As filed with the Securities and Exchange Commission on October 18, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WORLD AIRWAYS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13873 Park Center Road, Suite 490 94-1358276
(State or other juris- Herndon, Virginia 20171 (I.R.S. Employer
diction of incorpo- (703) 834-9200 Identification No.)
ration or organization (Address, including zip
code, and telephone number,
including area code, of
registrant's principal executive offices)
Charles W. Pollard
President
World Airways, Inc.
Washington Dulles International Airport
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
(703) 834-9200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
David M. Carter
Hunton & Williams
Riverfront Plaza - East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8200
Approximate date of commencement of the
proposed sale of the securities to the public:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. __
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. X
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. __ _______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. __ _______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. __
Calculation of Registration Fee
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities Amount to be Offering Price Aggregate Registra-
to be Registered Registered Per Share(1) Offering Price tion Fee
Shares of Common
Stock, par value,
$.001 per share. . .194,149 shares $9.50 $1,844,416 $559.00
(1)Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) on the basis of $9.50 per share, which was the
average of the high and low prices of the Common Stock as quoted on the Nasdaq
National Market on October 16, 1996.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED OCTOBER 18, 1996
P R O S P E C T U S
194,149 Shares
World Airways, Inc.
Common Stock
This Prospectus covers up to 194,149 shares (the "Shares")
of common stock (the "Common Stock") of World Airways, Inc., a Delaware
corporation (the "Company" or "World Airways"). All of the Shares being
registered are owned by the World Airways, Inc. Employee Savings and Stock
Ownership Plan (the "Selling Stockholder"). The Shares are being registered
in connection with the possible resale of those shares by Scott &
Stringfellow, Inc. (the "Pledge Holder") as pledge holder of the Shares under
a loan to the Selling Stockholder. Registration of the Shares enables the
Pledge Holder to sell publicly all or a portion of the Shares. Resales of the
Shares may, from time to time, be made on the Nasdaq National Market (the
"Nasdaq"), or other stock exchanges, in privately negotiated transactions or
otherwise. The Selling Stockholder has advised the Company that it has no
present intention to sell any of the Shares and is restricted from doing so as
long as the Shares are pledged as collateral. See "Selling Stockholder."
The Selling Stockholder will receive any proceeds received
by the Pledge Holder from the sale of the Shares offered hereby in excess of
the loan amount. The Shares only become available for sale by the Pledge
Holder (or a subsequent pledgee) pursuant to this registration statement upon
an event of default under that certain customer agreement, as amended (the
"Customer Agreement"), dated January 11, 1995 between the WorldCorp Employee
Savings and Stock Ownership Trust and Scott & Stringfellow, Inc. See "Pledge
Holder." The Company believes that if the Pledge Holder were to foreclose its
security interest in the Shares, it would sell the Shares, from time to time,
either through a standard underwriting agreement, or in transactions involving
broker-dealers who might act as agent and/or acquire Shares as principal.
The Common Stock is listed on the Nasdaq under the trading
symbol "WLDA." The reported closing price on the Nasdaq on October 17, 1996
was $9.13 per share.
See "Risk Factors" on Page 4 for a discussion of certain
risk factors that should be considered in connection with an investment in the
Common Stock offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is October __, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. In
addition, copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a Web Site on the Internet that
contains reports, proxy and information statements and other information
regarding the Company. The Commission's Web Site address is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933 (the
"Securities Act") with respect to the securities offered hereby. For further
information with respect to the Company and the Shares, reference is hereby
made to such Registration Statement. Statements contained herein concerning
the provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into
this Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and (ii) the Company's Quarterly Reports on Form
10-Q for the fiscal quarters ended March 31, 1996 and June 30, 1996, 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 Michael E. Savage, Vice President and Chief Financial Officer, at
World Airways, Inc., 13873 Park Center Road, Suite 490, Herndon, Virginia
20171 (telephone: (703) 834-9200).
2
<PAGE>
PROSPECTUS SUMMARY
The Company
World Airways was organized in 1948 and became a wholly owned
subsidiary of WorldCorp, Inc. ("WorldCorp"), a Delaware corporation, in a
holding company reorganization in 1987. In February 1994, pursuant to an
October 1993 agreement, WorldCorp sold 24.9% of its ownership in World Airways
to MHS Berhad ("MHS"), a Malaysian aviation company. Effective December 31,
1994, WorldCorp increased its ownership in World Airways to 80.1% through the
purchase of 5% of World Airways common stock held by MHS. In October 1995,
World Airways completed an initial public offering in which 2,000,000 shares
of its common stock were issued and sold by World Airways and 900,000 shares
were sold by WorldCorp. As of October 14, 1996, WorldCorp and MHS owned
approximately 59.4% and 17.1%, respectively, of the outstanding common stock
of World Airways. The balance is publicly-traded.
World Airways earns revenue primarily in three distinct markets within
the air transportation industry: passenger and cargo services to major
international air carriers; passenger and cargo services, on a fixed and ad
hoc basis, to the U.S. Government; and international tour operators in leisure
passenger markets.
In May 1996, World Airways commenced scheduled charter operations
between the United States and Germany, Switzerland, Ireland and the United
Kingdom. For its scheduled service operations, World Airways commenced
service between Tel Aviv and New York in July 1995 and commenced service
between the U.S. and South Africa in June 1996. However, World Airways was
unable to operate these markets profitably. Based on disappointing results
from its scheduled charter operations and scheduled service operations and a
decision to refocus World Airways' strategic direction on its core business,
World Airways announced in July 1996 its decision to exit its scheduled
charter operations and scheduled service operations by October 1996. World
Airways will focus on operating aircraft under contracts with international
carriers, the U.S. Government, and international tour operators.
World Airways is a contract air carrier that generally charges
customers based on a block hour basis rather than a per seat or per pound
basis. A "block hour" is defined as the elapsed time computed from the moment
the aircraft moves at its point of origin to the time it comes to rest at its
destination. Fluctuations in flight revenues are not necessarily indicative
of true growth because of shifts in the mix between full service contracts and
basic contracts. Under the terms of full service contracts, World Airways is
responsible for all costs associated with operating these contracts and
receives a higher rate per hour. Under the terms of basic contracts, World
Airways provides only certain services associated with the contract including
aircraft, crews, insurance, and maintenance ("Basic Contracts"). World
Airways typically charges a lower rate per hour for Basic Contracts since the
customer is responsible for other operating costs. For this reason, it is
important to measure pure growth through block hours flown rather than actual
revenues earned. Typically, U.S. military contracts are full service
contracts where the rate paid is set annually and consists of all flying
costs, including fuel and ground handling of the aircraft and cargo. World
Airways currently operates nine wide-body MD-11 and six DC10-30 aircraft in
long-range international markets.
The Company's principal executive offices are located at 13873 Park
Center Road, Suite 490, Herndon, Virginia 20171 and its telephone number is
(703) 834-9200.
Risk Factors
See "Risk Factors" for a discussion of certain risk factors that
should be considered in connection with an investment in the Common Stock
offered hereby.
3
<PAGE>
RISK FACTORS
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
The Private Securities Litigation Reform Act of 1995 (the "Act") was
recently passed by Congress. World Airways desires to take advantage of the
new "safe harbor" provisions of the Act. Therefore, World Airways wishes to
caution readers that the following important factors, among others, in some
cases have affected, and in the future could affect, World Airways' actual
results and could cause World Airways' actual results for 1996 and beyond to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, World Airways.
Customers
World Airways' business relies heavily on its contracts with
Malaysian Airline System Berhad ("Malaysian Airlines"), P.T. Garuda Indonesia
("Garuda") and the U.S. Air Force's Air Mobility Command (the "U.S. Air
Force"). These customers provided approximately 39%, 10%, and 20%,
respectively, of World Airways' revenues and 46%, 10%, and 13%, respectively,
of the total block hours during 1995. For the first six months of 1996, these
customers provided approximately 35%, 23% and 17%, respectively, of World
Airways' revenues and 43%, 25%, and 11%, respectively, of total block hours.
The loss of any of these contracts or a substantial reduction in business from
any of these key customers, if not replaced, would have a material adverse
effect on World Airways' financial condition and results of operations.
World Airways has provided service to Malaysian Airlines since 1981,
providing wet lease services for Malaysian Airlines' scheduled passenger and
cargo operations as well as transporting passengers for the annual Hadj
pilgrimage. In 1996, World Airways provided three aircraft for Hadj
operations. The current five-year Hadj contract with Malaysian Airlines
expired after the 1996 Hadj. The Company is currently in negotiations with
Malaysian Airlines regarding future Hadj operations.
As a means of improving aircraft utilization, the Company entered
into a series of multi-year contracts, with expiration dates running from 1997
through 2000, to provide basic services to Malaysian Airlines. One contract
provides for the Company's operation of three MD-11 freighter aircraft for a
five-year period for a combined guaranteed minimum of 1,200 hours per month
(except when an aircraft is in scheduled maintenance). The lease for one of
the aircraft commenced in June 1994, and the leases for the other two aircraft
commenced in June and July 1995. A second contract provides for each of two
of the Company's MD-11 passenger aircraft to operate a guaranteed minimum of
320 hours per month from October 1994 through March 1997. For 1995 and the
first six months of 1996, 29% and 25%, respectively, of the Company's revenues
and 37% and 36%, respectively, of the Company's block hours flown resulted
from these new multi-year contracts with Malaysian Airlines.
Recently the Company announced that it had reached a new agreement
with Malaysian Airlines whereby the Company will provide two aircraft with
cockpit crews, maintenance and insurance to Malaysian Airlines' newly formed
passenger charter division through May 1999.
The Company has provided international air transportation to the U.S.
Air Force since 1956. As compensation for pledges of aircraft to the Civil
Reserve Air Fleet ("CRAF") for use in times of national emergency, the U.S.
Air Force awards contracts to CRAF participants for peacetime transportation
of personnel and cargo. The U.S. Air Force awards contracts to air carriers
acting alone or through teaming arrangements in proportion to the number and
type of aircraft that the carriers make available to CRAF. As a result of the
Company's increasingly effective use of teaming arrangements, the Company's
fixed awards have grown in recent years and the Company has one of the largest
U.S. Air Force fixed award under the CRAF program for the U.S.
4
<PAGE>
Government's 1996-97 fiscal year. The current annual contract commenced on
October 1, 1996 and expires on September 30, 1997. These contracts provide
for a fixed level of scheduled business from the U.S. Air Force with
opportunities for additional short-term expansion business on an ad hoc basis
as needs arise. The Company's fixed award for the current contract is $54.6
million compared to the $55.4 million fixed award for the prior contract. Due
to the utilization of a significant number of the Company's aircraft under
multi-year contracts and other contractual commitments, it is unlikely that
the Company will be able to accept all of the available expansion business.
Although overall Defense Department spending is being reduced, the level of
U.S. Air Force contract awards has remained relatively constant in recent
years. World Airways, however, cannot determine how future cuts in military
spending may affect future operations with the U.S. Air Force.
World Airways has provided wet lease services to Garuda since 1973
(operating under an annual Hadj contract since 1988). The Company operated
five aircraft in the 1995 Garuda Hadj and seven aircraft in the 1996 Hadj.
In addition to these customers, the Company recently entered into an
agreement with Philippine Airlines, Inc. ("Philippine Airlines") to provide
four MD-11 aircraft under year-round wet lease contracts. The first two
aircraft began flying for Philippine Airlines in June and July 1996, with the
remaining two aircraft scheduled to commence operations in October 1996.
Under the agreement, each aircraft will operate for an 18-month term. In
addition, Philippine Airlines has an option for the Company to operate a
DC10-30 cargo aircraft beginning late in 1996.
As a result of these and other contracts, the Company had an overall
contract backlog at June 30, 1996, of $532.6 million. The Company's backlog
for each contract is determined by multiplying the minimum number of block
hours guaranteed under the applicable contract by the specified hourly rate
under such contract. Approximately 52% of the backlog (including
substantially all of the backlog beginning in 1997) relates to the multi- year
contracts with Malaysian Airlines. The loss of any of these contracts or a
substantial reduction in business from any of these key customers, if not
replaced, would have a material adverse effect on the Company's financial
condition and results of operations.
Competition
The air transportation industry is highly competitive and susceptible
to price discounting. 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' ability to provide service in certain foreign markets
in the future may depend in part on the willingness of the U.S. Department of
Transportation to allocate limited traffic rights to World Airways rather than
to competing U.S. airlines, including major scheduled passenger carriers
capable of carrying greater passenger traffic, and the approval of the
applicable foreign regulators. There can be no assurance that World Airways
will be able to obtain the traffic rights it seeks in expanding its business.
The allocation of military air transportation contracts by the U.S.
Air Force 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 that have larger
partners than those sponsored by World Airways, an increase by other air
carriers in their commitment of aircraft to the emergency program, or the
withdrawal of World Airways' current partners, could adversely affect the size
of the U.S. Air Force contracts, if any, which are awarded to World Airways in
future years.
World Airways believes that the most important bases for competition
in the air cargo business are the payload and cubic capacities of the
aircraft, and the price, flexibility, quality and reliability of the cargo
5
<PAGE>
transportation service. Competitors in the cargo market include all-cargo
carriers, such as Atlas Air, Inc. and Polar Air Cargo, and scheduled and non-
scheduled passenger carriers which have substantial belly capacity.
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. The
airline industry may also 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 has
experienced a growth in demand, such that World Airways has increased block
hours flown by 42% in the first six months of 1996 over the comparable 1995
period and by 41% in 1995 over 1994, there can be no assurance that this
growth will continue.
Seasonality
Historically, World Airways' business has been significantly affected
by seasonal factors. During the first quarter, World Airways typically
experiences lower levels of utilization and yields as demand for passenger and
cargo services is lower relative to other times of the year. World Airways
experiences higher levels of utilization in the second quarter, principally
due to peak demand for commercial passenger services associated with the
annual Hadj pilgrimage. During 1996, World Airways' flight operations
associated with the Hadj pilgrimage occurred from March 22 to June 1. Because
the Hadj occurs approximately 10 to 12 days earlier each year, revenues
resulting from future Hadj contracts will begin to shift from the second
quarter to the first quarter over the next several years. Fourth quarter
utilization depends primarily on the demand for air cargo services in
connection with the shipment of merchandise in advance of the U.S. holiday
season.
As discussed above, the Company announced its decision to exit
scheduled service operations by October 1996 to focus on its core business:
operating aircraft under contracts with international carriers, the U.S.
Government, and international tour operators. World Airways believes that its
contracts with Malaysian Airlines, Philippine Airlines and the U.S. Air Force
should lessen the effect of these seasonal factors.
Operating Losses
While World Airways was profitable 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. During the first six months of 1996, the Company reported a
net loss of $21.9 million, which resulted from operating losses incurred in
the Company's scheduled service operations and the related estimated loss on
disposal. Earnings from continuing operations were $10.8 million for the
first six months ended June 30, 1996. While the Company expects its
continuing operations to remain profitable, there can be no assurance that the
Company will be able to maintain this profitability for the remainder of 1996
and future years.
Discontinued Operations
Based on disappointing results from its scheduled service operations
and a decision to refocus its strategic direction on its core business, World
Airways announced in July 1996 its decision to exit its scheduled service
operations by October 1996. This decision resulted in a loss of approximately
$28.5 million (net of income tax effect) which was recognized in the second
quarter of 1996. This amount includes a loss from discontinued operations
(net of tax effect) of approximately $7.5 million relating to second quarter
operations and a $21.0 million charge (net of income tax effect) which
includes the following: estimated operating losses during the phase-out
period; lease costs on unutilized aircraft; passenger reprotection expenses;
and the writeoff of certain leasehold
6
<PAGE>
improvements. As a result of this decision, World Airways will reduce its
fixed overhead costs, primarily through the elimination of costs related to
discontinued operations. World Airways expects to meet all cash requirements
of this phase-out period during the third and fourth quarters of 1996 and
expects to satisfy these obligations with income generated from its continuing
operations and financings consummated to date.
Liquidity and Capital Resources
The Company's cash and cash equivalents at June 30, 1996 and December
31, 1995 were $18.9 million and $25.3 million, respectively. At June 30, 1996
the Company's current assets were $61.8 million and current liabilities were
$98.2 million. The Company believes that the combination of the financings
consummated to date, income from continuing operations and additional
financings will be sufficient to allow the Company 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 at least
the next 12 months.
Maintenance
World Airways outsources major airframe maintenance and power plant
work to several suppliers. World Airways has a 10-year contract ending 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 a specified rate per hour during the term of
the contract. The specified rate per hour is subject to annual escalation,
and increases substantially in 1998. Accordingly, while World Airways
believes the terms of this agreement will result in lower engine maintenance
costs than it otherwise would incur during the first five years of the
agreement, these costs will increase substantially during the last seven years
of the agreement.
World Airways' 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 guarantees and warranties began
to expire in 1995 and will fully expire by 1998. Therefore, World Airways
expects that maintenance expenses will increase as these guarantees and
warranties expire.
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 the
Company's operations in recent years, because, in general, the Company's
contracts with its customers limit the Company's 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 on the financial condition and results of operations
of the Company, in particular.
Legal and Administrative Proceedings
The Company 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. Washington Bancorporation filed for relief under the Federal Bankruptcy
Code on August 1, 1990. The Committee seeks recovery of approximately $4.8
million from the Company and approximately $2.0 million from WorldCorp, which
are alleged to be the amounts
7
<PAGE>
paid to each of the Company and WorldCorp by Washington Bancorporation. On
the motion of the World Defendants, among others, the Boster Litigation was
removed from the Bankruptcy Court to the District Court for the District of
Columbia on May 10, 1993. The World Defendants filed a motion to dismiss the
Boster Litigation as it pertains to them on June 9, 1993, and intend to
vigorously contest liability. On September 20, 1995, the District Court for
the District of Columbia granted the motion to dismiss filed by the World
Defendants with respect to three of the four courts alleged in the litigation,
but declined to grant a motion to dismiss the remaining claim regarding
fraudulent transfers. The District Court's ruling is subject to appeal in
certain cases. The World Defendants filed a summary motion with respect to
the remaining claim on October 19, 1995, which remains pending. In any event,
the Company believes it has substantial defenses to this action, although no
assurance can be given of the eventual outcome of this litigation. Depending
upon the timing of the resolution of this claim, if the Committee were
successful in recovering the full amount claimed, the resolution could have a
material adverse effect on the Company's financial condition and results of
operations.
In addition, the Company is party to routine litigation and
administrative proceedings incidental to its business, none of which is
believed by the Company to be likely to have a material adverse effect on the
financial condition of the Company. In connection with the discontinuance of
World Airways' scheduled service operations, World Airways may be subject to
claims by third parties. Although no claims have yet been filed against World
Airways, there can be no assurance that such claims will not be filed in the
future.
Control by WorldCorp; Potential Conflicts of Interest
As of October 14, 1996, WorldCorp owned approximately 59.4% of the
Company's outstanding Common Stock. WorldCorp is a holding company that owns
majority positions in two companies: US Order, Inc. ("US Order") and the
Company. 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
the Company's common stock from time to time, and such sales, or the threat of
such sales, could have a material adverse effect on the market price of the
Common Stock. Except as limited by contractual arrangements with MHS,
WorldCorp also is in a position to control the outcome of substantially all
issues submitted to the Company's stockholders, including the election of all
of the Company's Board of Directors, adoption of amendments to the Company's
Certificate of Incorporation, and approval of mergers. Under Delaware law,
WorldCorp may approve certain action by written consent without a meeting of
the stockholders of the Company. In addition, the Company's Board of
Directors has eight members, one of whom, T. Coleman Andrews, III, is
President, Chief Executive Officer and a director of 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,
including actively exploring the feasibility of WorldCorp disposing of a
substantial portion of its ownership position in World Airways. There can be
no assurances, however, that any transaction 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 October 14, 1996, World Airways has purchased 359,000
shares of its Common Stock pursuant to such purchases. There can be no
assurances, however, that World Airways will purchase any additional shares.
USE OF PROCEEDS
Proceeds from the sale of the Shares will be received directly by the
Selling Stockholder and/or by the Pledge Holder. See "Selling Stockholder."
8
<PAGE>
PLAN OF DISTRIBUTION
Resales of the Shares may, from time to time, be made on the Nasdaq
or in privately negotiated transactions or otherwise. The Shares covered by
this Prospectus are being registered for the benefit of the Pledge Holder,
thus enabling the Pledge Holder to sell publicly all or a portion of the
Shares. The Pledge Holder may from time to time offer such Shares through
underwriters, dealers or agents. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Pledge Holder in
connection with such sales of common stock. The Pledge Holder and
intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Securities Act with respect to the
common stock offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Shares have been listed on the Nasdaq.
SELLING STOCKHOLDER
The Selling Stockholder is the World Airways, Inc. Employee Savings
and Stock Ownership Plan. As of September 30, 1996, the Selling Stockholder
owned 194,149 shares of the Company's Common Stock, which were not yet
allocated to participants' accounts. The Selling Stockholder has advised the
Company that it has no present intention to sell any of the Shares. Further,
the Selling Stockholder cannot sell any of the Shares so long as they are
pledged as collateral.
The Shares are being registered pursuant to the terms of a
Registration Rights Agreement, dated January 11, 1995, between Scott &
Stringfellow, Inc. and WorldCorp, Inc., which agreement was assumed by the
Company on September 30, 1996, pursuant to the Release and Substitution Letter
dated the same date among the Company, Scott & Stringfellow, Inc. and
WorldCorp, Inc. The Company has agreed to bear the expenses in connection
with the shelf registration of the Shares and to indemnify the Pledge Holder
against certain liabilities, including liabilities under applicable securities
laws or contribute to payments the Pledge Holder may be required to make in
respect thereof. The Company also has agreed to maintain the effectiveness of
the Registration Statement so long as the Pledge Holder holds any of the
Shares as collateral.
PLEDGE HOLDER
The Selling Stockholder will receive any proceeds received by the
Pledge Holder from the sale of the Shares offered hereby in excess of the loan
amount. The Shares only become available for sale by the Pledge Holder (or a
subsequent pledgee) pursuant to this registration statement upon an event of
default under the Customer Agreement. The Company believes that if the Pledge
Holder were to foreclose its security interest in the Shares, it would sell
the Shares, from time to time, either through a standard underwriting
agreement, or in transactions involving broker-dealers who might act as agent
and/or acquire Shares as principal. From time to time, the Pledge Holder may
engage in transactions with, or perform services for, the Company or the
Selling Stockholder or their affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Hunton & Williams, Richmond, Virginia.
9
<PAGE>
EXPERTS
The balance sheets of the Company as of December 31, 1995 and 1994,
and the related statements of operations, changes in common stockholders'
equity (deficit) and cash flows for each of the years in the three-year period
ended December 31, 1995, and the related financial statement schedule,
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, incorporated by reference herein, have been incorporated
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated herein by reference, and upon the
authority of that firm as experts in accounting and auditing.
10
<PAGE>
No dealer, salesman or other person
has been authorized to give any information
or to make any representation not contained
in this Prospectus and, if given or made, World Airways, Inc.
such information or representation must not
be relied on as having been authorized by
the Company, the Selling Stockholders or
any other person. This Prospectus does not
constitute an offer to sell or a solicitation
of an offer to buy any of the securities
offered hereby in any jurisdiction to any
person to whom it is unlawful to make such 194,149 Shares
offer in such jurisdiction. Neither the
delivery of this Prospectus nor any sale Common Stock made
hereunder shall, under any circumstances,
create any implication that the information
herein is correct as of any time subsequent
to the date hereof or that there has been
no change in the affairs of the Company
since such date.
____________
TABLE OF CONTENTS _________________________
Page
Available Information. . . . . . . . . . . 2 PROSPECTUS
Incorporation of Certain Documents
By Reference . . . . . . . . . . . . . . 2 _________________________
Prospectus Summary . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . 4
Use of Proceeds. . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . 9
Selling Stockholder. . . . . . . . . . . . 9
Pledge Holder. . . . . . . . . . . . . . . 9
Legal Matters. . . . . . . . . . . . . . . 9
Experts. . . . . . . . . . . . . . . . . .10
October __, 1996
____________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses* in connection with the Offerings are as
follows:
Securities and Exchange Commission registration fee . . . . . . . . . $559
Blue Sky fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Legal fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,000
Accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Printing, engraving and postage expenses. . . . . . . . . . . . . . . 3,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,441
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,000
___________________
*The Company will pay these expenses.
Item 15. Indemnification of Officers and Directors
Section 145 of the Delaware General Corporation Law ("DGCL")
authorizes, inter alia, a corporation generally to indemnify any person
("indemnitee") who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation, in a similar position
with another corporation or entity, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. With respect to actions or suits by or in the right of the
corporation, however, an indemnitee who acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation is generally limited to attorneys' fees and other expenses, and no
indemnification shall be made if such person is adjudged liable to the
corporation unless and only to the extent that a court of competent
jurisdiction determines that indemnification is appropriate. Section 145
further provides that any indemnification shall be made by the corporation
only as authorized in each specific case upon a determination by the (i)
stockholders, (ii) board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding or (iii) independent counsel if a quorum of disinterested directors
so directs, that indemnification of the indemnitee is proper because he has
met the applicable standard of conduct. Section 145 provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 8.02 of the Company's Bylaws, a copy of which is filed as
Exhibit 4.1 to this Registration Statement, provides, in substance, that
directors, officers, employees and agents shall be indemnified to the fullest
extent permitted by Section 145 of the DGCL.
Articles VIII and IX of the Company's Amended and Restated
Certificate of Incorporation, a copy of which is filed as Exhibit 4.1 to this
Registration Statement, limits the liability of directors of the Company to
the Company or its stockholders (in their capacity as directors but not in
their capacity as officers) to the fullest extent permitted by the DGCL.
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional
II-1
<PAGE>
misconduct or a knowing violation of law, (iii) for unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the DGCL or (iv) for any transaction from which the director derived an
improper personal benefit. The Amended and Restated Certificate of
Incorporation also provides that if the DGCL is amended after the approval of
the Amended and Restated Certificate of Incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Company will be eliminated or limited
to the full extent permitted by the DGCL, as so amended.
The Company has entered into indemnification agreements with certain
of its directors providing for indemnification to the fullest extent permitted
by the laws of the State of Delaware. These agreements provide for specific
procedures to better assure the directors' rights to indemnification,
including procedures for directors to submit claims, for determination of
directors' entitlement to indemnification and for enforcement of directors'
indemnification rights.
Item 16. Exhibits
4.1 Articles VIII and IX of the Company's Amended and Restated
Certificate of Incorporation, incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1,
as amended, (Commission File No. 33-95488) filed on August 8, 1995,
and Section 8.02 of the Company's Bylaws, incorporated by reference
to Exhibit 3.2 to the Company's Registration Statement on Form S-1,
as amended, (Commission File No. 33-95488) filed on August 8, 1995.
5.1 Opinion of Hunton & Williams.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Hunton & Williams (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of the
Registration Statement).
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual
II-2
<PAGE>
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a
part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Herndon, Commonwealth
of Virginia on October 17, 1996.
WORLD AIRWAYS, INC.
(Registrant)
By: /s/ Charles W. Pollard
Charles W. Pollard
President and Director
II-4
<PAGE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on September 25, 1996. Each of the directors and/or
officers of World Airways, Inc. whose signature appears below hereby appoints
Charles W. Pollard as his attorney-in-fact to sign in his name and behalf, in
any and all capacities stated below and to file with the Securities and
Exchange Commission, any and all amendments, including post-effective
amendments to this registration statement, making such changes in the
registration statement as appropriate, and generally to do all such things in
their behalf in their capacities as officers and directors to enable World
Airways, Inc. to comply with the provisions of the Securities Act of 1933, and
all requirements of the Securities and Exchange Commission.
Signature Title
/s/ T. Coleman Andrews, III Chief Executive Officer,
T. Coleman Andrews, III Chairman of the Board and Director
(Principal Executive Officer)
/s/ Charles W. Pollard President and Director Charles W. Pollard
/s/ Michael E. Savage Vice President and Chief Financial
Michael E. Savage Officer
(Principal Financial and Accounting
Officer)
/s/ Ahmad M. Khatib Executive Vice President
Ahmad M. Khatib Operations and Director
/s/ A. Scott Andrews Director
A. Scott Andrews
Director
Wan Malek Ibrahim
/s/ Russell L. Ray, Jr. Director
Russell L. Ray, Jr.
/s/ Peter M. Sontag Director
Peter M. Sontag
Director
Lim Kheng Yew
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.1 Articles VIII and IX of the Company's Amended and Restated
Certificate of Incorporation, incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on
Form S-1, as amended, (Commission File No. 33-95488) filed on
August 8, 1995, and Section 8.02 of the Company's Bylaws,
incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, as amended, (Commission
File No. 33-95488) filed on August 8, 1995.
5.1 Opinion of Hunton & Williams.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Hunton & Williams (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature pages of the
Registration Statement)
<PAGE>
Exhibit 5.1
[Hunton & Williams Letterhead]
File No.: 50131.1
October 18, 1996
The Board of Directors
World Airways, Inc.
13873 Park Center Road, Suite 490
Herndon, Virginia 20171
World Airways, Inc.
Registration Statement on Form S-3
Ladies & Gentlemen:
We have acted as counsel to World Airways, Inc., a Delaware corporation
(the "Company"), in connection with its Registration Statement on Form S-3 as
filed with the Securities and Exchange Commission on October 18, 1996 (as
amended, the "Registration Statement"), with respect to 194,149 shares of the
Company's Common Stock, $.001 par value per share (the "Shares"), which are
proposed to be offered and sold as described in the Registration Statement.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers
and of public officials as we have deemed necessary.
Based upon the foregoing and the further qualifications stated below, we
are of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware; and
2. The 194,149 Shares covered by the Registration Statement have been
duly authorized, are legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
statement made in reference to this firm under the caption "Legal Matters" in
the Registration Statement. In giving this consent, we do not admit that we
are within the category of persons whose consent is required by Section 7 of
the Securities Act of 1933 or the rules and regulations promulgated thereunder
by the Securities and Exchange Commission.
Very truly yours,
HUNTON & WILLIAMS
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
World Airways, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of World Airways, Inc. of our report dated March 18, 1996, relating
to the balance sheets of World Airways, Inc. as of December 31, 1995 and 1994,
and the related statements of operations, changes in common stockholders'
equity (deficit) and cash flows for each of the years in the three-year period
ended December 31, 1995, and the related financial statement schedule, which
report appears in the December 31, 1995 annual report on Form 10-K of World
Airways, Inc., incorporated by reference herein, and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Washington, D.C.
October 17, 1996
