<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
WorldCorp, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO OF WORLDCORP]
1996
Annual
Meeting
<PAGE>
April 18, 1996
Dear Stockholder:
We cordially invite you to attend your Company's Annual Meeting of
Stockholders to be held on Wednesday, May 22, 1996. It has been an exciting
year at WorldCorp with the initial public offerings at both US Order and World
Airways. Enclosed are a proxy statement and a form of proxy. Please note that
the meeting will commence at 8:30 a.m. at the Hyatt Dulles located at 2300
Dulles Corner Boulevard, Herndon, Virginia 22071.
At this meeting we will ask the Stockholders: (i) to elect four Class II
Directors to serve until the 1998 Annual Meeting; (ii) to approve the 1996
WorldCorp Non-Employee Directors Stock Retainer Plan; and (iii) to ratify the
selection of KPMG Peat Marwick LLP as WorldCorp's independent public accountants
for the year ending December 31, 1996.
We value your participation by voting your shares on matters that come
before the meeting. Please follow the instructions on the enclosed proxy to
ensure representation of your shares at the meeting.
Sincerely,
T. Coleman Andrews, III
Chief Executive Officer and President
<PAGE>
WORLDCORP, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 22071
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 22, 1996
To the Stockholder Addressed:
WorldCorp, Inc. will hold its Annual Meeting of Stockholders at 8:30 a.m.
at the Hyatt Dulles located at 2300 Dulles Corner Boulevard, Herndon, Virginia
22071 on May 22, 1996, for the following purposes:
1. To elect four Class II Directors to serve until the 1998 Annual
Meeting of Stockholders, and until their successors have been duly
elected and qualified;
2. To approve the 1996 WorldCorp Non-Employee Directors Stock
Retainer Plan;
3. To ratify the selection of KPMG Peat Marwick LLP as independent
certified public accountants for the Company for the year ending
December 31, 1996; and
4. To act upon such other matters as may properly come before the
meeting.
The record date for the determination of stockholders entitled to vote at
the meeting is March 25, 1996, and only stockholders of record at the close of
business on that date will be entitled to vote at this meeting and any
adjournment thereof.
Whether or not you plan to attend the stockholders' meeting, please follow
the instructions on the enclosed proxy to ensure representation of your shares
at the meeting. You may revoke your proxy at any time prior to the time it is
voted.
Herndon, Virginia By Order of the Board of Directors,
April 18, 1996
Andrew M. Paalborg
Vice President and General Counsel
<PAGE>
WORLDCORP, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 22071
PROXY STATEMENT
This proxy statement is furnished to stockholders in connection with
the solicitation of proxies by the Board of Directors of WorldCorp, Inc.
("WorldCorp" or the "Company") for use at the Annual Meeting of Stockholders to
be held on Wednesday, May 22, 1996, and any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders
and described in detail herein. The meeting will be held at 8:30 a.m. at the
Hyatt Dulles located at 2300 Dulles Corner Boulevard, Herndon, Virginia 22071.
All properly executed proxies will be voted in accordance with the
instructions contained thereon, and if no choice is specified, the proxies will
be voted for the election of all Class II Directors in this proxy statement, for
the 1996 WorldCorp Non-Employee Directors Stock Retainer Plan (the "Directors
Retainer Plan") and in favor of the appointment of KPMG Peat Marwick LLP as
independent auditors. Any proxy may be revoked by the stockholder at any time
before it is exercised by giving written notice to that effect to the Secretary
of the Company or by signing a later-dated proxy. Stockholders who attend the
meeting may revoke any proxy previously granted and vote in person.
This proxy statement and the accompanying proxy are being mailed to the
stockholders on or about April 18, 1996.
PURPOSE OF MEETING
At the meeting, the Board of Directors will ask stockholders to (1)
elect four Class II Directors to serve until the 1998 Annual Meeting of
Stockholders, and until their successors are duly elected and qualified, (2)
approve the Directors Retainer Plan, and (3) ratify the selection of KPMG Peat
Marwick LLP as independent certified public accountants for the Company for the
year ending December 31, 1996. In addition, the stockholders will act upon such
other matters as may properly come before the meeting.
VOTING
General
- -------
Only holders of record of the Company's Common Stock, par value $1.00
per share ("Common Stock"), at the close of business on March 25, 1996, will be
entitled to vote at the meeting. On March 25, 1996, 16,393,388 shares of Common
Stock were outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote.
Shares of Common Stock represented by proxies received in the
accompanying form that are properly executed and returned to the Company will be
voted at the Annual Meeting of Stockholders in accordance with the stockholders'
instructions contained in such proxies. Where no such instructions are given,
proxy holders will vote such shares in accordance with the recommendations of
the Board of Directors. The proxy holders will also vote such shares at their
discretion with respect to such other matters as may properly come before the
meeting.
<PAGE>
A quorum at the Annual Meeting will consist of the presence, in person
or by proxy, of at least a majority of the shares of Common Stock outstanding on
the record date and entitled to vote at the Annual Meeting. Each stockholder
may cast one vote per share owned by such stockholder for each of four nominees
for Class II Director. The four nominees receiving the greatest number of votes
will be elected. In calculating the vote, broker non-votes will be disregarded
and will have no effect on the outcome of the vote. The affirmative vote of a
majority of shares voting at the meeting is required to approve the Directors
Retainer Plan and to ratify the selection of KPMG Peat Marwick LLP. In
determining whether the Directors Retainer Plan and the selection of KPMG Peat
Marwick LLP have received the requisite number of affirmative votes, abstentions
and broker non-votes will be counted and will have the same effect as a vote
against the plan and against KPMG Peat Marwick LLP. The Company does not know
of any matters to be acted upon at the meeting other than the three items
described in this Proxy Statement. Any stockholder has the power to revoke a
proxy at any time before it is voted.
THE COMPANY
WorldCorp owns a majority position in World Airways, an air
transportation company, and in US Order, an interactive information and
transaction processing company.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS
Principal Stockholders
- ----------------------
The following are the only persons known to the Company who are
beneficial owners of more than five percent of Common Stock as of December 31,
1995 (except as otherwise noted). With respect to the information set forth
below, the Company has relied upon Schedule 13D or Schedule 13G filings and
information received from the persons listed.
<TABLE>
<CAPTION>
Name of Beneficial Address of Amount and Nature of Percent
Owner Beneficial Owner Beneficial Ownership/1/ of Class/1/
- ------------------- ---------------- ----------------------- -----------
<S> <C> <C> <C>
Ganz Capital 2875 N.E. 191st Street 1,975,450/2/ 12%
Management, Inc. Penthouse I
North Miami Beach, FL 33180
Morgan Stanley 1585 Broadway 1,928,200/3/ 11.8%
Group, Inc. New York, NY 10036
T. Rowe Price 100 East Pratt Street 985,000/4/ 6.0%
Associates, Inc. Baltimore, MD 21202
McCullough, Andrews 101 California Street 853,797/5/ 5.2%
& Cappiello, Inc. Suite 4250
San Francisco, CA 94111
The Equitable Companies 787 Seventh Avenue 815,000/6/ 5.0%
Incorporated New York, NY 10019
</TABLE>
- -------------------------
Footnotes
/1/ Beneficial ownership as reported in the table has been determined in
accordance with Securities and Exchange Commission ("SEC") regulations
and includes shares of Common Stock which may be acquired within 60 days
of December 31, 1995, upon the exercise of outstanding stock options and
warrants and the conversion of the Company's 7% Convertible Subordinated
Debentures due May 15, 2004 (the "Debentures"). In accordance with Rule
13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"),
shares of Common Stock issuable upon the exercise of such options and
warrants and upon conversion of such Debentures are deemed outstanding
for purposes of computing the percentage of Common Stock owned by the
beneficial owner thereof listed in the table, but are not deemed
outstanding for purposes of computing the percentage of outstanding
Common Stock owned by any other stockholder. Except as otherwise stated
below, the named persons have sole voting and investment power with
regard to the shares shown as owned by such person. Calculation of the
Percent of Class is based on 15,429,114 shares of Common Stock
outstanding as of December 31, 1995.
3
<PAGE>
/2/ As reported to the Company by (i) Charles M. Ganz, and (ii) Ganz Capital
Management, Inc., a registered investment adviser ("GCM") on April 4,
1996. Beneficial ownership calculation is based on Ganz Capital
Management, Inc.'s beneficial ownership of 1,611,268 shares of Common
Stock and $4,028,000 aggregate principal amount of the Debentures at an
initial conversion price of $11.06. By virtue of his direction and
control over GCM, Charles B. Ganz, President of GCM, may be deemed to be
the beneficial owner of these securities.
/3/ As reported in Amendment No. 1 to Schedule 13G dated February 13, 1996
filed jointly by Morgan Stanley Group, Inc. and Morgan Stanley Asset
Management Ltd., which beneficially owns 1,914,7000 (11.8%) shares of
Common Stock.
/4/ As reported in the Schedule 13G dated February 14, 1996 filed jointly by
T. Rowe Price Associates, Inc. and T. Rowe Price New Horizons Fund, Inc.
These securities are owned by various individual and institutional
investors including the T. Rowe Price New Horizons Fund, Inc. (which
owns 890,000 shares representing 5.5% of the shares of the outstanding
Common Stock), as to which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of
the reporting requirements of the Exchange Act, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates, expressly disclaims that it is, in fact, the beneficial
owner of such securities.
/5/ As reported in Schedule 13G dated February 14, 1996, filed jointly by
(i) McCullough, Andrews & Cappiello, Inc., a registered investment
adviser, and (ii) Robert F. McCullough, David H. Andrews and Frank A.
Cappiello, Jr., the shareholders of McCullough, Andrews & Cappiello,
Inc. Beneficial ownership calculation is based on McCullough, Andrews &
Cappiello, Inc.'s beneficial ownership of $9,443,000 aggregate principal
amount of the Debentures at an initial conversion price of $11.06.
/6/ As reported in Schedule 13G dated February 9, 1996 filed jointly by the
Equitable Life Assurance Society of the United States (339,300 shares of
Common Stock) and Alliance Capital Management L.P. (475,700) shares of
Common Stock.
4
<PAGE>
Security Ownership of Directors and Executive Officers
- ------------------------------------------------------
The following table sets forth information concerning the beneficial
ownership of WorldCorp's Common Stock ("WC C.S."), World Airways' common stock
("WA C.S.") and US Order common stock ("USO C.S.") as of March 31, 1996, for (a)
each director and nominee for director; (b) each executive officer; and (c)
directors and executive officers as a group.
<TABLE>
<CAPTION>
Name of Beneficial Amount and Nature of Title of Percent of
Owner Beneficial Ownership/1/ of Class/1/ Class/1/
- ------------------- ----------------------- ----------- ----------
<S> <C> <C> <C>
William F. Gorog 715,536/2/ WC C.S. 4.8
481,212/3/ USO C.S. 3.0
T. Coleman Andrews, III 557,992/4/ WC C.S. 3.3
11,500/5/ USO C.S. *
10,000/6/ WA C.S. *
James E. Colburn 343,556/7/ WC C.S. 2.6
3,000/8/ WA C.S. *
Gideon Argov 9,375/9/ WC C.S. 2.4
Patrick F. Graham 43,750/10/ WC C.S. *
6,750/11/ USO C.S. *
John C. Backus 0/12/ WC C.S. *
677,778/13/ USO C.S. 4.1
Geoffrey S. Rehnert 25,000/14/ WC C.S. *
6,250/15/ USO C.S. *
Jack F. Kemp 12,500/16/ WC C.S. *
Charles W. Pollard 150,022/17/ WC C.S. 1.5
108,000/18/ WA C.S. *
Andrew M. Paalborg 466,839/19/ WC C.S. 2.8
Directors and Executive
Officers as a Group
WorldCorp (ten persons) 1,751,208/20/ WC C.S. 10.7
US Order (five persons) 1,183,490 USO C.S. 7.5
World Airways (two persons) 121,000 WA C.S. 1
</TABLE>
* Individual is the beneficial owner of less than one percent (1%) of
outstanding common stock.
5
<PAGE>
- -------------------------
Footnotes
/1/ Beneficial ownership as reported in the table has been
determined in accordance with SEC regulations and includes shares of
Common Stock, World Airways common stock and US Order common stock which
may be acquired within 60 days of March 31, 1996, upon the exercise of
outstanding stock options and warrants. In accordance with Rule 13d-3 of
the Exchange Act, shares of common stock issuable upon the exercise of
such options and warrants are deemed outstanding for purposes of
computing the percentage of common stock owned by the beneficial owner
thereof listed in the table, but are not deemed outstanding for purposes
of computing the percentage of outstanding common stock owned by any
other stockholder. Except as otherwise stated below, the named persons
have sole voting and dispositive power with regard to the shares shown
as owned by such person. The latest information available for the
WorldCorp Employee Savings and Stock Ownership Plan ("ESSOP") is as of
the end of the plan year, December 31, 1995. Calculation of the Percent
of Class of Common Stock is based on 16,395,388 shares of Common Stock
outstanding as of March 31, 1996; calculation of the Percent of Class of
US Order common stock is based on 15,864,302 shares of US Order common
stock outstanding as of March 31, 1996; and calculation of the Percent
of Class of World Airways common stock is based on 12,000,064 shares of
World Airways common stock outstanding as of March 31, 1996. For a
discussion of considerations relevant to calculating the beneficial
ownership of the directors and executive officers as a group, please see
footnote 19.
/2/ Consists of (i) 200,000 shares of Common Stock issuable upon the
exercise of stock options granted to Mr. Gorog under the 1988 Stock
Option Plan, (ii) 228,855 shares of Common Stock held directly, and
(iii) 286,681 shares of Common Stock held by the ESSOP, as to which Mr.
Gorog exercises shared voting and investment power as one of three
trustees of the ESSOP. Mr. Gorog disclaims beneficial ownership of
shares held by the ESSOP.
/3/ Consists of (i) 10,000 shares of US Order common stock held by Mr.
Gorog's wife; and (ii) 471,212 shares of US Order common stock issuable
to Mr. Gorog upon the exercise of stock options exercisable through June
1, 1996 granted under US Order's Stock Option Plan (the "US Order Stock
Option Plan").
/4/ Consists of (i) 535,000 shares of Common Stock issuable to Mr. Andrews
upon the exercise of stock options granted to Mr. Andrews under the 1988
Stock Option Plan, (ii) 4,139 shares of Common Stock owned directly by
Mr. Andrews, and (iii) 18,853 shares of Common Stock allocated to Mr.
Andrews' account under the ESSOP.
/5/ Consists of 11,500 shares of US Order common stock owned directly by Mr.
Andrews.
/6/ Consists of 10,000 shares of World Airways common stock owned directly
by Mr. Andrews.
/7/ Consists of (i) 46,875 shares of Common Stock issuable to Mr. Colburn
upon the exercise of stock options granted to Mr. Colburn under the 1988
Stock Option Plan, (ii) 286,681 shares of Common Stock held by the
ESSOP, as to which Mr. Colburn exercises shared voting and investment
power as one of the three trustees of the ESSOP, and (iii) 10,000 shares
of Common Stock held directly by Mr. Colburn. Mr. Colburn disclaims
beneficial ownership of shares held by the ESSOP.
6
<PAGE>
/8/ Consists of 3,000 shares of World Airways common stock owned directly by
Mr. Colburn.
/9/ Consists of (i) 9,375 shares of Common Stock issuable to Mr. Argov upon
the exercise of stock options granted to Mr. Argov under the 1988 Stock
Option Plan.
/10/ Consists of 43,750 shares of Common Stock issuable to Mr. Graham upon
the exercise of stock options granted to Mr. Graham under the 1988 Stock
Option Plan.
/11/ Includes 6,250 shares of US Order common stock issuable to Mr. Graham
upon the exercise of options granted to Mr. Graham exercisable through
June 1, 1996.
/12/ On June 15, 1995, Mr. Backus exercised his remaining 14,333 WorldCorp
stock options that had been granted to him by the Company in November
1990.
/13/ Includes 637,500 shares of US Order common stock issuable to Mr. Backus
upon the exercise of stock options exercisable through June 1, 1996 and
options to purchase 15,278 shares transferred by Mr. Backus to his son,
John C. Backus, III exercisable through June 1, 1996.
/14/ Consists of 25,000 shares of Common Stock issuable to Mr. Rehnert upon
the exercise of stock options granted to Mr. Rehnert under the 1988
Stock Option Plan.
/15/ Consists of 6,250 shares of US Order common stock issuable to Mr.
Rehnert upon the exercise of options exercisable through June 1, 1996
granted to Mr. Rehnert.
/16/ Consists of 12,500 shares of Common Stock issuable to Mr. Kemp upon the
exercise of stock options granted to Mr. Kemp under the 1988 Stock
Option Plan.
/17/ Consists of (i) 130,000 shares of Common Stock issuable to Mr. Pollard
upon the exercise of warrants granted to Mr. Pollard in 1989 expiring
August 31, 1997, (ii) 19,022 shares of Common Stock allocated to Mr.
Pollard's account under the ESSOP, and (iii) 1,000 shares of Common
Stock owned through an IRA account. Upon the execution of Mr. Pollard's
employment agreement, which was effective January 1, 1995, Mr. Pollard
agreed to cancel options to purchase 100,000 shares of Common Stock at
an exercise price of $9.64 in consideration for the grant to him of
options to purchase 250,000 shares of the common stock of World Airways
at an exercise price of $11.00 per share. Please see "Contracts and
Termination of Employment and Change in Control Arrangements" below.
/18/ Consists of (i) 8,000 shares of World Airways common stock owned
directly by Mr. Pollard, and (ii) 100,000 shares of World Airways common
stock issuable to Mr. Pollard upon the exercise of options granted to
him under the 1995 World Airways Stock Option Plan.
/19/ Consists of (i) 108,611 shares of Common Stock issuable to Mr. Paalborg
upon the exercise of stock options granted to him under the 1988 Stock
Option Plan, (ii) 7,043 shares of Common Stock allocated to Mr.
Paalborg's account under the ESSOP, and (iii) 286,681 shares of Common
Stock held by the ESSOP, as to which Mr. Paalborg exercises shared
voting and investment power as one of three trustees of the ESSOP. Mr.
Paalborg disclaims beneficial ownership of shares held by the ESSOP.
7
<PAGE>
/20/ The 286,681 shares of Common Stock held by the ESSOP are reflected in
the individual holdings of each of the ESSOP's three trustees: Messrs.
Gorog, Colburn and Paalborg. These 286,681 shares of Common Stock held
by the ESSOP are only reflected once, however, in the aggregate
beneficial ownership of the directors and executive officers as a group.
Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's directors and executive officers, and persons who own more than 10% of
its Common Stock, to file with the SEC initial reports of ownership of the
Company's equity securities and to file subsequent reports when there are
changes in such ownership. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company, all Section 16(a) filing
requirements applicable to its greater than 10% beneficial owners, directors and
executive officers were complied with in 1995.
BOARD OF DIRECTORS
The Board of Directors of the Company is responsible for establishing
broad corporate policies and for the overall performance of the Company. The
Board held a total of five meetings during the year ended December 31, 1995;
each director attended each meeting. To manage the complex nature of the
Company's business effectively, the Board of Directors has delegated certain
authority to committees of the Board.
The Board has authorized its Executive Committee to exercise all of its
power and authority when the full Board is unable to meet, except for certain
fundamental responsibilities, such as the declaration of dividends, that are
reserved for the Board. The members of the Executive Committee are William F.
Gorog (Chairman), T. Coleman Andrews, III, and Patrick F. Graham.
The Audit Committee recommends to the Board of Directors the auditing
firm to be selected each year as independent auditors of the Company's financial
statements and to perform services related to the completion of such audit. The
Audit Committee also has responsibility for (i) reviewing the scope and results
of the audit with the independent auditors, (ii) reviewing the Company's
financial condition and results of operations with management and the
independent auditors, (iii) considering the adequacy of the internal accounting
and control procedures of the Company, and (iv) reviewing any non-audit services
and special engagements to be performed by the independent auditors. The Audit
Committee also reviews, at least once each year, the terms of all material
transactions and arrangements between the Company and its affiliates. The
current members of the Audit Committee, none of whom is an employee of the
Company, are James E. Colburn (Chairman) and Patrick F. Graham. The Audit
Committee met six times in 1995.
The Board has also assigned certain responsibilities relating to
employee compensation to the Compensation Committee. The principal duties of the
Compensation Committee are to review key employee compensation policies, plans,
and programs; to monitor performance and compensation of officers of the Company
and other key employees; to prepare recommendations and periodic reports to the
Board concerning such matters; and to administer the Company's management
incentive compensation plans, including its stock option plan. In 1995, the
members of the Compensation Committee, none of whom is an employee of the
Company, were James E. Colburn (Chairman), Patrick F. Graham, and Geoffrey S.
Rehnert. The Compensation Committee met four times in 1995.
Pursuant to the Amended and Restated WorldCorp, Inc. 1988 Stock Option
Plan (the "Option Plan"), each director of the Company who is not an executive
of the Company was granted options to purchase 25,000 shares of Common Stock
upon his election to the Board under the terms of the Option Plan. Accordingly,
Mr. Gideon Argov
8
<PAGE>
was granted options to purchase up to 25,000 shares of Common Stock upon his
appointment to the Board of Directors of the Company on August 23, 1995. The
Option Plan was further amended by the Company's shareholders at a Special
Meeting on August 19, 1994, to provide that each non-employee Director upon
election to subsequent two-year terms on the Board would receive additional
grants of options for 25,000 shares of Common Stock upon each reelection. In
1995, the full Board of Directors determined to amend the Option Plan to provide
that non-employee Directors will only be granted options under the Option Plan
to purchase 25,000 shares of Common Stock upon their initial election or
appointment to the Board of Directors, and an additional discretionary option
grant may be made of up to 25,000 options. Under the Option Plan, these options
vest in equal monthly installments over a two year period commencing on the date
of a director's election or appointment to the Board, and the exercise price for
these options is set at the average closing price on the New York Stock Exchange
for the Common Stock for the thirty trading day period preceding the grant date
of the option. Additionally, until June 30, 1996, each director who is not an
executive of the Company will receive an annual fee of $25,000 (payable
quarterly in advance) for serving as a director of the Company. Directors are
compensated at a daily rate of $750 for participating in committee meetings in
excess of four meetings per year.
Upon receipt of shareholder approval of the Directors Retainer Plan at the
Company's 1996 Annual Shareholders Meeting, effective July 1, 1996, each non-
employee director of the Company will be paid his annual fee of $25,000 in
quarterly installments (payable in advance) of shares of Common Stock. The
number of shares of Common Stock to be received by the non-employee directors
each quarter will be valued at the average closing price on the New York Stock
Exchange for the Common Stock, for the thirty trading day period preceding the
first day of the new quarter.
9
<PAGE>
ITEM NO. 1 - ELECTION OF DIRECTORS
Class II Directors will be elected to serve until the 1998 Annual Meeting
and until their successors are duly elected and qualified. Unless directed to
do otherwise, the proxy holders intend to vote all shares for which they hold
proxies for the nominees set forth below. Although it is not contemplated that
any nominee will decline or be unable to serve, if either occurs prior to the
Annual Meeting, the Board will select a substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE WITH AUTHORITY FOR THE PROXY HOLDERS TO
VOTE FOR THE NOMINEES NAMED BELOW OR THEIR SUBSTITUTES AS SET FORTH HEREIN.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
Term of Office Expiring at the 1998 Annual Meeting
<TABLE>
<CAPTION>
Name and Age Past Five Years' Principal Occupation(s) and Other Directorships
- ------------ ----------------------------------------------------------------
<S> <C>
John C. Backus, 37 Mr. Backus was appointed a Director of WorldCorp in August, 1994.
Mr. Backus has worked with US Order since its inception in 1990 and has
served as President, Chief Operating Officer and a director of US Order
since 1994. Prior to working with US Order, Mr. Backus worked for six
years at WorldCorp and its subsidiaries holding a variety of executive
positions including vice president of corporate development, vice
president of finance, and vice president of sales and marketing at a
Worldcorp subsidiary. Prior to joining WorldCorp, Mr. Backus worked at
Bain & Company, Inc., a worldwide strategy consulting firm with approximately
1,200 employees, in its consulting and venture capital groups where he
focused on consumer products and services. Mr. Backus serves on the Board
of Directors of US Order, Visa InterActive and Home Financial Network, Inc.
He received both his B.S. and M.B.A. from Stanford University.
James E. Colburn, 72 Mr. Colburn served as a director of World Airways from 1985 to 1987 and has
served as a director of WorldCorp since 1987. Mr. Colburn served as President
of Aviation Consulting, Inc. from October 1982 to July 1986 and is currently
retained by Aviation Consulting, Inc. as a consultant. From 1979 to 1982 he
was Vice President--Operations and Maintenance of Wien Air Alaska.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Geoffrey S. Rehnert, 38 Mr. Rehnert is a Managing Director of Bain Capital, Inc., a private equity
investment firm, and was elected a director of both WorldCorp and US Order
in 1994. Mr. Rehnert joined Bain Capital at its inception in 1984 and became
a partner in 1986. Prior to joining Bain Capital, Mr. Rehnert worked as a
consultant with Bain & Company. He currently serves as a director of FTD
Holdings, Inc., ICON Health & Fitness, Inc., and GT Bicycles, Inc.
Gideon Argov, 39 Mr. Argov was elected President and CEO of Kollmorgen Corporation, a diversified
technology company, in May, 1991, and was appointed a director of WorldCorp on
August 23, 1995. Prior to joining Kollmorgen, Mr. Argov was President and CEO
of High Voltage Engineering Corporation. He currently serves as a director of
Kollmorgen and Transtechnology Corporation.
</TABLE>
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
Class I Directors - Terms of Office Expiring at the 1997 Annual Meeting
<TABLE>
<CAPTION>
Name and Age Past Five Years' Principal Occupation(s) and Other Directorships
- ------------ ----------------------------------------------------------------
<S> <C>
T. Coleman Andrews, III, 41 Mr. Andrews was elected Chief Executive Officer and Chairman of the
Board of Directors of World Airways in August 1986 and Chief Executive Officer,
President, and a director of WorldCorp in June 1987. Mr. Pollard succeeded Mr.
Andrews as Chief Executive Officer of World Airways in March, 1996. Mr. Andrews
remains Chairman of the Board of World Airways. He has served as a director and
as chairman of the executive committee of US Order since 1990. From 1978 through
1986, he was affiliated with Bain & Company, an international strategy consulting
firm. At Bain, he was elected partner in 1982 and was a founding general partner
in 1984 of the Bain Capital Fund, a private venture capital partnership. Prior
to his experience with Bain, Mr. Andrews served in several appointed positions in
the Ford Administration, including serving with Mr. Gorog in the White House. Mr.
Andrews received his B.A. from Dartmouth College and his M.B.A. from Stanford University.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
William F. Gorog, 70 Mr. Gorog is the founder of US Order and has served as its chairman and chief
executive officer since May 1, 1990. He was elected a director of WorldCorp in
April 1989 and was elected Chairman of the WorldCorp Board of Directors in May
1993. From October, 1987 until founding US Order, he served as Chairman of the
Board of Arbor International, an investment management firm. From 1982 to 1987,
he served as president and chief executive officer of the Magazine Publishers of
America, an association representing the principal consumer publications in the
United States. During the Ford Administration, Mr. Gorog served as deputy
assistant to the President for Economic Affairs and Executive Director of the
Council on International Economic Policy. Prior to that time, he founded and
served as Chief Executive Officer of Data Corporation, which developed the LEXIS
and NEXIS systems for legal and media research which was subsequently sold to the
Mead Corporation in 1969. Mr. Gorog also assisted VeriFone, Inc., a leading provider
of point-of-sale transaction systems, during its development stage. Mr. Gorog formed
a company that served as VeriFone's east coast distributor and he served on its Board
of Directors from 1981 through 1993. He currently serves as a director of Home
Financial Network, Inc. Mr. Gorog is a graduate of the United States Military
Academy and received an M.S. from Ohio State University.
Patrick F. Graham, 56 Mr. Graham was appointed a director of WorldCorp in October 1992 and elected as a
Class I Director at the 1993 Annual Meeting. He was also appointed a director of US
Order in February, 1993. Mr. Graham is a director of Bain & Company, Inc., a
management consulting firm co-founded by Mr. Graham in 1973. In addition to his
primary responsibilities with Bain clients, he has served as Bain's vice chairman and
chief financial officer. Prior to founding Bain, Mr. Graham was a group vice president
with the Boston Consulting Group.
Jack F. Kemp, 60 Mr. Kemp was elected as a Class I Director at the 1995 Annual Meeting. Mr. Kemp is
Co-Director of Empower America, a public policy organization established to advance
social and economic policies which empower people, not government bureaucracies, and
expand entrepreneurial capitalism here and around the world. In addition to his role
as Co-Director of Empower America, Mr. Kemp also serves as a Distinguished Fellow at
the Heritage Foundation, a Visiting Fellow at the Hoover Institute, and on the Boards of
Howard University, Habitat for Humanity, and Opportunities Industrialization Centers.
These recent endeavors follow a lengthy and distinguished list of achievements in public
service as HUD Secretary and as a Member of Congress, as well as a notable career as a
professional football quarterback.
</TABLE>
12
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION REPORT
In 1995, the Compensation Committee of the Company was composed of three
independent, non-employee directors, Messrs. Colburn (Chairman), Graham and
Rehnert. The Committee administers the Company's executive incentive plans,
reviews its compensation plans, programs and policies, monitors the performance
and compensation of executive officers and other key employees, and makes
appropriate recommendations and reports to the Board concerning matters of
executive compensation.
Compensation Philosophy
- -----------------------
The Compensation Committee maintains compensation programs designed to
attract, motivate, develop, and retain highly capable executive leaders. The
fundamental philosophy of the Company's executive compensation program is to
relate the executive's total compensation closely to superior individual,
departmental and corporate performance, and through this performance to
shareholder value. The Company's philosophy discourages automatic annual salary
increases and favors variable incentive compensation tied to measurable results.
The Compensation Committee's executive compensation program consists of
three main components: (1) base salary; (2) the 1995 Management Incentive
Compensation Plan (the "Incentive Plan"); and (3) incentive stock options, all
of which are structured to encourage the achievement of superior results over
time and to link executive officer and shareholder interests. In addition, the
Company occasionally awards bonuses for extraordinary individual performance.
The decision to award bonuses for extraordinary individual performance is made
by the Compensation Committee upon the recommendation of the Company's Chief
Executive Officer.
The WorldCorp Compensation Committee determines the compensation (including
incentive bonuses and stock option grants) for Messrs. Andrews and Paalborg, and
for Mr. Gorog's compensation as Chairman of the Board of the Company. The
Compensation Committee of the Board of Directors of US Order determines Mr.
Backus' compensation as President of US Order and Mr. Gorog's compensation as
Chairman and Chief Executive Officer of US Order. The Compensation Committee of
World Airways determines the compensation of Mr. Pollard as President of World
Airways. A portion of Messrs. Andrews' and Paalborg's salaries are allocated to
World Airways. Compensation of other officers and management of WorldCorp and
its subsidiaries, World Airways and US Order, is based on the Management
Incentive Compensation Plan, which was separately adopted in 1995 by the Board
of Directors of each company for their respective organizations.
Components of Compensation
- --------------------------
(1) Base Salary
Base salaries for new management employees are determined initially by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for management
talent.
Through 1994, the Company had a merit-based system for determining base
salary increases for its executive officers. Annual base salary increases would
be awarded to executives based upon the performance
13
<PAGE>
ratings they received in their annual performance review. In 1995, the
Management Incentive Plan discussed below replaced entirely the system of annual
merit increases for officers and managers of the Company and its subsidiaries.
Although the Incentive Plan replaced the system of annual merit increases,
the base salaries of executives may still be adjusted from time to time if the
Compensation Committee determines (after reference to market data) that an
executive's base salary is not competitive with the marketplace, or if there is
a substantial change in the duties and responsibilities of the executive.
The full Boards of Directors of WorldCorp, US Order and World Airways are
responsible for setting the base salaries of the companies' Presidents and Chief
Executive Officers taking into account the recommendations of the various
Compensation Committees. Messrs. Andrews, Gorog, Backus and Pollard recuse
themselves from these deliberations and decisions. The WorldCorp Compensation
Committee is responsible for setting Mr. Paalborg's salary, based upon the
recommendations of Mr. Andrews, WorldCorp's Chief Executive Officer.
(2) Management Incentive Plan
In 1995 the Board implemented at WorldCorp a Management Incentive Plan for
officers of WorldCorp which is based upon the Management Incentive Plan adopted
by its US Order and World Airways subsidiaries. Employees below the level of
manager continue to be covered by the existing merit pay plan. There are minor
differences in the formulas applied by each of the three companies.
The Company's Incentive Plan is a quantitative matrix consisting of two
components: individual performance and corporate performance. The Committee
uses its discretion at the conclusion of each year to assess individuals on
corporate performance. Corporate performance is based upon the degree to which
the Company and its subsidiaries have achieved their strategic objectives in the
prior year, whether shareholder value has been increased, and the overall
financial performance of the Company and its subsidiaries.
In 1995, the WorldCorp Compensation Committee used the following
quantitative matrix to calculate the incentive bonuses paid to Messrs. Andrews
and Paalborg:
<TABLE>
<CAPTION>
Rating Individual Performance Individual & Corporate Performance
- ------ ------------------------ ----------------------------------
<S> <C> <C>
5 50% Bonus 75% Bonus
4 25% Bonus 50% Bonus
3 12% Bonus 25% Bonus
2 0 0
1 0 0
</TABLE>
In determining the bonuses of $225,000, and $115,000 awarded by the
Compensation Committee (and approved by the Board of Directors) to Messrs.
Andrews and Paalborg, respectively, the members of the Committee, exercising
their discretion, took into account the following corporate accomplishments: 1)
completion of initial public offerings of US Order and World Airways common
stock, resulting in substantial balance sheet improvements and increases in cash
available to WorldCorp, US Order and World Airways, 2) a positive $18 million
swing in net income at World Airways (from a $9 million net loss in 1994 to 1995
net income of $9 million), and 3) substantial progress made by US Order toward
achieving its strategic objectives. Based on the foregoing corporate
achievements and their individual contributions toward accomplishing them, the
Compensation Committee awarded the bonuses to Messrs. Andrews and Paalborg in
the amounts described above. Using the
14
<PAGE>
quantitative matrix set forth above, the bonus awards to Messrs. Andrews and
Paalborg were set at approximately 64% of their base salaries. The Committee
also recommended, and the Company's Board approved, bonuses to Mr. Gorog of
$50,000 for his contributions as the Company's Chairman toward achieving these
corporate accomplishments, and $50,000 to Mr. Backus for his role in completing
the initial public offering at US Order and for his contributions toward the
substantial progress made by US Order in 1995 toward achieving its strategic
objectives. The Committee did not use the quantitative matrix to determine
either Mr. Gorog's or Mr. Backus' bonus.
(3) Incentive Stock Options
The Compensation Committee determines appropriate incentive stock option
awards for new employees by evaluating the responsibilities of the position held
and the experience of the individual, and by reference to the competitive
marketplace for management talent. The Compensation Committee bases decisions
concerning subsequent incentive stock option awards on recommendations made by
the Chief Executive Officer. The Compensation Committee determines whether to
accept or modify Mr. Andrews' proposals by evaluating the competitive
marketplace, the performance of the Company, the performance of the executive,
and any change in the responsibilities of the individuals. Individuals who
receive a promotion or who have maintained a high level of performance over a
long period often receive stock option awards. To promote mutual long-term
interests between the Company's officers and managers and the Company's
stockholders, each incentive option agreement provides for options which vest in
equal monthly installments over a three to five-year period. The Compensation
Committee approves all stock option awards.
In 1994, in connection with the signing of their employment agreements, (i)
grants of WorldCorp options were made to Mr. Andrews, Chief Executive Officer
and President of the Company, and to Mr. Gorog, Chairman of the Board of
Directors of the WorldCorp, and (ii) a grant of US Order options was made to Mr.
Backus, President of US Order. In 1995, in connection with the signing of his
employment agreement, a grant of World Airways options was made to Mr. Pollard,
President of World Airways.
Compensation of the Chief Executive Officer
- -------------------------------------------
As part of its ongoing review of the compensation of the Chief Executive
Officer, the Compensation Committee determined it was appropriate for the Chief
Executive Officer to be eligible to participate in the Company's 1988 Stock
Option Plan (as amended and restated through 1993, the "1988 Plan"). When the
1988 Plan was originally adopted in 1988 by the stockholders and amended in 1992
by the stockholders, the Chief Executive Officer was not an eligible participant
because he had otherwise received equity incentive compensation in the form of
warrants from the Company; the warrants served as the functional equivalent of
stock options for the Chief Executive Officer. The Compensation Committee was
aware that the vast majority of the warrants held by the Chief Executive Officer
directly or beneficially would expire worthless on May 24, 1994, and that he
would no longer hold any warrants or stock options of the Company.
The Compensation Committee believes that one important element of the
compensation of the Chief Executive Officer is incentive compensation. Upon the
expiration of the warrants, the Chief Executive Officer did not have, as part of
his compensation package, an incentive compensation component. The Compensation
Committee considered various alternative forms of incentive compensation for the
Chief Executive Officer, including warrants and stock appreciation rights. The
Compensation Committee considered the securities, tax, financial accounting and
other relevant issues presented by the different alternatives. To assist it,
the Compensation
15
<PAGE>
Committee retained the services of an independent compensation consultant. The
Compensation Committee reviewed compensation data for the Chief Executive
Officers of other public companies. Based on its review, the Compensation
Committee determined that it would be appropriate and in the stockholder's
interest for the 1988 Plan to be amended so that the Chief Executive Officer
could participate under that plan. Through this approach, the Compensation
Committee believed the Chief Executive Officer's interests and those of the
stockholders would be aligned.
Pursuant to the recommendation of the Compensation Committee, on August 19,
1994, at a Special Meeting the shareholders of the Company approved amendments
to the Company's 1988 Stock Option Plan which permitted the Company's Chief
Executive Officer to participate in the Stock Option Plan as part of a new
compensation arrangement, concluded on August 19, 1994. For further
descriptions of the employment agreements, the Stock Option Agreement, and
related matters, please see "Contracts and Termination of Employment and Change
in Control Arrangements" below.
On February 14, 1996, the Board of Directors, upon the recommendation of
the Compensation Committee, approved increasing Mr. Gorog's salary as Chairman
of the Board of the Company (effective January 1, 1996) from $50,000 to
$100,000. The Board and the Compensation Committee took into account: 1) the
fact that Company's previous Chairman had been paid $134,000 annually and that
Mr. Gorog's time commitment as Chairman was as extensive as his predecessor's;
and 2) Mr. Gorog's substantial achievements as the Company's Chairman.
The Compensation Committee
--------------------------
James E. Colburn (Chairman)
Patrick F. Graham
Geoffrey S. Rehnert
PERFORMANCE GRAPH INDEX
Dec. 1989 to Dec. 1995
16
<PAGE>
STOCK PERFORMANCE GRAPH*
The following graph and chart compare the five year performance of the
Company's common stock to the Russell 2000 Index, the Standard & Poor's (S & P)
Conglomerates Index, the Dow Jones Airlines Index, and the Dow Jones Air
Freight/Couriers Index. Both the graph and the chart assume that the value of
the investment in the Company's common stock and each index was $100 at December
31, 1989, and that all dividends were reinvested.
[Graph of Performance Chart Appears Here]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WorldCorp Inc. $100 $246 $151 $129 $166 $229
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 $100 $146 $173 $206 $202 $259
- ------------------------------------------------------------------------------------------------------------------------
S&P(R) Conglomerates Index $100 $108 $134 $177 $168 $218
- ------------------------------------------------------------------------------------------------------------------------
Dow Jones Airlines Index $100 $133 $130 $157 $110 $270
- ------------------------------------------------------------------------------------------------------------------------
Dow Jones Air Freight/Couriers Index $100 $128 $159 $209 $183 $223
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
__________________________________
* In last year's proxy statement the Company stated that if, and to the
extent that, air transportation services become a smaller component of the
Company's total operations in future years, different industry peer group
indices may be used by the Company at that time. The Dow Jones Airlines Index
and Dow Jones Air Freight/Couriers Index (collectively, the "Dow Jones Indices")
had been used by WorldCorp in previous years as industry peer group indices
because of the importance of its World Airways subsidiaries to the Company's
consolidated financial results. Due to initial public offerings at World Airways
and US Order in 1995, and the growing importance of US Order to the Company's
stock performance, the Company believes that its industry peer group index
should be changed from an airline index to a conglomerates index. The Dow Jones
indices are shown in accordance with SEC regulations, but will not be used in
next year's Stock Performance Graph.
17
<PAGE>
WorldCorp is a New York Stock Exchange company that owns majority positions
in two subsidiaries: World Airways, Inc. and US Order, Inc. World Airways and
US Order are public companies whose common stock is traded on the Nasdaq
National Market. Each of the following tables includes aggregate compensation
information for each Named Executive Officer received from WorldCorp and one or
more of the subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------
Awards
------------
Securities
Underlying All Other
Options/ Compen-
Name and Principal Year Salary/2/ Bonus/3/ SARs/4/ sation/5/
Position/1/ ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
T. Coleman Andrews, III 1995 350,000 225,000 --- 394,676/6/
President/CEO 1994 350,000 70,000 800,000/7/ 49,240
WorldCorp 1993 335,058/8/ --- --- 215,281/9/
William F. Gorog 1995 300,000/10/ 75,000/11/ --- ---
Chairman/CEO 1994 270,805/12/ --- 250,000/13/ ---
US Order 1993 247,230/14/ --- --- ---
Charles W. Pollard 1995 230,365 45,000 250,000/15/ 11,108/16/
President 1994 176,539 --- --- 8,134
World Airways 1993 172,316/8/ --- --- 14,960
John C. Backus 1995 250,000 75,000/17/ --- 9,250/18/
President 1994 190,192 --- 850,000/19/ 875,000/20/
US Order 1993 139,981 4,000 --- ---
Andrew M. Paalborg 1995 177,923 115,000 --- 6,128
VP & General Counsel 1994 160,000 25,000 --- 3,080
WorldCorp 1993 160,485 25,000 100,000 10,480
</TABLE>
____________________
Footnotes
/1/ The compensation of Messrs. Andrews and Paalborg is paid entirely by the
Company, including, where applicable, options to purchase common stock of
the Company. A portion of their respective salaries, however, is allocated
to World Airways. Mr. Gorog's compensation as Chairman of the Board of
Directors of the Company is paid by the Company.
18
<PAGE>
Mr. Gorog's annual compensation as Chairman of the Board of Directors and
Chief Executive Officer of US Order, Inc. is paid by US Order, Inc., but
his long term compensation consists of options to purchase common stock
both of WorldCorp and US Order. Mr. Pollard's annual compensation is paid
entirely by World Airways, Inc., but his long term compensation consists of
options and warrants to purchase common stock of WorldCorp and options to
purchase World Airways common stock. Mr. Backus' annual compensation is
paid entirely by US Order, Inc., and his long term compensation consists
primarily of options to purchase common stock of US Order.
/2/ Excludes compensation deferred under the Company's ESSOP, which is also
available to employees of World Airways, Inc., and compensation deferred
under US Order's 401(k) plan. The Company's contributions to the ESSOP
accounts of the Named Executive Officers is included in the column titled
"All Other Compensation." See footnote 5.
/3/ Bonuses are listed for the year in which the bonus was earned. Most bonuses
are paid early in the year following the year in which the bonus was earned
by the individual.
/4/ Includes options granted in 1995, 1994, and 1993 under (i) WorldCorp's
Amended and Restated 1988 Stock Option Plan, (ii) World Airways' 1995 Stock
Option Plan, and (iii) the US Order Employee Stock Option Plan. No warrants
or SARs were granted under any of the option plans in 1995, 1994, or 1993.
/5/ Amount includes value of WorldCorp contributions to the ESSOP accounts of
the Named Executive Officers. WorldCorp's contributions to the WorldCorp
ESSOP are made in WorldCorp Common Stock and are valued using closing
prices for the year in which the contributions were made. US Order's 401(k)
Plan does not provide for company contributions to employee accounts. With
regard to Mr. Backus, this item also includes premiums for life insurance
payable to Mr. Backus' estate per the terms of his employment agreement
with US Order.
/6/ Consists of (i) $9,240 of WorldCorp contributions to the WorldCorp ESSOP,
(ii) $5,436 of premiums paid for life insurance under the terms of the
August, 1994, Employment Agreement between Mr. Andrews and the company and
(iii) $380,000 paid in connection with the modification in 1993 of Mr.
Andrews' Supplemental Incentive Compensation Agreement. Please see
"Contracts and Termination of Employment and Change in Control
Arrangements" below.
/7/ Mr. Andrews was granted options to purchase 800,000 shares of WorldCorp
common stock pursuant to the terms of his WorldCorp employment agreement
dated August 19, 1994. The terms and conditions of the employment agreement
and the stock option agreement are set forth below in detail; please see
"Contracts and Termination of Employment and Change in Control
Arrangements."
/8/ Due to the prolonged global airline recession and its adverse effects on
WorldCorp's financial performance, Messrs. Andrews and Pollard elected to
reduce their salaries by 10% for the period beginning October 23, 1992, and
ending June 1, 1993.
/9/ Consists of (i) $14,451 of WorldCorp contributions to the WorldCorp ESSOP,
and (ii) $200,830 paid in connection with the modification of Mr. Andrews'
Supplemental Incentive Compensation Agreement. Please see "Contracts and
Termination of Employment and Change in Control Arrangements" below.
/10/ Consists of $50,000 paid to Mr. Gorog by WorldCorp for Mr. Gorog's services
as Chairman of WorldCorp's Board, and $250,000 paid to Mr. Gorog by US
Order for Mr. Gorog's services as Chairman of the Board and Chief Executive
Officer of US Order.
/11/ Consists of a $25,000 bonus paid to Mr. Gorog by US Order and a $50,000
bonus paid to Mr. Gorog by WorldCorp.
/12/ Consists of $50,000 paid to Mr. Gorog by WorldCorp for Mr. Gorog's services
as Chairman of WorldCorp's Board, and $220,805 paid to Mr. Gorog for Mr.
Gorog's services as Chairman of the Board and Chief Executive Officer of US
Order.
19
<PAGE>
/13/ Mr. Gorog was granted options to purchase 250,000 shares of WorldCorp
common stock as partial compensation for his services as Chairman of the
Board of Directors of WorldCorp. The terms and conditions of the employment
agreement are set forth below in detail; please see "Contracts and
Termination of Employment and Change in Control Arrangements."
/14/ Consists of $50,000 paid to Mr. Gorog by WorldCorp for Mr. Gorog's services
as Chairman of WorldCorp's Board, and $197,230 paid to Mr. Gorog by US
Order as Chairman of the Board and Chief Executive of US Order.
/15/ Consists of options to purchase 250,000 shares of the common stock of World
Airways granted to Mr. Pollard in connection with the execution of his
employment agreement. Please see, "Contracts and Termination of Employment
and Change in Control Arrangements" below.
/16/ Consists of (i) $9,240 of WorldCorp contributions to the WorldCorp ESSOP
and (ii) $1,868 of premiums paid for life insurance under the terms of the
January 1, 1995, Employment Agreement between Mr. Pollard and World
Airways. Please see, "Contracts and Termination of Employment and Change in
Control Arrangements" below.
/17/ Consists of a $25,000 bonus paid to Mr. Backus by US Order and a $50,000
bonus paid to Mr. Backus by WorldCorp.
/18/ Consists of premiums paid for life insurance under the terms of the August
1, 1994 Employment Agreement between Mr. Backus and US Order. Please see,
"Contracts and Termination of Employment and Change in Control
Arrangements" below.
/19/ Includes options to purchase 850,000 shares of US Order common stock
pursuant to the terms of Mr. Backus' US Order employment agreement dated
August 1, 1994. Please see, "Contracts and Termination of Employment and
Change in Control Arrangements" below.
/20/ As part of the August 1, 1994 purchase of US Order's bill pay operations,
Visa required that all US Order employees of Visa InterActive, Visa's newly
formed bill pay subsidiary, cancel their outstanding vested US Order
options to eliminate any potential conflicts of interest. As a result, US
Order's shareholders and Board of Directors agreed to pay all active and
full-time US Order employees (excluding William F. Gorog) for the
cancellation of their outstanding and vested options. This payment to Mr.
Backus was for cancellation of the majority of his outstanding and vested
US Order options.
20
<PAGE>
The following table lists option grants to each of the Company's Named Executive
Officers in 1995. No options were granted to Messrs. Andrews, Gorog, Backus or
Paalborg in 1995. The grant to Mr. Pollard consists of options to purchase the
common stock of World Airways. The options were granted to Mr. Pollard in
connection with the execution of his employment agreement (please see "Contracts
and Termination of Employment and Change in Control Arrangements", below). In
addition, in accordance with the rules of the Commission, the table also sets
forth the hypothetical gains that would exist for the options based on assumed
rates of annual compounded growth in the stock price of 0%, 5% and 10% from the
date the options were granted over the full option term. The actual value, if
any, that an executive may realize will depend on the spread between the market
price and the exercise price on the date the options are exercised.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1995
INDIVIDUAL GRANTS
Number of % of
Securities Securities
Underlying Underlying
Options Options
Granted Granted Exercise Expiration
Name (#) (%) Price ($) Date 0% 5% 10%
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. Coleman Andrews, III --- --- --- --- --- --- ---
William F. Gorog --- --- --- --- --- --- ---
Charles W. Pollard 250,000 23.4% 11.00 Dec. 31, 2002 $0 $1,729,460 $4,382,792
John C. Backus --- --- --- --- --- --- ---
Andrew M. Paalborg --- --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
The following table lists aggregate option exercises in 1995. Mr. Andrews holds
options to purchase WorldCorp stock only. Mr. Gorog holds options to purchase
both WorldCorp and US Order common stock. In 1995, Mr. Backus held options for
both WorldCorp and US Order. As of December 31, 1995, Mr. Backus did not hold
any WorldCorp options. Mr. Pollard holds both options and warrants to purchase
WorldCorp common stock, as well as for WorldCorp, and options to purchase World
Airways common stock. Mr. Paalborg holds options only to purchase WorldCorp
stock.
AGGREGATED OPTION EXERCISES IN 1995
AND YEAR-END OPTION VALUES/1/
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at FY-End
Shares Acquired FY-End (#) ($)
on Value
Exercise Realized (Exercisable/ (Exercisable/
Names (#) ($)/2/ Unexercisable) Unexercisable)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T. Coleman Andrews, III 65,000 WOA 528,400 WOA 535,000/200,000 WOA 2,942,500/1,100,000 WOA
William F. Gorog --- WOA --- WOA 200,000/50,000 WOA 1,100,000/275,000 WOA
--- USOR --- USOR 400,000/0 USOR 8,560,000/0 USOR
John C. Backus 11,000 WOA 78,430 WOA --- WOA ----- WOA
178,708 USOR 2,625,824 USOR 654,123/238,893 USOR 10,239,924/3,643,119 USOR
Charles W. Pollard 80,000 WOA 526,000 WOA 150,000/0 WOA 672,500/0 WOA
---WLDA ---WLDA 100,000/150,000 WLDA 25,000/37,500 WLDA
Andrew M. Paalborg 105,944 WOA 435,987 WOA 97,500/68,056 WOA 85,216/192,620 WOA
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The information set forth in this table includes the aggregate amount of
all options granted to the Named Executive Officers by WorldCorp and one or
more of its subsidiaries. The calculations in this table are based upon a
December 29, 1995, closing price of $10.00 of WorldCorp's Common Stock on
the New York Stock Exchange, and closing prices of $11.25 and $22.37 for
World Airways and US Order, respectively, on the Nasdaq National Market.
WOA is the New York Stock Exchange trading symbol for WorldCorp and WLDA
and USOR are the Nasdaq trading symbols for World Airways and US Order,
respectively.
/2/ Value based on market value of the common stock on the exercise date minus
the exercise price.
22
<PAGE>
CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements
- ---------------------
The Company has entered into employment agreements with each of Messrs.
Andrews, Gorog, and Paalborg. The terms and conditions of each agreement are
more fully discussed below. US Order has entered into an employment agreement
with Mr. Backus and World Airways has entered into an employment agreement with
Mr. Pollard. Following the analysis and research completed by the Compensation
Committee of the Board of Directors in concluding its agreement with the Chief
Executive Officer of the Company, the principles included in that agreement have
generally been applied to the employment agreements of each of the other Named
Executive Officers.
T. Coleman Andrews, III
-----------------------
The Company and T. Coleman Andrews, III entered into an employment
agreement and a stock option agreement on August 19, 1994, upon obtaining
shareholder approval at a special meeting of amendments to the Company's 1988
Stock Option Plan (the "Plan") permitting Mr. Andrews to participate in the Plan
as part of a new employment agreement with the Company.
The principal terms of Mr. Andrews' employment agreement are as follows:
(i) Mr. Andrews receives a minimum salary of $350,000 per year beginning on the
date of the executed contract; (ii) the term of the agreement expires on
December 31, 1997, subject to a renewal and extension provision described below;
(iii) Mr. Andrews is eligible to receive bonuses pursuant to the Company's
Management Incentive Compensation Plan; (iv) Mr. Andrews received a grant of
options to purchase 800,000 shares of Common Stock; (v) Mr. Andrews agrees to
hold a substantial number of shares of Common Stock and (vi) the Company
maintains a $5 million life insurance policy, the proceeds of which, in the
event of Mr. Andrews' death are payable to Mr. Andrews' estate.
If, as of December 31, 1996, Mr. Andrews and WorldCorp have not executed a
new employment agreement, or neither party has given written notice to the other
that they intend to allow this agreement to expire at the end of its term on
December 31, 1997, then and in that event Mr. Andrews' employment agreement will
be automatically extended for an additional period of eighteen (18) months
through June 30, 1998, with all economic provisions extended on a pro rata
basis.
The following terms were retained from Mr. Andrews' previous employment
agreement. Mr. Andrews may terminate his employment in the event (i) the
Company relocates its headquarters outside of the Washington, D.C. area, (ii)
his duties are diminished in a manner materially altering his responsibilities,
(iii) the Board determines that the Company should be liquidated or dissolved
during the term of the employment agreement or (iv) there is a Change of Control
of WorldCorp. Under the terms of Mr. Andrews' employment agreement, a change of
control includes (i) any person, other than WorldCorp, becoming the beneficial
owner of more than 50% of the then outstanding securities of WorldCorp, (ii)
certain changes involving a majority of the Board of Directors of WorldCorp,
(iii) certain mergers or acquisitions of WorldCorp with any other corporations
and (iv) the liquidation or sale of substantially all of WorldCorp's assets.In
the event Mr. Andrews exercises this termination right, or, in the event the
Company terminates Mr. Andrews' employment with the Company other than for Cause
(as defined in the Agreement), the Company is obligated to pay Mr. Andrews the
undiscounted remainder of his base salary then in effect, any deferred salary
and/or bonus compensation payable, and all granted but unexercisable stock
options under Mr. Andrews' stock option agreement shall become immediately
exercisable for a period of one year following the date of termination, and any
federal or state taxes imposed upon this termination payment. WorldCorp may
terminate the agreement for Cause or if Andrews becomes disabled for a period of
12 months.
23
<PAGE>
To align Mr. Andrews' interests with those of the Company's shareholders,
Mr. Andrews has agreed to hold the following amounts of Common Stock for the
balance of the term of his employment agreement (and for any renewals or
extensions thereof), from the earlier to occur of: (1) Mr. Andrews' exercise of
-------
options in the amounts set forth below; or (2) the dates indicated below.
For purposes of Mr. Andrews' employment agreement, any shares of Common Stock
owned by members of Mr. Andrews' immediate family (i.e., spouse, sons or
daughters) shall be counted toward Mr. Andrews' stock ownership holding
requirements. As of April 1, 1996, Mr. Andrews was in compliance with the stock
ownership requirements set forth in his employment agreement.
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- ---- ----------------
<S> <C> <C>
300,000 April 1, 1995 20,000
400,000 April 1, 1996 30,000
500,000 April 1, 1997 40,000
600,000 --- 50,000
700,000 --- 60,000
800,000 --- 70,000
</TABLE>
Mr. Andrews was granted options to purchase 800,000 shares of the Company's
common stock, 200,000 of which were immediately exercisable upon the grant on
August 19, 1994. The remaining 600,000 options become exercisable ten years
less 90 days from the original grant date of August 19, 1994, provided, however,
the exercise date will be accelerated with respect to these 600,000 shares if
certain targets are achieved with respect to the Company's stock price.
Pursuant to this provision, Mr. Andrews will be entitled to exercise options to
purchase 100,000 shares of Common Stock, at the $4.50 exercise price, each time
that WorldCorp stock trades at a price that is an increase of 25% over the
preceding eligibility level for twenty trading days, up to the maximum of
600,000 shares. Thus, Mr. Andrews will be entitled to exercise options for
100,000 shares, at the exercise price of $4.50 per share, if WorldCorp stock
trades at or above $5.63 for twenty trading days (that is, a 25% increase in the
price of the stock above the preceding option grant price of $4.50). The same
entitlement would arise for five additional grants of options for 100,000 shares
each, at the exercise price of $4.50 per share, if WorldCorp stock trades at or
above $7.03, $8.79, $10.99, $13.74, and $17.17, for twenty trading days each
(each of these trading prices is 25% above the price of the stock at the earlier
tier).
The options expire at the earlier of (i) the end of ten years, or (ii) one
year after Mr. Andrews ceases to provide any services, including services as a
member of the board of directors, to the Company, World Airways, US Order, the
Company's other affiliates, or any other entity in which the Company has both
any equity or debt investment and representation on the board of directors
thereof. In the event Mr. Andrews is no longer employed as Chief Executive
Officer of the Company, options that have not become exercisable by such time
will not thereafter become exercisable.
The Company and Mr. Andrews in 1989 entered into a Supplemental Incentive
Compensation Agreement (the "Incentive Agreement") in lieu of the Company's
granting additional equity to Mr. Andrews. Under the Incentive Agreement, the
Company agreed to pay Mr. Andrews the amount of $1,300,000, plus interest, on
the expiration of his employment agreement if certain conditions were met,
including Mr. Andrews being an employee at that time. In December, 1993, the
Company and Mr. Andrews agreed to modify the Incentive Agreement by terminating
it and entering into a new agreement. In connection with the new agreement, the
Company paid Mr. Andrews in December, 1993, (approximately seven months early)
$200,830 due him under the Incentive Agreement. The new agreement delays payment
to Mr. Andrews of the balance due under the Incentive Agreement and provides
24
<PAGE>
that the Company will make four annual installment payments, of $420,000,
including interest, between 1995 and 1998.
In 1989, concurrent with execution of the Incentive Agreement, the Company
loaned Mr. Andrews $1,300,000 under a full recourse promissory note that bore
interest at the same rate as the interest rate set forth in the Incentive
Agreement. The Company and Mr. Andrews agreed, in December 1993, to cancel the
earlier note and to substitute a new, full recourse promissory note due in
installments between January 1994 and February 1998; the new note bears interest
at the same rate as in the amount of $1,763,000 set forth in the new Incentive
Agreement. Mr. Andrews reduced the principal balance of his obligation to the
Company by $896,000 as of March 31, 1996.
William F. Gorog
----------------
On February 14, 1996, the Company and Mr. Gorog entered into an agreement
pursuant to which Mr. Gorog has agreed to serve as Chairman of the Board through
December 31, 1996. Mr. Gorog's term as Chairman is extended automatically
through December 31, 1997 if the Company fails to give Mr. Gorog written notice
by September 30, 1996 of the Company's intention not to renew Mr. Gorog's
agreement. Pursuant to the terms of the new agreement with Mr. Gorog, Mr.
Gorog's salary as Chairman of the Board was increased from $50,000 to $100,000
effective January 1, 1996.
Mr. Gorog has agreed to hold the following amounts of Common Stock for the
balance of the term of his employment agreement (and for any renewals or
extensions thereof), from the earlier to occur of: (1) Mr. Gorog's exercise of
-------
options in the amounts set forth below, or (2) the dates indicated below. As is
the case with Mr. Andrews, for purposes of Mr. Gorog's employment agreement, any
shares of Common Stock owned by members of Mr. Gorog's immediate family shall be
counted toward Mr. Gorog's stock ownership and holding requirements. As of
April 1, 1996, Mr. Gorog was in compliance with the stock ownership requirements
set forth in his agreement with the Company.
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- ---- ----------------
<S> <C> <C>
125,000 April 1, 1995 8,500
150,000 April 1, 1996 12,500
175,000 April 1, 1997 16,500
</TABLE>
As additional compensation to Mr. Gorog for serving as the Chairman of the
Board of Directors of the Company, Mr. Gorog was granted options to purchase
250,000 shares of Common Stock, 100,000 of which were immediately exercisable
upon the grant on August 1, 1994. The remaining 150,000 options become
exercisable ten years less 90 days from the original grant date of August 1,
1994; provided, however, the exercise date will be accelerated with respect to
these 150,000 shares if the same targets are achieved with respect to the
Company's stock price as are set forth in Mr. Andrews' stock option agreement.
Mr. Gorog's stock options expire under the same terms and conditions that govern
the expiration of Mr. Andrews' options.
Andrew M. Paalborg
------------------
On February 1, 1995, the Company and Mr. Paalborg entered into an
employment agreement. The principal terms of Mr. Paalborg's agreement are as
follows: (i) Mr. Paalborg receives a base salary of $180,000 per year effective
February 1, 1995; (ii) the term of the agreement expires on February 1, 1998,
subject to a renewal and extension provision similar to that set forth in Mr.
Andrews' agreement; (iii) Mr. Paalborg is eligible to receive bonuses pursuant
to the Company's Management Incentive Compensation Plan; and (iv) Mr. Paalborg
25
<PAGE>
agrees to hold the following amounts of Common Stock for the balance of the term
of his employment agreement (and for any renewals or extensions thereof), from
the earlier to occur of: (1) Mr. Paalborg's exercise of options in the amounts
-------
set forth below; or (2) the dates indicated below. As is the case with Messrs.
Andrews and Gorog, Common Stock owned by members of Mr. Paalborg's immediate
family shall be counted toward Mr. Paalborg's stock ownership and holding
requirements. As of April 1, 1996, Mr. Paalborg was in compliance with the stock
ownership requirements set forth in his agreement with the Company.
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- ---- ---------------
<S> <C> <C>
112,500 April 1, 1996 7,500
150,000 April 1, 1997 11,250
187,500 April 1, 1998 15,000
225,000 --- 18,750
262,500 --- 22,500
300,000 --- 26,250
</TABLE>
John C. Backus
--------------
US Order, Inc. entered into an employment agreement with Mr. Backus
providing that Mr. Backus will serve as President and Chief Operating Officer of
US Order until July 31, 1997, a term which automatically extends until December
31, 1997 unless terminated earlier. Mr. Backus is entitled to a base salary of
$250,000 per year, a bonus of between 0 and 75% of his base salary based on his
individual performance as well as that of US Order as determined by the Board of
Directors, the right to participate in all bonus and incentive compensation
plans or arrangements made available to other US Order officers and directors
and certain other benefits, including a $5 million life insurance policy. Mr.
Backus is entitled to receive performance stock options in accordance with the
Company's 1991 Stock Option Agreement (the "1991 Plan"). US Order may terminate
the agreement upon Mr. Backus' death, disability or for cause (as defined) upon
the affirmative vote of the majority of the Board of Directors. If the Board
terminates Mr. Backus without cause, Mr. Backus is entitled to receive the
remainder of the base salary and certain other compensation due under the
agreement and all options granted to Mr. Backus but unexercisable under the 1991
Plan shall become immediately exercisable for a period of one year. Mr. Backus
may terminate the agreement upon 30 days notice under certain circumstances,
including a diminution of responsibilities, a change of control (as defined) of
US Order or a relocation of its executive offices outside of the Washington,
D.C. area. Upon such termination by Mr. Backus, he is entitled to receive the
remainder of his base salary and certain other compensation due under the
employment agreement and all options granted but unexercisable shall immediately
be exercisable for a period of one year. As part of his employment agreement,
Mr. Backus has agreed to hold the following amounts of US Order common stock for
the balance of the term of his employment agreement (and for any renewals or
extensions thereof), from the earlier to occur of: (1) Mr. Backus' exercise of
-------
options in the amounts set forth below; or (2) the dates indicated below. For
purposes of Mr. Backus' employment agreement, any shares of US Order common
stock owned by members of Mr. Backus' immediate family (i.e., spouse, sons
26
<PAGE>
or daughters) shall be counted toward Mr. Backus' stock ownership holding
requirements. As of April 1, 1996, Mr. Backus was in compliance with the stock
ownership requirements set forth in his agreement with US Order.
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- ---- --------------
<S> <C> <C>
100,000 April 1, 1996 10,000
200,000 April 1, 1997 15,000
300,000 April 1, 1998 20,000
</TABLE>
Pursuant to a stock option agreement between US Order and Mr. Backus, Mr.
Backus has been awarded options to purchase 600,00 shares of US Order common
stock at an exercise price of $7.13 per share. The options for 600,000 shares
will become exercisable on May 1, 2004; however, the exercise date will be
accelerated with respect to increments of 100,000 shares if certain targets are
achieved regarding US Order's stock price. Pursuant to this provision, Mr.
Backus will be entitled to exercise options to purchase 100,000 shares of US
Order common stock, at the $7.13 exercise price, each time that US Order common
stock trades at a price that is an increase of 25% over the preceding
eligibility level for twenty trading days. Thus, Mr. Backus will first be
entitled to exercise options for 100,000 shares if US Order common stock trades
at or above $8.91 for twenty consecutive trading days. The same entitlement
would arise for five additional blocks of 100,000 options, at the exercise price
of $7.13 per share, if US Order common stock trades at or above, $11.14, $13.93,
$17.41, $21.76, and $27.20 for twenty trading days each (each of these trading
prices is 25% above the price of US Order common stock at the earlier tier).
Mr. Backus' options expire under similar terms and conditions that govern the
expiration of Mr. Andrews' options.
Charles W. Pollard
------------------
World Airways has entered into an employment agreement with Charles W.
Pollard, dated as of January 1, 1995, providing that Mr. Pollard will serve as
Director and President of World Airways until December 31, 1997 unless
terminated earlier or extended. Mr. Pollard is entitled to a base salary of
$225,000 per year and bonuses under the 1995 World Airways Management Incentive
Compensation Plan, the right to participate in all bonus and incentive
compensation plans or arrangements made available to other World Airways'
officers and directors and certain other benefits, including a $2 million life
insurance policy and non-qualified retirement benefits that guarantee a
retirement of at least $50,000 per year commencing at age 60, subject to
vesting. Mr. Pollard is entitled to receive performance stock options in
accordance with the 1995 Plan. The agreement terminates upon Mr. Pollard's
death. World Airways may terminate the agreement upon disability which
continues for a period of 12 months, or for cause (as defined) upon the
affirmative vote of the majority of the Board of Directors. If the Board
terminates Mr. Pollard without cause, Mr. Pollard is entitled to receive the
remainder of the base salary and certain other compensation due under the
agreement and all options granted to Mr. Pollard but unexercisable under the
1995 Plan will become immediately exercisable. The nonqualified retirement
benefits also will fully vest. Mr. Pollard may terminate the agreement upon 30
days notice under certain circumstances, including a substantial alteration of
his responsibilities, a relocation of World Airways' executive offices outside
of the Washington, D.C. area or a change of control of World Airways. Under the
terms of the employment agreement, a change of control includes (i) any person,
other than WorldCorp, becoming the beneficial owner of more than 50% of the then
outstanding securities of World Airways or WorldCorp, (ii) certain changes
involving a majority of the Board of Directors of World Airways or WorldCorp,
(iii) certain mergers or acquisitions of World Airways or WorldCorp with any
other corporations and (iv) the liquidation or sale of all or substantially all
of World Airways' or WorldCorp's assets. Upon such termination by Mr. Pollard,
he is entitled to receive the greater of the remainder of his base salary or six
months salary and certain other compensation due under the agreement and all
options granted but unvested under the 1995 Plan shall become immediately
exercisable. If, on December 31, 1996, Mr. Pollard and World Airways have not
executed a new employment agreement, and neither party has given written
27
<PAGE>
notice to the other that they intend to allow the agreement to expire at the end
of its term on December 31, 1997, then Mr. Pollard's employment agreement will
be automatically extended through June 30, 1998, with all economic provisions
extended on a pro rata basis.
Pursuant to a stock option agreement between World Airways and Mr. Pollard,
Mr. Pollard has been awarded options to purchase up to 250,000 shares of World
Airways' common stock at an exercise price of $11.00 per share. The options for
100,000 shares are immediately exercisable. The options for the remaining
150,000 shares will become exercisable on September 30, 2002; however, the
exercise date will be accelerated with respect to increments of 25,000 shares if
certain targets are achieved regarding World Airways' stock price. Pursuant to
this provision, Mr. Pollard will be entitled to exercise options to purchase
25,000 shares of World Airways common stock, at the $11.00 exercise price, each
time that World Airways common stock trades at a price that is an increase of
25% over the preceding eligibility level for twenty trading days. To align Mr.
Pollard's interests with those of WorldCorp's and World Airways' shareholders,
Mr. Pollard has agreed to hold the following amounts of World Airways or
WorldCorp common stock for the balance of the term of his employment agreement
(and for any renewals or extensions thereof), from the earlier to occur of: (1)
-------
Mr. Pollard's exercise of any combination of World Airways and WorldCorp stock
options or warrants in the amounts set forth below; or (2) the dates indicated
below. For purposes of Mr. Pollard's employment agreement, any shares of
WorldCorp and/or World Airways common stock owned by members of Mr. Pollard's
immediate family (i.e., spouse, sons or daughters) shall be counted toward
Pollard's stock ownership holding requirements. As of April 1, 1996, Mr.
Pollard was in compliance with the stock ownership requirements set forth in his
agreement.
<TABLE>
<CAPTION>
Required Common
Options Exercised Date Stock Holdings
----------------- ---- --------------
<S> <C> <C>
176,250 April 1, 1995 11,750
235,000 April 1, 1996 17,625
293,750 April 1, 1997 23,500
352,500 --- 29,375
411,250 --- 35,250
470,000 --- 41,125
</TABLE>
The options expire at the earlier of (i) the end of ten years, or (ii) one
year after Mr. Pollard ceases to provide any services, including services as a
member of the board of directors, to WorldCorp or World Airways. In the event
Mr. Pollard is no longer employed in that capacity or other specified capacities
by World Airways, options that have not become exercisable by such time will not
thereafter become exercisable. Options exercisable at such time will remain
exercisable for one year.
Change in Control Agreements
- ----------------------------
The Company has issued stock options to each of the Company's Named
Executive Officers. Certain of the options issued to executive officers under
the Company's 1988 Stock Option Plan prior to May 13, 1992, provided that upon a
Change of Control (as defined) the executive officer's option shall become
immediately exercisable as of the date of the Change of Control for up to double
the number of shares of Common Stock for which the option is otherwise
exercisable as of the date of the Change of Control (not to exceed the total
number of Option Shares, as defined). Other options issued to executive
officers under the 1988 Stock Option Plan prior to May 13, 1992, provided that
in the event of termination of the executive officer's employment by the Company
28
<PAGE>
without Cause (as defined) or by the executive officer for Good Reason (as
defined) within two years after a Change of Control (as defined) the executive
officer's stock options shall become fully vested and exercisable. In 1992, the
Company amended and restated its 1988 Stock Option Plan. The Company's
stockholders approved the amended and restated 1988 Stock Option Plan on May 13,
1992. Options issued to executive officers under the 1988 Stock Option Plan as
amended and restated provide that in the event of termination of the executive
officer's employment by the Company without Cause (as defined) or by the
executive officer for Good Reason (as defined) within two years after a Change
of Control (as defined) the executive officer's stock options shall become fully
vested and exercisable.
Pursuant to the terms of the option agreements between the Company and
Messrs. Andrews, Gorog and Paalborg, in the event of the termination of their
employment by the Company without Cause (as defined) or by the executive officer
for Good Reason (as defined) within two years after a Change of Control (as
defined), the executive officer's stock options shall become immediately
exercisable. Pursuant to the terms of the option agreement between US Order and
Mr. Backus, in the event of the termination of Mr. Backus' employment by US
Order without Cause (as defined) or by the executive officer for good Reason (as
defined) within two years after a Change of Control (as defined), Mr. Backus' US
Order stock options shall become immediately exercisable. The agreement between
World Airways and Mr. Pollard includes a similar provision relating to his World
Airways' options.
CERTAIN TRANSACTIONS
Mr. William F. Gorog is Chief Executive Officer and Chairman of the Board
of US Order, and Mr. Gorog, together with certain members of his immediate
family (referred to collectively herein as the "Founders"), owned 43% of US
Order prior to WorldCorp's exercise of the option described below, completed in
February, 1995.
In February 1995, the Company completed the purchase from the Founders of
4,757,679 shares of the common stock of US Order, par value $.001 per share.
Consideration for this purchase paid by the Company consisted of cash,
promissory notes and 302,282 shares of WorldCorp common stock which were
registered with the Securities and Exchange Commission in an S-3 filing declared
effective January 19, 1995. Upon completion of this transaction the Company
owned 89% of the voting stock of US Order.
On June 1, 1995, US Order and WorldCorp sold 4,427,500 shares of US Order
common stock, par value $.001 per share ("US Order Common Stock") in an initial
public offering. US Order sold 3,062,500 shares, and WorldCorp sold 1,365,000
shares of US Order Common Stock in the offering. Approximately $12.3 million of
the net proceeds of the offering were used to (i) pay approximately $2.7 million
in accumulated dividends on US Order's Series A Convertible Preferred Stock (the
"Series A Preferred Stock") held by WorldCorp and Series C Convertible Preferred
Stock (the "Series C Preferred Stock"), a portion of which was held by
WorldCorp, in connection with the mandatory conversion of all outstanding shares
of Series A and Series C Preferred Stock into US Order Common Stock, (ii) redeem
all outstanding shares of US Order's Series B Redeemable Preferred Stock (the
"Series B Preferred Stock" and together with the Series A Preferred Stock and
the Series C Preferred Stock, the "Former Preferred Stock") for $4.3 million and
pay approximately $0.6 million in accumulated dividends, and (iii) retire a $3.5
million 14% note held by WorldCorp due upon a public sale of US Order's equity
securities. As of March 31, 1996, WorldCorp owns 56.9% of US Order's Common
Stock.
The Company and World Airways historically have utilized a single corporate
staff for administrative services, thus permitting World Airways to utilize the
Company's management personnel as needed. Effective January 1, 1995,
substantially all of the Company's management personnel became employees of
World Airways and since such date, World Airways has provided certain
administrative services to the Company. The Company
29
<PAGE>
and World Airways have entered into a services agreement pursuant to which World
Airways and the Company will continue to provide services to each other at
negotiated rates, which the Company believes are comparable to those that could
be obtained on an arms-length basis. In June 1995, World Airways borrowed $1.8
million from the Company pursuant to a demand promissory note with an interest
rate of 13.875%. In July 1995, this note was repaid to the Company.
30
<PAGE>
ITEM NO. 2 -- APPROVAL OF WORLDCORP
1996 NON-EMPLOYEE DIRECTORS STOCK RETAINER PLAN
The Board proposes that the shareholders approve the WorldCorp, Inc. Non-
Employee Directors Stock Retainer Plan (the "Retainer Plan"), adopted by the
Board on February 24, 1996, subject to the approval of WorldCorp's shareholders.
The following paragraph summarize the more significant features of the Retainer
Plan. This summary is subject, in all respects, to the terms of the Retainer
Plan. WorldCorp will provide promptly, upon request and without charge, a copy
of the full text of the Retainer Plan to each person to whom a copy of this
proxy statement is delivered. Requests should be directly to: WorldCorp, Inc.,
13873 Park Center Road, Suite 490, Herndon, VA, Attn: Andrew M. Paalborg, Vice
President and General Counsel.
Summary of the Retainer Plan
Purpose. The Plan is intended to further align non-employee Director
-------
compensation with the interests of all shareholders. The Plan promotes this
objective by issuing shares of Common Stock to each non-employee Director in
lieu of the cash retainer otherwise payable to those Directors. The Retainer
Plan does not involve any increase in the compensation paid to non-employee
Directors.
Eligibility. Each Director who is not an employee of WorldCorp or an
-----------
affiliate of WorldCorp is eligible to participate in the Retainer Plan. Members
of the Committee, which will be appointed by the Board to administer the
Retainer Plan, are not eligible to participate in the Retainer Plan.
Awards. Shares of Common Stock will be issued to each Participant on each
------
December 31, March 31, June 30 and September 30 during the term of the Plan.
The number of shares that will be issued to each Participant will be determined
by dividing $6,250 (the amount of cash retainer otherwise payable to each
Participant for the following three month period) by the "Fair Market Value" of
the Common Stock. For purposes of the Retainer Plan, the "Fair Market Value" of
the Common Stock is the average closing price of the Common Stock for the thirty
trading days preceding the award.
Shares of Common Stock issued under the Retainer Plan will be immediately
vested and transferable, subject to any limitations imposed by the securities
laws. Participants will have all the rights of shareholders with respect to
shares of Common Stock issued under the Plan.
Share Authorization. The maximum aggregate number of shares of Common
-------------------
Stock that may be issued under the Retainer Plan is 50,000 shares. The maximum
aggregate number of shares that may be issued under the Retainer Plan will be
adjusted as the Committee determines is equitably required in the event of a
stock dividend, stock split, stock consolidation or similar change in the
capitalization of WorldCorp.
Amendment and Termination. The Board may amend or terminate the Retainer
-------------------------
Plan at any time. No amendment will be effective without the approval of
WorldCorp's shareholders, however, if the amendment materially (i) increases the
number of shares of Common Stock that may be issued under the Retainer Plan
(other than an adjustment as described above), (ii) changes the class of
individuals who may participate in the Retainer Plan or (iii) increases the
benefits that may be provided under the Retainer Plan. If not sooner terminated
by the Board, the last award of shares of Common Stock under the Retainer Plan
will be made on May 31, 2004.
Benefits. WorldCorp cannot determine the number of shares that will be
--------
issued to Participants under the Retainer Plan during 1996 because the number of
shares to be issued will be based on the Fair Market Value of the Common Stock
on the applicable award dates. If the Retainer Plan had been in effect during
all of 1995, each of the non-employee Directors would have been issued 2,769
shares during 1995 (assuming each such Director served during the entire year),
for a total of 13,845 shares.
31
<PAGE>
ITEM NO. 3 -- RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP served as independent certified public
accountants for the Company in 1994 and is expected to be represented at the
Annual Meeting. A representative of KPMG Peat Marwick LLP will have an
opportunity to make a statement if the representative so desires and will be
available to respond to appropriate questions.
As of this date, the Board of Directors desires to have KPMG Peat Marwick
LLP continue as accountants for the Company for the year ending December 31,
1995. Accordingly, the Company is presenting a resolution to the meeting to
ratify the appointment by the Board of Directors. If the stockholders do not
approve the proposal, the Board of Directors will reconsider its action with
respect to the appointment of accountants. Approval of the resolution, however,
will in no way limit the Board's authority to terminate or otherwise change the
engagement of KPMG Peat Marwick LLP during the year ending December 31, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1997 Annual Meeting
of Stockholders must be received by the Company's Secretary no later than
December 1, 1996, to be included in the Company's 1997 proxy materials.
Proposals intended for inclusion in next year's proxy statement should be
sent to the Secretary of the Company at WorldCorp, Inc., The Hallmark Building,
13873 Park Center Road, Herndon, Virginia 22071.
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by
the Chief Executive Officer and a general discussion period during which
stockholders will have an opportunity to ask questions about the business.
The Company does not intend to bring any other matter before the meeting
and does not know of any other matter which is proposed to be brought before the
meeting. However, should any other matter properly come before the meeting, the
persons named in the enclosed proxy will have discretionary authority to vote
all proxies in accordance with their judgment on such matter.
ANNUAL REPORT
A copy of the Annual Report is being mailed to each stockholder entitled to
vote at the Annual Meeting of Stockholders. A copy of the Company's Form 10-K
is available at no charge to all stockholders. For a copy write to: Andrew M.
Paalborg, Vice President and General Counsel, WorldCorp, Inc., The Hallmark
Building, 13873 Park Center Road, Herndon, Virginia 22071.
32
<PAGE>
OTHER INFORMATION
This solicitation of proxies is made by the Board of Directors, and the
Company will bear the costs of solicitation. In addition to solicitation by
mail, proxies may also be solicited by directors, officers, and employees of the
Company, who will not receive additional compensation for such solicitation.
Brokerage firms and other custodians, nominees and fiduciaries will be
reimbursed by the Company for their reasonable expenses incurred in sending
proxy material to beneficial owners of the Common Stock. The address of
WorldCorp's principal executive offices is The Hallmark Building, 13873 Park
Center Road, Herndon, Virginia 22071, and its telephone number is (703) 834-
9200. The above notice and proxy statement are sent by order of the Board of
Directors.
Dated: April 18, 1996
By Order of the Board of Directors,
Andrew M. Paalborg
Vice President & General Counsel
33
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WORLDCORP, INC.
THIS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 22, 1996 IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints T. COLEMAN ANDREWS III, WILLIAM F. GOROG
and ANDREW M. PAALBORG, and each of them, the proxy or proxies of the
undersigned, with full power of substitution, to vote all shares of Common
Stock, par value $1 per share, of WorldCorp, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Hyatt Dulles in Herndon, Virginia on May 22, 1996, at
8:30 A.M., and at any adjournments or postponements thereof, with the same force
and effect as the undersigned might or could do if personally present thereat.
Unless a contrary instruction is indicated, this proxy will be voted for
the election of directors as described in the accompanying Proxy statement, for
approval of the WorldCorp, Inc. 1996 Non-Employee Directors Stock Retainer Plan
and in favor of the proposal to ratify the selection of the independent public
accountants for 1996. This proxy will also be voted at the discretion of the
proxy holders on such matters other than the three specific items as may come
before the meeting.
A majority of such proxies or their substitutes as shall be present and
acting at the meeting, or if only one be present and acting then that one, shall
have and may exercise all of the powers of all of said proxies hereunder.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE
AND RETURN PROMPTLY
<PAGE>
DETACH HERE
[x]Please mark
votes as in
this example
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is
returned, such shares will be voted "FOR" authority in Item 1 and "FOR"
Item 2.
1. AUTHORITY TO VOTE FOR THE FOLLOWING NOMINEES AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT:
Nominees: James E. Colburn, Geoffrey S. Rehnert, John C. Backus, Gideon
Argov
FOR WITHHELD
[__] [__]
-----------------------------------
(INSTRUCTION: To withhold authority to vote for one
individual nominee, write such name in the space provided
above)
2. PROPOSAL TO APPROVE THE FOR AGAINST ABSTAIN
WORLDCORP 1996 NON-EMPLOYEE [__] [__] [__]
DIRECTORS STOCK RETAINER PLAN.
3. PROPOSAL TO RATIFY THE
SELECTION OF KPMG PEAT MARWICK FOR AGAINST ABSTAIN
LLP as independent public accountants [__] [__] [__]
for the Company for the fiscal year
ending December 31, 1996.
MARK HERE
FOR ADDRESS [__]
CHANGE AND
NOTE AT LEFT
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney executer, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized person. If a
partnership, please sign in full partnership name by authorized person.
