<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 23, 1997
WORLDCORP, INC.
(Exact name of registrant as specified in charter)
Delaware 1-5351 94-3040585
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
13873 Park Center Road, Suite 490, Herndon, Virginia 22071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 834-9200
<PAGE>
Item 5. Other Events
------------
On June 23, 1997, WorldCorp, Inc. (the "Company") filed with the
Securities and Exchange Commission (the "Commission"), an Amendment No.2
("Amendment No.2") to a Registration Statement on Form S-4, (File No. 333-19481,
the "Registration Statement"), initially filed with the Commission on January 9,
1997, and amended by Amendment No.1 to the Registration Statement, filed with
the Commission on May 7, 1997, relating to an offer by the Company to exchange
its 10.00% Senior Subordinated Notes due September 30, 2000, with its 10.00%
Senior Subordinated Notes due September 30, 2000, which are being registered
under the Securities Act of 1933, as amended. A copy of the preliminary
prospectus contained in Amendment No. 2 is filed as an Exhibit attached hereto.
Item 7. Exhibits
--------
Exhibit 99.1 Preliminary prospectus, dated June 23, 1997, filed as part of
Amendment No.2 to a Registration Statement on Form S-4, dated as
of June 23, 1997 (File No. 333-19481).
-2-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WORLDCORP, INC.
Date: June 27, 1997 By: /s/ Andrew M. Paalborg
-------------------------------
Andrew M. Paalborg
Vice President and General
Counsel
-3-
<PAGE>
INDEX TO EXHIBITS
99.1 Preliminary Prospectus, dated June 23, 1997, filed as part of
Amendment No.2 to a Registration Statement on Form S-4, dated as of
June 23, 1997 (File No. 333-19481).
-4-
<PAGE>
Exhibit 99.1
<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 JUNE 23, 1997
O F F E R T O E X C H A N G E
ALL OUTSTANDING
10.00% SENIOR SUBORDINATED NOTES
DUE SEPTEMBER 30, 2000
($10,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10.00% SENIOR SUBORDINATED NOTES
DUE SEPTEMBER 30, 2000
OF
WORLDCORP, INC.
---------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., HERNDON, VIRGINIA TIME,
ON , 1997, UNLESS EXTENDED
---------------
WorldCorp, Inc., a Delaware corporation (the "Company" or "WorldCorp"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 10.00% Senior Subordinated Notes due
September 30, 2000 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, 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 and the Old
Notes are collectively referred to herein as the "Notes."
WORLDCORP HAD $15.0 MILLION OF SENIOR INDEBTEDNESS OUTSTANDING, $65 MILLION OF
SUBORDINATED INDEBTEDNESS OUTSTANDING, $10 MILLION OF OLD NOTES OUTSTANDING AND
NO FIRM ARRANGEMENTS TO ISSUE ANY SIGNIFICANT SUBORDINATED INDEBTEDNESS, IN EACH
CASE AS OF MARCH 31, 1997. THE COMPANY'S TOTAL INDEBTEDNESS AND TOTAL
CAPITALIZATION AS OF MARCH 31, 1997, WERE $203.1 MILLION AND ($39.5) MILLION,
RESPECTIVELY. THE COMPANY CURRENTLY HAS APPROXIMATELY $65 MILLION OF
OUTSTANDING INDEBTEDNESS TO WHICH THE NEW NOTES WOULD BE SENIOR. THE INDENTURE
DOES NOT LIMIT THE COMPANY'S ABILITY TO SECURE SENIOR INDEBTEDNESS.
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1997, unless the Exchange Offer is
extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date, unless previously accepted for payment. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions
which may be waived by the Company and to the terms and provisions of the
Purchase Agreement (as defined herein). See "The Exchange Offer." Old Notes
may be tendered only in denominations of $1,000 and integral multiples thereof.
The New Notes will be obligations of the Company entitled to the benefits of
the Indenture (as defined herein). The form and terms of the New Notes are the
same in all material respects as the form and terms of the Old Notes except that
(i) the New Notes have been registered under the Securities Act and will not
contain terms restricting the transfer thereof (other than as provided below),
(ii) the New Notes will be issued free from any covenant regarding registration,
and (iii) the New Notes will be subject to the requirements of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and therefore
will be issued under an Indenture (as defined herein) that provides for various
rights and benefits of the holders of the New Notes to be exercisable, received
and coordinated through a Trustee (as defined herein) in the manner required by
the Trust Indenture Act. See "The Exchange Offer."
See "Risk Factors" beginning on page 16 for a discussion of certain factors
that should be considered by prospective investors.
----------- (Continued on Next Page)
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 June __, 1997.
<PAGE>
(Continued from Cover Page)
The New Notes will bear interest from March 31, 1997. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from March 31, 1997 to the date of the issuance of the New Notes. Interest on
the New Notes is payable semi-annually on September 30 and March 31 in each
year, commencing September 30, 1997, and at maturity and shall be computed on
the basis of a 360-day year or twelve 30-day months. Interest shall accrue from
March 31, 1997, at a rate of 10.00% per annum. The New Notes will be unsecured
senior subordinated obligations of the Company and will be subordinated in right
of payment to all existing and future Senior Indebtedness (as defined herein) of
the Company.
The Notes may be declared due prior to their expressed maturity date,
voluntary prepayments may be made thereon and certain prepayments are required
to be made thereon, all in the events, on the terms and in the manner provided
in the Indenture. Such prepayments include (i) certain required sinking fund
payments on September 30, 1998 and September 30, 1999, (ii) certain required
prepayments upon the occurrence of certain events specified in the Indenture,
and (ii) certain optional prepayments. The principal of the Notes may not be
prepaid prior to the expressed maturity date except as provided in the
Indenture.
The Old Notes are, and the New Notes will be, subordinated in right of payment
to all existing and future Senior Indebtedness (as defined herein) of the
Company.
The Old Notes were issued and sold on September 30, 1996, in transactions not
registered under the Securities Act, in reliance upon the exemption provided in
Section 4(2) of the Securities Act and the rules promulgated thereunder.
Accordingly, the Old Notes may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. The New Notes are being offered hereunder in order to satisfy
certain of the obligations of the Company under the Purchase Agreement relating
to the registration of the New Notes under the Securities Act. See "The
Exchange Offer -- General." The Company is making the Exchange Offer in
reliance upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in a series of no-action letters issued
to third parties. See Exxon Capital Holdings Corp. (available April 13, 1989),
Morgan Stanley & Co. Incorporated (available June 5, 1991) and Shearman &
Sterling (available July 2, 1993). Based on such interpretation, the Company
believes that New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 promulgated under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business, such holder has no arrangement with any person to
participate in the distribution of such New Notes and neither such holder nor
any such other person is engaging in or intends to engage in a distribution of
such New Notes. However, the Company has not sought, and does not intend to
seek, its own no-action letter, and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal relating
to the Exchange Offer states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Notes received in exchange for Old Notes where
such New Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Each broker-dealer that receives New
Notes from the Company in the Exchange Offer and not as a result of market-
making or other trading activities, in the absence of an exemption, must comply
with the registration requirements of the Securities Act. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this Prospectus and any amendment or supplement to this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The New Notes are a new issue of securities for which there is currently no
trading market. Any Old Notes not tendered or accepted in the Exchange Offer
will remain outstanding. If the New Notes are traded after their initial
issuance, they may trade at a discount from their principal amount, depending
upon prevailing interest rates, the market for similar securities and other
factors, including general economic conditions and the financial condition and
performance of, and prospects for, the Company. There can be no assurance as to
the development or liquidity of any market for the Old Notes and the New Notes.
The Company does not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices: Seven World Trade Center,
13th Floor, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, such material can also be obtained from the Commission's Web site at
http://www.sec.gov. Such information may also be inspected and copied at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. 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 and (ii) the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, all filed pursuant to Section 13 or 15(d) 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).
UNTIL _________, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM INVESTOR RELATIONS,
2
<PAGE>
WORLDCORP, INC. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY
REQUEST SHOULD BE MADE NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION
DATE.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
AVAILABLE INFORMATION............................................ 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................. 2
PROSPECTUS SUMMARY............................................... 4
RISK FACTORS..................................................... 16
USE OF PROCEEDS.................................................. 34
THE EXCHANGE OFFER............................................... 34
DESCRIPTION OF OLD NOTES......................................... 40
DESCRIPTION OF NEW NOTES......................................... 40
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES................. 48
PLAN OF DISTRIBUTION............................................. 51
VALIDITY OF NEW NOTES............................................ 52
EXPERTS.......................................................... 52
</TABLE>
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 Exchange Offer 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 Malaysian Helicopter Services 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 one of the largest suppliers 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.
5
<PAGE>
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.
Effective September 30, 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
6
<PAGE>
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
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
March 31, 1997, the Asset Value was $185.7 million and $105.6 million,
respectively. In
7
<PAGE>
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.
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"). The purpose of the Margin Loan
was to obtain cash for short-term working capital purposes. As of March 31,
1997, WorldCorp had no outstanding balance on 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.
Summary of the Terms of the Renegotiated Bridge Loan
Borrower ................. WorldCorp.
Loan Amount .............. $15.0 million.
Maturity Date ............ September 29, 1997.
Interest ................. LIBOR Rate in effect from time to time plus 175
basis points.
Cash Collateral .......... $1.0 million.
Securities Collateral .... All stock and warrants owned by WorldCorp and
WorldCorp Investments in InteliData and World
Airways, including 6,915,915 shares of common
stock of World Airways and approximately 8.7
million shares of InteliData Common Stock.
Approximately 400,000 shares of InteliData Common
Stock are pledged to Scott & Stringfellow as
collateral for the repayment of the Margin
Loan.
Guarantor ................ WorldCorp Investments, a wholly-owned subsidiary
of the Company.
Prepayment of Loan ....... WorldCorp may prepay the loan in whole or in part
at any time without penalty or premium, provided
that any such prepayment (a) is in the amount of
$1 million or any integral multiple thereof, and
(b) is
8
<PAGE>
accompanied by all unpaid and accrued interest on
the amount so prepaid to the date of prepayment.
Security Interest ........ WorldCorp and WorldCorp Investments have granted
the Bank a security interest in the Cash
Collateral and Securities Collateral.
Merger, Sale of Assets,
etc. .................... WorldCorp and WorldCorp Investments covenant that
they will not, without the Bank's prior written
consent, suffer or permit to occur any merger,
consolidation, dissolution or liquidation and
certain other transactions unless WorldCorp
provides advance written notice and continues as
the surviving entity, remains in full compliance
with the terms of the Renegotiated Bridge Loan and
management of WorldCorp remains substantially
unchanged.
Certain Covenants ........ The Renegotiated Bridge Loan contains certain
covenants, which, among other things, require
WorldCorp to maintain at least a 50.1% ownership
of World Airways, restrict WorldCorp and World
Airways from entering into a merger, sale of
assets, consolidation, dissolution or share
exchange, restrict WorldCorp or World Airways from
purchases of certain assets, and restrict
prepayment of Funded Debt, which includes any
obligation of WorldCorp to any person other than
the Bank that is payable more than one year from
the date of its creation and which under Generally
Accepted Accounting Principles ("GAAP") is shown
on the balance sheet as a liability excluding
certain reserves. In addition, the Renegotiated
Bridge Loan stipulates that the fair market value
of each share of World Airways and InteliData
common stock that collateralizes the loan must
equal or exceed $5.00 per share at all times.
Summary of the Terms of the Exchange Offer
The Exchange Offer relates to the exchange of up to $10,000,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
New Notes. The New Notes will be obligations of the Company entitled to the
benefits of the Indenture. The form and terms of the New Notes are the same as
the form and terms of the Old Notes except that (i) the New Notes have been
registered under the Securities Act and will not contain terms restricting the
transfer thereof (other than as provided herein), (ii) the New Notes will be
subject to the requirements of the Trust Indenture Act and therefore will be
issued under an Indenture (as defined herein) that provides for various rights
and benefits of the holders of the New Notes to be exercisable, received and
coordinated through the Trustee (as defined herein) in the manner required by
the Trust Indenture Act and (iii) the New Notes will be issued free from any
covenant regarding registration. The Old Notes and the New Notes are herein
collectively referred to as the "Notes." See "Description of New Notes."
The Exchange Offer ....... $1,000 principal amount of New Notes will be
issued in exchange for each $1,000 principal
amount of Old Notes validly tendered pursuant to
the Exchange Offer. As of the date hereof,
$10,000,000 in aggregate principal amount of Old
Notes are outstanding. The Company will issue the
New Notes to tendering holders of Old Notes
promptly after the Expiration Date.
Resale ................... The Company believes that the New Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery
requirement
9
<PAGE>
under the Securities Act, except that a "dealer"
or any "affiliate" of the Company, as such terms
are defined under the Securities Act, that
exchanges Old Notes held for its own account (a
"Restricted Holder") may be required to deliver
copies of this Prospectus in connection with any
resale of the New Notes issued in exchange for
such Old Notes. See "The Exchange Offer --
General" and "Plan of Distribution."
Expiration Date .......... 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
Accrued Interest on the
New Notes and the Old
Notes ................... The New Notes will bear interest from March 31,
1997. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have
waived the right to receive any payment in respect
of interest on such Old Notes accrued from March
31, 1997 to the date of the issuance of the New
Notes. Consequently, holders who exchange their
Old Notes for New Notes will receive the same
interest payment on September 30, 1997 (the first
interest payment date with respect to the Old
Notes and the New Notes) that they would have
received had they not accepted the Exchange Offer.
See "The Exchange Offer -- Interest on the New
Notes."
Termination of the Exchange
Offer ................... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, any new law,
statute, rule or regulation or any interpretation
of the staff of the Commission of any existing
law, statute, rule or regulation or if the Company
deems it advisable to terminate the Exchange
Offer. Holders of Old Notes will have certain
rights against the Company under the Purchase
Agreement should the Company fail to consummate
the Exchange Offer. See "The Exchange Offer --
Termination."
No federal or state regulatory requirements must
be complied with or approvals obtained in
connection with the Exchange Offer, other than
applicable requirements under federal and state
securities laws.
Procedures for Tendering
Old Notes ............... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with the Old Notes to be
exchanged and any other required documentation, to
Norwest Bank Minnesota, National Association, as
Exchange Agent, at the address set forth herein
and therein or effect a tender of Old Notes
pursuant to the procedures for book-entry transfer
as provided for herein. See "The Exchange Offer --
Procedures for Tendering."
10
<PAGE>
Special Procedures for
Beneficial Holders ...... Any beneficial holder whose Old Notes are
registered in the name of his broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly and
instruct such registered holder to tender on his
behalf. If such beneficial holder wishes to tender
on his own behalf, such beneficial holder must,
prior to completing and executing the Letter of
Transmittal and delivering his Old Notes, either
make appropriate arrangements to register
ownership of the Old Notes in such holder's name
or obtain a properly completed bond power from the
registered holder. The transfer of record
ownership may take considerable time. See "The
Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures .............. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes
(or who cannot complete the procedure for book-
entry transfer on a timely basis) and a properly
completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date
may tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights ........ Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The
Exchange Offer -- Withdrawal of Tenders."
Acceptance of Old Notes
and Delivery of New
Notes ................... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully in "The Exchange Offer --
Termination"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The
New Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer --
General."
Certain Federal Income
Tax Consequences ........ The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal
income tax purposes. See "Certain Federal Income
Tax Consequences."
Exchange Agent ........... Norwest Bank Minnesota, National Association, the
Trustee under the Indenture, is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. See "The
Exchange Offer -- Exchange Agent."
Use of Proceeds .......... There will be no cash proceeds payable to the
Company from the issuance of the New Notes
pursuant to the Exchange Offer. Net proceeds
received by the Company from the sale of the Old
Notes were applied to repay a portion of the
amount outstanding under the Renegotiated Bridge
Loan.
11
<PAGE>
Summary Description of New Notes
Securities Offered ....... $10,000,000 aggregate principal amount of 10.00%
Senior Subordinated Notes due September 30, 2000
(the "New Notes").
Maturity Date ............ September 30, 2000.
Interest ................. Payable semi-annually in cash on March 31, and
September 30, commencing on September 30, 1997.
Ranking .................. The Old Notes are, and the New Notes will be,
unsecured, general obligations of the Company
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company
(which includes all indebtedness under the
Renegotiated Bridge Loan). The New Notes will rank
senior in right of payment to all existing and
future Subordinated Indebtedness of the Company
and on parity with the Old Notes. Senior
Indebtedness shall not exceed $50.0 million. At
March 31, 1997, the Company (excluding its
subsidiaries) had $15.0 million of Senior
Indebtedness outstanding, $65 million of
Subordinated Indebtedness outstanding, $10 million
of Old Notes outstanding and no firm arrangements
to issue any significant Subordinated
Indebtedness. 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 the Notes. 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. Additionally, if the
Company 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 the Company upon such sale will
be used to prepay the then outstanding Notes, pro
rata, within 30 days. Any sale by the Company of
shares of common stock of either World Airways or
InteliData would also require a waiver from the
Bank in accordance with the Renegotiated Bridge
Loan. See "Risk Factors -- Ranking of the Notes"
and "Description of New Notes -- Ranking."
No Guaranties ............ The Old Notes are not, and the New Notes will not
be guaranteed by the Company or any other entity.
Therefore, there can be no assurance that should
there be a Mandatory Prepayment of the Notes that
adequate funds will be available to the Company to
prepay the Notes. See "Risk Factors"
Optional Prepayment ...... The Notes may be prepaid at the election of the
Company, in whole or from time to time in part (in
units of at least $250,000), at par together with
accrued interest to the date of prepayment.
Mandatory Prepayment ..... If the Asset Value at the end of any fiscal
quarter is less than $70.0 million, then the
Company shall prepay 50% of each of the then
outstanding Notes within 60 days. If the Asset
Value at the end of any
12
<PAGE>
fiscal quarter is less than $50.0 million, then
the Company shall prepay all of the then
outstanding Notes within 60 days. 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 new 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.
If the Company 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 the Company upon such sale will
be used to prepay the then outstanding Notes, pro
rata, within 30 days. Any sale by the Company of
shares of common stock of either World Airways or
InteliData would also require a waiver from the
Bank in accordance with the Renegotiated Bridge
Loan.
Sinking Fund Payments .... The Company shall prepay pursuant to a sinking
fund and there shall become due and payable 20% of
the outstanding principal amount of the then
outstanding Notes, or such lesser amount as would
constitute payment in full of the then outstanding
Notes on such date, on September 30, 1998 and
September 30, 1999. No premium shall be payable in
connection with any such sinking fund payment.
Change of Control ........ There is no Change of Control provision.
Certain Covenants ........ The Purchase Agreement pursuant to which the Old
Notes were issued and the indenture pursuant to
which the New Notes will be issued (the
"Indenture") each contain covenants for the
benefit of the holders of the Notes (the
"Holders"), including covenants limiting the
incurrence of additional Senior Indebtedness, the
payment of dividends and other distributions and
the terms of additional Subordinated Indebtedness.
See "Description of New Notes -- Certain
Covenants."
Freely Transferable ...... Generally, the New Notes will be freely
transferable under the Securities Act by holders
who are not affiliates of the Company. The New
Notes otherwise will be substantially identical in
all material respects (including interest rate and
maturity) to the Old Notes. See "Description of
New Notes."
Registration Rights ...... The Company is obligated to file a registration
statement with the Commission with respect to the
registration of the New Notes under the Securities
Act and to use its best efforts to have such
registration statement declared effective, which
registration will be effected through the Exchange
Offer. Holders who do not participate in the
Exchange Offer may thereafter hold a less liquid
security. See "Description of New Notes --
Registration Rights."
Risk Factors
For a discussion of certain factors that should be considered by
prospective investors, see "Risk Factors."
13
<PAGE>
Selected Financial Data
The following table sets forth selected consolidated statement of
operations data, operating data and balance sheet data for the Company for the
periods indicated. The historical financial information for, and as of the end
of, each of the years ended December 31, 1992, 1993, 1994, 1995 and 1996 are
derived from the audited consolidated financial statements of the Company for
such years. This information should be read in conjunction with, and is
qualified by reference to, the consolidated financial statements of the Company
and the notes thereto incorporated by reference in this Prospectus. The
following selected financial data for the three months ended March 31, 1996 and
1997 are derived from the Company's unaudited financial statements. In the
opinion of management of the Company, such unaudited financial statements
include all adjustments necessary for a fair presentation of the results of
operations for such periods. Operating results for the three months ended March
31, 1997 are not necessarily indicative of results that may be expected for the
entire year ending December 31, 1997. The data appearing under the caption
"Operating Data" are derived from the records of the Company. The unaudited pro
forma condensed consolidated statements of operations data for the year ended
December 31, 1996 give effect to the Merger as if it was completed as of January
1, 1996. As a result, WorldCorp's pro forma consolidated statement of operations
data includes InteliData's results for the period under the equity method of
accounting. Such statements of operations data do not include the combined
effect of the $20.9 million nonrecurring charge for the Company's share of
InteliData's charge for in-process research and development or the gain on
issuance of stock by InteliData of approximately $42.6 million, which was offset
by the elimination of approximately $1.3 million of goodwill related to US
Order, which were recorded by the Company as a result of this transaction in the
fourth quarter of 1996. However, such statements do reflect adjustments for the
elimination of historical transactions between WorldCorp, US Order and Colonial
Data, amortization of goodwill and related income tax effects.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Operating revenues.......................... $ 180,416 $ 179,932 $ 182,147 $ 246,572 $ 313,672
Operating expenses.......................... 217,271 203,177/1/ 200,959/2/ 240,279 310,935
--------- --------- --------- --------- ---------
Operating income (loss)..................... (36,855)/3/ (23,245) (18,812) 6,293 2,737
Earnings (loss) from continuing
operations before income taxes,
minority interest, extraordinary
item and change in accounting principle... (44,692) (33,698) 10,496/4/ 65,685/5/ 8,509/6/
Earnings (loss) from continuing operations
before extraordinary item and change
in accounting principle................... (42,891) (30,945) 8,308 64,158 7,437
Discontinued operations,
net of tax and minority interest.......... -- -- -- (3,950) (19,191)
Extraordinary gain (loss) on acquisition
of debt, net.............................. (3,253) -- -- -- --
Change in accounting principle.............. (1,973) -- -- -- --
Net earnings (loss)......................... $(48,117) $(30,945) $8,308 $60,208 $(11,754)
Primary earnings (loss) per common
equivalent share:
Continuing operations................... $( 3.02) $( 2.12) $ 0.54 $ 3.75 $ 0.45
Net earnings (loss)..................... ( 3.39) ( 2.12) 0.54 3.52 (0.70)
Fully diluted earnings (loss) per common
equivalent share:
Continuing operations................... * * $ 0.53 $ 2.99 *
Net earnings (loss)..................... * * 0.53 2.82 *
Operating Data:
Ratio of earnings to fixed charges/7/....... -- -- 1.33x 2.78x 1.72x
Deficiency in earnings to cover fixed
charges................................... $ 44,692 $ 33,698 -- -- --
<CAPTION>
Pro Quarter Ended
Forma March 31,
----- ---------------
1996 1996 1997
------ ------ ------
<S> <C> <C> <C>
Results of Operations:
Operating revenues.......................... $ 309,587 $66,691 $78,748
Operating expenses.......................... 291,745 73,364 72,726
--------- ------- -------
Operating income (loss)..................... 17,842 (6,673) 6,022
Earnings (loss) from continuing
operations before income taxes,
minority interest, extraordinary
item and change in accounting principle... (181) (8,974) 2,888
Earnings (loss) from continuing operations
before extraordinary item and change
in accounting principle................... (8,061) (6,592) 709
Discontinued operations,
net of tax and minority interest.......... (19,191) (2,481) --
Extraordinary gain (loss) on acquisition
of debt, net.............................. -- -- --
Change in accounting principle.............. -- -- --
Net earnings (loss)......................... $(27,252) $(9,073) $ 709
Primary earnings (loss) per common
equivalent share:
Continuing operations................... $ (0.48) $(0.41) $ 0.05
Net earnings (loss)..................... (1.63) (0.56) 0.05
Fully diluted earnings (loss) per common
equivalent share:
Continuing operations................... * * *
Net earnings (loss)..................... * * *
Operating Data:
Ratio of earnings to fixed charges/7/....... 1.09x 0.03x 1.26x
Deficiency in earnings to cover fixed
charges................................... -- -- --
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
December 31, March 31
--------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
--------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and short-term investments............. $14,769 $17,584 $8,828 $78,661/8/ $ 14,509/8/ $ 7,936/8/
Working capital (deficit)................... (9,193) (24,850) (34,926) 39,622 (40,308) (44,656)
Total assets................................ 93,346 98,119 98,536 202,089 178,963 168,796
Long-term obligations including current
maturities................................ 104,192 129,049 119,032 122,700 114,794 110,948
Common stockholders' accumulated deficit.... (76,362) (101,073) (88,193) (23,297) (40,337) (39,536)
</TABLE>
- -------------------
* Fully diluted earnings per share are anti-dilutive.
(1) Includes $2.3 million of termination fees related to the early return of
three DC10-30 aircraft.
(2) Includes a $4.2 million reversal of excess accrued maintenance reserves
associated with the expiration of three DC10 aircraft leases in 1994.
(3) Includes a $31.4 million loss on the sale of Key Airlines, Incorporated,
partially offset by $4.1 million related to settlement of contract claims
with the U.S. Government related to Operation Desert Shield/Desert Storm.
(4) Includes a $27.0 million gain on the sale of 24.9% of World Airways common
stock and a $14.5 million gain on the sale of US Order's bill payment
operations.
(5) Includes the $51.3 million gain realized on US Order's offering in June
1995 and other stock transactions and the $16.0 million gain realized on
World Airways' offering in October 1995.
(6) Includes the $41.3 million net gain realized on the issuance of stock by
InteliData to effect the Merger of US Order and Colonial Data in November
1996; a $2.4 million net loss on other stock transactions of World Airways
and InteliData; partially offset by approximately $23.6 million of
one-time noncash Merger related charges.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) before income taxes, minority interest,
extraordinary items and cumulative effect of change in accounting
principle, fixed charges, and equity in loss of non-consolidated
subsidiary. Fixed charges consist of interest expense, including
amortization of debt issuance costs and one-third of rent expense which is
deemed to be representative of interest expense.
(8) Includes restricted cash and cash equivalents of $2.3 million, $2.5
million and $4.8 million as of March 31, 1997 and December 31, 1996 and
1995, respectively. In addition, includes $3.6 million, $8.1 million and
$54.5 million, as of March 31, 1997 and December 31, 1996 and 1995,
respectively, of cash and short-term investments held by World Airways and
InteliData, which is not available to satisfy WorldCorp's
obligations.
15
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully by
prospective investors in evaluating an investment in the Notes. 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 March 31, 1997, World Airways had a working capital deficit of $32.4
million and had substantial debt and lease commitments. At March 31, 1997,
InteliData had working capital of $66.4 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 $7.9 million in cash and short-term investments WorldCorp held
at March 31, 1997, approximately $3.6 million was held by World Airways and,
therefore, is not available to satisfy WorldCorp's obligations. As of March 31,
1997, WorldCorp had parent company repayment obligations, including principal
and interest, of approximately $20.7 million for the remainder of 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. As
of March 31, 1997, WorldCorp had no outstanding balance on 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 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
March 31, 1997, the Company's total long-term indebtedness including current
maturities was $110.9 million, the Company had liabilities (including total
debt) of approximately $203.1 million and total stockholders' deficit of $
(39.5) million. In the ordinary course of business, the Company has incurred
and, subject to certain covenants and financial
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tests set out in the Renegotiated Bridge Loan, the 7% Indenture and the
Indenture, will continue to incur additional indebtedness to fund working
capital requirements and for other corporate purposes. See "Description of
Renegotiated Bridge Loan" and "Description of New Notes."
The degree to which the Company is leveraged could have important
consequences to holders of the New Notes, 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.
New Notes Represent Unsecured, Subordinated Claims; No Limitation on Additional
Indebtedness
The New Notes will be unsecured obligations of the Company that are
subordinated in right of payment to all Senior Indebtedness of the Company,
including all indebtedness under the Renegotiated Bridge Loan. As of March 31,
1997, $15 million of Senior Indebtedness was outstanding, $65 million of
Subordinated Indebtedness was outstanding and $10 million of Old Notes were
outstanding. The Indenture, the 7% Indenture and the Renegotiated Bridge Loan
permit the Company to incur additional Senior Indebtedness, provided that
certain conditions are met, and the Company expects from time to time to incur
additional Senior Indebtedness. Furthermore, the Indenture does not limit the
Company's ability to secure Senior Indebtedness. In the event of the insolvency,
liquidation, reorganization, dissolution or other winding up of the Company or
upon a default in payment with respect to, or the acceleration of, or if a
judicial proceeding is pending with respect to, any default under any Senior
Indebtedness, the Bank under the Renegotiated Bridge Loan and any other
creditors who are holders of Senior Indebtedness must be paid in full before a
holder of the New Notes may be paid. Accordingly, there may be insufficient
assets remaining after such payments to pay principal of or interest on the New
Notes. See "Description of New Notes -- Ranking."
The Company's obligations under the Renegotiated Bridge Loan are
collateralized by $1.0 million in cash and all stock and warrants owned by
WorldCorp and WorldCorp Investments in InteliData and World Airways, including
6,915,915 shares of common stock of World Airways and approximately 8.7 million
shares of InteliData Common Stock. Approximately 400,000 shares of InteliData
Common Stock are pledged to Scott & Stringfellow as security for the repayment
of the Margin Loan. As of March 31, 1997, the Company has no outstanding
balance on the Margin Loan. These securities represent substantially all of the
assets of the Company. In addition, WorldCorp Investments is the guarantor of
the Renegotiated Bridge Loan. If a default occurs under the Renegotiated Bridge
Loan and the Company is unable to repay such borrowings, the Bank would have the
right to exercise the remedies available to secured creditors under applicable
law and pursuant to the Renegotiated Bridge Loan. Accordingly, the Bank would
be entitled to payment in full out of the assets securing such indebtedness
prior to payment to holders of the New Notes. If the Bank, Scott & Stringfellow
or the holders of any other secured indebtedness were to foreclose on the
collateral securing the Company's obligations to the Bank and Scott &
Stringfellow, it is possible that there would be insufficient assets remaining
after satisfaction in full of all such indebtedness to satisfy in full the
claims of holders of the New Notes.
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Restrictive Debt Covenants; Consequences of Failure to Comply with Debt
Covenants
The Renegotiated Bridge Loan and the 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. In addition, the Renegotiated Bridge Loan stipulates that the fair
market value of each share of World Airways and InteliData common stock that
collateralizes the Renegotiated Bridge Loan must equal or exceed $5.00 per share
at all times. 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. See
"Summary of 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 or interest on the New Notes. See
"Description of New Notes -- Ranking." 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.
Absence of Public Market for Notes
There is no existing market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell their Notes or the price at which holders of the
Notes may be able to sell their Notes. Future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, WorldCorp's operating results and the market for similar securities.
Ranking of the Notes
The Old Notes are, and the New Notes will be, unsecured, general
obligations of the Company, subordinated in right of payment to all existing and
future Senior Indebtedness of the Company, including indebtedness under the
Renegotiated Bridge Loan but senior in right of payment to all existing and
future Subordinated Indebtedness. Amounts outstanding under the Renegotiated
Bridge Loan are collateralized by a first priority security interest in the
Company's assets and a pledge of all of the Company's shares of World Airways
and InteliData. Under the terms of the Indenture, Senior Indebtedness shall not
exceed $50.0 million. At March 31, 1997, the Company had $15.0 million of
Senior Indebtedness, approximately $65 million of Subordinated Indebtedness
outstanding and $10 million of Old Notes outstanding. In the event of
bankruptcy, liquidation or reorganization of the Company, the assets of the
Company would be available to pay obligations on the Notes only after all Senior
Indebtedness has been repaid in full. In addition, under the terms of the New
Notes, the Company is required to use 20% of the net proceeds from sales of the
InteliData Common Stock it beneficially owns to repay the Notes. Consequently,
sufficient assets may not exist to pay amounts due on the Notes. In addition,
the subordination provisions of the Indenture provide that no cash payments may
be made with respect to the Notes during the continuance of a payment default
under any Senior Indebtedness of the Company. See "Description of New Notes --
Ranking."
Mandatory Prepayment
Pursuant to the 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
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additional capital through issuing equity, selling shares of its World Airways
or InteliData common stock, or through entering into new loan arrangements, in
order to meet the principal and interest payment obligations on the Notes.
There can be no assurance, however, that the Company would be able to obtain
sufficient capital through such financings or that the terms of such financings
would be favorable to WorldCorp.
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 or parties. 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 System Berhad ("Malaysian Airlines"), Philippine Airlines, Inc.
("Philippine Airlines"), P.T. Garuda Indonesia ("Garuda") and the USAF. For the
first quarter of 1997, these customers provided 33%, 36%, 13% and 17%,
respectively, of World Airways' revenues and 37%, 37%, 14% and 10%,
respectively, of total block hours. 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.
World Airways presently operates four MD-11 passenger aircraft for
Philippine Airlines under an agreement, with high minimum monthly utilization
levels. World Airways, however, has recently received a written communication
from Philippine Airlines in which the airline contends that its leases for all
four aircraft expire on November 15, 1997. World Airways believes that this
position is contrary to the understanding of the parties that each of the MD-11s
are to be leased by Philippine Airlines for a period of 17 months from delivery
of each aircraft. The parties are currently discussing the length of the lease
term for these aircraft. World Airways can provide no assurances, however, that
Philippine Airlines will agree to lease any of the four MD-11 passenger aircraft
beyond November 15, 1997, or that World Airways will be able to secure other
business at as favorable price and utilization levels. Also, at Philippine
Airlines' request, World Airways agreed to a payment plan with respect to
Philippine Airlines' wet lease obligations beginning March 1997. In spite of
the fact that Philippine Airlines is current with its obligations, the Company
believes that Philippine Airlines continues to face serious financial
challenges. If Philippine Airlines fails to meet its 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.
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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. While World Airways generated operating income for
the quarter ended March 31, 1997 of $6.3 million, there can be no assurance that
World Airways will be able to generate operating income for the remainder of
1997 or future years.
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 March 31, 1997, World
Airways had total long-term indebtedness of approximately $27.0 million and
notes payable and current maturities of long-term obligations of $15.0 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 March 31, 1997 and
December 31, 1996 were $2.6 million and $7.0 million, respectively. As is
common in the airline industry, World Airways operates with a working capital
deficit. At March 31, 1997, World Airways' current assets were $35.7 million
and current liabilities were $68.1 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 the remainder
of 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 the next 12 months.
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.
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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 64% and 17% of World Airways' contract
backlog at March 31, 1997, 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 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
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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.
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 has begun 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
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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 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 occurred 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
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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 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. In
light of the proposed settlement, the district court has dismissed the lawsuit
against the World Defendants, subject to reinstatement if the settlement does
not become final. The FDIC and MONY each has the option to terminate the
settlement if a certain contingency is not satisfied by June 30, 1997. That
contingency requires the IRS to agree that it will not assert any additional tax
claims against Washington Bancorporation that could require a net payment by
Washington Bancorporation to the IRS. The World Defendants understand that the
IRS has so agreed but approval must still be obtained from the Joint Committee
on Taxation of the United States Congress, before which the issue has been
pending since April 22, 1997. In any event, World Airways and WorldCorp believe
they have 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. In November 1996, 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. Under 49 U.S.C., Section 46301, any violation of
pertinent provisions of 49 U.S.C. Subsection 40101 or related rules is subject
to a civil penalty for each violation. Upon review of the evidence or facts and
circumstances relating to the violation, the statute allows for the compromise
of proposed civil penalties. The proposed penalties were imposed by the FAA in
connection with recent inspections at foreign airport facilities and relate
primarily to ground handling services provided by World Airways' customers in
connection with their operations; specifically, the inspection procedures of its
aircrafts, passengers and associated cargo. As previously indicated in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, in
each of these instances, World Airways was in compliance with international
regulations, but not the more stringent U.S. requirements, despite the fact that
the flights in question did not originate or terminate in the United States.
World Airways has taken steps to comply with the U.S. requirements and is
currently working with the FAA to settle these claims 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.
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In connection with the discontinuance of World Airways' 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 which had been
filed in connection with World Airways' discontinuance of scheduled service to
South Africa, sought approximately $37.8 million in compensatory and punitive
damages has been settled by the parties, for approximately $0.7 million.
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' 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' ability to
pay dividends on the World Airways Common Stock. Additionally, WorldCorp is
subject to the provisions of the 7% Indenture, 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
Indenture, WorldCorp is obligated not to pay dividends excepted 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
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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 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.
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
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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 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.
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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 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
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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 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. For the first quarter ended March 31, 1997,
InteliData's two largest customers, WorldWide Telecom Partners, Inc. and US West
Communications, Inc. accounted for 16% and 13% of InteliData's revenues,
respectively. 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 March 31, 1997, 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
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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(TM), 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.
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
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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 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.
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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
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
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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 any such source to continue to
supply components could have a material adverse effect on InteliData pending the
development of an alternative source.
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
New Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Company will receive in exchange Old Notes
in like principal amount, the terms of which are the same in all material
respects as the form and terms of the New Notes except that (i) the New Notes
have been registered under the Securities Act and will not contain terms
restricting the transfer thereof and (ii) the New Notes will be subject to the
requirements of the Trust Indenture Act and therefore will be issued under an
Indenture that provides for various rights and benefits of the holders of the
New Notes to be exercisable, received and coordinated through a Trustee in the
manner required by the Trust Indenture Act. The Old Notes surrendered in
exchange for the New Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the New Notes will not result in any increase in the
indebtedness of the Company.
The net proceeds received by the Company from the offering of the Old
Notes was approximately $10.0 million and was used to repay a portion of the
amount outstanding under the Renegotiated Bridge Loan.
THE EXCHANGE OFFER
General
In connection with the sale of the Old Notes, the purchasers thereof
became entitled to the benefits of certain registration rights as set forth in
the Purchase Agreement. Pursuant to the Purchase Agreement, the Company agreed,
to file, at its cost, a registration statement with the Commission with respect
to registration of the New Notes under the Securities Act and to use its best
efforts to have such registration statement declared effective, which
registration will be effected through the Exchange Offer. Upon such registration
statement being declared effective, the Company has agreed to offer the New
Notes in return for surrender of the Old Notes. For each Old Note surrendered to
the Company under the Exchange Offer, the Holder will receive a New Note of
equal principal amount. Interest on each New Note will accrue from March 31,
1997. In the event that applicable interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer or under
certain other circumstances, the Company has agreed to file, at its cost, a
shelf registration statement with the Commission with respect to resales of the
Old Notes under the Securities Act, and to use its reasonable best efforts to
cause to become effective a shelf registration statement with respect to resales
of the Old Notes. The Company shall, in the event of such a shelf registration,
provide to each holder copies of the prospectus, notify each holder when the
shelf registration statement for the Old Notes has become effective and take
certain other actions as are required to permit resales of the Old Notes.
In the event the Exchange Offer is consummated, the Company will not be
required under the Purchase Agreement to file a shelf registration statement to
register any outstanding Old Notes. The Exchange Offer shall be deemed to have
been consummated upon the earlier to occur of (i) the Company having exchanged
New Notes for all outstanding Old Notes pursuant to the Exchange Offer and (ii)
the Company having exchanged, pursuant to the Exchange Offer, New Notes for all
Old Notes that have been tendered and not withdrawn on the Expiration Date. In
such event, holders of Old Notes seeking liquidity in their investment would
have to rely on exemptions to registration requirements under the securities
laws, including the Securities Act. See "Description of New Notes--Registration
Rights" and "Risk Factors."
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Old Notes properly tendered prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer in denominations of $1,000 and integral
multiples thereof.
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Based on no-action letters issued by the staff of the Commission to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Notes. Any holder of Old Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the New Notes could not rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
This Prospectus, together with the accompanying letter of transmittal
(the "Letter of Transmittal"), is being sent to all registered holders of Old
Notes as of , 1997 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to Norwest
Bank Minnesota, National Association (the "Exchange Agent"). See "-- Exchange
Agent." The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purpose of receiving New Notes from the Company and delivering New
Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender pursuant to the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean , 1997, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "Termination" shall have occurred and shall not have been waived by
the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the exchanging holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Old Notes of such amendment.
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Without limiting the manner in which the Company may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to the Dow Jones News Service.
Interest on the New Notes
The New Notes will bear interest from March 31, 1997, payable
semiannually on March 31 and September 30, of each year commencing on September
30, 1997, at the rate of 10.00% per annum. Holders of Old Notes whose Old Notes
are accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued from March 31, 1997
until the date of the issuance of the New Notes. Consequently, holders who
exchange their Old Notes for New Notes will receive the same interest payment on
September 30, 1997 (the first interest payment date with respect to the Old
Notes and the New Notes) that they would have received had they not accepted the
Exchange Offer.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its
address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for such holders.
The method of delivery of Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
a reliable overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery. No Letter of Transmittal or Old
Notes should be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special
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Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
(a) purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within five business days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in prior form for
transfer and any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent; and
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(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within five business days after the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any
Old Notes which have been tendered but which are not accepted for exchange will
be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "Procedures for Tendering" at any time prior to
the Expiration Date.
Termination
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer, that, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer, (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute rule or regulation is interpreted by
the staff of the Commission in a manner, that, in the Company's judgment, might
materially impair the Company's ability to proceed with the Exchange Offer, or
(iii) any change (or any development involving a prospective change) shall have
occurred or be threatened in the business, properties, assets, liabilities,
financial condition, operations, results of operations or prospects of the
Company that is or may be adverse to the Company, or the Company shall have
become aware of facts that have or may have adverse significance with respect to
the value of the Notes or the New Notes, which, in the reasonable judgment of
the Company, in any of these cases, and regardless of the circumstances
(including any action by the Company) giving rise to any such condition, makes
it inadvisable to proceed with the Exchange Offer or with such acceptance for
exchange or with such exchange.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn, or (iv) amend
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the offer. If such waiver constitutes a material change in the Exchange Offer,
the Company will disclose such change by means of a supplement to this
Prospectus that will be distributed to each registered holder of Old Notes, and
the Company will extend the Exchange Offer for a period of five to 10 business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders if the Old Notes, if the Exchange Offer would
otherwise expire during such period. See "Description of New Notes -
Registration Rights."
Exchange Agent
Norwest Bank Minnesota, National Association, the Trustee under the
Indenture, has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
By Mail: Norwest Bank Minnesota, National Association
P.O. Box 1517
Minneapolis, Minnesota 55480-1517
Attention: Corporate Trust Operations
By Overnight Courier: Norwest Bank Minnesota, National Association
Norwest Center
6th and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Operations
Facsimile Transmission: (612) 667-4927
Confirm by Telephone: (612) 667-9764
By Hand: Norwest Bank Minnesota, National Association
Northstar East, 12th Floor
608 2nd Avenue
Minneapolis, Minnesota 55479-0113
Attention: Corporate Trust Operations
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and employees of the Company and its affiliates in person, by telegraph
or telephone.
The Company will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services
estimated to be approximately $1,000 and will reimburse the Exchange Agent for
its reasonable out-of-pocket expenses in connection therewith. The Company may
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, Letters of Transmittal and related documents to the beneficial
owners of the Old Notes and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than
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the registered holder of the Old Notes tendered, or if tendered Old Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Accounting Treatment
The expenses of the Exchange Offer will be amortized by the Company
over the term of the New Notes under generally accepted accounting principles.
DESCRIPTION OF OLD NOTES
The Old Notes were issued and sold on September 30, 1996, in
transactions not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and the rules
promulgated thereunder. Accordingly, the Old Notes may not be reoffered, resold
or otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. The New Notes are being offered hereunder
in order to satisfy certain of the obligations of the Company under the Purchase
Agreement relating to the registration of the New Notes under the Securities
Act. The form and terms of the New Notes are the same in all material respects
as the form and terms of the Old Notes except that (i) the New Notes have been
registered under the Securities Act and will not contain terms restricting the
transfer thereof (other than as provided below), (ii) the New Notes will be
issued free from any covenant regarding registration, and (iii) the New Notes
will be subject to the requirements of the Trust Indenture Act, and therefore
will be issued under the Indenture that provides for various rights and benefits
of the holders of the New Notes to be exercisable, received and coordinated
through a Trustee in the manner required by the Trust Indenture Act. The other
material terms of the New Notes as set forth in the Indenture are identical to
such material terms as set forth in the Purchase Agreement. See "Description of
New Notes."
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes are the same in all material
respects as the form and terms of the Old Notes except that (i) the New Notes
have been registered under the Securities Act and will not contain terms
restricting the transfer thereof, (ii) the New Notes will be issued free from
any covenant regarding registration, and (iii) the New Notes will be subject to
the requirements of the Trust Indenture Act, and therefore will be issued under
an Indenture that provides for various rights and benefits of the holders of the
New Notes to be exercisable, received and coordinated through a trustee in the
manner required by the Trust Indenture Act.
The New Notes will be, issued under an Indenture, dated as of
September 30, 1996 (the "Indenture"), among the Company, as Issuer, and Norwest
Bank Minnesota, National Association, as Trustee (the "Trustee"). The Indenture
is governed by the Trust Indenture Act.
The following summary of the material provisions of the Indenture and
the New Notes does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture
and the New Notes including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act. Whenever particular
Sections or defined terms of the Indenture not otherwise defined herein are
referred to, such Sections or defined terms are incorporated herein by
reference. References in this section to the "Notes" shall be references to the
Old Notes and the New Notes.
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The Indenture authorizes a maximum principal amount of $10,000,000 of
New Notes at any one time outstanding. The New Notes will be issued solely in
exchange for an equal principal amount of Old Notes pursuant to the Exchange
Offer. See "-- Registration Rights."
General
The Old Notes are, and the New Notes will be, unsecured senior
subordinated obligations of the Company and will mature on September 30, 2000.
The New Notes will bear interest at the rate of 10.00% from March 31, 1997 or
from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semiannually on March 31 and September 30 of each year,
commencing September 30, 1997.
Principal of and interest on the New Notes will be payable at the
corporate trust office of the Trustee in Minneapolis, Minnesota, and the New
Notes may be presented for registration of transfer or exchange, at the office
or agency of the Company maintained for that purpose in Herndon, Virginia;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Holders as such address appears in the
Security Register.
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
Ranking
The indebtedness evidenced by the Old Notes is, and the New Notes will
be, unsecured, general obligations of the Company, subordinated in right of
payment, as set forth in the Purchase Agreement and the Indenture, respectively,
to the prior payment of all present and future Senior Indebtedness of the
Company, whether outstanding on the date of issuance or thereafter incurred.
All Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes and all Indebtedness of the Company that is Subordinated
Indebtedness will rank junior to the Notes in accordance with the provisions of
the Purchase Agreement and the Indenture. The Old Notes and the New Notes will
rank in parity with each other.
In the event that the Company defaults in the payment of any principal
of or interest on any Senior Indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for repayment or by declaration of
acceleration or otherwise, then, upon written notice of such default to the
Company by the holders of Senior Indebtedness or any trustee therefor or
representative thereof, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash,
property, securities, by set-off or otherwise) shall be made or agreed to be
made on account of the principal of or interest on any of the Notes, or in
respect of any prepayment, retirement, purchase or other acquisition of any of
the Notes. In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its property,
(ii) any proceeding for the liquidation, dissolution or other
winding up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of
creditors, or
(iv) any other marshalling of the assets of the Company,
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all Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made to any holder of any of the Notes on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions of the Purchasing Agreement
and the Indenture with respect to the indebtedness evidenced by the Notes, to
the payment of all Senior Indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for such subordination provisions) be
payable or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness in accordance with the priorities
then existing among such holders until all Senior Indebtedness (including any
interest thereof accruing after the commencement of any such proceedings) shall
have been paid in full. In the event of any such proceeding, after payment in
full of all sums owing with respect to Senior Indebtedness, the Holders of the
Notes shall be entitled to be paid from the remaining assets of the Company the
amounts at the time due and owing on account of unpaid principal of and interest
on the Notes and such other obligations before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Company ranking junior to the
Notes and such other obligations.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the Holders of Notes shall be subrogated to all
rights of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the indebtedness
evidenced by the Notes shall have been paid in full, and such payments or
distributions received by such Holders, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or distributed to the
holders of Senior Indebtedness, shall, as between the Company and its creditors
other than the holders of Senior Indebtedness, on the one hand, and such
Holders, on the other hand, be deemed to be a payment by the Company on account
of Senior Indebtedness, and not on account of the Notes.
No provision contained in the Purchase Agreement, the Indenture or the
Notes will affect the obligation of the Company, which is absolute and
unconditional, to pay, when due, principal of, and interest on the Notes. The
subordination provisions of the Purchase Agreement, the Indenture and the Notes
do not prevent the occurrence of any Event of Default under the Purchase
Agreement, the Indenture or the Notes or limit the rights of the Trustee or any
Holder to pursue any other rights or remedies with respect to the Notes.
By reason of the subordination provisions contained in the Purchase
Agreement and the Indenture, in the event of bankruptcy, liquidation, insolvency
or other similar proceedings, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Holders of the Notes, and
creditors of the Company who are not holders of Senior Indebtedness may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Holders of the Notes.
Certain Covenants
The Indenture contains covenants including, among others, those set forth
below.
Subordination
The Company shall cause all future Subordinated Indebtedness to be
subordinated to the Notes in the same manner, on the same terms and to the same
extent as the Notes are subordinated to Senior Indebtedness pursuant to the
Purchase Agreement and the Indenture, and the Company shall include such terms
in any agreement, note or instrument evidencing such future Subordinated
Indebtedness.
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Stock Repurchase
Each subsidiary of the Company shall be permitted to, directly or
indirectly, repurchase, redeem, retire or otherwise acquire for value any of its
shares of capital stock of any class or any warrants, rights, options to
purchase or acquire any shares of its capital stock.
Limitations on Senior Indebtedness
The Company agrees that Senior Indebtedness shall not exceed $50.0 million.
Limitation on Dividends, Distributions and Certain Transactions
The Company shall not declare or pay any dividend or make any distribution
on or in respect of any of its capital stock or to its stockholders (other than
dividends or distributions payable solely in its capital stock) or purchase,
redeem or otherwise acquire or retire for value any capital stock or any
warrants, rights or options (including any securities convertible into or
exercisable or exchangeable for such capital stock, but not including the Notes
or the warrants) of the Company or any subsidiary of the Company, provided,
however, that unless a default or an Event of Default (as defined herein) has
occurred and is continuing, such provisions shall not prevent (i) the retirement
of any shares of the Company's capital stock by exchange for, or out of the
proceeds of, the substantially concurrent sale of other shares of its capital
stock, (ii) the purchase, redemption, retirement or other acquisition for value,
at any time, of the Common Stock using $25.0 million in cash and up to 650,000
shares of Common Stock using shares of common stock of World Airways of which
the Company is the beneficial owner or (iii) any prepayment of the Notes
pursuant to the terms thereof; provided, further, that such provisions shall not
prevent the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment complied with the
provisions of this limitation on dividends. The Company shall also be able to
repurchase, redeem, retire or otherwise acquire for value up to $5.0 million of
additional shares of Common Stock for every $15.0 million increase in Asset
Value at such time compared to such Asset Value as of September 12, 1996.
"Asset Value" is defined in the Indenture to mean (A) the market value of the
common stock of World Airways beneficially owned by the Company, the InteliData
Common Stock beneficially owned by the Company, the common stock of any other
Subsidiary of the Company beneficially owned by the Company which is listed on
an exchange or quoted on the Nasdaq National Market, and the Common Stock, in
each case measured based on the monthly closing prices of each of the common
stocks as listed on the New York Stock Exchange or the Nasdaq National Market,
as the case may be, plus (B) the value of all other tangible assets of the
Company calculated in accordance with GAAP consistently applied, measured based
on the value of such assets as of the applicable date of calculation. As of
September 12, 1996, the Asset Value was approximately $185.7 million.
Optional Prepayment
The Notes may be repaid at the election of the Company, in whole or from
time to time in part (in units of at least $250,000), at par together with
accrued interest to the date of prepayment.
Mandatory Prepayment
If the Asset Value at the end of any fiscal quarter of the Company is less
than $70.0 million, then the Company shall prepay 50% of each of the then
outstanding Notes within 60 days of the end of such fiscal quarter. If the
Asset Value at the end of any fiscal quarter of the Company is less than $50.0
million, then the Company shall prepay all of the then outstanding Notes within
60 days of the end of such fiscal quarter. As of September 12, 1996 and
March 31, 1997, the Asset Value was $185.7 million and $105.6 million,
respectively.
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If the Company 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 the Company upon such sale will be used to prepay the then
outstanding Notes, pro rata, within 30 days.
Sinking Fund Payments
The Company shall prepay pursuant to a sinking fund, and there shall become
due and payable 20% of the outstanding principal amount of each of the then
outstanding Notes, or such lesser amount as would constitute payment in full of
the then outstanding Notes on such date, on September 30, 1998 and September 30,
1999. No premium shall be payable in connection with any such sinking fund
payment.
The Company (i) may deliver outstanding New Notes (other than any
previously called for prepayment or any sinking fund payment) and (ii) may apply
as a credit New Notes that have been prepaid at the election of the Company
pursuant to the terms of such New Notes, in satisfaction of all or any part of
any sinking fund payment with respect to the New Notes required to be made;
provided that such New Notes have not been previously so credited. Such New
Notes shall be received and credited for such purpose by the Trustee for
prepayment through operation of the sinking fund and the amount of such sinking
fund payment shall be reduced accordingly.
Consolidation
The Company shall not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to any person, and the Company shall not permit any person to consolidate with
or merge into the Company, unless (i) in case the Company shall consolidate with
or merge into another person or convey, transfer or lease its properties and
assets substantially as an entirety to any person, the person formed by such
consolidation or into which the Company is merged or the person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws of the United
States of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, the due and punctual payment of the principal of and interest on
all the Notes and the performance or observance of every covenant of the
Indenture on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and (iii) the Company has
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, conveyance, transfer or lease and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture, complies with the Indenture and that all conditions
precedent therein provided for relating to such transaction have been complied
with.
Commission Reports
Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will file with the Commission and provide the Trustee and Holders of the
Notes with such annual reports and such information, documents and other reports
as may be required by the Trust Indenture Act, such information, documents and
other reports to be so filed and provided at the times specified for the filing
of such information, documents and reports under the Trust Indenture Act.
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Events of Default
The following events will be defined as "Events of Default" in the
Indenture:
(i) default shall occur in the payment of interest on any New Note when the
same shall have become due and such default shall continue for more than 10
calendar days; or (ii) default shall occur in the making of any required
prepayment on any of the New Notes as provided in Section 1102 of the Indenture
or sinking fund payment as provided in Section 1201 of the Indenture or in the
making of any other payment of the principal of any New Notes at their stated
maturity; or (iii) default shall be made in the payment of the principal of or
interest or premium on Indebtedness of the Company and its subsidiaries
aggregating in excess of $5.0 million, as and when the same shall become due and
payable by the lapse of time, by declaration of acceleration, by call for
redemption or otherwise, and such default shall continue beyond the period of
grace, if any, allowed with respect thereto unless such default is being
contested in good faith by appropriate actions or proceedings; or (iv) default
shall occur in the observance or performance of any other covenant of the
Indenture which is not remedied within 30 calendar days after the Company has
received written notice thereof; or (v) any representation or warranty made by
the Company in the Indenture, or made by the Company in any statement or
certificate furnished by the Company in connection with the consummation of the
issuance and delivery of the New Notes or furnished by the Company pursuant
thereto, is untrue in any material respect as of the date of the issuance or
making thereof; or (vi) any judgment, writ or warrant of attachment or any
similar process in an aggregate amount in excess of $5.0 million shall be
entered or filed against the Company or any subsidiary of the Company or against
any property or assets of either and remain unpaid, unvacated, unbonded or
unstayed (through appeal or otherwise) for a period of 60 days after the date of
entry or filing thereof; or (vii) the Company or any subsidiary of the Company
shall: (A) generally not pay its debts as they become due or admit in writing
its inability to pay its debts generally as they become due; (B) file a petition
in bankruptcy or for reorganization or for the adoption of an arrangement under
the Federal Bankruptcy Code, or any similar applicable bankruptcy or insolvency
law, as now or in the future amended (herein collectively called "Bankruptcy
Laws"), or an answer or other pleading admitting or failing to deny the material
allegations of such a petition or seeking, consenting to or acquiescing in
relief provided for under the Bankruptcy Laws; (C) make an assignment of all or
a substantial part of its property for the benefit of its creditors; (D) seek or
consent to or acquiesce in the appointment of a receiver, liquidator, custodian
or trustee of it or for all or a substantial part of its property; (E) be
subject to the entry of a court order, which shall not be vacated, set aside or
stayed within 45 days from the date of entry, appointing a receiver, liquidator,
custodian or trustee of it or for all or a substantial part of its property; (F)
be subject to the institution against it of bankruptcy, reorganization,
arrangement or insolvency proceedings, or other proceedings pursuant to the
Bankruptcy Laws or any other proceedings for judicial modification or alteration
of the rights of creditors, which proceedings are not dismissed within 60 days
after such institution or which otherwise result in the Company or such
subsidiary being finally adjudicated a bankrupt or insolvent; or (G) be subject
to the assumption of custody or sequestration by a court of competent
jurisdiction of all or a substantial part of its property, which custody or
sequestration shall not be suspended or terminated within 60 days from its
inception.
When any Event of Default described in clause (i) or (ii) above has
occurred and is continuing, any Holder of any New Note may, and when any Event
of Default described in clauses (iii) through (vi) above, both inclusive, has
occurred and is continuing, the Holder or Holders of a majority in aggregate
principal amount of the New Notes at the time outstanding may, by notice in
writing, declare the entire principal and all interest accrued on all New Notes
to be due and payable. When any Event of Default described in paragraph (vii)
has occurred and is continuing, all of the New Notes, and all interest accrued
thereon, shall automatically become due and payable. Upon the New Notes
becoming due and payable as a result of any Event of Default, the Company will
pay to the Holders of the New Notes the entire principal of, and interest
accrued on, the New Notes. The Company has further agreed to pay to the Holder
or Holders of the New Notes all costs and expenses incurred by them in the
collection or enforcement of any New Notes upon any such default hereunder or
thereon, including reasonable attorneys' fees.
If the principal of and accrued interest on all or any outstanding New
Notes have been declared immediately due and payable by reason of any Event of
Default, the Holders of a majority in aggregate principal amount of the New
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Notes then outstanding may within 90 days of the New Notes becoming due and
payable, by written instrument filed with the Company, rescind and annul such
declaration and the consequences thereof, provided that at the time such
declaration is annulled and rescinded: (i) no judgment or decree has been
entered for the payment of any monies due pursuant to the New Notes or the
Indenture; (ii) all arrears of interest upon all the New Notes and all other
sums payable under the New Notes and under the Indenture shall have been duly
paid; and (iii) each and every default and Event of Default shall have been made
good, cured or waived pursuant to Section 513 of the Indenture.
The Holders of at least a majority in principal amount of the then
outstanding New Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the New
Notes, provided that: (i) such direction shall not be in conflict with any rule
of law or with the Indenture, expose the Trustee to personal liability or be
unduly prejudicial to holders not joining therein, and (ii) the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction. The Holders of not less than a majority in principal amount of
the then outstanding New Notes may on behalf of the Holders of all the New Notes
waive any past default hereunder with respect to such securities and its
consequences, except a default:
(A) in the payment of the principal of or interest on any New Note, or
(B) in respect of a covenant or provision which under Article Nine of the
Indenture cannot be modified or amended without the consent of the Holder
of each outstanding New Note affected.
No Holder of any New Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless: (i) such
Holder has previously given written notice to the Trustee of a continuing Event
of Default with respect to the New Notes; (ii) the holders of not less than 25%
in principal amount of the then outstanding New Notes shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder; (iii) such Holder or Holders have
offered to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request; (iv) the Trustee for
60 days after its receipt of such notice, request and offer of indemnity has
failed to institute any such proceeding; and (v) no direction inconsistent with
such written request has been given to the Trustee during such 60-day period by
the Holders of a majority in principal amount of the then outstanding New Notes;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of the Indenture to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any other
of such Holders or to enforce any right under the Indenture, except in the
manner herein provided and for the equal and ratable benefit of all of such
Holders.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the New Notes), its property or its creditors, the Trustee shall be
entitled and empowered, by intervention in such proceeding or otherwise, to take
any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to file and prove a claim for the
whole amount of principal and interest owing and unpaid in respect of the New
Notes and to file such other papers or documents as may be necessary or
advisable in order to have claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements, and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial proceeding,
and to collect and receive any moneys or other property payable or deliverable
on any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is authorized pursuant to the Indenture by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under
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Section 607 of the Indenture. The Indenture also requires certain officers of
the Company to certify, within 30 days after the end of each fiscal quarter,
that Senior Indebtedness did not exceed $50.0 million and that no mandatory
prepayment of the Notes is required.
No provision of the Indenture authorizes the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the New Notes
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and may be a member of the creditors'
committee.
The Indenture will require certain officers of the Company to certify,
within 120 days after the end of each fiscal year, that a review of the
activities of the Company during such year and of the Company's performance
under the Indenture has been made under such officer's supervision and whether
such officer knows of any defaults by the Company under the Indenture throughout
such year or, if there has been such a default, specifying each such default and
the nature and status thereof. The Company will also be obligated to notify the
Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding New Notes; provided that no such
modification or amendment may, without the consent of each Holder of the New
Notes affected thereby, (i) change the stated maturity of the principal of, or
any installment of principal of or interest on, any New Note, or reduce the
principal amount thereof or the rate of interest thereon upon the prepayment
thereof, or change the method of determination of interest thereon, or change
any provisions with respect to prepayments pursuant to Article Eleven of the
Indenture or sinking fund payments pursuant to Article Twelve of the Indenture,
or change any place of payment where, or the coin or currency in which, any Note
or the interest thereon is payable or impair the right to institute suit for the
enforcement of any such payment or the provisions of this Indenture with respect
to the subordination of the Securities, in a manner adverse to the Holders of
the New Notes, or (ii) reduce the percentage in principal amount of the then
outstanding New Note, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences) provided for in the Indenture, or
(iii) modify any of the provisions of Section 902, Section 513 or Section 1008
of the Indenture, except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding New Note affected thereby.
Regarding the Trustee
Norwest Bank Minnesota, National Association is the Trustee under the
Indenture and is also the Exchange Agent in the Exchange Offer.
Denomination
Old Notes initially sold to institutional "accredited investors" were
issued only in fully registered definitive form without coupons, in
denominations of $1,000 of principal amount and integral multiples of $1,000 in
excess thereof. New Notes may be issued only in fully registered definitive
form without coupons, in denominations of $1,000 and integral multiplies
thereof.
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Governing Law
The Indenture provides that it and the New Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
Registration Rights
The Company is a party to the Purchase Agreement with the initial
purchasers of the Old Notes, pursuant to which the Company has agreed, for the
benefit of the holders of the Old Notes to file, at its cost, a registration
statement with the Commission with respect to registration of the Old Notes
under the Securities Act and to use its best efforts, to have such registration
statement declared effective, which registration will be effected through the
Exchange Offer. In the event that applicable interpretations of the staff of
the Commission do not permit the Company to effect the Exchange Offer or under
certain other circumstances, the Company has agreed to file, at its cost, a
shelf registration statement with the Commission under the Securities Act and to
use its reasonable best efforts to cause such shelf registration statement to
become effective with respect to resales of the Old Notes. The Company shall,
in the event of such a shelf registration, provide to each holder copies of a
prospectus, notify each holder when the shelf registration statement for the Old
Notes has become effective and take certain other actions as are required to
permit resales of the Old Notes.
In the event the Exchange Offer is consummated, the Company will not be
required under the Purchase Agreement to file a shelf registration statement to
register any outstanding Old Notes. The Exchange Offer shall be deemed to have
been consummated upon the earlier to occur of (i) the Company having exchanged
New Notes for all outstanding Old Notes pursuant to the Exchange Offer or (ii)
the Company having exchanged, pursuant to the Exchange Offer, New Notes for all
Old Notes that have been tendered and not withdrawn on the Expiration Date. In
such event, holders of Old Notes seeking liquidity in their investment would
have to rely on exemptions to registration requirements under the securities
laws, including the Securities Act.
Interest on each New Note will accrue from March 31, 1997 or from the most
recent interest payment date to which interest was paid on the Old Note
surrendered in exchange therefor or on the New Note, as the case may be. The
New Notes will bear interest at the original interest rate borne by the Old
Notes.
The summary herein of certain provisions of the Purchase Agreement and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Purchase Agreement and
the Indenture.
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal income
tax consequences of the ownership and disposition of the Notes based upon the
opinion of Hunton & Williams, tax counsel to the Company. This summary deals
only with Notes held as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), by
holders ("Holders") that for United States federal income tax purposes are (i)
citizens or residents of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. Thus, the following does not address any tax consequences that apply
specifically to nonresident aliens or foreign entities. Moreover, it does not
discuss all of the tax consequences that may be relevant to a Holder in light of
his particular circumstances or to Holders subject to special rules, such as
certain financial institutions, insurance companies, dealers in securities,
individual retirement and certain tax deferred accounts, and persons who engage
in a straddle or a hedge relating to a Note. The following also assumes that a
Holder will not make an election to treat all interest on a Note as original
issue discount pursuant
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to pertinent Treasury Regulations. This summary is based on existing laws,
existing and proposed regulations, and applicable judicial and administrative
determinations, all of which are subject to change at any time, and any such
changes may be retroactively applied in a manner that could adversely affect
Holders.
Exchange Offer
For United States federal income tax purposes, the Exchange will be
disregarded and each New Note will be treated as a continuation of the
corresponding Old Note. Accordingly, Holders will not recognize gain or loss
upon the Exchange.
Interest on the Notes
Interest on a Note generally will be taxable to a Holder as ordinary
interest income at the time it accrues or is received in accordance with the
Holder's method of accounting for federal income tax purposes. In addition,
special rules governing the treatment of original issue discount will apply to
the Notes, as described below, and consequently Holders of Notes will be taxed
on additional income as such discount accrues.
Original Issue Discount
The Old Notes were issued, and the New Notes (as a continuation of the Old
Notes) will be treated as issued, with original issue discount ("OID") within
the meaning of Section 1273 of the Code because a portion of the issue price of
the Old Notes and Warrants must be allocated to Warrants, causing the issue
price of an Old Note to be less than its principal amount. The Company has
determined that, for each $1,000 principal amount of the Old Notes, $34.65 of
the total issue price is allocable to Warrants, and $965.35 is allocable to the
Old Notes. That allocation will be binding on each Holder, unless the Holder
explicitly discloses that his allocation of issue price between an Old Note and
Warrants is different from that allocation. Unless otherwise provided by the
Internal Revenue Service, such disclosure must be made on a statement attached
to the Holder's timely filed federal income tax return for the taxable year in
which the Holder acquired the Old Note.
The amount of OID on a Note is the excess of the "stated redemption price
at maturity" over the "issue price" of the Note. The stated redemption price at
maturity of a Note is the total of all payments provided by the Note excluding
payments of qualified stated interest. The semiannual interest payments on the
Notes are qualified stated interest payments. Thus, the stated redemption price
at maturity is the stated principal amount, and the amount of OID is $34.65 per
$1,000 of principal amount. Holders of the Notes (including Holders who are
cash basis taxpayers) will include OID in income currently as interest as it
accrues over the life of the Notes under a formula based upon the semiannual
compounding of interest at a rate that provides for a constant yield to
maturity, which (based on the Company's allocation of issue price to the Old
Notes) is 11.253%. Under this formula, Holders of the Notes generally will have
to include in gross income greater amounts of OID in each successive accrual
period. As further described below, accrued OID generally must be included in
income by subsequent as well as original Holders of the Notes.
In general, the amount of OID that a Holder of a Note must include in
income for a taxable year is the sum of the "daily portions" of OID on the Note
for all days during the taxable year that such Holder owns the Note. Such daily
portions are determined by allocating to each day in the accrual period a
ratable portion of the OID allocable to that accrual period. An accrual period
is each successive period that ends on March 31 or September 30. In the case of
an initial Holder of an Old Note, the amount of OID on a Note allocable to each
accrual period is determined by multiplying the "adjusted issue price" of the
Note by its yield to maturity (based on compounding at the close of each accrual
period). The adjusted issue price of a Note at the beginning of any accrual
period will be the sum of its issue price and the amount of OID allocable to all
prior accrual periods, reduced by the amount of any payments (other than
payments of qualified stated interest) made with respect to such Note in all
prior accrual periods. A subsequent Holder also will be required to include in
gross income daily portions of OID with respect to the Note. However, if such a
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subsequent Holder acquires the Note for an amount greater than the Note's
adjusted issue price (i.e., at an acquisition premium), the subsequent Holder's
daily portions of OID with respect to the Note will be reduced by an allocable
portion of the amount by which the price paid by such Holder (up to the stated
principal amount) exceeds the Note's adjusted issue price.
The Company is to provide annual information statements to certain
noncorporate Holders and to the Internal Revenue Service stating the amount of
OID determined to have accrued on the Notes. A Holder that acquires a Note at
an acquisition premium must independently determine the amount of OID includible
in income with respect to such Note.
Sale or Retirement of Notes
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Note, a Holder will recognize gain or loss equal
to the difference between the amount realized on such sale, retirement or other
disposition and the Holder's adjusted tax basis in the Note or part thereof.
Any recognized gain or loss will be capital gain or loss, except to the extent
of any accrued market discount (see "Market Discount" below), and such capital
gain or loss will be long-term if the holding period for the Note is more than
one year at the time of sale, retirement or other disposition. For these
purposes, the amount realized does not include any amount received for accrued
interest on a Note, which will be taxable as interest income. A Holder's
adjusted tax basis in a Note acquired by purchase will equal the cost of such
Note to the Holder, increased by the amount of any accrued OID and market
discount included in taxable income by the Holder with respect to such Note and
reduced by any amortized Section 171 premium (see "Amortizable Premium" below)
and any prior payments (other than payments of qualified stated interest) on the
Note to the Holder. The redemption of only part of a Note will require the
allocation of the entire note's adjusted tax basis and adjusted issue price
between the redeemed part and the part retained by the Holder in order to
determine gain or loss and future accruals of OID.
Market Discount
A secondary market purchaser of a Note at a discount from the adjusted
issue price of the Note acquires such Note with "market discount." However,
market discount with respect to a Note will be considered to be zero if such
market discount is minimal, i.e., less than the product of (A) 0.25% of the
adjusted issue price of such Note multiplied by (B) the weighted average
maturity of the Note after the date of purchase. Under Section 1276 of the
Code, the purchaser of a Note with more than a minimal amount of market discount
generally will be required to treat any gain on the sale, exchange, redemption
or other disposition of all or part of the Note as ordinary income to the extent
of accrued (but not previously taxable) market discount. Market discount
generally will accrue ratably during the period from the date of purchase to the
maturity date of the Note, unless the Holder irrevocably elects to accrue such
market discount on the basis of a constant interest rate.
Under Section 1277 of the Code, a Holder who has acquired a Note at a
market discount generally will be required to defer any interest deductions
attributable to any indebtedness incurred or continued to purchase or carry the
Note, to the extent such deductions exceed interest and OID income on the Note.
Any such deferred interest expense generally will be allowable as a deduction
not later than the year in which the related market discount is recognized. As
an alternative to the inclusion of market discount in income upon disposition of
a Note, a Holder may make an election to include market discount in income as it
accrues on all market discount instruments acquired by the Holder during or
after the taxable year for which the election is made. In that case, the
preceding deferral rule for interest expense will not apply.
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Amortizable Premium
A secondary market purchaser of a Note at a premium over the stated
principal amount of the Note (plus accrued interest) generally may elect to
amortize such premium ("Section 171 premium") from the purchase date to the
maturity date, under a constant yield method that reflects semiannual
compounding. Amortized Section 171 premium generally will be treated as an
offset to interest income on a Note and not as a separate deduction.
Section 171 premium does not include any acquisition premium attributable
to the portion of a purchase price for a Note that exceeds the adjusted issue
price but not the stated principal amount of such Note. As described above
under "Original Issue Discount," such an acquisition premium reduces the amount
of OID includible in the income of the Holder.
Backup Withholding
A Holder may be subject to "backup withholding" under certain
circumstances. Backup withholding applies to a Holder if the Holder, among
other things, (i) fails to furnish his social security number or other taxpayer
identification number ("TIN") to the payor responsible for backup withholding
(for example, the Holder's securities broker), (ii) furnishes such payor an
incorrect TIN, (iii) fails to provide such payor with a certified statement,
signed under penalties of perjury, that the TIN provided to the payor is correct
and that the Holder is not subject to backup withholding, or (iv) fails to
report properly interest and dividends on his tax return. Backup withholding,
however, does not apply to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. The backup withholding rate is 31%
of "reportable payments," which generally will include interest payments and
principal payments on the Notes.
The federal income tax discussion set forth above may not be applicable to
a Holder, depending upon a Holder's particular situation, and therefore each
Holder should consult his tax advisor with respect to the tax consequences of
the ownership and disposition of the Notes, including the tax consequences under
state, local, foreign and other tax laws and the possible effects of changes in
federal or other tax law.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in connection
with any such resale for a period of 90 days from the date of this Prospectus,
or shorter period as will terminate when all Old Notes acquired by broker-
dealers for their own accounts as a result of market-making activities or other
trading activities have been exchanged for New Notes and resold by such broker-
dealers.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and
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any profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 90 days from the date of this Prospectus, or such shorter
period as will terminate when all Old Notes acquired by broker-dealers for their
own accounts as a result of market-making activities or other trading activities
have been exchanged for New Notes and resold by such broker-dealers, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal.
VALIDITY OF NEW NOTES
The validity of the New Notes will be passed upon for the Company by Hunton
& Williams, Richmond, Virginia. In rendering its opinion on the validity of the
New Notes, Hunton & Williams will express no opinion as to Federal or state laws
relating to fraudulent transfers. Certain of the tax consequences of the
Exchange Offer will be passed upon by Hunton & Williams, Richmond, Virginia, as
tax counsel to the Company.
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 year ended December
31, 1996, incorporated by reference herein, have been incorporated by reference
herein 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.
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