-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ETbFyyRM0aETJubkhWep9p33rmSMXdtkXDYcZHeLz6qPQz1BaYOuRbGSDKaqVTOU cSoBpY0CQbg7kjONOVezDQ== 0000928385-95-000163.txt : 19950616 0000928385-95-000163.hdr.sgml : 19950616 ACCESSION NUMBER: 0000928385-95-000163 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19950615 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCORP INC CENTRAL INDEX KEY: 0000811664 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 943040585 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-60247 FILM NUMBER: 95547215 BUSINESS ADDRESS: STREET 1: 13873 PARK CTR RD STE 490 CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7038349200 MAIL ADDRESS: STREET 1: 13873 PARK CENTER ROAD CITY: HERNDON STATE: VA ZIP: 22071 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on June 15, 1995 Registration No. 33- ====================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ------------------ WORLDCORP, INC. (Exact name of registrant as specified in its charter) Delaware 94-3040585 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 13873 Park Center Road Suite 490 Herndon, Virginia 22071 (703) 834-9200 (Name, address, including ZIP code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------------- T. Coleman Andrews, III Chief Executive Officer and President WorldCorp, Inc. 13873 Park Center Road, Suite 490 Herndon, Virginia 22071 (703) 834-9200 (Address, including ZIP code, and telephone number, including area code, of agent for service) ----------------- Copies to: ANDREW M. PAALBORG Vice President and General Counsel WORLDCORP, INC. 13873 Park Center Road, Suite 490 Herndon, Virginia 22071 (703) 834-9200 Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend and interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------------------------------- Proposed Title of Maximum Securities Amount Offering Aggregate Amount of to be to be Price Per Offering Registration Registered Registered Share /(1)/ Price /(1)/ Fee - ---------- ---------- ----------- ---------- ------------------ Common Stock, par value $1.00 . . . 275,000/(2)/ $10.375 $2,825,625 $983.84 - --------------------------------------------------------------------------------------------------------
(1) Estimated in accordance with Rule 457 solely for the purpose of determining the registration fee. (2) 250,000 shares of the Common Stock registered hereby are issuable upon the exercise of warrants (the "Warrants") issued to BNY Financial Corporation. Pursuant to Rule 416, any shares of Common Stock issued under the antidilution provisions of the Warrants are deemed to be registered here with. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- WORLDCORP ---------------------------- PROSPECTUS ----------------------------- 275,000 Shares of Common Stock ($1.00 par value) This Prospectus relates to (i) 25,000 shares of common stock, par value $1.00 per share (the "Common Stock"), of WorldCorp, Inc. ("WorldCorp" and, together with its subsidiaries, the "Company"), issuable upon exercise of an option (the "Option") dated as of April 1, 1995 (with an exercise price of $4.56 per share) granted Patrick F. Graham, a director of WorldCorp and (ii) 250,000 shares of Common Stock issuable upon exercise of 250,000 warrants ("Warrants") issued to BNY Financial Corporation, a New York corporation ("BNYFC"), pursuant to the Warrant Agreement (the "Warrant Agreement") dated as of December 7, 1993 between WorldCorp and BNYFC. Each Warrant is exercisable for one share of Common Stock (a "Share") at an exercise price of $6.15 per share at any time until 5:00 p.m. on December 7, 1996, subject to adjustment as provided in the Warrant Agreement. Mr. Graham and BNYFC are referred to herein as the "Selling Shareholders". WorldCorp will not receive any proceeds from the sale of the Shares by the Selling Shareholders. The Shares are being offered for sale by the Selling Shareholders, and may be offered and sold in negotiated transactions, or otherwise, at market prices prevailing at the time of sale or at negotiated prices. See "Selling Shareholders" and "Plan of Distribution." ------------------------- SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT PROSPECTIVE INVESTORS SHOULD CONSIDER. ------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Common Stock is listed on the New York Stock Exchange (Symbol: WOA), on which the last reported sales price on June ______, 1995 was $______ per share. The date of this Prospectus is June _________, 1995. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Shares offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits thereto. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matters involved, and each such statement shall be deemed qualified in its entirety by such reference. For further information with respect to the Company and the Shares offered hereby, reference is made to the Registration Statement, including the exhibits thereto, which may be obtained from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the Commission. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. Reports, proxy statements and other information filed by the Company and its predecessor, World Airways, can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can also be obtained from the Public Reference Section of the Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of prescribed rates. In addition, the Company's Common Stock is listed on the New York Stock Exchange, Inc. ("NYSE") and reports, proxy statements and other information concerning the Company can be inspected at the NYSE at 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act are hereby incorporated by reference into this Prospectus: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-5351) (the "1994 Form 10-K"); (ii) the Company's Proxy Statement dated April 20, 1995 in connection with the Company's Annual Meeting of Shareholders held on May 24, 1995 (File No. 1-5351); 2 (iii) the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1995 (File No. 1-5351) (the "First Quarter 10-Q"); (iv) the Company's Form 8-K dated June 9, 1995 which includes the Prospectus filed by US Order, Inc. pursuant to Rule 424(b) under the Securities Act on June 5, 1995 (Registration No. 33-90978); and -- (iv) the description of the Company's Common Stock in the Registration Statement on Form 8-B filed June 9, 1987 under Section 12 of the Exchange Act, including any amendment or report for the purpose of updating that description (File No. 1-9591). All documents filed by the Company after the date of this Prospectus pursuant to Sections 13(a) and (c), 14 or 15(d) of the Exchange Act prior to the filing of a post-effective amend ment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated by reference in this Prospectus shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in any other subsequently filed document which is also incorpo rated by reference in this Prospectus) modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Upon written or oral request, the Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus has been delivered a copy of such documents referred to above which have been incorporated by reference in this Prospectus (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information incorporated by reference in this Prospectus). Requests for information should be directed to Andrew M. Paalborg, Vice President and General Counsel, WorldCorp, Inc., 13873 Park Center Road, Suite 490, Herndon, Virginia 22071 (telephone (703) 834-9200). THE COMPANY WorldCorp, a Delaware corporation, was organized in March 1987 to serve as the holding company for World Airways, Inc,. a Delaware corporation ("World Airways"), which was organized in March 1948 and is the predecessor to the Company. WorldCorp currently 3 owns majority positions in companies that operate in two distinct business areas: air transpor tation (through World Airways) and transaction processing (through US Order, Inc. ("US Order")). WorldCorp's air transportation subsidiary, World Airways, is a leading worldwide provider of air transportation for commercial and government customers. US Order designs and develops products and services for two target markets: home banking and intelligent telecommunications network services. Pursuant to a Stock Purchase Agreement dated October 30, 1993, on February 28, 1994, WorldCorp sold 24.9% of its ownership in World Airways to MHS Berhad, a Malaysian aviation company ("MHS") for $27 million. Effective December 31, 1994, the Company increased its ownership in World Airways to 80.1% through the purchase of 5% of the World Airways common stock owned by MHS. On April 6, 1995 US Order filed a Registration Statement on Form S-1 under the 1933 Act (Registration No. 33-90978) (the "Registration Statement") to register shares of US Order common stock (the "US Order IPO"). The Registration Statement became effective on June 1, 1995. Of the 4,427,500 shares registered pursuant to the Registration Statement, 3,062,500 were issued and sold by US Order, and 1,365,000 shares were sold by WorldCorp. After the Offering WorldCorp received net proceeds of approximately $18.6 million from the sale of a portion of its ownership in US Order and approximately $10.2 million from US Order's repayment of debt and accrued dividends. Subsequent to the US Order IPO, WorldCorp owns 8,832,844 shares of US Order common stock, with a beneficial ownership of 61% in US Order. The principal executive offices of WorldCorp are located at 13873 Park Center Road, Suite 490, Herndon, Virginia 22071. WorldCorp's telephone number is (703) 834-9200. AIRLINE OPERATIONS - ------------------ World Airways is a contract air carrier that generally charges customers based on a block hour basis rather than a per seat or per pound basis. A "block hour" is defined as the elapsed time computed from the moment the aircraft moves at its point of origin to the time it comes to rest at its destination. Fluctuations in flight revenues are not necessarily indicative of true growth because of shifts in the mix between full service contracts and basic contracts. Under the terms of full service contracts, World Airways is responsible for all costs associated with operating these contracts and receives a higher rate per hour. Under the terms of basic contracts, World Airways provides only certain services associated with the contract including aircraft, crews, insurance, and maintenance ("Basic Contracts"). World Airways typically charges a lower rate per hour for Basic Contracts since the customer is responsible for other operating costs. For this reason, it is important to measure pure growth through block hours flown rather than actual revenues earned. Typically, U.S. military contracts are full service 4 contracts where the rate paid is set annually and consists of all flying costs, including fuel and ground handling of the aircraft and cargo. World Airways operates in four core markets: wet lease, cargo, passenger charter and military. In addition, World Airways has obtained regulatory approval from the Government of Israel to operate scheduled service between New York, New York and Tel Aviv, Israel, commencing in July 1995. World Airways currently operates eleven wide-body MD-11 and DC10-30 aircraft in long-range international markets. Airline operations accounted for 100% of the Company's operating revenue and operating income in 1986 through 1991. In 1992 through 1994, revenue from other business areas represented less than 1% of the Company's total operating revenues. US ORDER - -------- Home banking allows consumers to pay bills, check account balances and receive other bank information from their homes. Intelligent network services allow consumers to send and receive text information from a smart telephone, which is a telephone with a central processing unit, an integrated display screen and memory. In the home banking market, US Order expects to generate revenues from (i) royalties from Visa International Service Association ("Visa"), (ii) sales to banks of voice response systems with software that supports touch-tone bill payment applications, and (iii) monthly fees for bank- branded customer service supporting electronic bill payment customers. In the intelligent network services market, US Order expects to generate revenues from (i) royalties from sales to customers of its smart telephones through Colonial Data Technologies Corp. ("Colonial Data") and (ii) sales of smart telephone- based interactive application such as catalog shopping and national directory assistance. US Order intends to introduce additional intelligent network services on its new smart telephone, the Falcon, which US Order expects to introduce at the end of 1995. On June 8, 1995 US Order concluded the public offering of 4,427,500 shares of common stock at a price of $14.75 per share. Of the common stock sold, 3,062,500 shares were sold by US Order and 1,365,000 shares were sold by WorldCorp. Proceeds to US Order from the offering were used to repay indebtedness, to convert preferred stock into common stock and to redeem certain equity securities, and will be used by US Order for general corporate purposes including product development, working capital, the financing of operating losses, capital expenditures, and possible international expansion. 5 VISA TRANSACTION In August 1994, US Order sold its bill payment operations and technology (the "Visa-Bill-Pay System") to Visa for cash and the right to receive future royalties generated by customers using the Visa-Bill-Pay System during a 72- month period. US Order recognized a one-time non-operating gain of $14,523,217 from the sale. In addition, Visa designated US Order as a "preferred provider" through the royalty period and as such will make its member banks aware that US Order can provide certain of its interactive applications, customer support services and smart telephones to Visa member banks, with Visa acting as a direct marketer and reseller. As a result of the Visa transaction, US Order is in the process of converting its current home banking customer base over to Visa member banks and by the end of 1995 expects to be offering its services strictly on a wholesale basis to Visa and other strategic partners. In January 1995, US Order entered into a strategic alliance with a leading manufacturer of CallerID units, Colonial Data, to jointly develop and distribute the Company's next generation of smart telephones to the telecommunications industry. US Order's primary source of revenue to date has been derived from the monthly service fees which it charges its customers for the use of its smart telephones and interactive applica tions. To date, US Order has generated limited revenue. As a result of its new strategic relationships in the home banking and telecommunications industries, US Order no longer offers its services directly to the end user but, instead, markets its products and services on a wholesale basis. This shift in strategy will reduce US Order's overall cost structure, in particular its expenditures for advertising and promotion, while improving its distribution channels. As a result of the strategic change in US Order's business focus, it anticipates that in the future it will generate revenue by selling its products such as smart telephones and voice response systems as well as by generating monthly fees for providing ongoing services, including interactive applications and customer support services. In addition, commencing January 1, 1995, through December 31, 2000, US Order will have the right to receive on a quarterly basis from Visa $0.66 per month per active retail bill pay customer that uses the Visa Bill-Pay System, subject to certain limitations (the "Royalty Period'). US Order does not expect to receive any Visa royalty payments in 1995. See "Risk --- Factors - US Order Risk Factors -- Reliance on Visa Royalty Payments." US Order's strategy is to sell its smart telephones and voice response systems pursuant to a market penetration pricing strategy designed to build an installed based of subscribers who are potential sources of monthly fee revenue. 6 RISK FACTORS Prospective investors should carefully consider the following matters, together with the other information contained or incorporated by reference in this Prospectus, in evaluating the Company and its business before making an investment decision. SUBSTANTIAL FINANCIAL LEVERAGE AND COMMITMENTS; STOCKHOLDERS' DEFICIT - --------------------------------------------------------------------- The Company is highly leveraged, primarily due to losses sustained by World Airways' scheduled operations between 1979 and 1986, debt restructurings in 1984 and 1987 and the losses the Company incurred in 1990, 1992 and 1993. In addition the Company had operating losses of $18.7 million in 1994, and $5.6 million in the first quarter of 1995. The losses are reflected in the Company's retained common stockholders' deficiency, which was $88.2 million at December 31, 1994 and $95.4 million at March 31, 1995. At March 31, 1995, the Company had total long-term indebtedness of approximately $107.7 million with notes payable and current maturities of long term obligations of $27.6 million (see Notes 11 and 12 of the Company's Notes to Consolidated Financial Statement in the Company's Annual Report on Form 10-K for the fiscal year ending December 31, 1994). World Airways was not in compliance with its debt covenants under the revolving line of credit at December 31, 1994, but obtained a waiver of these covenants from the lender. In 1995, World Airways amended this agreement to adjust certain covenants beginning in the first quarter of 1995. No assuranc es can be given that the Company will meet these revised covenants or, if required, obtain the required waivers. World Airways has substantial long-term aircraft lease obligations. For a discussion of such lease obligations, see the information set forth under the heading "Operating Leases" in Note 12 of the Company's Notes to Consolidated Financial Statement and under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations -- 7 Liquidity and Capital Resources" in the 1994 Form 10-K and the First Quarter 10- Q. These leases, however, are not guaranteed by WorldCorp. At December 31, 1994, the Company's working capital (current assets less current liabilities) was a negative $34 million and the Company's current ratio (the ratio of current assets to current liabilities) was less than one. At March 31, 1995, the Company's working capital was a negative $47.4 million and the Company's current ratio remained less than one. In October 1992 and January 1993, World Airways signed a series of agreements to lease seven new MD-11 aircraft for initial lease terms of two to five years. As of March 31, 1995, World Airways has taken delivery of all seven aircraft consisting of four passenger MD-11 aircraft, one freighter MD-11, and two convertible MD-11s. As part of the lease agreements, World Airways was assigned purchase options for four additional MD-11 aircraft. In 1992, World Airways made non-refundable deposits toward four of the option aircraft. While the option exercise dates expired on May 31, 1995, World Airways is discussing with McDonnell Douglas transactions for the purchase or lease of aircraft in which the deposits would be applied against World Airways' payment obligations. If the aircraft are purchased, World Airways will require external financing for any such purchase. World Airways has recently entered into two short-term DC10 aircraft leases with lease terms expiring June 1995 and August 1995, and one DC10 aircraft lease expiring in September 1997. World Airways may choose to lease additional DC10 aircraft to meet short-term peak demand requirements. World Airways made $6.7 million and $3.6 million of capital expenditures and cash deposits for MD-11 integration in 1994, and the first quarter of 1995, respectively. World Airways estimates that its required capital expenditures for MD-11 integration will be approximately $6.9 million for the remainder of 1995. In addition, World Airways will require approximately $8.0 million to purchase a spare engine in the fourth quarter of 1995. While World Airways is currently seeking financing for the purchase of the engine and additional spare parts relating to the MD-11 aircraft recently acquired, no assurances can be given that it will obtain the necessary financing. World Airways has obtained regulatory approval from the government of Israel to operate a scheduled service commencing in July 1995. World Airways anticipates working capital requirements of approximately $2 million in connection with the start of scheduled service. In 1995, WorldCorp has parent company repayment obligations totaling $16.5 million, consisting primarily of an $8.5 million (excluding interest thereon) note payable to MHS due in December 1995 and approximately $8.1 million of annual debt service on subordinated notes and debentures. WorldCorp intends to satisfy these obligations by one or more of the follow ing: intercompany loans, further sales of equity securities of its subsidiaries, and/or external financing. After the closing of the US Order IP in June 1995, WorldCorp received net 8 proceeds of approximately $18.6 million from the sale of a portion of its ownership in US Order and approximately $10.2 million from US Order's repayment of debt and accrued dividends. All of WorldCorp's funds are generated by its subsidiaries or through periodic sales by WorldCorp of a portion of its stock ownership in such subsidiaries, (such as the sale of 19.9% of World Airways to MHS and the US Order IPO). The ability of WorldCorp and its subsid iaries to pay principal and interest on their respective short and long-term obligations is substantially dependent upon the payment to WorldCorp of dividends, interest or other charges by its subsidiaries, upon funds generated by the operations of the subsidiaries, secured borrowings and other financings from banks and other lenders or from proceeds from sales of stock of its subsidiaries. The degree to which the Company is leveraged could have important consequences to holders of Common Stock, including the following: (i) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be impaired; (ii) the Company's degree of leverage and related debt service obligations, as well as its obligations under operating leases for aircraft, may make it more vulnerable than some of its competitors in a prolonged economic downturn; and (iii) the Company's financial position may restrict its ability to exploit new business opportunities and limit its flexibility in responding to changing business conditions. The Company's competitive position could also be affected by the fact that it may be more highly leveraged than some of its competitors. POSSIBLE EFFECTS OF LITIGATION AGAINST THE COMPANY - -------------------------------------------------- On August 11, 1992, WorldCorp, World Airways, and certain other commercial paper customers of Washington Bancorporation ("WBC") were served with a complaint by WBC as debtor-in-possession by and through the Committee of Unsecured Creditors of WBC (the "Committee"). The complaint arises from investment proceeds totaling $6.8 million received by WorldCorp and World Airways from WBC in May 1990 in connection with the maturity of WBC commercial paper. The Committee seeks to recover this amount on the grounds that these payments constituted voidable preferences and/or fraudulent conveyances under the Federal Bankruptcy Code and under applicable state law. On June 9, 1993, WorldCorp filed a motion to dismiss the litigation and intends to vigorously contest the claim. No assurances can be given, however, of the eventual outcome of this litigation. The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these other 9 matters will not have a material adverse effect on the Company's consolidated financial position. SHARES AVAILABLE FOR FUTURE SALE; SALES BY THE SELLING SHAREHOLDER - ------------------------------------------------------------------ As of June 9, 1995, there were 15,905,961 Shares of Common Stock of WorldCorp outstanding, including 302,278 Shares issued to the founders of US Order in connection with the Company's 1995 increase in its US Order ownership position. In addition, as of May 31, 1994, 361,401 Shares of Common Stock were held for the account of Scott & Stringfellow, Inc., the pledgee of the Shares under a loan to the WorldCorp Employee Savings and Stock Ownership Plan. As of March 31, 1995, there were an additional 2,796,098 warrants and options outstanding, principally to management of WorldCorp exercisable for shares of Common Stock, of which 2,166,376 warrants and options had vested, at a weighted average exercise price of $5.58 per share. In addition, a total of approximately 5,877,034 shares of Common Stock would be issued if all of the outstanding 7% Convertible Debentures (as hereinafter defined) were converted. No prediction can be made as to the effect, if any, that future sales of shares of Common Stock, including sales available under this Prospectus or the availability of shares for future sale (including shares issuable upon the exercise of warrants, options, or the 7% Convertible Debentures), will have on the market price of Common Stock prevailing from time to time. Sales of substantial amounts of Common Stock or the perception that such sales may occur, could adversely affect prevailing market prices for the Common Stock. See "Plan of Distribution" and "Selling Shareholders." AIRLINE RISK FACTORS - -------------------- DEPENDENCE UPON MATERIAL CONTRACTS The Company's business relies heavily on World Airways' contracts with U.S. Air Mobility Command ("AMC"), Malaysia Airline Service Berhad ("MAS") and P.T. Garuda Indonesia ("Garuda"), which provided approximately 22%, 19% and 24%, respectively, of World Airway's consolidated revenues in 1994 and 14%, 23% and 20%, respectively, of total block hours in 1994. The AMC and MAS contracts provided 12% and 44%, respectively, of consolidated revenues and 7% and 47%, respectively, of total block hours during the first quarter of 1995. Operations under the Garuda contract commenced in the second quarter. The loss of any of these contracts or a substantial reduction in business from any of these 10 sources, if not replaced, would have a material adverse effect on WorldCorp's revenues and financial condition. AMC has awarded contracts to World Airways since 1956. The minimum contract amount for 1995 of $33.4 million is a 73% increase over 1994; the current contract will expire in September 1995. While World Airways cannot determine how any future cuts in military spending may affect future operations with AMC, the minimum contract amount for 1996 is anticipated to be approximately $46 million, a 38% increase over 1995. World Airways has provided service to MAS since 1981, providing aircraft for integra tion into MAS' scheduled passenger and cargo operations as well as transporting passengers for the annual Hadj pilgrimage. MHS, which owns 19.9% of World Airways effective December 31, 1994, acquired a 32% ownership interest in MAS from the Malaysian govern ment during 1994. As a result of the strengthening of the MHS/MAS relationship, World Airways recently entered into a series of long-term contracts with MAS. World Airways has agreed to provide five aircraft to MAS under long-term contracts with expirations ranging from March 1997 to September 2000. The current MAS Hadj contract, which was entered into in 1992, expires in 1996. In 1994, World Airways provided two aircraft for Hadj operations. World Airways has provided three aircraft for the 1995 MAS Hadj operations. World Airways has provided service to Garuda since 1988 under an annual contract. World Airways provided six aircraft for the 1994 Garuda Hadj operation and has provided five aircraft for the 1995 operations. In addition, World Airways has provided aircraft for Garuda's cargo operations in previous years. The Company is subject to the risk that a customer which has contracted with the Company will cancel or default on its contract or contracts and the Company will be unable to obtain other business to cover the resulting loss of revenues. If the size of the contract or contracts is significant enough, any such default or cancellation could have a material adverse effect on the Company. EFFECTS OF SEASONALITY OF BUSINESS ON THE COMPANY The Company's air carrier business is significantly affected by seasonal factors. Typically, the Company experiences lower levels of utilization during the first quarter as demand for passenger and cargo services are lower relative to other times of the year. The Company generally experiences higher levels of utilization in the second and third quarters due to demand for commercial passenger service, including the annual Hadj pilgrimage. Fourth 11 quarter utilization generally depends upon the overall world economic climate, global trade patterns and the resulting demand for air cargo services. In recent years, soft demand and weakening yields have adversely affected worldwide cargo and passenger markets. DEPENDENCE UPON AIR CARRIER BUSINESS World Airways operates in a very challenging business environment. In recent years the combination of a generally weak economy and the depressed state of the airline industry has adversely affected the Company's operating performance. Although there has been recent growth in demand within the industry such that World Airways experienced a 13% increase in block hours flown in 1994 over 1993, yields generally remain low. Airline operations accounted for 100% of the Company's operating revenue and operating income in 1986 through 1991. In 1992 through 1994, revenue from other business areas represented less than 1% of the Company's total operating revenues. AIRLINE COMPETITION The airline industry is highly competitive and susceptible to price discounting. The Company generally competes on the basis of price, quality of service and convenience. Many of the airlines against which the Company competes possess substantially greater financial resources and more extensive facilities and equipment than those which are now, or will in the foreseeable future become, available to the Company. Many of World Airways' competitors (both scheduled and non-scheduled air carriers) compete for customers in a variety of ways, including wholesaling to tour operators, discounting seats on scheduled flights, promoting to travel agents, prepackaging tours for sale to retail customers and selling discounted, excursion airfare-only products to the public. During periods of dramatic fare cuts by World Airways' competitors, World Airways may be forced to respond with reduced fares, which could have a material adverse effect on World Airways' operating results. World Airways competes directly against charter airlines, some of which are substantially larger than it, and certain of which are affiliates of major scheduled airlines or tour operators. As a result, in addition to greater access to financial resources, these charter airlines may have greater distribution capabilities, including exclusive or preferential relationships with affiliates which are tour operators. Under bilateral air services agreements between the United States and many foreign countries, traffic rights in those countries are available to only a limited number, and in some cases only one or two, U.S. carriers and are subject to approval by the applicable foreign regulators. Consequently, World Airways' ability to provide service in some foreign markets 12 in the future may depend in part on the willingness of the Department of Transportation (the "DOT") to allocate limited traffic rights to World Airways rather than to competing US airlines, including major scheduled carriers capable of carrying greater passenger traffic, and the approval of the applicable foreign regulators. While World Airways generally has been able to obtain traffic rights where it has sought them in the past, there can be no assurance that it will be able to do so in the future. There are relatively few barriers to entry into the airline business, apart from the need for certain government licenses and the need for and availability of financing, particularly for those seeking to operate on a small scale with limited infrastructure and other support systems. As a result, World Airways may face increased competition from start-up airlines in selected markets from time to time. The commencement of service by new carriers on World Airways' routes could negatively impact World Airways' operating results. AVIATION FUEL The Company's source of aviation fuel is primarily from major oil companies, under annual delivery contracts, at often frequented commercial locations, and from United States military organizations at military bases. The Company's current fuel purchasing policy consists of the purchase of fuel within seven days in advance of all flights based on current prices set by individual suppliers. More than one supplier is under contract at several locations. The Company purchases no fuel under long-term contracts nor does the Company enter into futures or fuel swap contracts. Although the crisis in the Persian Gulf resulted in substantially higher fuel prices during the third and fourth quarters of 1990 and the first quarter of 1991, the Company has experienced no difficulty purchasing fuel during the past four years and does not expect availability to be a problem in the foreseeable future. The availability and price of aviation fuels remain subject to the various unpredictable economic and market factors that affect the supply of all petroleum products. The Company manages fuel price risk by making the Company's customers responsible (in all of the Company's contracts) for potential fuel price fluctuations in excess of five percent. Although rapidly escalating fuel costs may cause a decrease in the overall level of activity in the industry, the Company does not anticipate that any future industry-wide energy problems would have a substantial adverse effect upon the profitability of Airline Operations. EMPLOYEE RELATIONS 13 Flight Attendants. On July 16, 1987, World Airways and the Teamsters ----------------- executed a five-year agreement on behalf of the World Airways' flight attendants, which was ratified on August 5, 1987. This contract also became subject to renegotiation on July 1, 1992. The parties exchanged their opening proposals in 1992 and have had numerous contract negotiation sessions. In December 1994, the Company and the Teamsters jointly requested the assistance of a federal mediator to facilitate negotiations. Dispatchers. World Airways' aircraft dispatchers are represented by the ----------- Transport Workers Union (the "TWU"). This contract became subject to renegotiation on June 30, 1993. In May, 1995 the parties reached agreement in principle with respect to a new four year contract which remains subject to employee ratification. Less than a dozen World Airways employees are covered by this collective bargaining agreement. The outcome of the negotiations with flight attendants and dispatchers cannot be deter mined at this time and therefore there can be no assurance that the result of the negotiations will not have a material adverse effect on the Company. 14 US ORDER RISK FACTORS - --------------------- MINIMAL REVENUES; HISTORY OF LOSSES US Order did not introduce its first commercial product until 1991 and accordingly has a limited operating history. To date, US Order has generated minimal operating revenues, has incurred significant losses and has experienced a substantial negative cash flow. US Order had an accumulated deficit as of March 31, 1995 of approximately $17.8 million, with operating losses of $6.6 million, $10.5 million and $10.2 million for the years ended December 31, 1992, 1993 and 1994, respectively, and an operating loss of $1.2 million for the three months ended March 31, 1995. To date, US Order has generated limited revenues from the sale of its products and services. US Order expects to incur operating losses at least into 1996, at decreasing levels. There can be no assurance that US Order will be able to achieve profitabili ty and, if achieved, sustain such profitability, nor can there be any assurance as to when such profitability might be achieved. US Order is subject to all of the risks inherent in the establishment of a new business enterprise. DEVELOPING MARKETPLACE Home banking and intelligent network services are developing markets. Consumer preferences in interactive technologies are difficult to predict. US Order's future growth and profitability will depend, in part, upon consumer acceptance of electronic home banking and smart telephone technologies and a significant expansion in the consumer market for telephone-based interactive applications technologies. Even if these markets experience substantial growth, there can be no assurance that US Order's products and services will be commercially successful or benefit from such growth. US Order commenced operations in 1991 with an emphasis on grocery shopping applications. US Order subsequently discontinued its grocery shopping applications and now focuses on home banking and telecommunications. EARLY STAGE PRODUCTS AND SERVICES The continued development of the marketplace for US Order's products and services will depend in part upon its ability to create and develop additional interactive applications for its technologies. Many of US Order's interactive products and services, including its smart telephones, are in the early stages of development or marketing, and are subject to the risks inherent in the development and marketing of new products and services. Many of US Order's competitors, including Philips Home Services, Inc. ("Phillips") and Northern Telecom Ltd. ("Northern Telecom"), have already introduced smart telephones which include technological features incorporated in US Order's PhonePlus product. US Order's Falcon product incorpo rates newer digital signal processing technology. Although US Order is currently unaware of 15 any efforts by its competitors to deploy digital signal processing technology in their smart telephones, US Order expects that its competitors will attempt to replicate the Falcon digital signal processing design if it is commercially successful. US Order is discontinuing its ScanFone smart telephones in anticipation of the introduction of its PhonePlus and Falcon smart telephones. US Order has not completed the sale of a substantial number of PhonePlus smart telephones and is still developing its fourth-generation smart telephone, the Falcon. US Order's risks include competition from banks, electronics manufacturers, telecommunications companies, computer software and data processing companies and technology or service companies, failure of its products to attain widespread acceptance in the marketplace, and the development of unforeseen design or engineering problems with its products and applications. There can be no assurance that these or other risks associated with new product and service development will not occur. The occurrence of one or more of these risks could have a material adverse effect on US Order's financial condition and operating results. DEPENDENCE ON STRATEGIC ALLIANCES US Order's business strategy is to sell products and services that support and enhance home banking and intelligent network services primarily through a strategic alliance in each of these two marketplaces. Its success in each area depends both on the ultimate success of these partners as well as on the ability of its partners to successfully market US Order's products and interactive applications. Therefore, US Order's success in home banking will depend not only on growing consumer acceptance of home banking but also on the success of Visa Interactive, Inc. ("Visa Interactive'), (the wholly-owned subsidiary of Visa formed to partici pate in the home banking market), in having the Visa Bill-Pay System become a widely accepted industry standard. Failure by US Order to complete its strategic alliance strategy or failure of US Order's strategic partners to successfully develop and sustain a market for US Order's products and services would adversely affect US Order's overall performance. Although US Order views its alliances as a key factor in the development and commer cialization of its technologies, there can be no assurance that these industry partners view their alliance with US Order as significant for their own businesses or that they will not reassess their commitment to US Order at any time in the future. Colonial Data, US Order's strategic ally in the telecommunications industry, can terminate its agreement with US Order if US Order's Falcon smart telephone is not available for commercial distribution by April 1, 1996. Visa can also, under certain circumstances, abandon the Visa Bill-Pay System (the use of which will generate royalties for US Order) in favor of another bill payment system. The ability of the alliance members to incorporate US Order's products and services into successful commercial ventures will depend, in part, on US Order's ability to continue to successfully upgrade and develop new technologies. There can be no assurance that US Order will be able to comply with future specification and delivery schedule requirements regarding its technol- 16 ogies. US Order's inability to meet such requirements would delay the ongoing development of services utilizing its technologies and could result in the strategic alliance partners seeking alternative technologies for use in their products and services, which would have a material adverse impact on US Order. RELIANCE ON VISA ROYALTY PAYMENTS US Order sold its electronic banking and bill payment operation to Visa on August 1, 1994, for approximately $15 million in cash, the assumption of certain liabilities and a 72-month royalty obligation commencing January 1, 1995 and ending December 31, 2000 (the "Royalty Period"). Visa subsequently transferred these assets to Visa Interactive. The royalty obligation is based on the number of customers who use the Visa Bill-Pay System during the Royalty Period. The royalty will apply only if the means by which a customer makes an electronic bill payment involves the use of a significant portion of the Visa Bill-Pay System. Royalties to US Order are calculated and paid by Visa Interactive quarterly during the Royalty Period. Because the amount of the royalties to US Order is dependent upon the number of customers that use the Visa Bill-Pay System on a monthly basis during the Royalty Period, US Order cannot provide any assurances of the amount of royalties, if any, that will be payable by Visa Interactive to US Order. The royalty payment will be reduced for each quarter through December 31, 1997 by an offset amount (the "Visa Offset") which is initially set at $73,315. If the royalty payment that would otherwise be due in respect of a quarter is smaller than the offset amount for the quarter, no royalty payment will be made to US Order, and the difference between $73,315 and the royalty otherwise due will increase the size of the Visa Offset for the next quarter. The aggregate amount of the Visa Offset is $879,780. US Order does not expect to receive any royalty revenues from Visa in 1995 due to the Visa Offset. In addition, after a Visa member bank commits to use the Visa Bill-Pay System, there can be an extended technical and marketing roll-out period before US Order begins to earn royalty revenues. At present, only three banks have begun such a technical and marketing roll-out in small limited markets. These banks have successfully enrolled in their home banking program only 2,000 customers. These banks have over a million customers in the aggregate, although the US Order estimates that a substantial majority of them have not been solicited at this time regarding this program. There can be no assurances as to the banks' ultimate success with this program. Failure to receive significant royalties from Visa Inter active during the Royalty Period would have a material adverse effect upon US Order's future prospects, assets, financial condition and liquidity. US Order does not expect to begin receiving royalties under the Visa Bill Pay System until 1996. In addition, under the terms of its agreement with Visa, Visa Interactive is not obligated to pay royalties to US Order for active bank customers who utilize home banking and bill 17 payment technology independently developed by Visa Interactive. If Visa Interactive indepen dently develops or acquires its own home banking and bill payment technology which does not use or build upon US Order's technology, this could have a material adverse effect on the amount of royalties payable by Visa Interactive to US Order. As a condition of Visa's acquisition of US Order's bill payment and banking operation, US Order has agreed to work exclusively with Visa in certain areas and to refrain from certain activities that are in competition with Visa and its affiliates. These covenants may increase US Order's reliance upon Visa. Although Visa must make its members aware of the preferred provider status of US Order and its products and services, Visa is under no obligation to guarantee any minimum purchases by it or any of its members of any such US Order products and services. Because of US Order's status as a preferred provider, Visa Interactive makes its customers aware of US Order's ability to provide customer support services and US Order provides such services at predetermined prices and established standards during the Royalty Period. US Order's depen dence on Visa, and the terms of the agreement between the parties, may have a material adverse effect on US Order. COMPETITION The market for interactive products and services is highly competitive and subject to rapid innovation and technological change, shifting consumer preferences and frequent new product introductions. In addition to competing with other companies that provide smart tele phones, including Philips, Northern Telecom and AT&T Corp., US Order also faces increas ing competition from other emerging interactive applications delivered through personal computers and cable television, including developing transactional services offered by Microsoft Corp., Intuit, Inc., Electronic Data Systems, Inc. and other software companies. US Order expects competition to increase in the future from existing and new competitors, possibly including telecommunications companies. Established on- line information services, including America Online Inc. and Prodigy Services Company, offer competing home banking and other services delivered through home computers. In addition, several banks including Citibank, N.A. and The Huntington National Bank, have developed home banking products for their own customers and, in the future, may offer these services to other banks. Most of US Order's primary current and potential competitors in the market for its products have substan tially greater financial, marketing and technical resources than US Order. US Order believes that potential new competitors, including large multimedia and information systems companies, are increasing their focus on interactive transaction processing. Increased competition in the market for US Order products and services could materially and adversely affect US Order's results of operations through price reductions and loss of market share. Additionally, US 18 Order's customers, including its strategic partners, face competition from other resellers of interactive applications. For example, MasterCard International, Inc. offers Masterbanking home banking to compete with Visa Interactive. US Order's success will depend in part upon the ability of its strategic partners and customers to successfully compete in the retail interac tive applications marketplace. There can be no assurance that US Order or its strategic partners will be able to continue to compete successfully against its existing competitors or new competitors. DEPENDENCE ON PROPRIETARY TECHNOLOGY; PROTECTION OF PROPRIETARY RIGHTS US Order's success is heavily dependent upon its proprietary technology. Having sold its sole patent to Visa, US Order holds no patents, and existing copyright and trade secret laws afford only limited practical protection for US Order's software. US Order sold a significant portion of its proprietary technology to Visa, and Visa licensed back certain proprietary technology to US Order. While this license agreement gives US Order a worldwide, royalty-free license (exclusive in some cases and non-exclusive in others) to use the transaction processing software owned by Visa, this license does contain certain restrictions on the usage of the licensed technology, including certain restrictions on US Order's sublicensing of such technology for banking applications or financial services. No assurances can be given as to whether any of such restrictions in the licensing agreement from Visa to US Order will adversely affect the operations or business of US Order in the future or the ability of US Order to enter into future strategic alliances. US Order regards certain of its interactive applications technologies as proprietary and attempts to protect such technologies and associated smart telephones and transaction process ing software. US Order depends in part upon its proprietary technology and know-how to differentiate its products and services from those of its competitors. It relies on a combination of contractual rights and trade secret laws to protect it proprietary technology, and presently expects to seek patent protection for certain other proprietary technologies. There can be no assurance that US Order will be able to protect its technology or that third parties will not be able to independently develop technologies that are substantially equivalent or superior to US Order's technologies. Therefore, existing and potential competitors may be able to develop products that are competitive with US Order's products, and such competition could adversely affect US Order. In addition, the laws of some foreign countries do not protect US Order's proprietary rights to the same extent as do the laws of the United States and Canada. Accordingly, US Order relies primarily on trade secret protection and confidentiality and proprietary information agreements to protect its intellectual property. The loss of any material trade secret, trade mark, trade name or copyright could have a material adverse effect on US Order. There can 19 be no assurance that US Order's efforts to protect its intellectual property rights will be successful. Despite US Order's precautions, it may be possible for unauthorized third parties to copy certain portions of US Order's products and services or to obtain and use information that US Order regards as proprietary. From time to time, US Order receives communications from third parties asserting that certain features or content of US Order's products infringe upon the intellectual property rights held by such third parties. Although US Order does not believe that its products and services infringe on the rights of third parties, there can be no assurance that third parties will not assert infringement claims against US Order in the future or that any such assertion will not result in costly litigation or require US Order to cease using, or obtain a license to use, intellectual property rights of such parties. In addition, there can be no assurance that such licenses will be available to US Order on reasonable terms. TECHNOLOGICAL CONSIDERATIONS US Order's business activities are concentrated in fields characterized by rapid and significant technological advances. There can be no assurance that US Order will remain competitive technologically or that US Order's products, processes or services will continue to be reflective of such advances. Failure to introduce new products or product enhancements that achieve market acceptance on a timely basis could materially and adversely affect US Order's business, operating results and financial condition. Many of US Order's competitors and potential competitors have substantial experience and expertise in producing and selling interactive products and services and have significantly greater financial, technological, marketing and research and development resources than US Order. MANAGEMENT OF GROWTH Certain of US Order's key employees have not had experience in managing companies larger than US Order. US Order's ability to manage growth successfully will require US Order to continue to improve its operational, management and financial systems and controls. If US Order's management is unable to manage growth effectively, US Order's business, results of operation and financial condition could be materially and adversely affected. DEPENDENCE ON KEY EMPLOYEES US Order is highly dependent on certain key executive officers and technical employees, the loss of any of whom could have an adverse impact on the future operations of US Order. Given US Order's stage of development, US Order is dependent on its ability to recruit, retain and motivate high quality personnel. Competition for such personnel is intense, and the 20 inability to attract and retain additional qualified employees or the loss of current key employees could materially and adversely affect US Order's business, operating results and financial condition. While US Order maintains proprietary non-disclosure agreements with all of its key employees, it has an employment agreement with only its President and Chief Operating Officer, John C. Backus, Jr. Additionally, US Order does not maintain "key man" insurance policies on any of its employees nor does it intend to secure such insurance. DEPENDENCE ON FOREIGN PRODUCTION US Order's telephone devices are manufactured or are contemplated to be manufactured by manufacturers with facilities in Hong Kong, Taiwan and the People's Republic of China. The availability or cost of these smart telephones may be adversely affected by political, economic or labor conditions in Hong Kong, including the 1997 return of Hong Kong to China, and by fluctuations in currency exchange rates. In addition, a change in the tariff structure or other trade policies of the United States or countries from which US Order imports products could adversely affect US Order' foreign manufacturing strategies. FLUCTUATIONS IN OPERATING RESULTS US Order may experience fluctuations in quarterly operating results due to the size and timing of customer orders or the royalty payments from Visa Interactive, changes in US Order's pricing policies or those of its competitors, new product introductions or enhancements by competitors, delays in the introduction of new products or product enhancements by US Order or by its competitors, customer order deferrals in anticipation of upgrades and new products, market acceptance of new products, the timing and nature of sales and marketing ex penses, research and development expenses, other changes in operating expenses, personnel changes and general economic conditions. USE OF PROCEEDS The Company will not receive any proceeds resulting from the sale of the Shares by the Selling Shareholders. See "Selling Shareholders." Upon exercise of the Warrants, WorldCorp will receive aggregate consideration of $1,537,500. Upon the exercise in full of Mr. Graham's option, the Company will receive $114,000. There can be no assurance that such exercises will occur. 21 SELLING SHAREHOLDERS BNYFC is party to an Accounts Receivable Management and Security Agreement and an Aircraft Parts Security Agreement (together, the "Loan Agreements") each dated as of Decem ber 7, 1993, with World Airways. Pursuant to the Loan Agreements, World Airways sold its receivables to BNYFC, and BNYFC agreed to make revolving credit advances to World Airways. To secure such loans, World Airways pledged its interest in certain aircraft parts to BNYFC and granted BNYFC a security interest in such parts, spare parts and accounts receivable. The Loan Agreement expires on January 7, 1998. In connection with the Loan Agreement, WorldCorp entered into the Warrant Agreement with BNYFC. In connection with his service as a director of WorldCorp, Mr. Graham was issued the Option to purchase 25,000 Shares at an exercise price of $4.56 per Share. The Option expires on April 1, 2003. The Option is presently exercisable as to 7,291.36 Shares and becomes exercisable as to the balance in 17 monthly installments of 1041.68 Shares, the final monthly installment vesting on October 28, 1996. The following table sets forth the name of the Selling Shareholders who are offering the Shares in this offering and the number of Shares of Common Stock being offered in this offering by such Selling Shareholders.
NAME OF SELLING SHARES AFTER SHAREHOLDER PRIOR TO OFFERING/(/1/)(/2/) OFFERED/(/3/) OFFERING/(1)(3)/ ----------------------- ----------------- ------- -------- SHARES PERCENT SHARES PERCENT ------ ------- ------ ------- BNY Financial Corporation 250,000/4/ 1.6% 250,000 0 0% Patrick F. Graham 50,000/5/ * 25,000 25,000 *
* Less than 1% /1/ Any securities that are not issued and outstanding, but that can be acquired by the Selling Shareholder through the exercise of options, warrants or convertible securities, exercisable or convertible within 60 days, are deemed to be outstanding for the purposes of computing the percentage of outstanding securities owned by shareholders holding such options, warrants or convertible securities. /2/ BNYFC will have sole voting and investment power with respect to its shares following exercise of the Warrants. Mr. Graham will 22 have sole voting and investment power with respect to his shares following exercise of the Option. /3/ Assumes the sale of all of the shares of Common Stock being registered herein. /4/ Represents 250,000 shares issuable upon exercise of the 250,000 Warrants issued to BNYFC pursuant to the Warrant Agreement. /5/ Consists of (i) 25,000 shares of Common Stock issuable upon the exercise of stock options granted under the 1988 Stock Option Plan and (ii) 25,000 shares of Common Stock issuable upon the exercise of stock options expiring April 1, 2003. 23 PLAN OF DISTRIBUTION This Prospectus covers the sale of up to 275,000 Shares which may be sold following their issuance to the Selling Shareholders pursuant to the exercise of the Warrants or the Option, as the case may be. The Selling Shareholders have informed the Company they may sell the Shares being offered hereby in one or more transactions effected on the NYSE or on any other national exchange upon which the Shares may be listed in the future, in the over-the-counter market, or in one or more negotiated transactions, or through a combination of such methods of sale, in each case at market prices prevailing at the time of sale, at prices relating to such prevailing market prices, or at negotiated prices. The Shares will be listed on the NYSE. If any of the Shares included in this Prospectus are sold through broker- dealers, then the Selling Shareholders and any broker-dealers or other persons who participate with them in the distribution of the securities being offered hereby may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions and discounts received by such broker-dealers, and any profit on the resale of the Shares by such broker-dealers, may be deemed to be underwriting discounts and commissions under the Securities Act. DESCRIPTION OF COMMON STOCK The Company is authorized to issue 60,000,000 shares of Common Stock, par value $1.00 per share. Holders of Common Stock are entitled to one vote for each share of Common Stock held. All outstanding shares of Common Stock are fully paid and nonassess able. Holders of Common Stock are entitled to receive such dividends as are declared by the Board of Directors out of funds legally available therefor. WorldCorp has never paid and does not intend to pay cash dividends in the foreseeable future on its Common Stock. In the event of liquidation, holders of the Common Stock are entitled to receive pro rata any assets distributable after payment of liabilities and the liquidation preference of any shares of any series of preferred stock then outstanding. There are no conversion, preemptive or redemption rights of the Common Stock. Under the terms of the Indenture dated as of August 1, 1987 between WorldCorp and Norwest Bank of Minneapolis, N.A. (the "1987 Indenture"), pursuant to which 13 7/8% 24 Subordinated Notes due 1997 (the "13 7/8% Subordinated Notes") were issued, the Company is generally restricted in its ability to pay dividends or make distributions on its capital stock if: (i) a default or an event of default exists under the 1987 Indenture and is continuing; or (ii) Adjusted Stockholders' Equity (as defined in the 1987 Indenture) is not a positive amount; or (iii) the aggregate amount expended for such purpose and certain other purposes since June 30, 1987 exceeds the sum of (A) 50% of the Company's Consolidated Net Income since June 30, 1987 (or if such aggregate is a loss, minus 100% of such loss), plus (B) the aggregate net proceeds from certain issuances of capital stock since June 30, 1987, plus (C) $10 million. As of March 31, 1994, Adjusted Stockholders' Equity was not a positive amount. In May 1992, the Company issued $65.0 million of Convertible Subordinated Debentures due 2004 (the "7% Convertible Debentures") under an Indenture dated May 15, 1992 between WorldCorp and The First National Bank of Boston (the "1992 Indenture"). The 7% Convertible Debentures are convertible into shares of Common Stock at $11.06 per share, subject to adjustment in certain events, and bear an annual interest rate of 7%. Semiannual interest payments are due on May 15 and November 15. During the second and third quarters of 1992, the Company used $47.1 million of the proceeds from this borrowing to retire a portion of its 13 7/8% Subordinated Notes. Under the terms of the 1992 Indenture, the Company is precluded from paying dividends or making distributions on its capital stock if a default or an event of default exists under the 1992 Indenture and is continuing. The Company is not currently in default under the 1992 Indenture. The 1992 Indenture provides that distributions and dividends may in no event exceed the sum of (a) 50% of cumulative Consolidated Net Income (as defined) after December 31, 1991: (b) the aggregate net proceeds, including the fair market value of property other than cash, of certain issuances after December 31, 1991 of its capital stock; and (c) $27,800,000. Pursuant to this restriction, as of March 31, 1995, the Company could not make distribution or dividend payments. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the text of WorldCorp's Certificate of Incorporation and By-Laws, the 1987 Indenture and the 1992 Indenture, copies of each of which are exhibits to the Registration Statement and are incorporated herein by reference. 25 LEGAL MATTERS The validity of the shares of Common Stock being offered hereby will be passed upon by Andrew M. Paalborg, Vice President and General Counsel of the Company. EXPERTS The consolidated financial statements of WorldCorp and its subsidiaries as of December 31, 1994 and 1993 and for each of the years in the three-year period ended December 31, 1994, and the related financial statement schedule have been incorporated by reference herein and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering the 1994 consolidated financial statements of the Company refers to changes in the methods of accounting for postretirement benefits other than pensions and income taxes. The financial statements of US Order, Inc. as of December 31, 1994 and 1993 and for each of the years in the three-year period ended December 31, 1994, and the related financial statement schedule incorporated by reference herein and in the Registration Statement have been incorporated by reference herein and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 26 No person is authorized to give any information or to make any representation not contained or incorporated by reference in this Prospectus, and any information or representations not contained or incorporated by reference herein must not be relied upon as having been authorized by the Company or the Selling Shareholders. This Prospectus does not constitute an offer of any securities other than the registered securities to which it relates or an offer to any person in any jurisdiction where such offer would be unlawful. Neither the delivery of this Prospectus nor any WORLDCORP, INC. sales made hereunder shall, under any circumstances, create any implication that there 275,000 Shares has been no change in the affairs of the Company of Common Stock since the date hereof.
TABLE OF CONTENTS Page Available Information 1 Incorporation of Certain Documents by Reference 1 The Company 2 Risk Factors 6 PROSPECTUS Use of Proceeds 20 Selling Shareholders 21 Plan of Distribution 23 Description of Common Stock 23 Legal Matters 25 Experts 25
June _____, 1995 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth an itemized statement of all estimated expenses in connection with the issuance and distribution of the securities being registered: Registration fees $ 983.84 Legal expenses $20,000.00 Accounting fees and expenses $ 7,500.00 Stock Exchange Listing fee $ 1,500.00 Total $
All such expenses will be borne by the registrant. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. WorldCorp, a Delaware corporation, is empowered by Section 145 of the Delaware General Corporation Law, subject to the procedures and limitations stated therein, to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in the defense of any threatened, pending or completed action, suit or proceeding in which such person is made a party by reason of his or her being or having been a director or officer of WorldCorp. The statute provides that such indemnification is not exclusive of other rights or indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Certificate of Incorporation and Bylaws of WorldCorp provide that WorldCorp shall indemnify its directors and officers to the full extent permitted by the Delaware General Corporation Law. WorldCorp is also empowered by Section 102(b) of the Delaware General Corporation Law to include a provision in its Certificate of Incorporation that limits a director's liability to WorldCorp or its stockholders for monetary damages for breaches of his or her fiduciary duty except for (i) a breach of the director's duty of loyalty to WorldCorp or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) improper dividend payments, stock repurchases or redemptions; and (iv) any transaction from which the director derived an improper personal benefit. Article 10 of WorldCorp's Certificate of Incorporation includes such a provision. II-1 Policies of insurance are maintained by the Company under which directors and officers are insured, within the limits and subject to the limitations of the policies, against certain expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been directors or officers of the Company. The Company has entered into indemnification agreements with its officers and directors that indemnify such officers and directors to the full extent permitted by law against all expenses, judgments, fines or settlement amounts incurred or paid by them in any action or proceeding, including any action by or in the right of the Company on account of their service as a director or officer of the Company. ITEM 16. EXHIBITS -------- 4.1 Indenture dated as of August 1, 1987 between WorldCorp, Inc. and Norwest Bank of Minneapolis, N.A., as Trustee. Filed as Exhibit 4.1 to Amendment No. 2 to WorldCorp, Inc.'s Form S-2 Registration Statement (Commission File No. 33-1358276) filed August 13, 1987 and incorporated herein by reference. 4.2 First Supplemental Indenture dated as of March 1, 1988 between WorldCorp, Inc. and Norwest Bank of Minneapolis, N.A. Filed as Exhibit 4.2 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference. 4.3 Second Supplemental Indenture dated as of February 22, 1994 between WorldCorp, Inc. and Norwest Bank Minnesota, National Association. (filed herewith) 4.4 Third Supplemental Indenture dated as of March 15, 1995 between WorldCorp, Inc. and Norwest Bank Minnesota, National Association. (filed herewith) 4.5 Indenture dated as of May 15, 1992 between WorldCorp, Inc. and The First Bank of Boston, as Trustee. Filed as Exhibit 4.2 to WorldCorp, Inc.'s Current Report on Form 8-K filed on July 15, 1992 and incorporated herein by reference. II-2 4.6 First Supplemental Indenture dated as of February 22, 1994 between WorldCorp, Inc. and The First National Bank of Boston, as Trustee. (filed herewith) 4.7 Warrant Agreement dated as of December 7, 1993 between BNY Financial Corporation and WorldCorp, Inc. Filed as Exhibit 10.48 to WorldCorp, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 1993 and incorporated herein by reference. 4.8 Stock Option Agreement dated as of April 1, 1995 between WorldCorp, Inc. and Patrick F. Graham. (filed herewith) 5.1 Opinion of Andrew M. Paalborg, Vice President and General Counsel of WorldCorp, Inc. dated June 14, 1995. (filed herewith) 23.1 Consent of KPMG Peat Marwick LLP dated June 14, 1995. (filed herewith) 23.2 Consent of Andrew M. Paalborg, Vice President and General Counsel of WorldCorp, Inc. (included in the Opinion of Counsel filed as Exhibit 5.1 hereto). 24.1 Power of Attorney (included on signature page in this Registration Statement). ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) that, insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue; II-3 (2) that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) to file, during any period in which offers or sales are being made, a post effective amendment to the registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (4) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be an initial bona fide offering thereof; (5) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Herndon, Virginia, on this 15th day of June, 1995. WORLDCORP, INC. /s/ T. Coleman Andrews, III ----------------------------------- By: T. Coleman Andrews, III Chief Executive Officer and President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned officers and directors of WorldCorp, Inc., a Delaware corporation, do hereby constitute and appoint T. Coleman Andrews, III, and Andrew M. Paalborg, and each of them, the lawful attorneys and agents or attorney and agent, with power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, and any one of them, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933 as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereto, and each of the undersigned hereby ratifies and confirms all that said attorneys and agents or any of them shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated opposite his name. II-5 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date - --------- ----- ---- /s/ T. Coleman Andrews, III Chief Executive Officer, June 15, 1995 - -------------------------------------- President and Director (Principal T. Coleman Andrews, III Executive Officer and Principal Financial and Accounting Officer) /s/ William F. Gorog Chairman of the Board of Directors June 15, 1995 - ------------------------------------- William F. Gorog /s/ James E. Colburn Director June 15, 1995 - ------------------------------------- James E. Colburn /s/ Juan C. O'Callahan Director June 15, 1995 - ------------------------------------- Juan C. O'Callahan /s/ Patrick F. Graham Director June 15, 1995 - ------------------------------------- Patrick F. Graham /s/ Geoffrey S. Rehnert Director June 15, 1995 - ------------------------------------- Geoffrey S. Rehnert /s/ John C. Backus Director June 15, 1995 - ------------------------------------- John C. Backus
II-6 EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION 4.3 Second Supplemental Indenture dated as of February 22, 1994 between WorldCorp, Inc. and Norwest Bank Minnesota, National Association. 4.4 Third Supplemental Indenture dated as of March 15, 1995 between WorldCorp, inc. and Norwest Bank Minnesota, National Association. 4.6 First Supplemental Indenture dated as of February 22, 1994 between WorldCorp, Inc. and The First National Bank of Boston, as Trustee. 4.8 Stock Option Agreement dated as of April 1, 1995 between WorldCorp, Inc. and Patrick F. Graham. 5.1 Opinion of Andrew M. Paalborg, Vice President and General Counsel of WorldCorp, Inc. dated June 15, 1995. 23.1 Consent of KPMG Peat Marwick LLP dated June 15, 1995. EX-4.3 2 EXHIBIT 4.3 Exhibit 4.3 WORLDCORP, INC., Issuer, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee, SECOND SUPPLEMENTAL INDENTURE Dated as of February 22, 1994 to INDENTURE Dated as of August 15, 1987 Relating to 13 7/8% SUBORDINATED NOTES DUE AUGUST 15, 1997 THIS SECOND SUPPLEMENTAL INDENTURE is dated as of February 22, 1994, and is between WORLDCORP, INC., a Delaware corporation, (the "Company"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (formerly Norwest Bank Minneapolis, N.A.), as Trustee under the Indenture, as defined below (the "Trustee"). R E C I T A L S - - - - - - - - WHEREAS, the Company and the Trustee executed and delivered an Indenture dated as of August 15, 1987, as amended by a First Supplemental Indenture dated as of March 1, 1988 (as amended, the "Indenture") providing for the issuance of the Company's 13 7/8% Subordinated Notes due August 15, 1997 (the "Notes"); and WHEREAS, in accordance with Section 10.02 of the Indenture, the holders of a majority in aggregate principal amount of the Notes (the "Holders") have consented to an amendment to Section 5.03(a) and the deletion of Section 5.13 of the Indenture; and WHEREAS, all conditions and requirements necessary to make this Second Supplemental Indenture a valid and binding instrument in accordance with its terms have been performed, and the execution and delivery hereof have been authorized in all respects; NOW, THEREFORE, in consideration of the above premises, each party agrees, for the benefit of the other and for the equal and ratable benefit of the Holders, as follows: ARTICLE I Section 1.01. Amendment to Section 5.03(a). Section 5.03(a) of the ---------------------------- Indenture is hereby amended to read in its entirety as follows: (a) The Company shall not and shall cause each of its Restricted Subsidiaries not to, directly or indirectly, (i) pay or declare any dividends or make any distributions (other than dividends or distributions payable solely in shares of Qualified Capital Stock) on or in respect to any Capital Stock of the Company or, except for payments to the Company or any Restricted Subsidiary, any Restricted Subsidiary of the Company, (ii) purchase, redeem or otherwise acquire or retire for value (other than solely with shares of Qualified Capital Stock) any of the Capital Stock of the Company or any Restricted Subsidiary or warrants to purchase Capital Stock (other than Public Warrants or Private Warrants, the purchase, redemption or other acquisition of which is governed by clauses (vi) and (vii) of this Section 5.03), rights (other than convertible or exchangeable debt securities) or options to acquire any Capital Stock of the Company or any Restricted Subsidiary, (iii) make any Restricted Investment in any Unrestricted Subsidiary, (iv) purchase, redeem or otherwise acquire or retire for value any Permitted Exchange Indebtedness, (v) pay or set aside for payment any principal, interest, premium or penalty, if any, on any Permitted Exchange Indebtedness, (vi) purchase, redeem or otherwise acquire or retire for value any Private Warrants, or (vii) purchase, redeem or otherwise acquire for value Public Warrants other than pursuant to Section 8 of the Public Warrant Agreement, if, at the time of any action referred to in clauses (a)(i) through (viii) (individually and collectively, a "Restricted Payment"), or after giving effect to such Restricted Payment, (x) a Default or an Event of Default shall have occurred and be continuing, or (y) in the case of (i) (other than the payment or declaration of dividends or distributions by World Airways to its Stockholders or on Nonaffiliate Preferred Stock), (ii), (iv) and (v) above, Adjusted Stockholders' Equity is not a positive amount. Section 1.02. Deletion of Section 5.13. Section 5.13 of the ------------------------ Indenture is hereby deleted in its entirety to read as follows: Section 5.13. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. [Deleted] ARTICLE II Miscellaneous Provisions ------------------------ Section 2.01. Terms Defined. All capitalized terms used herein shall ------------- have the meanings assigned to them in the Indenture unless expressly defined otherwise in this Second Supplemental Indenture. Section 2.02. Indenture. Except as expressly amended hereby, the --------- Indenture and Notes remain in full force and effect. Any references to the Indenture in the Notes shall refer to the Indenture as amended. Section 2.03. Governing Law. This Second Supplemental Indenture ------------- shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of laws rules thereof. Section 2.04. Successors. All agreements of the Company and the ---------- Trustee in this Second Supplemental Indenture shall bind their respective successors. Section 2.05. Multiple Counterparts. The parties may sign multiple --------------------- counterparts of this Second Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. -2- Section 2.06. Effectiveness. The provisions of this Second ------------- Supplemental Indenture will take effect immediately upon its execution and delivery by the Trustee and the Company in accordance with the provisions of Section 10.2 of the Indenture. Section 2.07. Recitals. The recitals of fact contained herein shall -------- be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or adequacy of this Second Supplemental Indenture or the due execution hereof by the Company. IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their corporate seals to be hereunto affixed and attested, all as of the date first written above. WORLDCORP, INC. [SEAL] Attest: /s/ Andrew M. Paalborg By: /s/ A. Scott Andrews ---------------------------- --------------------------- Andrew M. Paalborg A. Scott Andrews Secretary Chief Financial Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION [SEAL] Attest: /s/ Daniel S. Pation By: /s/ Mimi Traynor ---------------------------- ---------------------------- Name: DANIEL S. PATION Name: MIMI TRAYNOR Title: Title: -3- STATE OF VIRGINIA ) ) ss.: COUNTY OF FAIRFAX ) On this 22nd day of February, 1994, before me personally appeared A. Scott ---- Andrews, Chief Financial Officer of WorldCorp, Inc. personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the foregoing Second Supplemental Indenture as Chief Financial Officer on behalf of WorldCorp, Inc. and acknowledged to me that WorldCorp, Inc. executed it. [NOTARY SEAL] /s/ Carol Sue Bengston ----------------------------------- Notary Public Carol Sue Bengston My commission expires: April 30, 1996 -------------------------------- I was commissioned a notary public as Carol Sue Peters -4- STATE OF MINNESOTA ) ) COUNTY OF HENNEPIN ) -------- On this 23rd day of February, 1994, before me personally appeared ------ MIMI TRAYNOR , ASST VICE PRES. of Norwest Bank Minnesota, - ----------------------------- ----------------------- National Association personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the foregoing Second Supplemental Indenture as ASST VICE PRES. on behalf of Norwest Bank ------------------------------ Minnesota, National Association and acknowledged to me that Norwest Bank Minnesota, National Association executed it. [NOTARY SEAL] /s/ B J. Fisk -------------------------------- Notary Public My commission expires: 1-31-00 --------------------------------- -5- EX-4.4 3 EXHIBIT 4.4 Exhibit 4.4 ================================================================================ WORLDCORP, INC., ISSUER AND NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, TRUSTEE ================================ THIRD SUPPLEMENTAL INDENTURE DATED AS OF MARCH 15, 1995 ================================ ================================================================================ Supplemental to the Indenture dated as of August 15, 1987, relating to 13 7/8% Subordinated Notes Due August 15, 1987 THIS THIRD SUPPLEMENTAL INDENTURE is dated as of March 15, 1995, and is between WORLDCORP, INC., a Delaware corporation (the "Company") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (formerly Norwest Bank Minneapolis, N.A.), as Trustee under the Indenture, as defined below (the "Trustee"). R E C I T A L S WHEREAS, the Company and the Trustee executed and delivered an Indenture dated as of August 15, 1987, as amended by a First Supplemental Indenture dated as of March 1, 1988, and a Second Supplemental Indenture dated as of February 22, 1994 (as amended, the "Indenture"), providing for the issuance of the Company's 13 7/8% Subordinated Notes due August 15, 1997 (the "Notes"); and WHEREAS, in accordance with Section 10.02 of the Indenture, the holders of a majority in aggregate principal amount of the Notes (the "Holders") have consented to an amendment to Section 5.03(a); and WHEREAS, all conditions and requirements necessary to make this Third Supplemental Indenture a valid and binding instrument in accordance with its terms have been performed, and the execution and delivery hereof have been authorized in all respects; NOW, THEREFORE, in consideration of the above premises, each party agrees, for the benefits of the other and for the equal and ratable benefit of the Holders, as follows: ARTICLE I Section 1.01. Amendment to Section 5.03(a). Section 5.03(a) of the ---------------------------- Indenture is hereby amended to read in its entirety as follows: "Notwithstanding the above, the Company may purchase 500,000 shares of Capital stock of World Airways, Inc. from Malaysian Helicopter Services, Berhard, a Malaysian corporation, on or prior to April 1, 1995, for an amount not to exceed $8,500,000. ARTICLE II Section 2.01. Terms Defined. All capitalized terms used herein shall ------------- have the meaning assigned to them in the Indenture unless expressly defined otherwise in this Third Supplemental Indenture. Section 2.02. Indenture. Except as expressly amended hereby, the --------- Indenture and Notes remain in full force and effect. Any references to the Indenture in the Notes shall refer to the Indenture as amended. Section 2.03. Governing Law. This Third Supplemental Indenture shall be ------------- governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of laws rules thereof. Section 2.04. Successors. All agreements of the Company and the Trustee ---------- in this Third Supplemental Indenture shall bind their respective successors. Section 2.05. Multiple Counterparts. The parties may sign multiple --------------------- counterparts of this Third Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 2.06. Effectiveness. The provisions of this Third Supplemental ------------- Indenture will take effect immediately upon its execution and delivery by the Trustee and the Company in accordance with the provisions of Section 10.2 of the Indenture. Section 2.07. Recitals. The recitals of fact contained herein shall be -------- taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or adequacy of this Third Supplemental Indenture or the due execution hereof by the Company. IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed, and their corporate seals to be hereunto affixed and attested, all as of the date first written above. WORLDCORP, INC. [SEAL] Attest: /s/ Andrew M. Paalborg By: /s/ T. Coleman Andrews, III ----------------------------- ----------------------------- Andrew M. Paalborg T. Coleman Andrews, III Secretary President and Chief Executive Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION [SEAL] Attest: /s/ Mary E. Traynor By: /s/ Raymond S. Haverstock --------------------- ---------------------------- Name: MARY E. TRAYNOR Name: RAYMOND S. HAVERSTOCK ------------------- ------------------------- Title:Assistant Secretary Title: Assistant Vice President ------------------- --------------------------- STATE OF VIRGINIA COUNTY OF FAIRFAX, to-wit: On this 15th day of March, 1995, before me personally appeared T. Coleman ---- Andrews, III, President and Chief Executive Officer of WorldCorp, Inc., personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the foregoing Third Supplemental Indenture as President and Chief Executive Officer on behalf of WorldCorp, Inc. and acknowledged to me that WorldCorp, Inc. executed it. [NOTARIAL SEAL] /s/ Carol Sue Bengston -------------------------------- NOTARY PUBLIC Carol Sue Bengston My commission expires: April 30, 1996 --------------------- I was commissioned a notary public as Carol Sue Peters. STATE OF MINNESOTA COUNTY OF Hennepin , to-wit ------------ On this 12th day of May, 1995, before me personally appeared ---- Raymond S. Haverstock, Assistant Vice President of Norwest Bank Minnesota, - --------------------- ------------------------- National Association, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the foregoing Third Supplemental Indenture as Assistant Vice President on behalf of Norwest Bank ------------------------ Minnesota, National Association, and acknowledged to me that Norwest Bank Minnesota, National Association executed it. [NOTARY SEAL] /s/ Theresa M. Stelter ----------------------------- NOTARY PUBLIC My commission expires: 1-31-2000 ----------------- EX-4.6 4 EXHIBIT 4.6 Exhibit 4.6 WORLDCORP, INC., Issuer, and THE FIRST NATIONAL BANK OF BOSTON Trustee, FIRST SUPPLEMENTAL INDENTURE Dated as of February 22, 1994 to INDENTURE Dated as of May 15, 1992 Relating to 7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004 THIS FIRST SUPPLEMENTAL INDENTURE is dated as of February 22, 1994, and is between WORLDCORP, INC., a Delaware corporation, (the "Company"), and THE FIRST NATIONAL BANK OF BOSTON, a national banking association, as Trustee under the Indenture, as defined below (the "Trustee"). R E C I T A L S - - - - - - - - WHEREAS, the Company and the Trustee executed and delivered an Indenture dated as of May 15, 1992, (the "Indenture") providing for the issuance of the Company's 7% Convertible Subordinated Debentures due 2004 (the "Debentures"); and WHEREAS, in accordance with Section 9.02 of the Indenture, the holders of a majority in principal amount of the Debentures (the "Holders") have consented to an amendment to Section 4.07 of the Indenture; and WHEREAS, all conditions and requirements necessary to make this First Supplemental Indenture a valid and binding instrument in accordance with its terms have been performed, and the execution and delivery hereof have been authorized in all respects; NOW, THEREFORE, in consideration of the above premises, each party agrees, for the benefit of the other and for the equal and ratable benefit of the Holders, as follows: ARTICLE I Section 1.01. Amendment to Section 4.07. Section 4.07 of the ------------------------- Indenture is hereby amended to read in its entirety as follows: The Company shall not and shall cause each Subsidiary not to, directly or indirectly, declare or pay any dividend or make any distribution on or in respect of any of its Capital Stock or to its shareholders (other than dividends or distributions payable solely in its Capital Stock, other than Disqualified Stock, and other than payments to the Company or any Subsidiary by any Subsidiary) or purchase, redeem or otherwise acquire or retire for value, or permit any Subsidiary to purchase or otherwise acquire for value, any Capital Stock or any warrants, rights or options (including any securities convertible into or exercisable or exchangeable for such Capital Stock, but not including the Securities) of the Company or any Subsidiary (collectively, "Restricted Payments") if, at the time of such Restricted Payment, or after giving effect thereto, a Default or an Event of Default shall have occurred and be continuing or shall occur as a result thereof, provided, however, that such provisions shall not -------- ------- prevent (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment complied with the provisions of this limitation on dividends, (ii) the retirement of any shares of the Company's Capital Stock by exchange for, or out of the proceeds of, the substantially concurrent sale of other shares of its Capital Stock other than Disqualified Stock, or (iii) any redemption of the Securities pursuant to the terms thereof. ARTICLE II Miscellaneous Provisions ------------------------ Section 2.01. Terms Defined. All capitalized terms used herein shall ------------- have the meanings assigned to them in the Indenture unless expressly defined otherwise in this First Supplemental Indenture. Section 2.02. Indenture. Except as expressly amended hereby, the --------- Indenture and Debentures remain in full force and effect. Any references to the Indenture in the Debentures shall refer to the Indenture as amended hereby. Section 2.03. Governing Law. The laws of the State of New York shall ------------- govern this First Supplemental Indenture without regard to principles of conflicts of laws. Section 2.04. Successors. All agreements of the Company and the ---------- Trustee in this First Supplemental Indenture shall bind their respective successors. Section 2.05. Multiple Counterparts. The parties may sign multiple --------------------- counterparts of this First Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 2.06. Effectiveness. The provisions of this First ------------- Supplemental Indenture will take effect immediately upon its execution and delivery by the Trustee and the Company in accordance with the provisions of Section 10.2 of the Indenture. -2- IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their corporate seals to be hereunto affixed and attested, all as of the date first written above. WORLDCORP, INC. [SEAL] Attest: /s/ Andrew M. Paalborg By: /s/ A. Scott Andrews ----------------------- -------------------------- Andrew M. Paalborg A. Scott Andrews Secretary Chief FinancialOfficer THE FIRST NATIONAL BANK OF BOSTON [SEAL] Attest: /s/ Eileen Bligh By: /s/ J.E. Mogavero -------------------------- -------------------------- Name: Name:J.E. Mogavero Title: Title: Authorized Officer -3- STATE OF VIRGINIA ) ) ss.: COUNTY OF FAIRFAX ) On this 22nd day of February, 1994, before me personally appeared A. Scott ---- Andrews, Chief Financial Officer of WorldCorp, Inc. personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the foregoing First Supplemental Indenture as Chief Financial Officer on behalf of WorldCorp, Inc. and acknowledged to me that WorldCorp, Inc. executed it. /s/ Carol Sue Bengston [NOTARY SEAL] -------------------------------------- Notary Public Carol Sue Bengston My commission expires: April 30, 1996 ------------------------------ I was commissioned a notary public as Carol Sue Peters. -4- STATE OF MASS ) -------- ) COUNTY OF SUFFOLK ) ------- On this 23rd day of February, 1994, before me personally appeared ---- James E. Mogavero Authorized Officer of The First National Bank - -------------------------, -------------------- of Boston personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the foregoing First Supplemental Indenture as Authorized Officer on behalf of The First National Bank of Boston ------------------ and acknowledged to me that The First National Bank of Boston executed it. /s/ Bernadette May [NOTARY SEAL] -------------------------------------- Notary Public My commission expires: 10/31/97 ------------------------------ -5- EX-4.8 5 EXHIBIT 4.8 Exhibit 4.8 WORLDCORP, INC. STOCK OPTION AGREEMENT THIS AGREEMENT is made as of the 1st day of April, 1995 (the "Grant Date") by and between WorldCorp, Inc., a Delaware corporation (the "Company"), and Patrick F. Graham ("Optionee"). WITNESSETH: ----------- RECITALS - -------- A. The Board of Directors of WorldCorp (the "Board") has granted to Optionee as of April 1, 1995 an option to purchase shares of the Company's common stock ("Common Stock"). B. The Option granted to Optionee is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code and was not issued under the WorldCorp, Inc. 1988 Stock Option Plan. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. In accordance with the terms and conditions as --------------- set forth in this Agreement, as of the Grant Date, Optionee was granted a Nonqualified Stock Option (the "Option") to purchase up to 25,000 shares of the Company's common stock, $1.00 par value (the "Option Shares") at an exercise price of $4.56 per share. 2. Option Term. The Option will expire at the close of business on ----------- April 1, 2003 (the "Expiration Date"), unless sooner terminated in accordance with the provisions of this Agreement. 3. Option Nontransferable. The Option is not transferable or ---------------------- assignable by Optionee other than by will or by the laws of descent and distribution. During the lifetime of Optionee, the Option shall be exercisable only by Optionee. 4. Dates of Exercise. So long as Optionee continues to serve as a ----------------- Director of WorldCorp, Inc. the Option will be exercisable as to the Option Shares within the specified term of the Option and pursuant to the Provisions of this Agreement, as follows: (a) the Option shall be come exercisable as to 5,208 of the Option Shares on the Grant Date; and (b) the Option shall become exercisable as to the remaining 19,792 in nineteen equal monthly installments of 1,041.68 Option Shares, the final monthly installment vesting on October 28, 1996. 5. Termination of Membership on the Board. -------------------------------------- If Optionee ceases for any reason (including death or disability) to be a member of the Board of Directors of the Company (the "Board"), the Option may, subject to the provisions of Section 4 hereof, be exercised (to the extent the option was exercisable by Op tionee at the time of termination of his membership on the Board) at any time within one year after the termination of his membership on the Board; provided however, in no event shall the Option be exercisable after the Expiration Date. 6. Privilege of Stock Ownership. The holder of the Option will have ---------------------------- none of the rights of a shareholder with respect to the Option Shares until such individual has exercised the Option and has been issued a stock certificate for the Option Shares. 7. Manner of Exercising Option. In order to exercise the Option --------------------------- with respect to all or any part of the Option Shares for which the Option is at the time exercisable, Optionee (or in the case of exercise after Optionee's death, Optionee's executor, administrator, heir or legatee, as the case may be) must take the following actions: (i) Provide the Company written notice of such exercise in accordance with Section 15 hereof, specifying the number of Option Shares with respect to which the Option is being exercised; (ii) Pay the aggregate exercise price for the pur chased shares in one or more of the following alternative forms: (A) full payment, in cash or cash equivalents, in the amount of the exercise price for the Option Shares being purchased; (B) full payment in shares of Common Stock (held for at least six months if acquired pursuant to an option) and having a Fair Market Value on the day of exercise (as determined under the terms of the Plan) equal to the exer cise price for the Option Shares being purchased; (C) a combination of such shares of Common Stock and cash or cash equivalents, equal in the aggregate to the exercise price for the Option Shares being purchased; or (D) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price; and (iii) Furnish the Company with appropriate docu mentation that the person (or persons) exercising the Option, if other than Optionee, has the right to exercise the Option. For purposes of this Section 7 and Section 11 hereof, the term "Fair Market Value" shall have the same meaning as ascribed to such term in the WorldCorp, Inc. 1988 Stock Option Plan. 8. Adjustments. ----------- If any change is made to the Common Stock (whether by reason of merger, consolida tion, reorganization, recapitalization, stock dividend, stock split, combination of shares, or exchange of shares or other change in capital structure made without receipt of consideration), the Board shall make equitable adjustments to the number and class of shares subject to the Option to reflect the effect of such change upon the Company's capital structure, and will make equitable adjustments to the exercise price per share of the Option. 9. Compliance with Laws and Regulations. ------------------------------------ (a) The exercise of the Option and the issuance of Option Shares upon such exercise is subject to compliance by the Company and Optionee with all applicable regulations of any stock exchange on which shares of the Company's common stock may be listed at the time of such exercise and issuance. (b) In connection with the exercise of the Option, Optionee will execute and deliver to the Company such representations in writing as may be requested by the Company so that it may comply with the applicable requirements of federal and state securities laws. 10. Liability of the Company. ------------------------ The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any common stock pursuant to the Option will relieve the Company of any liability with respect to the non-issuance or sale of the common stock as to which such approval is not obtained. 11. No Right to Remain on Board. Nothing in this Agreement confers --------------------------- upon Optionee any right to continued membership on the Board. 12. Withholding. ----------- (a) To the extent federal, state and local income and employment tax withholding requirements should apply to the exercise of this Option, Optionee hereby agrees to make appropriate arrangements with the Company for the satisfaction of such withholding requirements. (b) Any withholding obligation arising from exercise of the Option may be satisfied by any of the following means or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold from the Common Stock otherwise issuable to Optionee as the result of the exercise of the Option, a number of shares having a Fair Market Value, as of the date the withholding tax obligation arises, less than or equal to the amount of the withholding tax obligation; or (c) delivering to the Company already owned and unencumbered shares of Common Stock having a Fair Market Value, as of the date the withholding tax obligation arises, less than or equal to the amount of the withholding tax obligation. 13. Other Restrictions. Upon any exercise of the Option, the Board ------------------ may require Optionee to represent to and agree with the Company in writing that the shares are being acquired without a view to distribution thereof. The certificates for such shares may include any legend which the Board deems appropriate to reflect any restrictions on transfer determined by the Committee to be necessary or appropriate under applicable securities laws. All certificates for shares of common stock delivered pursuant to exercise of the Option shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the common stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificate to make appropriate reference to such restrictions. 14. Headings. The headings of Sections herein are included solely -------- for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Agreement. 15. Notices. Any notice required to be given or delivered to the ------- Company under the terms of this Agreement will be in writing and addressed to the Company in care of its Secretary at 13873 Park Center Road, Suite 490, Herndon, Virginia 22071. Any notice required to be given or delivered to Optionee will be in writing and addressed to Optionee at the address indicated below Optionee's signature line on this Agreement. All notices will be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. 16. Governing Law. The interpretation, performance, and enforcement ------------- of this Agreement will be governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf by its duly authorized officer and Optionee has also executed this Agreement in duplicate, all as of the day and year indicated above. WorldCorp, Inc. By /s/ T. Coleman Andrews, III --------------------------- T. Coleman Andrews, III Chief Executive Officer and President /s/ Patrick F. Graham --------------------------- Optionee Address: ------------------- ------------------- EX-5.1 6 EXHIBIT 5.1 EXHIBIT 5.1 June 15, 1995 WorldCorp, Inc. 13873 Park Center Road Suite 490 Herndon, Virginia 22071 Re: Registration Statement on Form S-3 ---------------------------------- Dear Ladies and Gentlemen: I am Vice President and General Counsel of WorldCorp, Inc., a Delaware corporation (the "Company"). The Company has filed a Registration Statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission relating to (i) 25,000 shares of common stock, par value $1.00 per share (the "Common Stock"), of WorldCorp, Inc. ("WorldCorp" and, together with its subsidiaries, the "Company"), issuable upon exercise of an option (the "Option") pursuant to the Option Agreement dated April 1, 1995 (the "Option Agreement") granted Patrick F. Graham, a director of WorldCorp and (ii) 250,000 shares of Common Stock issuable upon exercise of 250,000 warrants ("Warrants") issued to BNY Financial Corporation, a New York corporation ("BNYFC"), pursuant to the Warrant Agreement (the "Warrant Agreement") dated as of December 7, 1993 between WorldCorp and BNYFC. The shares of Common Stock issuable upon exercise of the Option and Warrants are collectively referred to herein as the "Shares". This opinion is delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the "Act"). In connection with this opinion, I have reviewed such documents as I have deemed necessary or appropriate as a basis for the opinion set forth below. In my exami nation, I have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion that I did not independently establish or verify, I have relied upon representations or certificates of the officers and directors of the Company. I am a member of the District of Columbia Bar, Virginia Bar and New York Bar and I express no opinion as to the laws of any other jurisdiction except the General Corporation Law of the State of Delaware. Based upon the foregoing, and subject to the qualifications set forth herein, I am of the opinion that the Shares have been duly and validly authorized and when the certificates for the Shares have been duly executed, delivered and paid for in accordance with the Option Agreement or the Warrant Agreement, as the case may be, the Shares will be duly and validly issued, fully paid and nonassessable. I hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the use of my name in the Prospectus that is a part of the Registration Statement. Very truly yours, /s/ Andrew M. Paalborg Andrew M. Paalborg Vice President and General Counsel EX-23.1 7 EXHIBIT 23.1 EXHIBIT 23.1 Consent of Independent Accountants The Board of Directors WorldCorp, Inc.: We consent to the use of our report included in WorldCorp's Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. Our report on the consolidated financial statements refers to changes in the methods of accounting for postretirement benefits other than pensions and income taxes. We consent to the use of our report with respect to the balance sheets of US Order, Inc. as of December 31, 1994 and 1993, and the related statements of operations, stockholders' equity (deficit) and cash flows and the related financial statement schedule for each of the years in the three-year period ended December 31, 1994, dated January 20, 1995, except as to note 4(b), which is as of February 16, 1995, and note 13, which is as of April 6, 1995, incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. KPMG PEAT MARWICK LLP Washington, D.C. June 15, 1995 -----END PRIVACY-ENHANCED MESSAGE-----