. Paalborg, Vice President and General Counsel of
WorldCorp, Inc. (included in the Opinion of Counsel filed as Exhibit
5.1 hereto).
24.1 Power of Attorney (included on signature page in this Registration
Statement).
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) that, insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue;
II-3
<PAGE>
(2) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) to file, during any period in which offers or sales are being
made, a post effective amendment to the registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(4) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof;
(5) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Herndon, Virginia, on this 15th day of June, 1995.
WORLDCORP, INC.
/s/ T. Coleman Andrews, III
-----------------------------------
By: T. Coleman Andrews, III
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of WorldCorp, Inc., a
Delaware corporation, do hereby constitute and appoint T. Coleman Andrews, III,
and Andrew M. Paalborg, and each of them, the lawful attorneys and agents or
attorney and agent, with power and authority to do any and all acts and things
and to execute any and all instruments which said attorneys and agents, and any
one of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933 as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereto, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents or any of them shall do or cause to be done
by virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite his name.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ T. Coleman Andrews, III Chief Executive Officer, June 15, 1995
- -------------------------------------- President and Director (Principal
T. Coleman Andrews, III Executive Officer and Principal
Financial and Accounting Officer)
/s/ William F. Gorog Chairman of the Board of Directors June 15, 1995
- -------------------------------------
William F. Gorog
/s/ James E. Colburn Director June 15, 1995
- -------------------------------------
James E. Colburn
/s/ Juan C. O'Callahan Director June 15, 1995
- -------------------------------------
Juan C. O'Callahan
/s/ Patrick F. Graham Director June 15, 1995
- -------------------------------------
Patrick F. Graham
/s/ Geoffrey S. Rehnert Director June 15, 1995
- -------------------------------------
Geoffrey S. Rehnert
/s/ John C. Backus Director June 15, 1995
- -------------------------------------
John C. Backus
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
4.3 Second Supplemental Indenture dated as
of February 22, 1994 between WorldCorp,
Inc. and Norwest Bank Minnesota,
National Association.
4.4 Third Supplemental Indenture dated as of
March 15, 1995 between WorldCorp, inc.
and Norwest Bank Minnesota, National
Association.
4.6 First Supplemental Indenture dated as of
February 22, 1994 between WorldCorp,
Inc. and The First National Bank of
Boston, as Trustee.
4.8 Stock Option Agreement dated as of April
1, 1995 between WorldCorp, Inc. and
Patrick F. Graham.
5.1 Opinion of Andrew M. Paalborg, Vice
President and General Counsel of
WorldCorp, Inc. dated June 15, 1995.
23.1 Consent of KPMG Peat Marwick LLP dated
June 15, 1995.
<PAGE>
Exhibit 4.3
WORLDCORP, INC.,
Issuer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee,
SECOND SUPPLEMENTAL INDENTURE
Dated as of February 22, 1994
to
INDENTURE
Dated as of August 15, 1987
Relating to
13 7/8% SUBORDINATED NOTES DUE
AUGUST 15, 1997
<PAGE>
THIS SECOND SUPPLEMENTAL INDENTURE is dated as of February 22, 1994,
and is between WORLDCORP, INC., a Delaware corporation, (the "Company"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (formerly Norwest Bank Minneapolis,
N.A.), as Trustee under the Indenture, as defined below (the "Trustee").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company and the Trustee executed and delivered an
Indenture dated as of August 15, 1987, as amended by a First Supplemental
Indenture dated as of March 1, 1988 (as amended, the "Indenture") providing for
the issuance of the Company's 13 7/8% Subordinated Notes due August 15, 1997
(the "Notes"); and
WHEREAS, in accordance with Section 10.02 of the Indenture, the
holders of a majority in aggregate principal amount of the Notes (the "Holders")
have consented to an amendment to Section 5.03(a) and the deletion of Section
5.13 of the Indenture; and
WHEREAS, all conditions and requirements necessary to make this Second
Supplemental Indenture a valid and binding instrument in accordance with its
terms have been performed, and the execution and delivery hereof have been
authorized in all respects;
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders, as follows:
ARTICLE I
Section 1.01. Amendment to Section 5.03(a). Section 5.03(a) of the
----------------------------
Indenture is hereby amended to read in its entirety as follows:
(a) The Company shall not and shall cause each of its Restricted
Subsidiaries not to, directly or indirectly, (i) pay or declare any
dividends or make any distributions (other than dividends or distributions
payable solely in shares of Qualified Capital Stock) on or in respect to any
Capital Stock of the Company or, except for payments to the Company or any
Restricted Subsidiary, any Restricted Subsidiary of the Company, (ii)
purchase, redeem or otherwise acquire or retire for value (other than solely
with shares of Qualified Capital Stock) any of the Capital Stock of the
Company or any Restricted Subsidiary or warrants to purchase Capital Stock
(other than Public Warrants or Private Warrants, the purchase, redemption or
other acquisition of which is governed by clauses (vi) and (vii) of this
Section 5.03), rights (other than convertible or exchangeable debt
securities) or options to acquire any Capital Stock of the Company or any
Restricted Subsidiary, (iii) make any Restricted Investment in any
Unrestricted Subsidiary, (iv) purchase, redeem or otherwise acquire or
retire for value any Permitted Exchange Indebtedness, (v) pay or set aside
for payment any principal, interest, premium or penalty, if any, on any
Permitted Exchange Indebtedness, (vi) purchase, redeem or otherwise acquire
or retire for value
<PAGE>
any Private Warrants, or (vii) purchase, redeem or otherwise acquire for
value Public Warrants other than pursuant to Section 8 of the Public Warrant
Agreement, if, at the time of any action referred to in clauses (a)(i)
through (viii) (individually and collectively, a "Restricted Payment"), or
after giving effect to such Restricted Payment, (x) a Default or an Event of
Default shall have occurred and be continuing, or (y) in the case of (i)
(other than the payment or declaration of dividends or distributions by
World Airways to its Stockholders or on Nonaffiliate Preferred Stock), (ii),
(iv) and (v) above, Adjusted Stockholders' Equity is not a positive amount.
Section 1.02. Deletion of Section 5.13. Section 5.13 of the
------------------------
Indenture is hereby deleted in its entirety to read as follows:
Section 5.13. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
[Deleted]
ARTICLE II
Miscellaneous Provisions
------------------------
Section 2.01. Terms Defined. All capitalized terms used herein shall
-------------
have the meanings assigned to them in the Indenture unless expressly defined
otherwise in this Second Supplemental Indenture.
Section 2.02. Indenture. Except as expressly amended hereby, the
---------
Indenture and Notes remain in full force and effect. Any references to the
Indenture in the Notes shall refer to the Indenture as amended.
Section 2.03. Governing Law. This Second Supplemental Indenture
-------------
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to the conflicts of laws rules thereof.
Section 2.04. Successors. All agreements of the Company and the
----------
Trustee in this Second Supplemental Indenture shall bind their respective
successors.
Section 2.05. Multiple Counterparts. The parties may sign multiple
---------------------
counterparts of this Second Supplemental Indenture. Each signed counterpart
shall be deemed an original, but all of them together represent the same
agreement.
-2-
<PAGE>
Section 2.06. Effectiveness. The provisions of this Second
-------------
Supplemental Indenture will take effect immediately upon its execution and
delivery by the Trustee and the Company in accordance with the provisions of
Section 10.2 of the Indenture.
Section 2.07. Recitals. The recitals of fact contained herein shall
--------
be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or adequacy of this Second Supplemental
Indenture or the due execution hereof by the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their corporate seals to be
hereunto affixed and attested, all as of the date first written above.
WORLDCORP, INC.
[SEAL]
Attest: /s/ Andrew M. Paalborg By: /s/ A. Scott Andrews
---------------------------- ---------------------------
Andrew M. Paalborg A. Scott Andrews
Secretary Chief Financial Officer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
[SEAL]
Attest: /s/ Daniel S. Pation By: /s/ Mimi Traynor
---------------------------- ----------------------------
Name: DANIEL S. PATION Name: MIMI TRAYNOR
Title: Title:
-3-
<PAGE>
STATE OF VIRGINIA )
) ss.:
COUNTY OF FAIRFAX )
On this 22nd day of February, 1994, before me personally appeared A. Scott
----
Andrews, Chief Financial Officer of WorldCorp, Inc. personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person who
executed the foregoing Second Supplemental Indenture as Chief Financial Officer
on behalf of WorldCorp, Inc. and acknowledged to me that WorldCorp, Inc.
executed it.
[NOTARY SEAL] /s/ Carol Sue Bengston
-----------------------------------
Notary Public Carol Sue Bengston
My commission expires: April 30, 1996
--------------------------------
I was commissioned a notary public as Carol Sue Peters
-4-
<PAGE>
STATE OF MINNESOTA )
)
COUNTY OF HENNEPIN )
--------
On this 23rd day of February, 1994, before me personally appeared
------
MIMI TRAYNOR , ASST VICE PRES. of Norwest Bank Minnesota,
- ----------------------------- -----------------------
National Association personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the foregoing Second
Supplemental Indenture as ASST VICE PRES. on behalf of Norwest Bank
------------------------------
Minnesota, National Association and acknowledged to me that Norwest Bank
Minnesota, National Association executed it.
[NOTARY SEAL] /s/ B J. Fisk
--------------------------------
Notary Public
My commission expires: 1-31-00
---------------------------------
-5-
<PAGE>
Exhibit 4.4
================================================================================
WORLDCORP, INC.,
ISSUER
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
TRUSTEE
================================
THIRD SUPPLEMENTAL INDENTURE
DATED AS OF MARCH 15, 1995
================================
================================================================================
Supplemental to the Indenture dated as of August 15, 1987,
relating to 13 7/8% Subordinated Notes Due August 15, 1987
<PAGE>
THIS THIRD SUPPLEMENTAL INDENTURE is dated as of March 15, 1995, and is
between WORLDCORP, INC., a Delaware corporation (the "Company") and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION (formerly Norwest Bank Minneapolis, N.A.),
as Trustee under the Indenture, as defined below (the "Trustee").
R E C I T A L S
WHEREAS, the Company and the Trustee executed and delivered an Indenture
dated as of August 15, 1987, as amended by a First Supplemental Indenture dated
as of March 1, 1988, and a Second Supplemental Indenture dated as of February
22, 1994 (as amended, the "Indenture"), providing for the issuance of the
Company's 13 7/8% Subordinated Notes due August 15, 1997 (the "Notes"); and
WHEREAS, in accordance with Section 10.02 of the Indenture, the holders
of a majority in aggregate principal amount of the Notes (the "Holders") have
consented to an amendment to Section 5.03(a); and
WHEREAS, all conditions and requirements necessary to make this Third
Supplemental Indenture a valid and binding instrument in accordance with its
terms have been performed, and the execution and delivery hereof have been
authorized in all respects;
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefits of the other and for the equal and ratable benefit of
the Holders, as follows:
ARTICLE I
Section 1.01. Amendment to Section 5.03(a). Section 5.03(a) of the
----------------------------
Indenture is hereby amended to read in its entirety as follows:
"Notwithstanding the above, the Company may purchase
500,000 shares of Capital stock of World Airways, Inc.
from Malaysian Helicopter Services, Berhard, a
Malaysian corporation, on or prior to April 1, 1995,
for an amount not to exceed $8,500,000.
ARTICLE II
Section 2.01. Terms Defined. All capitalized terms used herein shall
-------------
have the meaning assigned to them in the Indenture unless expressly defined
otherwise in this Third Supplemental Indenture.
Section 2.02. Indenture. Except as expressly amended hereby, the
---------
Indenture and Notes remain in full force and effect. Any references to the
Indenture in the Notes shall refer to the Indenture as amended.
<PAGE>
Section 2.03. Governing Law. This Third Supplemental Indenture shall be
-------------
governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of laws rules thereof.
Section 2.04. Successors. All agreements of the Company and the Trustee
----------
in this Third Supplemental Indenture shall bind their respective successors.
Section 2.05. Multiple Counterparts. The parties may sign multiple
---------------------
counterparts of this Third Supplemental Indenture. Each signed counterpart
shall be deemed an original, but all of them together represent the same
agreement.
Section 2.06. Effectiveness. The provisions of this Third Supplemental
-------------
Indenture will take effect immediately upon its execution and delivery by the
Trustee and the Company in accordance with the provisions of Section 10.2 of the
Indenture.
Section 2.07. Recitals. The recitals of fact contained herein shall be
--------
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or adequacy of this Third Supplemental
Indenture or the due execution hereof by the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, and their corporate seals to be
hereunto affixed and attested, all as of the date first written above.
WORLDCORP, INC.
[SEAL]
Attest: /s/ Andrew M. Paalborg By: /s/ T. Coleman Andrews, III
----------------------------- -----------------------------
Andrew M. Paalborg T. Coleman Andrews, III
Secretary President and Chief Executive Officer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
[SEAL]
Attest: /s/ Mary E. Traynor By: /s/ Raymond S. Haverstock
--------------------- ----------------------------
Name: MARY E. TRAYNOR Name: RAYMOND S. HAVERSTOCK
------------------- -------------------------
Title:Assistant Secretary Title: Assistant Vice President
------------------- ---------------------------
<PAGE>
STATE OF VIRGINIA
COUNTY OF FAIRFAX, to-wit:
On this 15th day of March, 1995, before me personally appeared T. Coleman
----
Andrews, III, President and Chief Executive Officer of WorldCorp, Inc.,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed the foregoing Third Supplemental Indenture as
President and Chief Executive Officer on behalf of WorldCorp, Inc. and
acknowledged to me that WorldCorp, Inc. executed it.
[NOTARIAL SEAL] /s/ Carol Sue Bengston
--------------------------------
NOTARY PUBLIC Carol Sue Bengston
My commission expires: April 30, 1996
---------------------
I was commissioned a notary public as Carol Sue Peters.
<PAGE>
STATE OF MINNESOTA
COUNTY OF Hennepin , to-wit
------------
On this 12th day of May, 1995, before me personally appeared
----
Raymond S. Haverstock, Assistant Vice President of Norwest Bank Minnesota,
- --------------------- -------------------------
National Association, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person who executed the foregoing Third
Supplemental Indenture as Assistant Vice President on behalf of Norwest Bank
------------------------
Minnesota, National Association, and acknowledged to me that Norwest Bank
Minnesota, National Association executed it.
[NOTARY SEAL] /s/ Theresa M. Stelter
-----------------------------
NOTARY PUBLIC
My commission expires: 1-31-2000
-----------------
<PAGE>
Exhibit 4.6
WORLDCORP, INC.,
Issuer,
and
THE FIRST NATIONAL BANK OF BOSTON
Trustee,
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 22, 1994
to
INDENTURE
Dated as of May 15, 1992
Relating to
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE is dated as of February 22, 1994,
and is between WORLDCORP, INC., a Delaware corporation, (the "Company"), and THE
FIRST NATIONAL BANK OF BOSTON, a national banking association, as Trustee under
the Indenture, as defined below (the "Trustee").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company and the Trustee executed and delivered an
Indenture dated as of May 15, 1992, (the "Indenture") providing for the issuance
of the Company's 7% Convertible Subordinated Debentures due 2004 (the
"Debentures"); and
WHEREAS, in accordance with Section 9.02 of the Indenture, the holders
of a majority in principal amount of the Debentures (the "Holders") have
consented to an amendment to Section 4.07 of the Indenture; and
WHEREAS, all conditions and requirements necessary to make this First
Supplemental Indenture a valid and binding instrument in accordance with its
terms have been performed, and the execution and delivery hereof have been
authorized in all respects;
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders, as follows:
ARTICLE I
Section 1.01. Amendment to Section 4.07. Section 4.07 of the
-------------------------
Indenture is hereby amended to read in its entirety as follows:
The Company shall not and shall cause each Subsidiary not to, directly
or indirectly, declare or pay any dividend or make any distribution on
or in respect of any of its Capital Stock or to its shareholders
(other than dividends or distributions payable solely in its Capital
Stock, other than Disqualified Stock, and other than payments to the
Company or any Subsidiary by any Subsidiary) or purchase, redeem or
otherwise acquire or retire for value, or permit any Subsidiary to
purchase or otherwise acquire for value, any Capital Stock or any
warrants, rights or options (including any securities convertible into
or exercisable or exchangeable for such Capital Stock, but not
including the Securities) of the Company or any Subsidiary
(collectively, "Restricted Payments") if, at the time of such
Restricted Payment, or after giving effect thereto, a Default or an
Event of Default shall have occurred and be continuing or shall occur
as a result thereof, provided, however, that such provisions shall not
-------- -------
prevent (i) the payment of any dividend within 60 days
<PAGE>
after the date of declaration thereof, if at said date of declaration
such payment complied with the provisions of this limitation on
dividends, (ii) the retirement of any shares of the Company's Capital
Stock by exchange for, or out of the proceeds of, the substantially
concurrent sale of other shares of its Capital Stock other than
Disqualified Stock, or (iii) any redemption of the Securities pursuant
to the terms thereof.
ARTICLE II
Miscellaneous Provisions
------------------------
Section 2.01. Terms Defined. All capitalized terms used herein shall
-------------
have the meanings assigned to them in the Indenture unless expressly defined
otherwise in this First Supplemental Indenture.
Section 2.02. Indenture. Except as expressly amended hereby, the
---------
Indenture and Debentures remain in full force and effect. Any references to the
Indenture in the Debentures shall refer to the Indenture as amended hereby.
Section 2.03. Governing Law. The laws of the State of New York shall
-------------
govern this First Supplemental Indenture without regard to principles of
conflicts of laws.
Section 2.04. Successors. All agreements of the Company and the
----------
Trustee in this First Supplemental Indenture shall bind their respective
successors.
Section 2.05. Multiple Counterparts. The parties may sign multiple
---------------------
counterparts of this First Supplemental Indenture. Each signed counterpart
shall be deemed an original, but all of them together represent the same
agreement.
Section 2.06. Effectiveness. The provisions of this First
-------------
Supplemental Indenture will take effect immediately upon its execution and
delivery by the Trustee and the Company in accordance with the provisions of
Section 10.2 of the Indenture.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their corporate seals to be
hereunto affixed and attested, all as of the date first written above.
WORLDCORP, INC.
[SEAL]
Attest: /s/ Andrew M. Paalborg By: /s/ A. Scott Andrews
----------------------- --------------------------
Andrew M. Paalborg A. Scott Andrews
Secretary Chief FinancialOfficer
THE FIRST NATIONAL BANK
OF BOSTON
[SEAL]
Attest: /s/ Eileen Bligh By: /s/ J.E. Mogavero
-------------------------- --------------------------
Name: Name:J.E. Mogavero
Title: Title: Authorized Officer
-3-
<PAGE>
STATE OF VIRGINIA )
) ss.:
COUNTY OF FAIRFAX )
On this 22nd day of February, 1994, before me personally appeared A. Scott
----
Andrews, Chief Financial Officer of WorldCorp, Inc. personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person who
executed the foregoing First Supplemental Indenture as Chief Financial Officer
on behalf of WorldCorp, Inc. and acknowledged to me that WorldCorp, Inc.
executed it.
/s/ Carol Sue Bengston
[NOTARY SEAL] --------------------------------------
Notary Public Carol Sue Bengston
My commission expires: April 30, 1996
------------------------------
I was commissioned a notary public as Carol Sue Peters.
-4-
<PAGE>
STATE OF MASS )
--------
)
COUNTY OF SUFFOLK )
-------
On this 23rd day of February, 1994, before me personally appeared
----
James E. Mogavero Authorized Officer of The First National Bank
- -------------------------, --------------------
of Boston personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person who executed the foregoing First Supplemental
Indenture as Authorized Officer on behalf of The First National Bank of Boston
------------------
and acknowledged to me that The First National Bank of Boston executed it.
/s/ Bernadette May
[NOTARY SEAL] --------------------------------------
Notary Public
My commission expires: 10/31/97
------------------------------
-5-
<PAGE>
Exhibit 4.8
WORLDCORP, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the 1st day of April, 1995 (the "Grant
Date") by and between WorldCorp, Inc., a Delaware corporation (the "Company"),
and Patrick F. Graham ("Optionee").
WITNESSETH:
-----------
RECITALS
- --------
A. The Board of Directors of WorldCorp (the "Board") has granted to
Optionee as of April 1, 1995 an option to purchase shares of the Company's
common stock ("Common Stock").
B. The Option granted to Optionee is not intended to be an incentive
stock option under Section 422 of the Internal Revenue Code and was not issued
under the WorldCorp, Inc. 1988 Stock Option Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. In accordance with the terms and conditions as
---------------
set forth in this Agreement, as of the Grant Date, Optionee was granted a
Nonqualified Stock Option (the "Option") to purchase up to 25,000 shares of the
Company's common stock, $1.00 par value (the "Option Shares") at an exercise
price of $4.56 per share.
2. Option Term. The Option will expire at the close of business on
-----------
April 1, 2003 (the "Expiration Date"), unless sooner terminated in accordance
with the provisions of this Agreement.
3. Option Nontransferable. The Option is not transferable or
----------------------
assignable by Optionee other than by will or by the laws of descent and
distribution. During the lifetime of Optionee, the Option shall be exercisable
only by Optionee.
<PAGE>
4. Dates of Exercise. So long as Optionee continues to serve as a
-----------------
Director of WorldCorp, Inc. the Option will be exercisable as to the Option
Shares within the specified term of the Option and pursuant to the Provisions of
this Agreement, as follows:
(a) the Option shall be come exercisable as to 5,208 of the
Option Shares on the Grant Date; and
(b) the Option shall become exercisable as to the remaining
19,792 in nineteen equal monthly installments of 1,041.68 Option Shares, the
final monthly installment vesting on October 28, 1996.
5. Termination of Membership on the Board.
--------------------------------------
If Optionee ceases for any reason (including death or disability) to
be a member of the Board of Directors of the Company (the "Board"), the Option
may, subject to the provisions of Section 4 hereof, be exercised (to the extent
the option was exercisable by Op tionee at the time of termination of his
membership on the Board) at any time within one year after the termination of
his membership on the Board; provided however, in no event shall the Option be
exercisable after the Expiration Date.
6. Privilege of Stock Ownership. The holder of the Option will have
----------------------------
none of the rights of a shareholder with respect to the Option Shares until such
individual has exercised the Option and has been issued a stock certificate for
the Option Shares.
7. Manner of Exercising Option. In order to exercise the Option
---------------------------
with respect to all or any part of the Option Shares for which the Option is at
the time exercisable, Optionee (or in the case of exercise after Optionee's
death, Optionee's executor, administrator, heir or legatee, as the case may be)
must take the following actions:
(i) Provide the Company written notice of such
exercise in accordance with Section 15 hereof, specifying the number of
Option Shares with respect to which the Option is being exercised;
(ii) Pay the aggregate exercise price for the pur
chased shares in one or more of the following alternative forms: (A) full
payment, in cash or cash equivalents, in the amount of the exercise price
for the Option Shares being purchased; (B) full payment in shares of Common
Stock (held for at least six months if acquired pursuant to an option) and
having a Fair Market Value on the day of exercise (as determined under the
terms of the Plan) equal to the exer cise price for the Option Shares being
purchased; (C) a combination of such shares of Common Stock and cash or
cash equivalents, equal in the aggregate to the
<PAGE>
exercise price for the Option Shares being purchased; or (D) delivery of a
properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price; and
(iii) Furnish the Company with appropriate docu
mentation that the person (or persons) exercising the Option, if other than
Optionee, has the right to exercise the Option.
For purposes of this Section 7 and Section 11 hereof, the term "Fair Market
Value" shall have the same meaning as ascribed to such term in the WorldCorp,
Inc. 1988 Stock Option Plan.
8. Adjustments.
-----------
If any change is made to the Common Stock (whether by reason of merger,
consolida tion, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or other change in capital
structure made without receipt of consideration), the Board shall make equitable
adjustments to the number and class of shares subject to the Option to reflect
the effect of such change upon the Company's capital structure, and will make
equitable adjustments to the exercise price per share of the Option.
9. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of the Option and the issuance of Option Shares
upon such exercise is subject to compliance by the Company and Optionee with all
applicable regulations of any stock exchange on which shares of the Company's
common stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of the Option, Optionee will
execute and deliver to the Company such representations in writing as may be
requested by the Company so that it may comply with the applicable requirements
of federal and state securities laws.
10. Liability of the Company.
------------------------
The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale
<PAGE>
of any common stock pursuant to the Option will relieve the Company of any
liability with respect to the non-issuance or sale of the common stock as to
which such approval is not obtained.
11. No Right to Remain on Board. Nothing in this Agreement confers
---------------------------
upon Optionee any right to continued membership on the Board.
12. Withholding.
-----------
(a) To the extent federal, state and local income and employment
tax withholding requirements should apply to the exercise of this Option,
Optionee hereby agrees to make appropriate arrangements with the Company for the
satisfaction of such withholding requirements.
(b) Any withholding obligation arising from exercise of the
Option may be satisfied by any of the following means or by a combination of
such means: (a) tendering a cash payment; (b) authorizing the Company to
withhold from the Common Stock otherwise issuable to Optionee as the result of
the exercise of the Option, a number of shares having a Fair Market Value, as of
the date the withholding tax obligation arises, less than or equal to the amount
of the withholding tax obligation; or (c) delivering to the Company already
owned and unencumbered shares of Common Stock having a Fair Market Value, as of
the date the withholding tax obligation arises, less than or equal to the amount
of the withholding tax obligation.
13. Other Restrictions. Upon any exercise of the Option, the Board
------------------
may require Optionee to represent to and agree with the Company in writing that
the shares are being acquired without a view to distribution thereof. The
certificates for such shares may include any legend which the Board deems
appropriate to reflect any restrictions on transfer determined by the Committee
to be necessary or appropriate under applicable securities laws.
All certificates for shares of common stock delivered pursuant to
exercise of the Option shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange upon which the common stock is then listed, and any applicable federal
or state securities law, and the Committee may cause a legend or legends to be
put on any such certificate to make appropriate reference to such restrictions.
14. Headings. The headings of Sections herein are included solely
--------
for convenience of reference and shall not affect the meaning or interpretation
of any of the provisions of this Agreement.
<PAGE>
15. Notices. Any notice required to be given or delivered to the
-------
Company under the terms of this Agreement will be in writing and addressed to
the Company in care of its Secretary at 13873 Park Center Road, Suite 490,
Herndon, Virginia 22071. Any notice required to be given or delivered to
Optionee will be in writing and addressed to Optionee at the address indicated
below Optionee's signature line on this Agreement. All notices will be deemed
to have been given or delivered upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
16. Governing Law. The interpretation, performance, and enforcement
-------------
of this Agreement will be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate on its behalf by its duly authorized officer and Optionee
has also executed this Agreement in duplicate, all as of the day and year
indicated above.
WorldCorp, Inc.
By /s/ T. Coleman Andrews, III
---------------------------
T. Coleman Andrews, III
Chief Executive Officer
and President
/s/ Patrick F. Graham
---------------------------
Optionee
Address:
-------------------
-------------------
<PAGE>
EXHIBIT 5.1
June 15, 1995
WorldCorp, Inc.
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
Re: Registration Statement on Form S-3
----------------------------------
Dear Ladies and Gentlemen:
I am Vice President and General Counsel of WorldCorp, Inc., a Delaware
corporation (the "Company"). The Company has filed a Registration Statement on
Form S-3 (the "Registration Statement") with the Securities and Exchange
Commission relating to (i) 25,000 shares of common stock, par value $1.00 per
share (the "Common Stock"), of WorldCorp, Inc. ("WorldCorp" and, together with
its subsidiaries, the "Company"), issuable upon exercise of an option (the
"Option") pursuant to the Option Agreement dated April 1, 1995 (the "Option
Agreement") granted Patrick F. Graham, a director of WorldCorp and (ii) 250,000
shares of Common Stock issuable upon exercise of 250,000 warrants ("Warrants")
issued to BNY Financial Corporation, a New York corporation ("BNYFC"), pursuant
to the Warrant Agreement (the "Warrant Agreement") dated as of December 7, 1993
between WorldCorp and BNYFC. The shares of Common Stock issuable upon exercise
of the Option and Warrants are collectively referred to herein as the "Shares".
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, I have reviewed such documents as I
have deemed necessary or appropriate as a basis for the opinion set forth below.
In my exami nation, I have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
me as originals, the conformity to original documents of all documents submitted
to me as certified or photostatic copies, and the authenticity of the originals
of such copies. As to any facts material to this opinion that I did not
independently establish or verify, I have relied upon representations or
certificates of the officers and directors of the Company.
I am a member of the District of Columbia Bar, Virginia Bar and New
York Bar and I express no opinion as to the laws of any other jurisdiction
except the General Corporation Law of the State of Delaware.
Based upon the foregoing, and subject to the qualifications set forth
herein, I am of the opinion that the Shares have been duly and validly
authorized and when the certificates for the Shares have been duly executed,
delivered and paid for in accordance with the Option Agreement or the Warrant
Agreement, as the case may be, the Shares will be duly and validly issued, fully
paid and nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of my name in the Prospectus that is a
part of the Registration Statement.
Very truly yours,
/s/ Andrew M. Paalborg
Andrew M. Paalborg
Vice President and General Counsel
<PAGE>
EXHIBIT 23.1
Consent of Independent Accountants
The Board of Directors
WorldCorp, Inc.:
We consent to the use of our report included in WorldCorp's Annual Report on
Form 10-K for the year ended December 31, 1994, incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the prospectus.
Our report on the consolidated financial statements refers to changes in the
methods of accounting for postretirement benefits other than pensions and income
taxes.
We consent to the use of our report with respect to the balance sheets of US
Order, Inc. as of December 31, 1994 and 1993, and the related statements of
operations, stockholders' equity (deficit) and cash flows and the related
financial statement schedule for each of the years in the three-year period
ended December 31, 1994, dated January 20, 1995, except as to note 4(b), which
is as of February 16, 1995, and note 13, which is as of April 6, 1995,
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Washington, D.C.
June 15, 1995
