<PAGE>
As filed with the Securities and Exchange Commission on May 7, 1997
Registration No. 333- 19483
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Amendment No. 2
---------------
to
--
FORM S-3
--------
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WORLDCORP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 13873 Park Center Road, 94-3040585
(State or other juris- Suite 490 (I.R.S. Employer
diction of incorporation Herndon, Virginia 20171 Identification No.)
or organization) (703) 834-9200
(Address, including zip
code, and telephone number,
including area code, of
registrant's principal
executive offices)
</TABLE>
Walter M. Fiederowicz
------------------------
President & CEO
WorldCorp, Inc.
The Hallmark Building
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
(703) 834-9200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
David M. Carter
Hunton & Williams
Riverfront Plaza - East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8200
Approximate date of commencement of the proposed sale of the securities to the
public:
As soon as practicable after the Registration Statement becomes effective.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement becomes+
+effective. This prospectus shall not constitute an offer to sell or the +
+solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 7, 1997
P R O S P E C T U S
- --------------------------------------------------------------------------------
120,000 Warrants
120,000 Shares
WorldCorp, Inc.
Warrants
Common Stock
--------------
This Prospectus relates to 120,000 warrants (the "Warrants") of WorldCorp,
Inc., a Delaware corporation (the "Company" or "WorldCorp"), held by seven
holders (the "Selling Securityholders"), and the 120,000 shares (the "Shares")
of the Company's common stock, par value $.001 per share (the "Common Stock"),
issuable upon the exercise of such Warrants. The Warrants held by the Selling
Securityholders together with the Shares are sometimes referred to herein as the
"Selling Securityholder Securities." The Warrants were issued to the Selling
Securityholders in connection with the issuance by WorldCorp of its 10.00%
Senior Subordinated Notes due September 30, 2000 (the "Notes") to the Selling
Securityholders. The Notes and Warrants are completely detached and separately
transferable. The Shares are being registered in connection with the possible
resale of those Shares. Registration of the Warrants and the underlying Shares
enables the Selling Securityholders to sell publicly all or a portion of the
Warrants or the underlying Shares. The Warrants and the underlying Shares
offered by the Selling Securityholders by this Prospectus may be sold from time
to time by the Selling Securityholders or by their transferees. The
distribution of the Warrants and the underlying Shares offered hereby by the
Selling Securityholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices prevailing
at the time of sale or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees, underwriting discounts or commissions
may be paid by the Selling Securityholders. Resales of the Shares may, from
time to time, be made on the New York Stock Exchange (the "NYSE"), or other
stock exchanges, in privately negotiated transactions or otherwise. See
"Selling Securityholders" and "Plan of Distribution." Each Warrant may be
exercised, in whole or in part, for shares of Common Stock at an exercise price
of $6.00 per share, subject to adjustment, at any time, and from time to time,
from the date of issue, September 30, 1996, and ending on September 30, 2000.
WorldCorp, concurrently with the registration of the Warrants pursuant to
this Prospectus is offering to exchange (the "Exchange Offer"), upon the terms
and subject to the conditions set forth in a prospectus, $1,000 principal amount
of its 10.00% Senior Subordinated Notes due September 30, 2000 (the "New
Notes"), which will be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement on Form S-4, for
each $1,000 principal amount of the outstanding 10.00% Senior Subordinated Notes
due September 30, 2000 (the "Old Notes") of the Company, of which $10,000,000
principal amount is outstanding. The New Notes will be issued pursuant to an
Indenture, dated as of September 30, 1996 (the "10% Indenture"). The New Notes
and the Old Notes are collectively referred to herein as the "Notes."
The Company will not receive any of the proceeds from the sale of the
Selling Securityholder Securities offered hereby by the Selling Securityholders.
In the event all of the Warrants are exercised, the Company will receive gross
proceeds of approximately $720,000. See "Selling Securityholders" and "Plan of
Distribution."
The Common Stock is listed on the NYSE under the trading symbol "WOA." The
reported closing price on the NYSE on May 5, 1997 was $3.50 per share.
See "Risk Factors" beginning on Page 9 for a discussion of certain risk
factors that should be considered in connection with an investment in the
Warrants and the underlying Shares offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is May __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048. In addition, copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web Site on the Internet that contains reports, proxy and
information statements and other information regarding the Company. The
Commission's Web Site address is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby (the Shares and the Warrants). For further information
with respect to the Company and the Warrants and the Shares, reference is hereby
made to such Registration Statement. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, filed pursuant to Section 13 or 15(d) of the Exchange
Act and (ii) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed May 19, 1992, with the Commission
pursuant to Section 12 of the Exchange Act. All documents filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
the offering made hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein or in any Prospectus Supplement modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference into this Prospectus, other than certain exhibits to
such documents. Requests for such copies should be directed to Investor
Relations, WorldCorp, Inc., 13873 Park Center Road, Suite 490, Herndon, Virginia
20171 (telephone: (703) 834-9200).
3
<PAGE>
PROSPECTUS SUMMARY
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995:
WorldCorp desires to take advantage of the new "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. WorldCorp wishes to
caution readers that this Prospectus contains forward looking statements that
are subject to risks and uncertainties, including, but not limited to, the
impact of competitive products, product demand and market acceptance risks,
reliance on key strategic alliances, fluctuations in operating results and other
risks detailed from time to time in the Company's filings with the Securities
and Exchange Commission, including risk factors disclosed in the Company's Form
10-K for the fiscal year ended December 31, 1996 and those discussed in "Risk
Factors." See "Risk Factors." These risks could cause the Company's actual
results for 1997 and beyond to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company.
The Company
WorldCorp was organized in March 1987 to serve as the holding company for
World Airways, Inc., a Delaware corporation ("World Airways"), which was
organized in March 1948 and is the predecessor to WorldCorp. WorldCorp owns
positions in companies that operate in two distinct business areas: aviation
services (through World Airways) and consumer telecommunications, electronic
commerce, and interactive services (through InteliData Technologies Corporation
("InteliData"), a newly-formed Delaware corporation and successor by merger to
US Order, Inc., a Delaware corporation ("US Order") and Colonial Data
Technologies Corporation, a Delaware corporation ("Colonial Data")). WorldCorp
owns its stock in InteliData through WorldCorp Investments, Inc., a Delaware
corporation and wholly owned subsidiary of WorldCorp ("WorldCorp Investments"
and, together with WorldCorp, "WorldCorp" or the "Company").
In February 1994, pursuant to an October 1993 agreement, WorldCorp sold
24.9% of its ownership in World Airways to MHS Berhad ("MHS"), a Malaysian
aviation company. Effective December 31, 1994, WorldCorp increased its ownership
in World Airways to 80.1% through the purchase of 5% of World Airways common
stock held by MHS. In October 1995, World Airways completed an initial public
offering in which 2,000,000 shares of its common stock were issued and sold by
World Airways and 900,000 shares were sold by WorldCorp. As of March 31, 1997,
WorldCorp and MHS owned approximately 61.6% and 17.7%, respectively, of the
outstanding common stock of World Airways.
In June 1995, US Order completed an initial public offering whereby
3,062,500 shares of its common stock were issued and sold by US Order, and
1,365,000 shares were sold by WorldCorp. On November 7, 1996, US Order and
Colonial Data were each merged (the "Merger") with and into InteliData. As a
result of the Merger, as of March 31, 1997, WorldCorp owned approximately 28.9%
of the outstanding common stock of InteliData (the "InteliData Common
Stock").
The principal executive offices of WorldCorp are located at Washington
Dulles International Airport in The Hallmark Building, 13873 Park Center Road,
Herndon, Virginia 20171. WorldCorp's telephone number is (703) 834-9200.
4
<PAGE>
World Airways
World Airways is a leading global provider of long-range passenger and
cargo air transportation outsourcing services to major international airlines
under fixed rate, multi-year contracts. Airline operations account for 100% of
World Airways' operating revenue and operating income. World Airways' passenger
and freight operations employ 13 wide-body aircraft which are currently operated
under contracts, primarily with Pacific Rim airlines. These contracts generally
require World Airways to supply aircraft, crew, maintenance and insurance
("ACMI" or "wet lease"), while World Airways' customers are responsible for a
large portion of the other operating costs, including fuel. World Airways'
airline customers have determined that outsourcing a portion of their wide-body
passenger and cargo requirements can be less expensive, and offer greater
operational and financial flexibility, than purchasing new aircraft and
additional spare parts required for such aircraft. World Airways also leads a
contractor teaming arrangement that is the largest single supplier of commercial
aircraft to the United States Air Force's Air Mobility Command ("U.S. Air Force"
or "USAF").
In July 1996, World Airways restructured its business to focus on the
growing and profitable ACMI contract services. As such, World Airways ceased
all scheduled passenger and scheduled charter services as of October 27, 1996,
taking a one-time charge of $21.0 million.
World Airways' operating philosophy is to build on its existing ACMI
contracts to achieve a strong platform for future growth. World Airways
concentrates on ACMI contracts because such contracts shift yield, load factor
and cost risks to the customer. The customer bears the risk of filling the
aircraft with passengers or cargo and assumes a large portion of the operating
expenses, including fuel. World Airways maximizes profitability by combining its
multi-year ACMI contracts with short term, higher-yielding ACMI agreements which
meet the peak seasonal requirements of its customers. World Airways responds
opportunistically to rapidly changing market conditions by maintaining a
flexible fleet of aircraft that can be deployed in a variety of configurations.
World Airways focuses its marketing efforts on the Pacific Rim, where rapid
economic development drives demand for World Airways' services. World Airways
believes that its modern fleet of long-range medium-density wide-body MD-11 and
DC10-30 aircraft are ideally suited to the Pacific Rim market. World Airways'
aircraft permit its customers to serve less dense international routes where a
Boeing 747 would provide excess capacity. World Airways has operated in the
Pacific Rim almost since its inception, and believes that it has developed the
ability to serve this market well.
World Airways substantially increases its potential customer base by being
able to serve both passenger and cargo customers. World Airways flies
passenger, cargo and passenger/cargo convertible aircraft that World Airways
believes permit it to target emerging opportunities. World Airways has been
providing safe, reliable ACMI services for almost 50 years. World Airways has
flown for the USAF since 1956, for Malaysian Airlines System Berhad ("Malaysian
Airlines") since 1981 and for P.T. Garuda Indonesia ("Garuda") since 1973.
InteliData
InteliData was incorporated on August 23, 1996 under the Delaware General
Corporation Law in order to effect the merger ("Merger") of US Order and
Colonial Data. The Merger was announced on August 5, 1996, when US Order and
Colonial Data entered into an Agreement and Plan of Merger ("Merger Agreement").
On November 7, 1996, the Merger was consummated with each share of outstanding
US Order and Colonial Data common stock being exchanged for one share of
InteliData common stock. The Merger was treated as a purchase of Colonial Data
by US Order.
5
<PAGE>
Effective October 4, 1996, US Order acquired the business of Braun, Simmons
& Co., an Ohio corporation ("Braun Simmons"), for approximately $7 million
consisting of cash and US Order common stock and including US Order transaction
costs pursuant to the merger of Braun Simmons into US Order (the "Braun Simmons
Acquisition"). Braun Simmons was an information engineering firm specializing in
the development of home banking and electronic commerce solutions for financial
institutions. The acquisition expands InteliData's product line for both large
and small financial institutions.
The business of InteliData consists of the businesses previously conducted
by US Order, Colonial Data and Colonial Data's subsidiaries. InteliData develops
and markets products and services for the telecommunications and financial
services industries through its three business divisions: consumer
telecommunications, electronic commerce and interactive services.
The consumer telecommunications division designs, develops and markets
telecommunications products that support intelligent network services being
developed and implemented by the regional Bell operating companies ("RBOCs") and
other telephone companies ("telcos"). InteliData has concentrated its product
development and marketing efforts on products that support Caller ID and other
emerging intelligent network services, including a smart telephone, the
Telesmart 4000/Intelifone/TM/, which provides consumers call management features
and the ability to access numerous network services and interactive applications
via telephone. InteliData currently offers a line of Caller ID adjunct units and
telephones with integrated Caller ID, small business telecommunications systems
and high-end consumer telecommunications equipment. InteliData also repairs and
refurbishes telecommunications products for commercial customers and provides
other services that support the development and implementation of intelligent
network services.
The electronic commerce division develops and markets products and services
to assist financial institutions in their home banking and electronic bill
payment initiatives. The products are designed to assist consumers in accessing
and transacting business with their banks and credit unions electronically, and
to assist financial institutions in connecting to and transacting business with
third parties, including data processors and billers. The services focus on a
financial institution's back office, offering outsourcing for data entry,
telemarketing, customer service and technical support. InteliData currently
receives its electronic commerce revenues largely from the sale of products and
services to Visa International Service Association, Inc. ("Visa") member banks.
On August 1, 1994, US Order sold its bill payment operations and technology
(the "Visa Bill-Pay System") to Visa for cash and the right to future royalty
payments which are based on the number of customers utilizing the Visa Bill-Pay
System. InteliData's right to future royalty payments from Visa is subject to a
cumulative offset amount aggregating $880,000 and, accordingly, InteliData does
not expect to begin receiving royalty payments until at least the second half of
1997. Visa formed Visa InterActive, Inc. ("Visa InterActive") around the
technology and personnel acquired from US Order, including 54 of its former
employees. Visa InterActive also has agreed through 2000 to inform Visa member
banks that InteliData is a preferred provider of certain electronic commerce
products and services.
The interactive services division was established to provide interactive
applications for use on smart telephones and other small screen devices, such as
alpha-numeric pagers, Personal Communication Systems ("PCS") devices and
personal digital assistants ("PDAs"). InteliData intends to sell interactive
applications directly to end users and through other companies, including telcos
and wireless communications companies. InteliData's current interactive
applications include electronic national directory assistance lookup, one-way
alpha-numeric paging, one-way internet e-mail, a personal directory data save
and restore function and information services such as news, weather, sports
scores, stock quotes, lottery results and horoscopes.
Recent Events
6
<PAGE>
On August 29, 1996, WorldCorp entered into a bridge loan (the "Bridge
Loan") with a financial institution (the "Bank"), pursuant to which WorldCorp
borrowed $25.0 million at an interest rate equal to the London Interbank Offered
Rate ("LIBOR") plus 2.50%. All borrowings under the Bridge Loan initially were
collateralized by $15.0 million in cash, all of the InteliData and World Airways
Common Stock beneficially owned by WorldCorp and a first priority security
interest in the Company's assets. Using the proceeds from the Bridge Loan, on
September 30, 1996, WorldCorp redeemed all of the remaining outstanding
principal amount of approximately $25.0 million of its 13 7/8% Subordinated
Notes due August 15, 1997 (the "13 7/8% Notes"). In October 1996, the cash
collateralization was reduced to $7.0 million as a result of a $10.0 million
repayment of the monies borrowed under the Bridge Loan. On December 31, 1996,
the Company successfully renegotiated the terms of the Bridge Loan (the
"Renegotiated Bridge Loan"). Pursuant to the Renegotiated Bridge Loan, the
interest rate was lowered to LIBOR plus 1.75%, and all borrowings are now
collateralized by $1.0 million in cash, all of the InteliData and World Airways
Common Stock beneficially owned by WorldCorp and a first priority security
interest in the Company's assets. In addition, certain financial covenants have
been released. On February 26, 1997, the Renegotiated Bridge Loan was further
amended to permit the Margin Loan (as described herein).
On September 30, 1996, WorldCorp sold the $10,000,000 in original aggregate
principal amount of its Old Notes pursuant to a purchase agreement, dated as of
September 30, 1996, among WorldCorp and the purchasers named therein (the
"Purchase Agreement"). The initial purchasers of the Notes also received
warrants, dated September 30, 1996 and expiring September 30, 2000, to acquire
120,000 shares of the common stock of WorldCorp, $.001 par value per share (the
"Common Stock"), additional warrants, issuable to such purchasers on October 1,
1997 and expiring on September 30, 2001, to acquire 40,000 shares of Common
Stock and additional warrants, issuable to such purchasers on October 1, 1998
and expiring on September 30, 2002, to acquire 40,000 shares of Common Stock,
which additional warrants will be issued only if certain market conditions are
met (collectively, the "Warrants"). The Warrants have an exercise price of $6.00
per share, subject to adjustments as set forth therein. Proceeds from the sale
of the Notes were used to repay $10.0 million aggregate principal amount
outstanding under the Renegotiated Bridge Loan. As of March 31, 1997, the
outstanding principal balance under the Renegotiated Bridge Loan was $15.0
million, and there was $10.0 million in aggregate principal amount outstanding
under the Notes.
The Purchase Agreement and the Renegotiated Bridge Loan generally restrict
stock repurchases by WorldCorp and its subsidiaries, except under certain
limited circumstances. These borrowings also contain a number of covenants
that, among other things, restrict the ability of WorldCorp to dispose of
assets, make certain acquisitions of the stock of other entities, incur
additional indebtedness, and make capital expenditures. The Renegotiated Bridge
Loan also contains certain covenants which, among other things, require
WorldCorp to maintain at least a 50.1% ownership of World Airways and in certain
instances to make repayment of the Renegotiated Bridge Loan. Pursuant to the
Renegotiated Bridge Loan, WorldCorp may retire or otherwise acquire up to $10.0
million worth of WorldCorp Common Stock. In addition, WorldCorp was permitted
to exchange with the WorldCorp Employee Savings and Stock Ownership Plan, in a
non-cash transaction, Common Stock held by the trust for common stock of World
Airways, provided, WorldCorp retained a 50.1% ownership of World Airways.
Pursuant to the Purchase Agreement, WorldCorp is permitted to purchase, redeem,
retire or otherwise acquire for value (i) at any time, Common Stock for up to
$25.0 million in cash and up to 650,000 shares of Common Stock using shares of
common stock of World Airways of which WorldCorp is the beneficial owner, and
(ii) up to $5.0 million worth of additional shares of Common Stock for every
$15.0 million increase in Asset Value (as defined herein) at such time compared
to such Asset Value as of September 12, 1996. As of September 12, 1996 and
December 31, 1996, the Asset Value was $185.7 million and $130.4 million,
respectively, although the Asset Value has declined since year-end. In
September 1996, WorldCorp announced its intention to purchase up to 2.5 million
shares of its publicly-traded common stock (the "WorldCorp Common Stock")
pursuant to open market transactions. As of March 31, 1997, the Company had
purchased 1,362,500 shares of WorldCorp Common Stock for an aggregate cost of
$7.8 million. WorldCorp does not intend to purchase any additional shares at
this time.
7
<PAGE>
On January 27, 1997, WorldCorp entered into a $1.0 million margin loan with
Scott & Stringfellow, Inc. ("Scott & Stringfellow"), whereby WorldCorp pledged
approximately 400,000 shares of InteliData common stock which WorldCorp owns as
collateral for such loan (the "Margin Loan").
On March 14, 1997, Charles W. Pollard departed as Chief Executive Officer
of World Airways. The Board of Directors named T. Coleman Andrews, III, Russell
L. Ray and Peter M. Sontag as an executive search committee to identify a new
Chief Executive Officer. Pursuant to World Airways' Bylaws, T. Coleman Andrews,
III, Chairman of the Board of Directors of World Airways served as Interim
President and Chief Executive Officer of World Airways pending the hiring of a
new Chief Executive Officer. On April 4, 1997, World Airways announced that
Russell L. Ray, Jr., had been appointed Interim President and Chief Executive
Officer of World Airways. Mr. Ray has held senior executive positions with
British Aerospace, Pan Am, Pacific Southwest Airlines, McDonnell Douglas, and
Eastern airlines. Mr. Ray has served on the World Airways Board of Directors for
four years.
On April 8, 1997, WorldCorp announced a long-planned transition in its
executive team. Walter M. Fiederowicz was appointed President and Chief
Executive Officer by the WorldCorp Board of Directors, succeeding T. Coleman
Andrews, III. Mr. Andrews was elected Chairman of the Board of Directors of
WorldCorp, succeeding William M. Gorog, who was elected Chairman of the
Executive Committee of the Board of Directors of WorldCorp. Mr. Fiederowicz
served as Chairman of the Board of Directors of Colonial Data, where he was
instrumental in managing Colonial Data's capital-raising efforts and in
consummating a number of acquisitions and strategic alliances, including an
alliance with US Order in 1995, which ultimately led to the Merger and the
resulting formation of InteliData.
Risk Factors
See "Risk Factors" for a discussion of certain risk factors that should be
considered in connection with an investment in the Common Stock offered hereby.
8
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully by prospective
investors in evaluating an investment in the Selling Securityholder Securities.
Set forth below are certain risk factors with respect to WorldCorp, World
Airways, InteliData and InteliData's predecessor companies, US Order and
Colonial Data.
Risk Factors with Respect to WorldCorp:
Holding Company Structure and Liquidity
WorldCorp is a highly leveraged holding company. As a holding company, all
of WorldCorp's funds are generated through its positions in World Airways and
InteliData, which have not paid dividends on common stock since 1992. At
December 31, 1996, World Airways had a working capital deficit of $29.6 million
and had substantial debt and lease commitments. At December 31, 1996,
InteliData had working capital of $63.5 million, with no long-term debt. World
Airways' ability to pay dividends is currently restricted under a borrowing
arrangement. World Airways and InteliData currently intend to retain their
future earnings, if any, to fund the growth and development of their businesses
and, therefore, do not anticipate paying any cash dividends in the foreseeable
future. Of the $12.5 million in cash and cash equivalents WorldCorp held at
December 31, 1996, approximately $7.0 million was held by World Airways and,
therefore, not available to satisfy WorldCorp's obligations. As of December 31,
1996, WorldCorp had parent company repayment obligations, including principal
and interest, of approximately $22.4 million for 1997. In order to meet these
obligations and its general and administrative costs, WorldCorp must use its
existing cash and either sell shares of World Airways or InteliData, or issue
additional debt or equity. Under the terms of certain borrowing arrangements,
however, WorldCorp has pledged all of its shares of World Airways and InteliData
as collateral for the borrowings.
On December 31, 1996, the Company successfully renegotiated the terms of
The Bridge Loan and executed the Renegotiated Bridge Loan. Pursuant to the
Renegotiated Bridge Loan, all borrowings are now collateralized by $1.0 million
in cash, all of the InteliData Common Stock and World Airways beneficially owned
by WorldCorp and a first priority security interest in the Company's assets. In
addition, certain financial covenants have been released. On February 26, 1997,
the Renegotiated Bridge Loan was further amended to permit the Margin Loan.
WorldCorp also announced its intention to purchase up to 2.5 million shares of
WorldCorp Common Stock pursuant to open market transactions. As of March 31,
1997, the Company had purchased 1,362,500 shares of WorldCorp Common Stock for
an aggregate cost of $7.8 million. WorldCorp does not intend to purchase any
additional shares at this time.
In May 1992, WorldCorp issued $65 million of 7% Convertible Subordinated
Debentures due 2004 (the "7% Debentures") issued pursuant to an Indenture (the
"7% Indenture"). The 7% Debentures are convertible into the common stock of
WorldCorp at $11.06 per share, subject to adjustment in certain events, and bear
an annual interest rate of 7%. The 7% Indenture governing WorldCorp's 7%
Debentures provides that WorldCorp will cause World Airways to not pay dividends
upon the occurrence of any event of default by WorldCorp under such 7%
Indenture. Further, the 10% Indenture defines Subordinated Indebtedness to
include the 7% Debentures and as such, the Notes will rank senior in right of
payment to the 7% Debentures.
Substantial Leverage; Inability to Service Indebtedness
The Company has substantial indebtedness and is highly leveraged. At
December 31, 1996, the Company's total long-term indebtedness including current
maturities was $114.8 million, the Company had liabilities (including total
debt) of approximately $215.8 million and total stockholders' deficit of $(40.3)
million. In the ordinary course of business, the Company has incurred and,
subject to certain covenants and financial tests set out in the Renegotiated
Bridge Loan, the 7% Indenture and the
9
<PAGE>
10% Indenture, will continue to incur additional indebtedness to fund working
capital requirements and for other corporate purposes.
The degree to which the Company is leveraged could have important
consequences including: (i) the Company's ability to obtain financing in the
future for working capital or other purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness; (iii) the indebtedness
outstanding under the Renegotiated Bridge Loan is secured and will mature prior
to the maturity of the New Notes; (iv) certain of the Company's borrowings are
at variable rates of interest, which could result in higher interest expense in
the event of increases in interest rates; and (v) the Company's high degree of
leverage may make it more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures.
The Company believes that, based upon current financing arrangements and
the Company's ability to raise additional capital through issuing equity,
selling shares of its World Airways or InteliData common stock, or through
entering into new loan arrangements, the Company will be able to meet its
principal and interest payment obligations on its outstanding indebtedness.
There can be no assurance, however, that the Company's future financial
condition will be such as to permit the Company to service its indebtedness,
including the New Notes.
Restrictive Debt Covenants; Consequences of Failure to Comply with Debt
Covenants
The Renegotiated Bridge Loan and the 10% Indenture contain a number of
significant covenants that, among other things, restrict the ability of the
Company to dispose of assets, incur additional indebtedness, pay dividends,
enter into sale-leaseback transactions, create liens, make capital expenditures
and make certain investments or acquisitions and otherwise restrict corporate
activities. The ability of the Company to comply with such provisions may be
affected by events beyond the Company's control. The breach of any of these
covenants could result in a default under the Renegotiated Bridge Loan. In the
event of any such default, depending upon the actions taken by the Bank, the
Company could be prohibited from making any payments of principal of or interest
on the New Notes. In addition, the Bank could elect to declare all amounts
borrowed under the Renegotiated Bridge Loan, together with accrued interest, to
be due and payable or could proceed against the collateral securing such
indebtedness.
Mandatory Prepayment
Pursuant to the 10% Indenture, WorldCorp is obligated under certain
conditions to make certain mandatory prepayments of the Notes. If the Asset
Value at the end of any fiscal quarter is less than $70.0 million, then
WorldCorp must prepay 50% of each of the then outstanding Notes within 60 days.
If the Asset Value at the end of any fiscal quarter is less than $50.0 million,
then WorldCorp must prepay all of the then outstanding Notes within 60 days. If
WorldCorp sells any shares of InteliData Common Stock, 20% of the net proceeds
(i.e., gross proceeds less direct costs associated with such sales) received by
WorldCorp upon such sale will be used to prepay the then outstanding Notes
within 30 days. There can be no assurance that WorldCorp will not be required
to make such mandatory prepayments and if so, such prepayments could have an
adverse effect on WorldCorp's financial condition and results of operations.
In the event of a Mandatory Prepayment of the Notes, WorldCorp would seek to
raise additional capital through issuing equity, selling shares of its World
Airways or InteliData common stock, or through entering into loan arrangements,
in order to meet the principal and interest payment obligations on the Notes.
There can be no assurance, however, that WorldCorp would be able to obtain
sufficient capital through such financings or that the terms of such financings
would be favorable to WorldCorp.
10
<PAGE>
Proposed Restructuring of World Airways
The managements of WorldCorp and World Airways are currently exploring ways
to maximize value for the stockholders of each company. WorldCorp is evaluating
the feasibility of a disposition of its interest in World Airways through a
secondary offering or a sale to a third party. There can be no assurances,
however, that any such transactions will ultimately be consummated.
Risk Factors with Respect to World Airways:
Dependence Upon Key Customers.
World Airways' business relies heavily on its contracts with Malaysian
Airlines, Philippine Airlines, Inc. ("Philippine Airlines"), P.T. Garuda
Indonesia ("Garuda") and the USAF. In 1996, these customers accounted for
approximately 34%, 15%, 13% and 25%, respectively, of World Airways' revenues
and 42%, 17%, 14%, and 17%, respectively, of total block hours flown from
continuing operations. As a result of teaming arrangements, World Airways has
one of the largest USAF fixed awards under the Civil Reserve Air Fleet ("CRAF")
program for the U.S. Government's 1996-97 fiscal year. World Airways, however,
cannot determine how the reduction in overall Defense Department spending may
affect arrangements with the USAF in future years. The loss of any of these
contracts with these key customers, a renegotiation of the terms of these
contracts or a substantial reduction in business from any of them, if not
replaced, could have a material adverse effect on the financial condition or
results of operations of World Airways. Although World Airways' customers bear
the financial risk of filling the World Airways' aircraft with passengers or
cargo, World Airways can be affected adversely if its customers are unable to
operate its aircraft profitably, or if one or more of World Airways' customers
experience a material adverse change in their market demand, financial condition
or results of operations. Under these circumstances, World Airways can be
adversely affected by receiving delayed or partial payments or by receiving
customer demands for rate and utilization reductions, flight cancellations,
and/or early termination of their agreements. Also, subsequent to year-end, at
Philippine Airlines' request, World Airways agreed to a payment plan with
respect to Philippine Airlines' wet lease obligations beginning in March 1997.
Although Philippine Airlines is current on this payment plan to date, if
Philippine Airlines defaults on this payment plan, or fails to meet its monthly
aircraft lease obligations, this development, if not offset by other business,
would have a material adverse effect on the cash flows, financial condition and
results of operations of World Airways. Geographic Concentration.
World Airways derives a significant percentage of its revenues and block
hours from its operations in the Pacific Rim region. While World Airways
believes the Pacific Rim region is a growth market for air transportation, any
economic decline or any military or political disturbance in this area may
interfere with World Airways' ability to provide service in this area and could
have a material adverse effect on the financial condition or results of
operations of World Airways.
Operating Losses.
While World Airways generated operating income each year from 1987 through
1992 and in 1995, it sustained operating losses in 1993 and 1994 of $7.3 million
and $5.2 million, respectively, and net losses of $9.0 million in each of these
two years. For the year ended December 31, 1996, World Airways incurred a net
loss of $14.0 million, which resulted from operating losses incurred in World
Airways' scheduled service operations, which were discontinued in 1996, and the
related estimated loss on disposal. Earnings from continuing operations were
$18.4 million for 1996. There can be no assurance that World Airways will be
able to generate operating income in 1997 or future years.
11
<PAGE>
Financial Leverage.
World Airways is highly leveraged. World Airways incurred substantial debt
and lease commitments during the past three years in connection with its
acquisition of MD-11 aircraft and related spare parts. At December 31, 1996,
World Airways had total long-term indebtedness of approximately $30.1 million
and notes payable and current maturities of long-term obligations of $20.4
million. In addition, World Airways has significant future long-term
obligations under aircraft lease obligations relating to its aircraft. The
degree to which World Airways is leveraged could have important consequences to
holders of the common stock of World Airways (the "World Airways Common Stock"),
including the following: (i) World Airways' ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or other purposes may be limited; (ii) World Airways' degree of leverage and
related debt service obligations, as well as its obligations under operating
leases for aircraft, may make it more vulnerable than some of its competitors in
a prolonged economic downturn; and (iii) World Airways' financial position may
restrict its ability to pursue new business opportunities and limit its
flexibility in responding to changing business conditions.
Liquidity and Capital Resources.
World Airways' cash and cash equivalents at December 31, 1996 and 1995 were
$7.0 million and $25.3 million, respectively. As is common in the airline
industry, World Airways operates with a working capital deficit. At December
31, 1996, World Airways' current assets were $44.4 million and current
liabilities were $74.0 million. Also, World Airways has substantial long-term
aircraft lease obligations with respect to its current aircraft fleet. Although
there can be no assurances, World Airways believes that its existing contracts
and additional business which it expects to obtain for 1997, along with it's
existing cash and financing arrangements, will be sufficient to allow World
Airways to meet its cash requirements related to the phase-out of its
discontinued operations and the operating and capital requirements for its
continuing operations for 1997.
In 1996, World Airways instituted a program to purchase up to one million
shares of its publicly-traded World Airways Common Stock pursuant to open market
transactions. As of March 31, 1997, World Airways had purchased 770,000 shares
of World Airways Common Stock at an aggregate cost of approximately $7.8 million
pursuant to such purchases. World Airways does not intend to purchase any
additional shares at this time.
In the event that World Airways enters into leases for additional aircraft,
World Airways will need to make capital expenditures for additional spare
engines and parts. No assurances can be given, however, that World Airways will
obtain all of the financing required for such capital expenditures. Under World
Airways' credit agreement, dated December 7, 1993, with BNY Financial
Corporation (as amended through October 1996, the "Credit Agreement"), World
Airways has agreed that it will not incur in excess of $25 million of additional
debt or make additional capital expenditures in excess of $25 million in
1997.
Utilization of Aircraft.
Due to the large capital costs of leasing and maintaining World Airways'
aircraft, each of World Airways' aircraft must have high utilization at
attractive rates in order for World Airways to operate profitably. Although
World Airways's strategy is to enter into long-term contracts with its
customers, the terms of World Airways's existing customer contracts are
substantially shorter than the terms of World Airways's lease obligations with
respect to the aircraft. Approximately 60% and 20% of World Airways' contract
backlog at December 31, 1996, relates to its multi-year contracts with Malaysian
Airlines and Philippine Airlines, respectively. While the percentage of its
1997 block hour capacity that is currently under contract exceeds the comparable
percentage in the past several years, World Airways still has substantial
uncontracted capacity in the third and fourth quarters of 1997. In addition, a
significant portion of World
12
<PAGE>
Airways' current contracts expire near the end of 1997.There can be no assurance
that World Airways will be able to enter into additional contracts with new or
existing customers or that it will be able to obtain enough additional business
to fully utilize each aircraft. World Airways' financial results could be
materially adversely affected even by relatively brief periods of low aircraft
utilization and yields. In order to maximize aircraft utilization, World Airways
does not intend to acquire new aircraft unless such aircraft would be necessary
to service existing needs or World Airways has obtained additional ACMI
contracts for the aircraft to service. World Airways is seeking to obtain
additional ACMI contracts with new and existing customers, to which such new
aircraft would be dedicated when placed in service, but World Airways can
provide no assurance that it will obtain new ACMI contracts or that existing
ACMI contracts will be renewed or extended.
Aging Aircraft.
World Airways's existing fleet includes four DC10-30 aircraft which were
manufactured between 1974 and 1988. Manufacturer Service Bulletins ("Service
Bulletins") and the FAA's Airworthiness Directives ("Directives") issued under
its "Aging Aircraft" program could cause DC10-30 aircraft operators to be
subject to extensive aircraft examinations and require DC10-30 aircraft to
undergo structural inspections and modifications to address problems of
corrosion and structural fatigue at specified times. It is possible that
Service Bulletins or Directives applicable to the types of aircraft or engines
included in World Airways' fleet could be issued in the future. The cost of
compliance with Directives and Service Bulletins cannot currently be estimated,
but could be substantial and could have a material adverse effect on the
financial condition or results of operations of World Airways.
Aircraft Fleet.
Each of the aircraft in World Airways' existing fleet is to a large extent
contractually dedicated by World Airways to the service of one or more
customers, with limited aircraft available to provide back-up capability.
Therefore, in the event the use of one or more of World Airways' aircraft was
lost, World Airways might have difficulty fulfilling its obligations under one
or more of these contracts, if it were unable to obtain substitute aircraft.
Also, as World Airways enters into additional agreements to use its aircraft
fleet on a year-round as opposed to seasonal basis, World Airways will have
fewer aircraft available to meet the peak seasonal demands for its traditional
customers such as Garuda for the Hadj pilgrimage and the USAF for short-term
expansion flying. To continue to meet the peak seasonal demand requirements of
its customers, World Airways will have to acquire additional aircraft on short-
term leases. World Airways has historically been successful in obtaining MD-11
and DC10-30 aircraft and the financing necessary for the acquisition of such
aircraft. There can be no assurance, however, that World Airways will be able to
lease such aircraft or a satisfactory substitute, that the terms of such leases
will be favorable to World Airways or that World Airways will be able to obtain
satisfactory financing necessary for the acquisition of such aircraft in the
future.
Reliance on Others.
World Airways has entered into agreements with contractors, including other
airlines, to provide certain facilities and services required for its
operations, including all of World Airways' off-wing engine maintenance and most
airframe maintenance. World Airways has also entered into agreements with
contractors to provide security, ground handling and personnel training.
Although World Airways believes that there are many advantages to outsourcing
these activities, the failure of these contractors to provide essential services
that are not otherwise entirely within the control of World Airways could have a
material adverse effect on the financial condition or results of operations of
World Airways.
13
<PAGE>
Maintenance.
Engine maintenance accounts for most of World Airways's annual maintenance
expenses. Typically, the hourly cost of engine maintenance increases as the
aircraft ages. World Airways outsources major airframe maintenance and power
plant work to several suppliers. World Airways has a 10-year contract expiring
in August 2003 with United Technologies Corporation's Pratt & Whitney Group for
all off-wing maintenance on the PW 4462 engines that power its MD-11 aircraft.
Under this contract, the manufacturer agreed to provide such maintenance
services at a cost not to exceed specified rates per hour during the term of the
contract. World Airways's maintenance costs associated with the MD-11 aircraft
and PW 4462 engines have been significantly reduced due in part to manufacturer
guarantees and warranties, which began to expire in 1995 and which will fully
expire by 1998. In addition, the specified rate per hour is subject to annual
escalation, increasing substantially in 1998. Accordingly, while World Airways
believes the terms of this agreement have resulted in lower engine maintenance
costs than it otherwise would incur, engine maintenance costs will increase
substantially during the last five years of the agreement. World Airways will
begin to accrue these increased expenses in 1997. Therefore, World Airways
expects that maintenance expenses will continue to increase during the remainder
of the term of the contract as World Airways's aircraft fleet ages.
Shareholders Agreement with MHS
Under a shareholders agreement (the "Shareholders Agreement"), dated as of
February 28, 1994, among World Airways, WorldCorp and MHS, WorldCorp has agreed
to vote its shares of World Airways Common Stock to elect the number of
directors nominated by MHS that represent MHS' proportionate interest in World
Airways, but in no event less than two directors. In addition, World Airways is
not permitted to consummate the sale of all or substantially all of its business
or make a fundamental change in its line of business without the approval of the
directors designated by MHS. Accordingly, MHS could block World Airways from
entering into a transaction or taking actions that could be in the best
interests of stockholders. Notwithstanding any other provision of the
Shareholders Agreement, if without the prior written consent of MHS, World
Airways sells all or substantially all of its business or fundamentally changes
its line of business, then MHS has the right to require WorldCorp to purchase
all or part of MHS' shares at fair market value, which could have the effect of
discouraging WorldCorp from taking certain actions that could be in the best
interests of other stockholders of World Airways. The Shareholders Agreement
terminates if either WorldCorp's or MHS' ownership interest falls below 5% of
the outstanding capital stock of World Airways.
Employee Relations
World Airways' flight attendants are represented by the International
Brotherhood of Teamsters (the "Teamsters") under a collective bargaining
agreement which expires in August 2000. World Airways' flight attendants
challenged the use of foreign flight attendant crews on World Airways' flights
for Malaysian Airlines and Garuda which has historically been World Airways'
operating procedure. World Airways is contractually obligated to permit its
Southeast Asian customers to deploy their own flight attendants. While the
arbitrator in this matter recently denied the Union's request for back pay to
affected flight attendants for flying relating to the 1994 Hadj, the arbitrator
concluded that World Airways' contract with its flight attendants requires World
Airways to first actively seek profitable business opportunities that require
using World Airways' flight attendants, before World Airways may accept wet
lease business opportunities that use the flight attendants of World Airways'
customers. World Airways can provide no assurances as to how the imposition of
this requirement will affect World Airways' financial condition or results of
operations. World Airways's cockpit crew members, who are also represented by
the Teamsters, are subject to a four-year collective bargaining agreement
expiring in June 1998. World Airways is unable to predict whether any of its
employees not currently represented by a labor union, such as World Airways's
maintenance personnel, will elect to be represented by a labor union or
collective bargaining unit. The election of such employees for
14
<PAGE>
representation in such an organization could result in employee compensation and
working condition demands that could have a material adverse effect on the
financial condition or results of operations of World Airways.
World Airways' NOLs
As of December 31, 1996, World Airways had net operating loss carryforwards
("NOLs") for federal income tax purposes of $104.7 million ($38.1 million of
which is subject to a $6.9 million annual limitation as a result of an ownership
change of World Airways for tax purposes in 1991). These NOLs, if not utilized
to offset taxable income in future periods, will expire between 1998 and 2011.
Use of World Airways' NOLs in future years could be further limited if an
ownership change were to occur in the future. While World Airways believes that
the sale of common stock in its initial public offering (the "Offering") did not
cause an ownership change, the application of the Internal Revenue Code in this
area is subject to interpretation by the Internal Revenue Service. Also, any
future transactions in World Airways' or WorldCorp's stock could cause an
ownership change. In the event that more than approximately $5.0 million of the
outstanding 7% Debentures of WorldCorp are converted into WorldCorp common
stock, WorldCorp believes an ownership change will occur. In addition, there
can be no assurances that operations of World Airways will generate taxable
income in future years so as to realize a tax benefit from its NOLs. The NOLs
are subject to examination by the IRS and, thus, are subject to further
adjustment or disallowance resulting from any such IRS examination. Accordingly,
prospective purchasers of the common stock of World Airways should not assume
the unrestricted availability of World Airways' currently existing or future
NOLs, if any, in making their investment decisions.
Seasonality.
Historically, World Airways's business has been significantly affected by
seasonal factors. During the first quarter, World Airways typically experiences
lower levels of utilization and yields due to lower demand for passenger and
cargo services relative to other times of the year. World Airways experiences
higher levels of utilization and yields in the second quarter, principally due
to peak demand for commercial passenger services associated with the annual Hadj
pilgrimage. In 1997, World Airways's flight operations associated with the Hadj
pilgrimage will occur from March 15 to May 20. Because the Islamic calendar is a
lunar-based calendar, the Hadj pilgrimage occurs approximately 10 to 12 days
earlier each year relative to the Western (Gregorian) calendar. As a result,
revenues resulting from future Hadj pilgrimage contracts will continue to shift
from the second quarter to the first quarter over the next several years. World
Airways believes that its contracts with Malaysian Airlines and the USAF should
lessen the effect of these seasonal factors.
Limitation on Voting by Foreign Citizens
Under applicable regulatory restrictions, because World Airways is a U.S.
certificated flag carrier, no more than 25% of the voting stock of World Airways
can be owned or controlled, directly or indirectly, by persons who are not U.S.
citizens ("Foreign Citizens"). World Airways' Certificate of Incorporation and
Bylaws provide that no shares of capital stock may be voted by or at the
direction of Foreign Citizens unless such shares are registered on a separate
stock record (the "Foreign Stock Record"). Currently, MHS owns approximately
16.7% of the outstanding shares of World Airways Common Stock. No shares of
World Airways Common Stock owned by Foreign Citizens will be registered on the
Foreign Stock Record of World Airways to the extent that the aggregate ownership
by Foreign Citizens reflected in the Foreign Stock Record would exceed 25% of
World Airways' outstanding shares of World Airways Common Stock.
Legal and Administrative Proceedings
World Airways and WorldCorp (the "World Defendants") are defendants in
litigation brought by the Committee of Unsecured Creditors of Washington
Bancorporation (the "Committee") in August 1992, captioned
15
<PAGE>
Washington Bancorporation v. Boster, et. al., Adv. Proc. 92-0133 (Bankr. D.D.C.)
(the "Boster Litigation"). The complaint asserts that the World Defendants
received preferential transfers or fraudulent conveyances from Washington
Bancorporation when the World Defendants received payment at maturity on May 4,
1990 of Washington Bancorporation commercial paper purchased on May 3, 1990. The
Committee seeks recovery of approximately $4.8 million from World Airways and
approximately $2.0 million from WorldCorp. Under a settlement agreement which
remains subject to certain contingencies, the plaintiff has agreed to dismiss
with prejudice the Boster Litigation against all defendants, including the World
Defendants, with each party to bear its own costs. In that event, the World
Defendants would not have any further liability in the Boster Litigation. On
January 28, 1997, the U.S. District Court conditionally dismissed the Boster
Litigation subject to reinstatement if the settlement is not finalized by May
15, 1997. In any event, World Airways and WorldCorp believe they have
substantial defenses to this action, although no assurance can be given of the
eventual outcome of this litigation. Depending upon the timing of the resolution
of this claim, if the Committee were successful in recovering the full amount
claimed, the resolution could have a material adverse effect on the financial
condition or results of operations of World Airways and WorldCorp.
World Airways has periodically received correspondence from the FAA with
respect to minor noncompliance matters. Most recently, as the FAA has increased
its scrutiny of U.S. airlines, World Airways was assessed a preliminary fine of
$810,000 in connection with certain minor security violations by ground handling
crews contracted by World Airways for services at foreign airport locations. In
each of these instances, World Airways was in compliance with international
regulations, but not the more stringent U.S. requirements. World Airways has
taken steps to comply with the U.S. requirements and believes that any fines
ultimately imposed by the FAA will not have a material adverse effect on the
financial condition or results of operations of World Airways. While World
Airways believes it is currently in compliance in all material respects with all
appropriate standards and has all required licenses and authorities, any
material non-compliance by World Airways therewith or the revocation or
suspension of licenses or authorities could have a material adverse effect on
the financial condition or results of operations of World Airways.
In connection with the discontinuance of World Airways's scheduled service
operations, World Airways is subject to claims by various third parties and may
be subject to further claims in the future. One claim has been filed in
connection with World Airways's discontinuance of scheduled service to South
Africa, seeking approximately $37.8 million in compensatory and punitive
damages. World Airways believes it has substantial defenses to this action,
although no assurance can be given of the eventual outcome of this litigation.
Depending upon the timing of the resolution of this claim, if the plaintiff were
successful in recovering the full amount claimed with respect to this claim, the
resolution could have a material adverse effect on the financial condition or
results of operations of WorldCorp and World Airways.
In addition, World Airways is party to routine litigation and
administrative proceedings incidental to its business, none of which is believed
by World Airways to be likely to have a material adverse effect on the financial
condition of World Airways.
Possible Volatility of Stock Price.
The market price of the World Airways Common Stock has been subject to
significant fluctuations in response to World Airways's operating results and
other factors and there can be no assurance that the market price of World
Airways Common Stock will not decline in the future. In addition, the stock
market has from time to time experienced extreme price and volume volatility.
These fluctuations may be unrelated to the operating performance of particular
companies whose shares are traded. Market fluctuations may adversely affect the
market price of the World Airways Common Stock.
Restrictions on Payment of Dividends.
The Credit Agreement contains restrictions on World Airways's ability to
pay dividends on the World Airways Common Stock. Additionally, WorldCorp is
subject to the provisions of the 7% Indenture,
16
<PAGE>
under which WorldCorp is obligated to cause World Airways not to pay dividends
upon the occurrence of any events of default by WorldCorp under the 7%
Indenture. Moreover, under the 10% Indenture, WorldCorp is obligated not to pay
dividends except under limited circumstances.
Anti-takeover Provisions; Certain Provisions of Delaware Law, Certificate of
Incorporation and Bylaws.
Certain provisions of Delaware law, World Airways' Certificate of
Incorporation and Bylaws and the Shareholders Agreement could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of World Airways. Certain of
these provisions allow World Airways to issue preferred stock with rights senior
to those of the common stock of World Airways without any further vote or action
by the holders of common stock of World Airways. The issuance of preferred stock
of World Airways could decrease the amount of earnings and assets available for
distribution to the holders of common stock of World Airways or could adversely
affect the rights and powers, including voting rights, of the holders of the
common stock of World Airways. In certain circumstances, such issuance could
have the effect of decreasing the market price of the World Airways Common
Stock.
Control by WorldCorp; Potential Conflicts of Interest
As of March 31, 1997, WorldCorp owned approximately 61.6% of the
outstanding World Airways Common Stock. WorldCorp is a holding company that
owns positions in two companies: InteliData and World Airways. WorldCorp is
highly leveraged and therefore requires substantial funds to cover debt service
each year. As a holding company, all of WorldCorp's funds are generated through
its subsidiaries, neither of which is expected to pay dividends in the
foreseeable future. As a result of WorldCorp's cash requirements, it may be
required to sell additional shares of World Airways Common Stock during 1997,
and such sales, or the threat of such sales, could have a material adverse
affect on the market price on World Airways Common Stock. World Airways' ability
to pay dividends is subject to certain restrictions contained within the 7%
Indenture and the 10% Indenture, respectively. See "-- Restrictions on Payment
of Dividends" Except as limited by contractual arrangements with MHS, WorldCorp
also is in a position to control the outcome of substantially all issues
submitted to World Airways' stockholders, including the election of all of World
Airways' Board of Directors, adoption of amendments to World Airways'
Certificate of Incorporation, and approval of mergers. Under Delaware law,
WorldCorp may approve certain actions by written consent without a meeting of
the stockholders of World Airways. In addition, World Airways' Board of
Directors has eight members, one of whom, T. Coleman Andrews, III, is Chairman
of the Board of Directors of WorldCorp.
The managements of WorldCorp and World Airways are currently exploring ways
to maximize value for the shareholders of each company. WorldCorp is currently
evaluating the feasibility of a disposition of its interest in World Airways
through a secondary offering or a sale to a third party. There can be no
assurances, however, that any such transactions will ultimately be consummated.
17
<PAGE>
In addition, World Airways has announced its intention to purchase up to
one million shares of its publicly-traded common stock pursuant to open market
transactions. As of March 31, 1997, World Airways had purchased 770,000 shares
of common stock of World Airways for an aggregate cost of $7.8 million pursuant
to such purchases. World Airways does not intend to purchase any additional
shares at this time.
Risks Related to the Air Transportation Industry:
Cyclical Nature of Air Carrier Business
World Airways operates in a challenging business environment. The air
transportation industry is highly sensitive to general economic conditions.
Since a substantial portion of passenger airline travel (both business and
personal) is discretionary, the industry tends to experience severe adverse
financial results during general economic downturns and can be adversely
affected by unexpected global political developments. The financial results of
air cargo carriers are also adversely affected by general economic downturns due
to the reduced demand for air cargo transportation. In 1993 and 1994, the
combination of a generally weak global economy and the depressed state of the
air transportation industry adversely affected World Airways' operating
performance. Although World Airways recently has experienced a growth in
demand, such that block hours flown from continuing operations increased in 1996
by 23% over 1995, there can be no assurance that this level of growth will
continue.
Competition
The market for outsourcing air passenger and cargo ACMI services is highly
competitive. Certain of the passenger and cargo air carriers against which World
Airways competes possess substantially greater financial resources and more
extensive facilities and equipment than those which are now, or will in the
foreseeable future become, available to World Airways. World Airways believes
that the most important bases for competition in the ACMI outsourcing business
are the age of the aircraft fleet, the passenger, payload and cubic capacities
of the aircraft, and the price, flexibility, quality and reliability of the air
transportation service provided. Competitors in the ACMI outsourcing market
include MartinAir Holland, Tower Air and American TransAir and all-cargo
carriers, such as Atlas Air, Gemini Air Cargo, Polar Air Cargo and Kitty Hawk,
and scheduled and non-scheduled passenger carriers which have substantial belly
capacity. The ability of World Airways to achieve the growth anticipated by its
strategic plan depends upon its success in convincing major international
airlines that outsourcing some portion of their air passenger and cargo business
remains more cost-effective than undertaking passenger or cargo operations with
their own incremental capacity and resources. The allocation of military air
transportation contracts by the USAF is based upon the number and type of
aircraft a carrier, alone or through a teaming arrangement, makes available for
use in times of national emergencies. The formation of competing teaming
arrangements comprised of larger partners than those sponsored by World Airways,
an increase by other air carriers in their commitment of aircraft to the
emergency program, or the withdrawal of World Airways' current partners, could
adversely affect the size of the USAF contracts, if any, which are awarded to
World Airways in future years.
Regulation
World Airways is subject to government regulation and control under the
laws of the United States and the various other countries in which it operates.
It is also governed by bilateral services agreements between the U.S. and the
countries to which World Airways provides airline service. World Airways is
subject to Title 49 of the United States Code (the "Transportation Code"), under
which the DOT and the Federal Aviation Administration (the "FAA") exercise
regulatory authority. Additionally, foreign governments assert jurisdiction
over air routes and fares to and from the U.S., airport operation rights and
facilities access. Due to its participation in CRAF, World Airways is subject
to inspections approximately every two years by the USAF as a condition to
retaining its eligibility to provide military charter flights. The
18
<PAGE>
USAF may terminate its contract with World Airways if World Airways fails to
pass such inspection or otherwise fails to maintain satisfactory performance
levels. World Airways has periodically received correspondence from the FAA with
respect to minor noncompliance matters.
Insurance Coverage and Expenses
World Airways is exposed to potential losses that may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and the consequent temporary or permanent
loss from service, but also significant potential claims of injured passengers
and others. World Airways is required by the DOT to carry liability insurance
on each of its aircraft. Although World Airways believes its current insurance
coverage is adequate and consistent with the current industry practice, there
can be no assurance that the amount of such coverage will not be changed or that
World Airways will not bear substantial losses from accidents. Substantial
claims resulting from an accident in excess of related insurance coverage could
have a material adverse effect on the financial condition or results of
operations of World Airways. In addition, World Airways' insurance expenses
could significantly increase if World Airways were to provide service to
destinations where military action is taking place. Any such increases in
expenses could have a material adverse effect on the financial condition or
results of operations of World Airways. As is customary in the airline
business, World Airways has no business interruption insurance. Any extended
interruption of World Airways' operations due to the loss, or unavailability due
to unscheduled servicing or repair, or lack of availability of substitute
aircraft could have a material adverse effect on the financial condition or
results of operations of World Airways.
Aviation Fuel
The air transportation industry in general is affected by the price and
availability of aviation fuel. Both the cost and availability of aviation fuel
are subject to many economic and political factors and events occurring
throughout the world and remain subject to the various unpredictable economic
and market factors that affect the supply of all petroleum products.
Fluctuations in the price of fuel have not had a significant impact on World
Airways' operations in recent years because, in general, World Airways' ACMI
contracts with its customers limit World Airways' exposure to increases in fuel
prices. However, a substantial increase in the price or the unavailability of
aviation fuel could have a material adverse effect on the air transportation
industry in general and the financial condition and results of operations of
World Airways.
Risk Factors with Respect to InteliData:
Uncertainty as to Future Financial Results
InteliData believes that the Merger will offer opportunities for long-term
efficiencies that should positively affect future operating results of the
combined companies. However, the combined companies will be more complex and
diverse than either US Order or Colonial Data individually, and the combination
and continued operation of their distinct business operations will present
difficult challenges for InteliData's management due to the increased time and
resources required in the management effort. While the management and the Board
of Directors of InteliData believe that the combination can be effected in a
manner that will realize the value of the two companies, neither management
group has experience in combinations of this size or complexity. Accordingly,
there can be no assurance that the process of effecting the business combination
can be effectively managed to realize the operational efficiencies anticipated
to result from the Merger.
Following the Merger, in order to maintain and increase profitability, the
combined Company will need to successfully integrate and streamline overlapping
functions. The two predecessor companies had different systems and procedures in
many operational areas that must be rationalized and integrated. There can be no
assurances that integration will be accomplished smoothly or successfully. The
difficulties of such integration may be increased by the necessity of
coordinating geographically separated organizations. The integration
19
<PAGE>
of certain operations following the Merger will require the dedication of
management resources that may temporarily distract attention from the day-to-day
business of the combined companies. Failure to effectively accomplish the
integration of the two companies' operations could have an adverse effect on
InteliData's results of operation and financial condition.
Developing Marketplace
Home banking and smart telephones are developing markets. Consumer
preferences in interactive technologies are difficult to predict. InteliData's
future growth and profitability will depend, in part, upon consumer acceptance
of electronic home banking and smart telephone technologies and a significant
expansion in the consumer market for telephone-based interactive applications
technologies. Even if these markets experience substantial growth, there can be
no assurance that InteliData's products and services will be commercially
successful or benefit from such growth.
Much of InteliData's success in the smart telephone market depends on
InteliData's ability to meet design specifications and delivery requirements for
its products and services. There can be no assurance of the timing of
introduction of, necessary regulatory approvals for, or market acceptance of
these services and applications. InteliData faces competition in these markets
from other emerging interactive applications delivered through personal
computers, cable television and Integrated Service Digital Network ("ISDN").
Fluctuations in Operating Results
Historically, US Order and Colonial Data have experienced fluctuations in
quarterly operating results, and accordingly, InteliData may experience
fluctuations in quarterly operating results due to a variety of factors, some of
which are beyond InteliData's control. These include the size and timing of
customer orders or the royalty payments from Visa InterActive, if any, changes
in InteliData's pricing policies or those of its competitors, new product
introductions or enhancements by competitors, delays in the introduction of new
products or product enhancements by InteliData or by its competitors, customer
order deferrals in anticipation of upgrades and new products, market acceptance
of new products, the timing and nature of sales, marketing, and research and
development expenses by InteliData and its competitors, the timing of programs
offering Caller ID or other intelligent network services by a telco, disruptions
in sources of supply, the effects of regulation on Caller ID and other
intelligent network services, the timing and extent of promotional activities by
a telco, changes in service charges by a telco, other changes in operating
expenses, personnel changes and general economic conditions. Additionally,
certain RBOCs have entered into merger agreements. InteliData is unable to
assess the future effect on the company of these mergers, if consummated, and of
other possible consolidations in the telecommunications industry. No assurance
can be given that such quarterly variations will not occur in the future and,
accordingly, the results of any one quarter may not be indicative of the
operating results for future quarters.
Reliance on Caller ID Revenues
A substantial majority of InteliData's revenues are derived from sales and
leases of its Caller ID products. The sale or lease of these products is
directly linked to the implementation and promotion of Caller ID service by
telcos. The timing of such implementation may be affected by government
regulation, by changes in the telecommunications industry resulting from changes
in the regulatory and competitive environment, by switch and software upgrades
and by other factors. There can be no assurance that telcos will continue to
introduce and promote this service successfully or that it will gain widespread
market acceptance. Delays in the introduction of Caller ID service in local
markets or failure of this service to gain widespread market acceptance would
materially and adversely affect InteliData's business, operating results and
financial condition.
Concentration of Distribution of Products and Services
InteliData sells its telecommunications products and services to telcos,
individual telephone subscribers, other equipment manufacturers on a private
label basis ("private label customers") and retail
20
<PAGE>
chains. In addition, InteliData leases its products to individual telco
subscribers. Sales and leases to individual telco subscribers are largely
dependent on direct fulfillment distribution arrangements with certain RBOCs and
other telcos. Since InteliData views the telcos with which it maintains direct
fulfillment relationships as its customers, it considers its customer base to be
highly concentrated. InteliData's current telco fulfillment arrangements are not
exclusive and may be terminated by either party. The loss of any one or more of
InteliData's major customers or the termination of its distribution arrangements
with any telco or the failure to be selected for significant orders or programs
by a telco could materially and adversely affect InteliData's business,
operating results, and financial condition. In addition, consolidation in the
telecommunications industry or changes in the telecommunications regulatory
environment could result in the loss of such customers or business.
InteliData Common Stock Owned by WorldCorp
As of December 31, 1996, WorldCorp beneficially owned approximately 29% of
the outstanding InteliData Common Stock. WorldCorp is highly leveraged, and
therefore requires substantial funds to meet debt service requirements each
year. As a result of WorldCorp's cash requirements, it may be required to sell
shares of InteliData's Common Stock during 1997 and such sales, or the threat of
such sales, could have a material adverse effect on the market price for
InteliData's common stock. In addition, InteliData's Board of Directors has nine
members, four of whom also serve on the Board of Directors of WorldCorp. As a
result of membership on InteliData's Board and stock ownership, WorldCorp may
have a significant influence on the decisions made by InteliData.
Technological Considerations
InteliData's business activities are concentrated in fields characterized
by rapid and significant technological advances. There can be no assurance that
InteliData will remain competitive technologically or that InteliData's
products, processes or services will continue to be reflective of such advances.
Failure to introduce new products or product enhancements that achieve market
acceptance on a timely basis could materially and adversely affect InteliData's
business, operating results and financial condition. There can be no assurance
that InteliData will not encounter unanticipated technical, marketing or other
problems or delays relating to new products, features or services which
InteliData has recently introduced or which it may introduce in the future.
Moreover, there can be no assurance that InteliData's new products, features or
services will be successful, that the introduction of new products, features or
services by InteliData's competitors will not materially and adversely affect
the sales of InteliData's existing products or that InteliData will be able to
adapt to future changes in the telecommunications industry. Most of InteliData's
competitors and potential competitors have significantly greater financial,
technological and research and development resources than InteliData.
Dependence on Foreign Production
InteliData's Caller ID units and certain other products, including the
smart telephone, the Telesmart 4000/Intelifone, are manufactured by companies
with facilities in Hong Kong, Malaysia, and the People's Republic of China.
These facilities are supplemented, in part, by other manufacturers in Asia for
certain integrated telephone and small business system products and by limited
manufacturing facilities in Connecticut. The availability or cost of these
Caller ID units and smart telephones may be adversely affected by political,
economic or labor conditions in Hong Kong, Malaysia or the People's Republic of
China, including the 1997 return of Hong Kong to China, and by fluctuations in
currency exchange rates. In addition, a change in the tariff structure or other
trade policies of the United States or countries from which InteliData will
import products could adversely affect InteliData's foreign manufacturing
strategies.
21
<PAGE>
Restrictions from the Visa Agreement
As a condition of Visa's acquisition of InteliData's bill payment
operations and technology (the "Visa Bill-Pay System"), InteliData has agreed to
work exclusively with Visa in certain areas and to refrain from certain
activities that are in competition with Visa and its affiliates. These covenants
may increase InteliData's reliance upon Visa. InteliData's dependence on Visa,
and the terms of the agreement between the parties, may have a material adverse
effect on InteliData.
Importance of Strategic Alliances
One of InteliData's business strategies is to manufacture or sell its
products and services through strategic alliances. The success of this strategy
will depend to an extent both on the ultimate success of its strategic partners
as well as on the ability of its partners to successfully market InteliData's
products and services. There can be no assurance that any alliance partners will
view their alliance with InteliData as significant for their own businesses or
that they will not reassess their commitment to InteliData at any time in the
future.
Competition
Consumer Telecommunications
---------------------------
The market for InteliData's products is highly competitive and subject to
increased competition resulting from rapid technological change as well as
resulting from changes in the telecommunications regulatory environment, the
telecommunications industry consolidation and the emergence of new market
entrants. At present, InteliData's principal competitors are CIDCO, Lucent and
Northern Telecom. InteliData's Caller ID products also compete with Caller ID
telephones offered by Panasonic, Sony, Thomson and US Electronics.
Marketing of InteliData's smart telephone is subject to competition from
smart telephones marketed or developed by Philips, Northern Telecom and CIDCO as
well as other emerging platforms for interactive applications delivered through
personal computers and cable television. InteliData expects competition in the
markets for its consumer telecommunications products and services to increase in
the future and expects competition from existing and new competitors, possibly
including RBOCs, other telcos or other current customers, as well as from
network switch-based services and from the increased application of cellular
technology. InteliData's primary current and potential competitors in the market
for its consumer telecommunications products and services have substantially
greater financial, marketing and technical resources than InteliData.
Competition could materially and adversely affect InteliData's results of
operations through price reductions and loss of market share.
InteliData competes with a large number of competitors for its repair
services and other services supporting the development and implementation of
intelligent network services. Several of InteliData's competitors in the market
for such services have substantially greater financial, marketing and
technological resources than InteliData. There can be no assurance that
InteliData will be able to continue to compete successfully against its existing
competitors or that it will be able to compete successfully against new
competitors.
Electronic Commerce
-------------------
The market for interactive products and services is highly competitive and
subject to rapid innovation and technological change, shifting consumer
preferences and frequent new product introductions. InteliData's home banking
products and services compete with services offered by a number of competitors
and competition may intensify as a result of new market entrants. Banks have
developed home banking products for their own customers and, in the future, may
offer these services to other banks. Non-banks also may develop home banking
products
22
<PAGE>
to offer to banks. Computer software and data processing companies also
offer home banking services. Visa competes with other organizations, including
MasterCard International, Inc. ("MasterCard"), which offers its Masterbanking
home banking service through CheckFree Corporation. Many competitors exist for
InteliData's various banking products including other manufacturers of touch-
tone response systems, other financial software companies and financial services
software and service companies. InteliData believes that its primary competition
for its customer support services will come from financial institutions and
third parties that choose to offer customer support services either directly
through Visa's customer support messaging standard ("CSMS") product or on their
own. InteliData expects that competition in all of these areas will increase in
the near future.
Relationship with Visa
InteliData sold the Visa Bill-Pay System to Visa on August 1, 1994, for
approximately $15 million in cash, the assumption of certain liabilities and
rights to a 72-month royalty period commencing January 1, 1995 and ending
December 31, 2000 (the "Royalty Period"). Visa subsequently transferred these
assets to Visa InterActive, its wholly owned subsidiary. The royalty obligation
is based on the number of customers who use the Visa Bill-Pay System during the
Royalty Period. The agreement with Visa expressly provides that the royalty will
apply only if the means by which a customer makes an electronic bill payment
involves the use of a "significant portion" of the Visa Bill-Pay System.
Royalties to InteliData are calculated and paid by Visa InterActive
quarterly during the Royalty Period. Because the amount of the royalties to
InteliData is dependent upon the number of customers that use the Visa Bill-Pay
System on a monthly basis during the Royalty Period, InteliData cannot provide
any assurances of the amount of royalties, if any, that will be payable by Visa
InterActive to InteliData. The royalty payment will be reduced for each quarter
through December 31, 1997, by an offset amount (the "Visa Offset") which was
initially set at $73,000. If the royalty payment that would otherwise be due in
respect of a quarter is smaller than the offset amount for that quarter, no
royalty payment will be made to InteliData, and the difference between $73,000
and the royalty otherwise due will increase the size of the Visa Offset for the
next quarter. The aggregate amount of the Visa Offset for the Royalty Period is
$880,000. InteliData did not receive any royalty revenue from Visa in 1996 due
to the Visa Offset and does not expect to receive any royalty revenue after
application of the Visa Offset until at least the second half of 1997.
In addition, under the terms of its agreement with Visa, Visa InterActive
is not obligated to pay royalties to InteliData for active bank customers who
utilize home banking and bill payment technology independently developed by Visa
InterActive. If Visa InterActive independently develops or acquires its own
home banking and bill payment technology which does not use or build upon
InteliData's technology, this could have a material adverse effect on the amount
of royalties payable by Visa InterActive to InteliData. As a condition of
Visa's acquisition of the Visa Bill-Pay System, InteliData has agreed to work
exclusively with Visa in certain areas and to refrain from certain activities
that are in competition with Visa and its affiliates. These covenants may
increase InteliData's reliance upon Visa.
Dependence on Key Employees
InteliData is highly dependent on certain key executive officers and
technical employees to manage the operations and business of InteliData as well
as to implement the business plans of InteliData on an ongoing basis. The loss
of any such key employees could have an adverse impact on the future operations
of InteliData.
Regulation
The Telecommunications Act of 1996 and regulations or orders promulgated
thereunder may result in or accelerate changes in various aspects of the
telecommunications industry, including the competitive environment, the delivery
and pricing of various telecommunications products and services and possible
23
<PAGE>
consolidation. Although InteliData is unable to predict what effect, if any, the
Telecommunications Act of 1996 or other regulatory developments may have upon
the telecommunications industry or InteliData's business, any such effects could
have a material adverse impact on the future operations of InteliData.
In the United States, Caller ID and other intelligent network services are
subject to federal and state regulation. Caller ID and other intelligent network
services may in the future be subject to further regulation by the federal
government, state public utility commissions and other regulatory authorities,
as well as court challenges, including possible challenges due to protests from
special interest groups that object to such services on the basis of privacy
concerns. An order issued by the FCC effective December 1, 1995, requires all
United States telephone service providers with Signaling System 7 switching
architecture to transmit to each other without charge Caller ID number
information on interstate calls within the United States (except for public pay
phones and party lines). The FCC's order also requires that telcos that offer
Caller ID service must provide to their telephone subscribers without charge a
per-call blocking mechanism to block the transmission of their Caller ID
information on interstate calls and must inform subscribers that their telephone
numbers may be identified to a called party and how to use this blocking
capability.
Volatility of Stock Price
The market price of InteliData's Common Stock has experienced significant
volatility. The stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology and
developmental stage companies and that has often been unrelated to the operating
performance of such companies. Factors such as announcements of the
introduction of new products or services by InteliData or its competitors,
announcements of joint development efforts or corporate partnerships in the
interactive applications industry, market conditions in the banking,
telecommunications and other emerging growth company sectors and rumors relating
to InteliData or its competitors may have a significant impact on the market
price of InteliData's Common Stock.
Limited Proprietary Protection
InteliData possesses limited patent or registered intellectual property
rights with respect to its technology. InteliData depends in part upon its
proprietary technology and know-how to differentiate its products from those of
its competitors and works independently and from time to time with third parties
with respect to the design and engineering of its own products. InteliData also
relies on a combination of contractual rights and trade secret laws to protect
its proprietary technology. There can be no assurance, however, that InteliData
will be able to protect its technology or successfully develop new technology or
gain access to such technology or that third parties will not be able to develop
similar technology independently or that competitors will not obtain
unauthorized access to InteliData's proprietary technology, that third parties
will not misuse the technology to which InteliData has granted access, or that
InteliData's contractual or legal remedies will be sufficient to protect
InteliData's interests in its proprietary technology.
Certain of Lucent's Caller ID patents are licensed by Lucent to InteliData
and others, including InteliData's competitors. If the Lucent license were
terminated and InteliData were unable to negotiate a new patent license
agreement with Lucent, InteliData would no longer be authorized to manufacture
or sell Caller ID products in the United States other than to the RBOCs and to
Lucent. As a result, InteliData's business would be materially and adversely
affected.
Limited Sources of Supply
The key components used in InteliData's products are currently being
purchased from multiple sources, except for its application specific integrated
circuit ("ASIC") chips, which are purchased from a single source, Integrated
Circuit Systems, Inc. Although InteliData believes it could develop other
sources for each of the components for its products, the process could take
several months. The inability or refusal of
24
<PAGE>
any such source to continue to supply components could have a material adverse
effect on InteliData pending the development of an alternative source.
USE OF PROCEEDS
Proceeds from the sale of the Warrants and the underlying Shares will be
received directly by the Selling Securityholders. However, to the extent that
the Warrants are exercised, the Company will receive proceeds equal to the
exercise price thereof multiplied by the number of Warrants exercised. If all
of the Warrants are exercised, the Company will receive gross proceeds of
approximately $720,000 (based on an exercise price of $6.00 per share). The
Company presently intends to use such proceeds, if any, for working capital and
general corporate purposes. See "Selling Securityholders."
PLAN OF DISTRIBUTION
The Warrants and the underlying Shares offered by the Selling
Securityholders by this Prospectus may be sold from time to time by the Selling
Securityholders or by their transferees. The distribution of the Warrants and
the underlying Shares offered hereby by the Selling Securityholders may be
effected in one or more transactions that may take place on the over-the-counter
market, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale or at
negotiated prices. Usual and customary or specifically negotiated brokerage
fees, underwriting discounts or commissions may be paid by the Selling
Securityholders. Resales of the Shares may, from time to time, be made on the
NYSE, or other stock exchanges, in privately negotiated transactions or
otherwise. For example, the Selling Securityholder Securities may be sold by
one or more of the following without limitation: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the Selling Securityholder
Securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions in which the broker solicits
purchasers; and (d) face to face transactions between sellers and purchasers
without a broker-dealer. In effecting sales, brokers or dealers engaged by the
Selling Securityholders may arrange for other brokers or dealers to participate
in the resales.
The Selling Securityholders and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of shares by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
To the extent required under the Securities Act, a supplemental prospectus will
be filed disclosing (a) the name of any such broker-dealers, (b) the number of
Selling Securityholder Securities involved, (c) the price at which such Selling
Securityholder Securities are to be sold, (d) the commissions paid or discounts
or concessions allowed to such broker-dealers, where applicable, (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus, as supplemented, and (f)
other facts material to the transaction.
The Company and the Selling Securityholders may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, the Company has agreed to indemnify the Selling
Securityholders with respect to the Selling Securityholder Securities against
certain liabilities, including, without limitation, certain liabilities under
the Securities Act, or, if such indemnity is unavailable, to contribute toward
amounts required to be paid in respect of such liabilities.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the Selling Securityholder Securities,
except that the Selling Securityholders shall be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of such Selling Securityholder Securities.
There is no assurance that any of the Selling Securityholders will sell any
or all of the Selling Securityholder Securities. The Company has agreed to keep
the registration statement relating to the offering and
25
<PAGE>
sale by the Selling Securityholders of the Selling Securityholder Securities
continuously effective for a period of 48 months from the date of this
Prospectus; provided, however, that the Company shall not be required to
maintain the registration statement once the Warrants and the underlying Shares
may be sold pursuant to Rule 144(k) under the Securities Act. In addition, the
Selling Securityholders have agreed not to sell any of the Selling
Securityholder Securities for a period of 90 days after receiving notice that
the Company intends to commence a registered public offering of its Common
Stock.
26
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the number of Warrants and underlying
Shares beneficially owned by each of the Selling Securityholders and included
herein. Because the Selling Securityholders may offer all or some of the
Selling Securityholder Securities which they own pursuant to the offering
contemplated by this Prospectus, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the
Securityholder Securities, no estimate can be given as to the amount of Selling
Securityholder Securities that will be held by the Selling Securityholders after
completion of this offering. The Selling Securityholder Securities offered by
this Prospectus may be offered from time to time by the Selling Securityholders
named below. All of the Selling Securityholders own less than 1% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Number of
Shares of
Number of Common Stock
Warrants Beneficially
Beneficially Held Held and Maximum
Names of Selling and Maximum Amount to be
Securityholders Amount to be Sold Sold(1)
- ---------------- ----------------- -------------------
<S> <C> <C>
Hoechst Celanese Employee Master
Benefit Trust....................... 86,400 86,400
20/20 Short Term High Yield Fund..... 12,000 12,000
Rectors and Visitors of the
University of Virginia.............. 6,000 6,000
Riverside Income Fund Ltd. LP........ 6,000 6,000
Riverside Specialty Income Fund Trust 3,600 3,600
North Broward Radiologists P.A.
Profit Sharing Plan FBO
Carl C. Peterson M.D. and Walter F.
Ciceric M.D......................... 3,000 3,000
Warwick Fund-Ansbacher Bahamas....... 3,000 3,000
- --------------
</TABLE>
(1) Represents Shares to be issued upon exercise of the Warrants.
LEGAL MATTERS
The validity of the Warrants and the Common Stock offered hereby will be
passed upon for the Company by Hunton & Williams, Richmond, Virginia.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1995, and the related consolidated statements of operations, changes in common
stockholders' deficit and cash flows for each of the years in the three year
period ended December 31, 1996, and the related financial statement schedules,
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, incorporated by reference herein, have been incorporated
herein by reference in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1996 consolidated
financial statements states that their opinion, insofar as it relates to the
amounts included for InteliData Technologies Corporation, is based solely on the
report of other auditors. The consolidated financial statements of InteliData
Technologies Corporation as of December 31, 1996, and for the year then ended,
included in WorldCorp's Annual Report on Form 10-K for the year ended December
31, 1996, incorporated by reference herein and in the Registration Statement,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
27
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied on as
having been authorized by the Company, the Selling Stockholders or any other
person. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................................ 3
Incorporation of Certain Documents By Reference...................... 3
Prospectus Summary................................................... 4
Risk Factors......................................................... 9
Use of Proceeds...................................................... 23
Plan of Distribution................................................. 23
Selling Securityholders.............................................. 25
Legal Matters........................................................ 25
Experts.............................................................. 25
</TABLE>
------------
================================================================================
================================================================================
WORLDCORP, INC.
120,000 WARRANTS
120,000 SHARES
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
May __, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses* in connection with the Offerings are as follows:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 155
Blue Sky fees.................................................... 2,000
Legal fees....................................................... 15,000
Accounting fees.................................................. 5,000
Printing, engraving and postage expenses......................... 3,000
Miscellaneous.................................................... 5,845
Total............................................................ $31,000
=======
</TABLE>
- -------------------
*The Company will pay these expenses.
Item 15. Indemnification of Officers and Directors
WorldCorp, Inc., a Delaware corporation (the "Company"), is empowered by
Section 145 of the Delaware General Corporation Law, subject to the procedures
and limitations stated therein, to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in the defense of any threatened, pending or
completed action, suit or proceeding in which such person is made a party by
reason of his or her being or having been a director or officer of WorldCorp.
The statute provides that such indemnification is not exclusive of other rights
or indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Certificate
of Incorporation and Bylaws of WorldCorp provide that WorldCorp shall indemnify
its directors and officers to the full extent permitted by the Delaware General
Corporation Law.
WorldCorp is also empowered by Section 102(b) of the Delaware General
Corporation Law to include a provision in its Certificate of Incorporation that
limits a director's liability to WorldCorp or its stockholders for monetary
damages for breaches of his or her fiduciary duty except for (i) a breach of the
director's duty of loyalty to WorldCorp or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) improper dividend payments, stock repurchases or
redemptions; and (iv) any transaction from which the director derived an
improper personal benefit. Article 10 of WorldCorp's Certificate of
Incorporation includes such a provision.
Policies of insurance are maintained by the Company under which directors
and officers are insured, within the limits and subject to the limitations of
the policies, against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might be imposed as
a result of such actions, suits or proceedings, to which they are parties by
reason of being or having been directors or officers of the Company.
The Company has entered into indemnification agreements with its officers
and directors that indemnify such officers and directors to the full extent
permitted by law against all expenses, judgments, fines or settlement amounts
incurred or paid by them in any action or proceeding, including any action by or
in the right of the Company on account of their service as a director or officer
of the Company.
II-1
<PAGE>
Item 16. Exhibits
4.1 Article 10 of the Company's Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form
S-4, as amended, (Commission File No. 33-012735) filed on March 19, 1987,
and Article VIII of the Company's Bylaws, incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-4, as
amended, (Commission File No. 33-012735) filed on March 19, 1987.
5.1 Opinion of Hunton & Williams.*
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Hunton & Williams (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of the Registration
Statement).
- ----
* Previously filed.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of
II-2
<PAGE>
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be a part of this Registration Statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Herndon, Commonwealth
of Virginia on May 7, 1997.
WORLDCORP, INC.
By: /s/ T. Coleman Andrews, III
---------------------------
T. Coleman Andrews, III
Chairman of the Board of Directors
II-4
<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 7, 1997.
Signature Title
--------- -----
/s/ Walter M. Fiederowicz Chief Executive Officer and
- ------------------------------------------ President
Walter M. Fiederowicz (Principal Executive Officer)
/s/ T. Coleman Andrews, III Director and Chairman of the Board
- ------------------------------------------
T. Coleman Andrews, III
* Vice President and Chief
- ------------------------------------------ Financial Officer
Mark S. Lynch (Principal Financial Officer and
Principal Accounting Officer)
* Director
- ------------------------------------------
Gideon Argov
* Director
- ------------------------------------------
John C. Backus, Jr.
* Director
- ------------------------------------------
James E. Colburn
* Director
- ------------------------------------------
William F. Gray
* Director
- ------------------------------------------
Patrick F. Graham
* By: /s/ T. Coleman Andrews, III
- ------------------------------------------
T. Coleman Andrews, III
As Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Hunton & Williams (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of the Registration
Statement).
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
WorldCorp,Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 (No. 333-19483) of WorldCorp, Inc. of our report dated February 14,
1997, relating to the consolidated balance sheets of WorldCorp, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, changes in common stockholders' deficit and cash flows
for each of the years in the three-year period ended December 31, 1996, and the
related financial statement schedule, which report appears in the December 31,
1996 annual report on Form 10-K of WorldCorp, Inc., incorporated by reference
herein, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Washington, D.C.
May 7, 1997
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement on Form S-3 (Registration No. 333-19483) filing of
WorldCorp, Inc. of our report dated February 5, 1997, appearing in the Annual
Report on Form 10-K of InteliData Technologies Corporation for the year ended
December 31, 1996, incorporated by reference in WorldCorp, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1996, which is incorporated by
reference in this Amendment No. 2 to Form S-3 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Hartford, Connecticut
May 7, 1997
