<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
WORLD AIRWAYS, INC.
- --------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF WORLD AIRWAYS APPEARS HERE]
--------------------------------------
1997
--------------------------------------
ANNUAL
--------------------------------------
MEETING
<PAGE>
April 30, 1997
DEAR STOCKHOLDER:
We cordially invite you to attend your Company's Annual Meeting of
Stockholders to be held on Friday, June 13, 1997. Enclosed are a proxy
statement and a form of proxy. Please note that the meeting will commence at
11:00 a.m. at the Company's headquarters located at 13873 Park Center Road,
Suite 490, Herndon, Virginia 20171.
At this meeting we will ask the Stockholders (i) to elect three Class II
Directors to serve until the 2000 Annual Meeting, and (ii) to ratify the
selection of KPMG Peat Marwick LLP as World Airways' independent public
accountants for the year ending December 31, 1997.
We value your participation by voting your shares on matters that come
before the meeting. Please follow the instructions on the enclosed proxy to
ensure representation of your shares at the meeting.
Sincerely,
/s/ Russell L. Ray, Jr.
-------------------------------------
RUSSELL L. RAY, JR.
President and Chief Executive Officer
<PAGE>
WORLD AIRWAYS, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 20171
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 1997
TO THE STOCKHOLDER ADDRESSED:
World Airways, Inc. will hold its Annual Meeting of Stockholders at 11:00
a.m. at the Company's Headquarters located at 13873 Park Center Road, Suite 490,
Herndon, Virginia, on June 13, 1997, for the following purposes:
1. To elect three Class II Directors to serve until the 2000 Annual
Meeting of Stockholders, and until their successors have been
duly elected and qualified ;
2. To ratify the selection of KPMG Peat Marwick LLP as independent
certified public accountants for the Company for the year ending
December 31, 1997; and
3. To act upon such other matters as may properly come before the
meeting.
The record date for the determination of stockholders entitled to vote at
the meeting is April 29, 1997, and only stockholders of record at the close of
business on that date will be entitled to vote at this meeting and any
adjournment thereof.
Whether or not you plan to attend the stockholders' meeting, please follow
the instructions on the enclosed proxy to ensure representation of your shares
at the meeting. You may revoke your proxy at any time prior to the time it is
voted.
Herndon, Virginia By Order of the Board of Directors,
April 30, 1997
/s/ Vance Fort
-----------------------------------
VANCE FORT
Executive Vice President
and General Counsel
<PAGE>
WORLD AIRWAYS, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 20171
PROXY STATEMENT
This proxy statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of World Airways, Inc. ("World
Airways" or the "Company") for use at the Annual Meeting of Stockholders to be
held on Friday, June 13, 1997, and any adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders and described
in detail herein. The meeting will be held at 11:00 a.m. at the Company's
headquarters located at 13873 Park Center Road, Suite 490, Herndon, Virginia.
All properly executed proxies will be voted in accordance with the
instructions contained thereon, and if no choice is specified, the proxies will
be voted for the election of all Class II Directors named elsewhere in this
proxy statement and in favor of the appointment of KPMG Peat Marwick LLP as
independent auditors. Any proxy may be revoked by the stockholder at any time
before it is exercised by giving written notice to that effect to the Secretary
of the Company or by signing a later-dated proxy. Stockholders who attend the
meeting may revoke any proxy previously granted and vote in person.
This proxy statement and the accompanying proxy are being mailed to the
stockholders on or about April 30, 1997.
PURPOSE OF MEETING
At the meeting, the Board of Directors will ask stockholders to (1) elect
three Class II Directors to serve until the 2000 Annual Meeting of Stockholders,
and until their successors are duly elected and qualified, and (2) ratify the
selection of KPMG Peat Marwick LLP as independent certified public accountants
for the Company for the year ending December 31, 1997. In addition, the
stockholders will act upon such other matters as may properly come before the
meeting.
VOTING
GENERAL
- -------
Only holders of record of the Company's Common Stock, par value $.001 per
share ("Common Stock"), at the close of business on April 29, 1997, will be
entitled to vote at the meeting. On April 29, 1997, 11,230,064 shares of Common
Stock were outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote.
Shares of Common Stock represented by proxies received in the accompanying
form that are properly executed and returned to the Company will be voted at the
Annual Meeting of Stockholders in accordance with the stockholders' instructions
contained in such proxies. Where no such instructions are given, proxy holders
will vote such shares in accordance with the recommendations of the Board of
Directors. The proxy holders will also vote such shares at their discretion
with respect to such other matters as may properly come before the meeting.
<PAGE>
A quorum at the Annual Meeting will consist of the presence, in person or
by proxy, of at least a majority of the shares of Common Stock outstanding on
the record date and entitled to vote at the Annual Meeting. Each stockholder
may cast one vote per share owned by such stockholder for each of three nominees
for Class II Director. The three nominees receiving the greatest number of votes
will be elected. In calculating the vote, broker non-votes will be disregarded
and will have no effect on the outcome of the vote. The affirmative vote of a
majority of shares voting at the meeting is required to ratify the selection of
KPMG Peat Marwick LLP. In determining whether KPMG Peat Marwick LLP has
received the requisite number of affirmative votes, abstentions and broker non-
votes will be counted and will have the same effect as a vote against KPMG Peat
Marwick LLP. The Company does not know of any matters to be acted upon at the
meeting other than the two items described in this Proxy Statement. Any
stockholder has the power to revoke a proxy at any time before it is voted.
THE COMPANY
World Airways is a leading provider of long-range passenger and cargo air
transportation outsourcing services to major international airlines under fixed
rate, multi-year contracts. World Airways also leads a contractor teaming
arrangement that is the largest single supplier of commercial airlift to the
United States Air Force's Air Mobility Command.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS
PRINCIPAL STOCKHOLDERS
- ----------------------
The following are the only persons known to the Company who are beneficial
owners of more than five percent of Common Stock as of March 31, 1997 (except as
otherwise noted). With respect to the information set forth below, the Company
has relied upon Schedule 13D or Schedule 13G filings and information received
from the persons listed.
<TABLE>
<CAPTION>
Name of Beneficial Address of Amount and Nature of Percent
Owner Beneficial Owner Beneficial Ownership/1/ of Class/1/
- ------------------ ---------------------- ----------------------- ------------
<S> <C> <C> <C>
WorldCorp, Inc. 13873 Park Center Road 6,915,915/2/ 61.6%
Suite 490
Herndon, VA 20171
Malaysian Helicopter Services 25th Floor 1,990,000/3/ 17.7%
International Limited Wing On Center
1111 Connaught Road
Central Hong Kong
</TABLE>
- -------------------------
Footnotes
/1/Beneficial ownership as reported in the table has been determined in
accordance with Securities and Exchange Commission ("SEC") regulations and
includes shares of Common Stock which may be acquired within 60 days of March
31, 1997, upon the exercise of outstanding stock options. In accordance with
Rule 13d-3 of the Securities Exchange Act of 1934 (the "Exchange Act"),
shares of Common Stock issuable upon the exercise of such options are deemed
outstanding for purposes of computing the percentage of Common Stock owned by
the beneficial owner thereof listed in the table, but are not deemed
outstanding for purposes of computing the percentage of outstanding Common
Stock owned by any other stockholder. Except as otherwise stated below, the
named persons have sole voting and investment power with regard to the shares
shown as owned by such person. Calculation of the Percent of Class is based
on 11,230,064 shares of Common Stock outstanding as of March 31, 1997.
/2/Beneficial ownership as reported in Schedule 13D dated October 23, 1995,
filed by WorldCorp, Inc.
/3/Beneficial ownership as reported in Schedule 13D dated October 12, 1995,
filed by Malaysian Helicopter Services International Limited.
3
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
- ------------------------------------------------------------
The following table sets forth information concerning the beneficial
ownership of World Airways' Common Stock ("WA C.S.") and the common stock of
WorldCorp, Inc., a Delaware corporation ("WorldCorp") and the beneficial owner
of 61.6% of the Common Stock of the Company ("WC C.S.") as of March 31, 1997,
for (a) each director and nominee for director; (b) each named executive
officer; and (c) directors and named executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of Title of
Name of Beneficial Owner Beneficial Ownership/1/ Class Class/1/
- ------------------------ ----------------------- -------- --------
<S> <C> <C> <C>
T. Coleman Andrews, III 10,000/2/ WA C.S. *
561,544/3/ WC C.S. 3.6%
Russell L. Ray, Jr. 195,921/4/ WA C.S. 1.7%
Vance Fort 44,456/5/ WA C.S. *
4,376/6/ WC C.S. *
Ahmad M. Khatib 80,170/7/ WA C.S. *
155,843/8/ WC C.S. 1.0%
A. Scott Andrews 190,921/9/ WA C.S. 1.7%
102,334/10/ WC C.S. *
John C. Backus, Jr. --- --- ---
Dato' Wan Malek Ibrahim --- --- ---
Peter M. Sontag 202,521/11/ WA C.S. 1.8%
Lim Kheng Yew --- --- ---
Directors and Executive
Officers as a Group
World Airways (six persons) 362,147 WA C.S. 3.2%
WorldCorp (five persons) 824,097 WC C.S. 5.4%
</TABLE>
* Individual is the beneficial owner of less than one percent (1%) of World
Airway's or WorldCorp's outstanding Common Stock.
- -------------------------
Footnotes
4
<PAGE>
/1/ Beneficial ownership as reported in the table has been determined in
accordance with SEC regulations and includes shares of Common Stock and
WorldCorp common stock which may be acquired within 60 days after March 31,
1997, upon the exercise of outstanding stock options and warrants. In
accordance with Rule 13d-3 of the Exchange Act, shares of common stock of
either company issuable upon the exercise of such options and warrants are
deemed outstanding for purposes of computing the percentage of common stock
of each company owned by the beneficial owner thereof listed in the table,
but are not deemed outstanding for purposes of computing the percentage of
outstanding common stock of such company owned by any other stockholder.
Except as otherwise stated below, the named persons have sole voting and
dispositive power with regard to the shares of either the Common Stock or
the common stock of WorldCorp shown as owned by such person. The latest
information available for the World Airways Employee Savings and Stock
Ownership Plan ("World Airways ESSOP") is as of the end of the plan year,
December 31, 1996 Calculation of the Percent of Class is based on
11,282,064 shares of Common Stock outstanding as of March 31, 1997;
calculation of the Percent of Class of WorldCorp common stock is based on
15,216,946 shares of WorldCorp common stock outstanding as of March 31,
1997.
/2/ Consists of 10,000 shares of Common Stock owned directly by Mr. Andrews.
/3/ Consists of (i) 535,000 shares of WorldCorp common stock issuable to Mr.
Coleman Andrews upon the exercise of stock options granted under the
WorldCorp 1988 Stock Option Plan, (ii) 22,405 shares of WorldCorp common
stock allocated to Mr. Andrews under the World Airways ESSOP and (iii)
4,139 shares of WorldCorp common stock owned directly by Mr. Andrews.
/4/ Consists of (i) 10,000 shares of Common Stock issuable to Mr. Ray upon the
exercise of options granted under the 1995 Option Plan, (ii) 5,000 shares
of Common Stock owned directly by Mr. Ray and (iii) 180,921 shares of
Common Stock held by the ESSOP, as to which Mr. Ray exercises shared voting
and investment power as one of three trustees of the ESSOP. Mr. Ray
disclaims beneficial ownership of shares held by the ESSOP.
/5/ Consists of 43,750 shares of Common Stock issuable to Mr. Fort upon the
exercise of options granted under the 1995 Option Plan and 706 shares
allocated to Mr. Fort under the World Airways ESSOP.
/6/ Consists of 4,376 shares of WorldCorp common stock allocated to Mr. Fort
under the World Airways ESSOP.
/7/ Consists of (i) 30,000 shares of Common Stock issuable to Mr. Khatib upon
the exercise of options granted under the 1995 Option Plan, (ii) 50,000
shares of Common Stock which may be acquired from WorldCorp pursuant to an
option granted to Mr. Khatib by WorldCorp in May 1995, and (iii) 170 shares
allocated to Mr. Khatib under the World Airways ESSOP.
/8/ Consists of (i) 150,000 shares of WorldCorp common stock issuable to Mr.
Khatib upon the exercise of options granted under the WorldCorp 1988 Stock
Option Plan and (ii) 5,843 shares of WorldCorp common stock allocated to
Mr. Khatib under the World Airways ESSOP.
/9/ Consists of (i) 10,000 shares of Common Stock issuable to Mr. A. Scott
Andrews upon the exercise of options granted under the 1995 Option Plan,
and (ii) 180,921 shares of Common Stock held by the ESSOP, as to which Mr.
Andrews exercises shared voting and investment power as one of three
trustees of the ESSOP. Mr. Andrews disclaims beneficial ownership of
shares held by the ESSOP.
5
<PAGE>
/10/ Consists of 102,334 shares of WorldCorp common stock issuable to Mr. A.
Scott Andrews upon the exercise of options granted under the WorldCorp 1988
Stock Option Plan.
/11/ Consists of (i) 10,000 shares of Common Stock issuable to Mr. Sontag upon
the exercise of options granted under the 1995 Option Plan, (ii) 11,600
shares of Common Stock owned directly by Mr. Sontag, and (iii) 180,921
shares of Common Stock held by the ESSOP, as to which Mr. Sontag exercises
shared voting and investment power as one of three trustees of the ESSOP.
Mr. Sontag disclaims beneficial ownership of shares held by the ESSOP.
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and executive officers, and persons who own more than 10% of its
Common Stock, to file with the SEC initial reports of ownership of the Company's
equity securities and to file subsequent reports when there are changes in such
ownership. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, all Section 16(a) filing requirements
applicable to its greater than 10% beneficial owners, directors and executive
officers were complied with in 1996.
BOARD OF DIRECTORS
The Board of Directors of the Company is responsible for establishing broad
corporate policies and for the overall performance of the Company. The Board
held a total of five meetings during the year ended December 31, 1996; each
director attended each meeting except A. Scott Andrews who did not attend one
meeting, Ahmad Khatib, who participated in one meeting by telephone, and
Messrs. Ibrahim and Yew, who did not participate in three meetings. To manage
the complex nature of the Company's business effectively, the Board of Directors
has delegated certain authority to committees of the Board.
The Board has authorized its Executive Committee to exercise all of its
power and authority when the full Board is unable to meet, except for certain
fundamental responsibilities, such as the declaration of dividends, that are
reserved for the Board. During 1996, the members of the Executive Committee
were T. Coleman Andrews, III, Charles W. Pollard, and Dato' Wan Malek Ibrahim.
The Executive Committee did not meet during 1996.
The Audit Committee recommends to the Board of Directors the auditing firm
to be selected each year as independent auditors of the Company's financial
statements and to perform services related to the completion of such audit. The
Audit Committee also has responsibility for (i) reviewing the scope and results
of the audit with the independent auditors, (ii) reviewing the Company's
financial condition and results of operations with management and the
independent auditors, (iii) considering the adequacy of the internal accounting
and control procedures of the Company, and (iv) reviewing any non-audit services
and special engagements to be performed by the independent auditors. The Audit
Committee also reviews, at least once each year, the terms of all material
transactions and arrangements between the Company and its affiliates. The
members of the Audit Committee during 1996, none of whom were employees of the
Company, were A. Scott Andrews (Chairman), Russell L. Ray, Jr. and Peter M.
Sontag. As of April 4, 1997, Mr. Ray began serving as President and Chief
Executive Officer for the Company. Mr. A. Scott Andrews is the brother of T.
Coleman Andrews, III, the Company's Chairman. The Audit Committee met one time
in 1996 and all members of the Audit Committee attended that meeting.
6
<PAGE>
The Board has also assigned certain responsibilities relating to employee
compensation to the Compensation Committee. The principal duties of the
Compensation Committee are to review key employee compensation policies, plans,
and programs; to monitor performance and compensation of officers of the Company
and other key employees; to prepare recommendations and periodic reports to the
Board concerning such matters; and to administer the Company's management
incentive compensation plans, including its stock option plan. The members of
the Compensation Committee, none of whom were employees of the Company during
1996, were Peter M. Sontag (Chairman), Russell L. Ray, Jr., and A. Scott
Andrews. As of April 4, 1997, Mr. Ray began serving as President and Chief
Executive Officer for the Company. The Compensation Committee met one time in
1996 and one time in March 1997, and all members of the Compensation Committee
attended each of those meetings.
Directors who are not also executive officers of the Company or of an
affiliate of the Company ("Non-Affiliate Directors") of the Company receive
$25,000 annually for serving on the Board of the Company, which amount is paid
quarterly in advance. Directors of the Company receive no compensation for
attendance at Board committee meetings. Non-Affiliate Directors are reimbursed
for usual and ordinary expenses of meeting attendance. The Company has adopted
the Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), pursuant
to which each new Non-Affiliate Director will be offered options to purchase
10,000 shares of Common Stock upon election or appointment to the Board of
Directors of the Company. On the third anniversary of the initial award, each
such Director will be offered an option to purchase an additional 5,000 shares
of Common Stock. Options granted under the Directors' Plan become exercisable
in equal monthly installments during the 36 months following the award, as long
as the person remains a Director of the Company. The exercise price of all such
options will be the average closing price of the Common Stock during the 30
trading days immediately preceding the date of grant. Up to 250,000 shares of
Common Stock may be issued under the Directors' Plan, subject to certain
adjustments.
On May 31, 1995, the Company granted to three Non-Affiliate Directors
30,000 options to purchase 30,000 shares of Common Stock under the World Airways
Stock Option Plan (the "1995 Plan"), all of which options expire on May 30,
2003. The Company granted to Russell L. Ray, Jr. 10,000 options, of which 7,083
became exercisable on the date of grant and the remaining 2,917 become
exercisable in seven equal monthly installments of 417 options following the
date of grant. The first 5,000 options to vest have an exercise price of $10.00
per share and the second 5,000 options to vest have an exercise price of $10.50
per share. The Company granted to Peter M. Sontag 10,000 options, of which
6,667 became exercisable on the date of grant and the remaining 3,333 become
exercisable in eight equal monthly installments of 417 options following the
date of grant. The first 5,000 options to vest have an exercise price of $11.00
per share and the second 5,000 options to vest have an exercise price of $11.55
per share. The Company granted to A. Scott Andrews 10,000 options, of which
5,000 became exercisable on the date of grant and the remaining 5,000 become
exercisable in 12 equal monthly installments of 417 options following the date
of grant. These options have an exercise price of $11.00 per share. All future
grants of options to Non-Affiliate Directors will be made under the Directors'
Plan; no grants of options to Non-Affiliate Directors were made under the
Directors' Plan in 1996.
7
<PAGE>
ITEM NO. 1 - ELECTION OF DIRECTORS
Class II Directors will be elected to serve until the 2000 Annual Meeting
and until their successors are duly elected and qualified. Class III Directors
serve until the Company's 1998 Annual Meeting, and Class I directors serve until
the Company's 1999 Annual Meeting. Unless directed to do otherwise, the proxy
holders intend to vote all shares for which they hold proxies for the nominees
set forth below. Although it is not contemplated that any nominee will decline
or be unable to serve, if either occurs prior to the Annual Meeting, the Board
will select a substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE WITH AUTHORITY FOR THE PROXY HOLDERS TO
VOTE FOR THE NOMINEES NAMED BELOW OR THEIR SUBSTITUTES AS SET FORTH HEREIN.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
TERMS OF OFFICE EXPIRING AT THE 2000 ANNUAL MEETING
Name and Age Past Five Years' Principal Occupation(s) and Other
- ------------ --------------------------------------------------
Directorships
-------------
John C. Backus, Jr. 38 John C. Backus, Jr. 38 Mr. Backus worked at US Order
since its inception in 1990 and served as its President
and Chief Operating Officer until US Order was merged
into InteliData in November, 1996. Upon the effective
date of the merger, Mr. Backus became President and
Chief Operating Officer of InteliData. Mr. Backus was
appointed a Director of WorldCorp in August 1994. Prior
to working with US Order, Mr. Backus worked for six
years at WorldCorp and its subsidiaries holding a
variety of executive positions including Vice President
of Corporate Development, Vice President of Finance,
and Vice President of Sales and Marketing at World
Airways. Prior to joining WorldCorp, Mr. Backus worked
at Bain & Company, Inc., a worldwide strategy
consulting firm with approximately 1,200 employees, in
its consulting and venture capital groups where he
focused on consumer products and services. Mr. Backus
serves on the Board of Directors of InteliData, Visa
Interactive and Home Financial Network, Inc. He
received both his B.S. and M.B.A. from Stanford
University.
Russell L. Ray, Jr., 61 Mr. Ray has served as a Director of the Company since
July 1993. Mr. Ray was appointed President and CEO of
he Company on April 4, 1997. Prior to that ppointment,
Mr. Ray was senior advisor to Winston Partners, a
private investment firm and an aviation/aerospace
consultant. From 1992 to 1993, Mr. Ray served as
Executive Vice President of British Aerospace, Inc.
From 1991 to 1992, Mr. Ray served as President and
Chief Executive Officer of Pan American World Airways.
From 1988 to 1991, he served as Vice President and
General Manager of Commercial Marketing of McDonnell
Douglas Corporation and from 1985 to 1988, he served as
President of Pacific Southwest Airlines. He has served
on a number of public company boards in and out of the
aviation industry.
8
<PAGE>
Lim Kheng Yew, 45 Lim Kheng Yew, 45 Lim Kheng Yew has served as a
Director of the Company since February 1994. Mr.
Lim has served as Managing Director and Chief
Executive Officer of Malaysian Helicopter Services
Berhad since February 1996. He is a Director of
MHS, TRI and Polypulp. Pursuant to the
Shareholders Agreement, WorldCorp is obligated to
vote its shares to elect two directors nominated
by MHS. Mr. Lim is one of such nominees designated
by MHS.
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
CLASS III DIRECTORS - TERMS OF OFFICE EXPIRING AT THE 1998 ANNUAL MEETING
Name and Age Past Five Years' Principal Occupation(s) and Other
- ------------ --------------------------------------------------
Directorships
-------------
A. Scott Andrews, 38 A. Scott Andrews, 38 Mr. Andrews has served as a
Director of the Company since June 1992. He was a
founder and has served as Managing Director of
Winston Partners, a private in vestment firm,
since May 1994. He served as Chief Financial
Officer of the Company and WorldCorp from May 1992
until May 1994. He joined WorldCorp as Treasurer
in August 1987 and was elected Vice President--
Finance and Treasurer of WorldCorp in April 1988.
From August 1985 to February 1987, he was Vice
President, Finance of Presidential Airways, a
passenger airline. From September 1980 to August
1985, he was associated with J.P. Morgan & Co., a
banking firm, most recently as Assistant Vice
President. Mr. Andrews serves on the boards of
Mayfair Partners, Comtrad Industries and Logotel.
He is the brother of T. Coleman Andrews, III .
Dato' Wan Malek Ibrahim, 49 Dato' Wan Malek Ibrahim has served as a Director
of the Company since February 1994. Mr. Malek is
Managing Director and a member of the Board of
Directors of Malaysian Airlines. He is a Director
of MHS and KYM Holdings Bhd, an industrial paper
manufacturer. Pursuant to the Shareholders
Agreement, WorldCorp is obligated to vote its
shares to elect two directors nominated by MHS.
Mr. Malek is one of such nominees designated by
MHS.
Ahmad M. Khatib, 47 Mr. Khatib has served as Executive Vice President
of the Company and also as a Director on World
Airways' board since February 1994. Mr. Khatib
served as Senior Vice President, in different
capacities, since June 1988. He joined the Company
in May 1972 as a passenger service agent. During
his more than 24 years with the Company, he has
held numerous management positions in the areas of
special projects, marketing and sales, planning
and services as well as in aircraft leasing and
related agreements, becoming Vice President of
Marketing and Customer Services in 1987. During
his tenure, Mr. Khatib's focus has been on the
Company's core business and he is responsible for
major accounts and strategic commercial
relationships.
9
<PAGE>
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
CLASS I DIRECTORS - TERMS OF OFFICE EXPIRING AT THE 1999 ANNUAL MEETING
Name and Age Past Five Years' Principal Occupation(s) and Other
- ------------ --------------------------------------------------
Directorships
-------------
T. Coleman Andrews, III, 42 Mr. Andrews has served as Chairman of the Board of
the Company since Septem ber 1986. He is a
Director and Chairman of the Board of WorldCorp,
and has served as a Director of InteliData
Technologies Corporation (and its predecessor US
Order, Inc.) since 1990. From 1978 through 1986,
he was affiliated with Bain & Company, Inc., an
international strategy consulting firm. At Bain,
he was elected partner in 1982 and was a founding
general partner in 1984 of The Bain Capital Fund,
a private venture capital partnership. Prior to
his experience with Bain, Mr. Andrews served in
several appointed positions in the White House for
the Ford Administration. He is the brother of A.
Scott Andrews.
Peter M. Sontag, 53 Mr. Sontag has served as a Director of the Company
since February 1994. Mr. Sontag currently is the
CEO of the Crown Marketing Group, Inc. in
Clearwater, Florida. Mr. Sontag provided
consulting services for two years to various
companies during the observation of his non-
compete agreement with USTravel. He worked on
travel and automation related projects with
companies such as: Choice Hotel Corporation, Ideon
Corporation, Reed Elsevier, Travelogue and Fast
Lane Travel, Inc. From 1986 to 1994, Mr. Sontag
served as Chairman and CEO of USTravel, the third
largest travel distribution company in the U. S.
which he founded in 1986. Prior to USTravel he was
CEO of Sontag, Annis & Associates, Inc. a Travel
and Computer consulting firm sold to Citibank in
1987.
10
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION REPORT
In 1996, the Compensation Committee of the Company was composed of three
independent, non-employee directors, Messrs. Sontag (Chairman), A. Scott Andrews
and Ray, none of whom was an employee of the Company during 1996. The Committee
administers the Company's executive incentive plans, reviews its compensation
plans, programs, and policies, monitors the performance and compensation of
executive officers and other key employees, and makes appropriate
recommendations and reports to the Board concerning matters of executive
compensation.
Compensation Philosophy
- -----------------------
The Company's compensation philosophy is to provide total compensation at a
level necessary to attract, motivate, develop, and retain outstanding employees.
The fundamental philosophy of the Company's executive compensation program is to
relate the executive's total compensation closely to superior individual,
departmental and corporate performance, and through this performance to
shareholder value. The Company's philosophy discourages automatic annual salary
increases and favors variable incentive compensation tied to measurable results.
The Compensation Committee's executive compensation program consists of
three main components: (1) base salary; (2) the 1995 Management Incentive
Compensation Plan (the "Incentive Plan"); and (3) incentive stock options under
the Company's 1995 Stock Option Plan (the "Option Plan"), all of which are
structured to encourage the achievement of superior results over time and to
link executive officer and shareholder interests. The Company also has an
Employee Savings and Stock Ownership Plan ("ESSOP") to further link executive
and employee interests with those of the Company. In addition, the Company
occasionally awards bonuses for extraordinary individual performance. The
decision to award bonuses for extraordinary individual performance is made by
the Compensation Committee upon the recommendation of the Company's President.
The Compensation Committee determines the compensation for the Named
Executive Officers of the Company. Mr. Andrews, who served as President and
Chief Executive Officer of WorldCorp and Chairman of the Board in 1996, is
compensated directly by WorldCorp. A portion of his annual salary, however, is
allocated to the Company. In May 1995, the Board of Directors of the Company
approved the Option Plan, which is described in detail herein. Prior to the
establishment of the Option Plan, certain executives of the Company were
eligible to receive awards of options to purchase common stock of WorldCorp
pursuant to the WorldCorp 1988 Amended and Restated Stock Option Plan. Mr.
Andrews' and Mr. Khatib's compensation is set forth in written employment
agreements, the terms of which are discussed herein. See "Contracts and
Termination of Employment and Change in Control Arrangements" below.
Components of Compensation
- --------------------------
(1) Base Salary
Base salaries for new management employees are determined initially by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for management
talent.
11
<PAGE>
Through 1994, the Company had a merit-based system for determining base
salary increases for its executive officers. Annual base salary increases would
be awarded to executives based upon the performance ratings they received in
their annual performance review. Effective 1995, the Incentive Plan discussed
below replaced entirely the system of annual merit increases for officers and
managers of the Company.
Although the Incentive Plan replaced the system of annual merit increases,
the base salaries of executives may still be adjusted from time to time if the
Compensation Committee determines (after reference to market data) that an
executive's base salary is not competitive with the marketplace, or if there is
a substantial change in the duties and responsibilities of the executive.
The full Board of Directors is responsible for setting the base salary of
the Company's President and Chief Executive Officer taking into account the
recommendations of the Compensation Committee. Mr. Pollard recused himself from
these deliberations and decisions. The Compensation Committee is responsible
for setting the base salaries of the other named executive officers, based upon
the recommendations of the Company's President.
(2) 1995 Management Incentive Plan
The Company's Incentive Plan makes eligible for annual incentive cash bonus
awards all Company employees at the management level or above who are not
covered by sales commissions or similar agreements, or by collective bargaining
agreements. The Incentive Plan has the following major objectives: 1) focus
management attention on a limited number of measurable objectives that drive
company performance; 2) reward and encourage individual results and excellence;
3) encourage contribution to team results; and 4) encourage all managers to look
beyond individual and team performance towards the achievement of Company
results. All performance objectives (individual, departmental and Company) are
established in writing at the beginning of each year. The most important annual
objective is for the Company to achieve its planned net income target that was
set at the beginning of each year. The net income target is part of the
Company's annual revenue and expense plan which is approved by the Company's
Board of Directors.
Target Awards
-------------
The Incentive Plan is a quantitative matrix consisting of three critical
components. First, it sets a target award (expressed as a percentage of base
salary) for each level of management. The target award is the level of
incentive compensation to be paid when individual performance requirements are
consistently met, departmental performance requirements are consistently met,
and Company results meet the Company's internal plan objectives. The target
bonus level for the Company's President is 40% of base salary; for Vice
Presidents and Department Heads, 30% of base salary; for director level
employees, 20% of base salary and for managers, 10% of base salary.
Weighting
---------
Second, the Incentive Plan weighs individual results, departmental results
and company results differently for each level of management. Senior managers'
incentives are more heavily weighted towards department and Company performance;
other managers' incentives are more heavily weighted towards individual and
department performance. Under this approach, managers may receive awards for
strong individual or department performance even when Company results are below
plan. However, all managers nevertheless retain a significant stake in Company
results. Under the Incentive Plan, President/CEO awards are determined solely
by Company net income performance compared to the Company's annual financial
plan. Company results are based upon whether the Company meets or exceeds
12
<PAGE>
certain net income targets expressed in the Company's annual internal revenue
and expense plan.
Adjustments
-----------
Third, the Incentive Plan adjusts the award up or down based on an
appraisal of individual results, department results and Company results. These
mechanics are expressed in a simple formula. Managers are encouraged to use the
formula to learn the range of potential incentive awards for different levels of
individual, department and Company performance.
The intent of the Incentive Plan is to provide greater compensation
"upside" to high performing managers than the 4-6% increase provided in the 1994
merit pay plan. In 1996, managers did not receive annual salary adjustments
under the merit pay plan (although the merit pay plan continues to cover non-
management personnel). However, department heads have limited budget authority
to adjust a manager's salary if two conditions are met: first, the manager's
base salary is below midpoint of the applicable salary range; and second,
adjustment is required to address a substantial salary inequity.
The Board of Directors intends to make incentive awards for 1996 pursuant
to the Incentive Plan. As of the date of this Proxy Statement no awards have
been made. In March, 1996, the Compensation Committee recommended and the Board
approved increasing Mr. Khatib's salary from $165,000 to $200,000 and Mr. Fort's
salary from $155,000 to $170,000.
(3) Incentive Stock Options
On May 24, 1995, the Company's stockholders approved the Option Plan that
took effect May 31, 1995. Members of the Company's Board of Directors, employees
and consultants to the Company or its affiliates are eligible to participate in
the 1995 Option Plan. The Company has reserved 1,100,000 shares of Common Stock
for issuance upon the exercise of options granted to participants under the 1995
Option Plan. As of December 31, 1996, the Company had awarded options to
purchase 911,173 shares of Common Stock, which are exercisable at prices
ranging from $10.00 to $11.55 per share. Of such options, 315,488 were
exercisable as of December 31, 1996.
The Option Plan is designed to help the Company attract and retain key
management level employees, and to reward the Company's employees for results
that contribute to strong earnings performance and improved share values. The
number of options granted in the case of Company executives is set by the Board
of Directors based upon a range of factors, including scope of responsibilities,
internal equity and external competitiveness. The number of stock options
granted to non-executives is determined by a formula based on annual salary and
the share price on the date of the grant.
Accelerated vesting of options is one element of the Option Plan designed
to align the interests of the Company's executives with those of the Company's
stockholders. For those executives, 20% of options granted vest on the later of
the grant date or completion of the first full year of employment, while vesting
of the balance of the options is based on performance of the Company's stock.
An additional 25% of the options vests for each 25% improvement in the Company's
share value (compounded). Vesting for participants below the Vice President
level is designed to encourage retention of employees, and occurs in equal
monthly installments over three years following the grant date. No option is
exercisable more than 10 years following the grant date.
13
<PAGE>
The Option Plan permits the grant of both incentive stock options and
nonqualified stock options. The Option Plan is administered by the Compensation
Committee, which has the authority to select individuals to participate in the
Option Plan and to determine the terms of all options awards made under the
Option Plan.
The exercise price for options awarded under the Option Plan may not be
less than 85% of the fair market value (as defined) of the Common Stock at the
time of grant, except that incentive stock options may not be less than the fair
market value of the Common Stock. Participants may pay the exercise price in
cash or shares of Common Stock already held by the participant.
(4) Employee Savings and Stock Ownership Plan
In addition to the three components of the executive compensation program,
the Company also offers an Employee Savings and Stock Ownership Plan ("ESSOP" or
"Plan") available to all executives and regular employees. In September 1996,
the Boards of Directors of WorldCorp and World Airways substituted World Airways
for WorldCorp as sponsor of the ESSOP.
When WorldCorp established the ESSOP in February 1989, World Airways was a
wholly-owned subsidiary. After the Company's initial public offering in October
1995, WorldCorp's ownership was reduced to 59.3 percent and Malaysian Helicopter
Services Berhad ("MHS") ownership was reduced to 16.6%. By September 1996, 256
of the ESSOP participants were World Airway's employees and only four were
employees of WorldCorp. Because World Airways now had a publicly traded stock
available and virtually all of the ESSOP participants were employees of World
Airways, the Board decided it was in the best interest of the Plan participants
and the Company to substitute the Company as the sponsor of the Plan and to make
the Common Stock available instead of WorldCorp's common stock. This
substitution better aligned the participants' interests with the Company because
they could purchase stock of their employer, World Airways, rather than the
parent company, WorldCorp. The Board also believed that the Company should bear
the administrative costs of the ESSOP because virtually all of the participants
were its employees.
To effect the substitution, the ESSOP trustees exchanged the unallocated
shares of WorldCorp held by the Plan with shares of the Company's Common Stock.
The exchange ratio was based on the average closing prices for WorldCorp and
World Airways common stock on the New York Stock Exchange and Nasdaq,
respectively, for the five trading day period preceding the closing date of
September 30, 1996. The Company also made a discretionary contribution of
$50,000 to the Plan to enhance the fairness of the exchange to the Plan
beneficiaries. The Company's Board deemed the contribution fair and in the
interest of the Company because it would have incurred similar organizational
costs to establish a new plan if the WorldCorp ESSOP were terminated, and
maintaining the existing Plan with the substitution of the Company and its stock
was less disruptive to the participants than creating a new plan.
The ESSOP contains a "cash or deferred arrangement" under Section 401(k) of
the Internal Revenue Code. The Company matches employee contributions dollar for
dollar when allocated for the purchase of the Common Stock and 33.3% when
allocated to other investment options. As a result of the substitution,
effective September 30, 1996, employee allocations to stock were matched with
Common Stock rather than WorldCorp common stock.
Compensation of the President and Chief Executive Officer
- ---------------------------------------------------------
Mr. Pollard, who departed the Company on March 14, 1997, received
compensation in 1996 pursuant to the terms of an employment agreement dated as
of January 1, 1995. This employment agreement contained terms and conditions
14
<PAGE>
consistent with the compensation philosophy stated herein, and substantially the
same as the terms and conditions of the employment agreement between T. Coleman
Andrews and WorldCorp, Inc. In 1996 Mr.
Pollard received a base salary of $225,000, $9,500 in matching contributions
under the ESSOP, and $577 in group term life insurance paid by the Company.
Under the Management Incentive Compensation Plan, awards for the President and
Chief Executive Officer are determined solely by the Company's net income
performance compared to the Company's annual financial plan; no award was made
to Mr. Pollard for 1996.
See "Contracts and Termination of Employment and Change in Control
Arrangements" below, for a discussion of the Company's employment agreements.
The Compensation Committee
--------------------------
Peter M. Sontag (Chairman)
A. Scott Andrews
Russell L. Ray, Jr.
15
<PAGE>
STOCK PERFORMANCE GRAPH*
The Company conducted an initial public offering on October 5, 1995. The
following graph and chart compare the performance of the Common Stock since such
date to the Russell 2000 Index, the Dow Jones Airlines Index, and the Dow Jones
Air Freight/Couriers Index. Both the graph and the chart assume that the value
of the investment in the Company's common stock and each index was $100 at
October 5, 1995, and that all dividends were reinvested.
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING OCTOBER 5, 1996
[CHART APPEARS HERE]
__________________________________
* The Dow Jones Airlines Index and Dow Jones Air Freight/Couriers Index
(collectively, the "Dow Jones Indices") have been used as industry peer group
indices because the Company has a limited number of competitors and because such
peer group data is unavailable from the primary competitors of the Company with
respect to its air transportation services business (these competitors,
consisting of other chartered airline services, being either foreign-owned or
only recently publicly traded). Although the Company has used the Dow Jones
Indices as peer group indices, differences between the companies which comprise
these indices and the Company reduce the comparability of stock price
performance and other performance indicators. The Dow Jones Airlines Index
consists of the major, scheduled, domestic airline carriers whereas World
Airways is a smaller airline carrier which does not provide scheduled passenger
or cargo services. The Dow Jones Air Freight/Couriers Index consists of large
freight/courier companies such as Federal Express which have freight and courier
operations significantly larger than World Airways' cargo operations.
16
<PAGE>
PERFORMANCE GRAPH INDEX
OCTOBER 1995 TO DECEMBER 1996
[GRAPH APPEARS HERE]
17
<PAGE>
EXECUTIVE COMPENSATION
In May 1995, the Board of Directors of the Company approved the Option
Plan, which is described in detail below. Prior to the establishment of the
Option Plan, executives of the Company were eligible to receive awards of
options to purchase common stock of WorldCorp pursuant to the WorldCorp 1988
Amended and Restated Stock Option Plan.
The following table sets forth information concerning the compensation
received for services rendered to the Company during the years ended December
31, 1994, 1995 and 1996 for each Named Executive Officer. Effective October 31,
1996, Mr. Guitjens departed the Company. Effective February 7, 1997, Mr. Savage
departed the Company. On March 14, 1997, Mr. Pollard departed the Company and
was succeeded as President and Chief Executive Officer, pursuant to the
Company's by laws, by T. Coleman Andrews. On April 4, 1997, Mr. Ray was named
President and Chief Executive Officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Securities
Underlying All Other
Options/ Compensa-
Name and Principal Salary/1/ Bonus/2/ SARs/3/ tion/4/
Position Year ($) ($) (#) ($)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles W. Pollard 1996 225,000 --- --- 10,077/5/
President and 1995 230,365 45,000/6/ 250,000/7/ 10,124/8/
Chief Executive Officer 1994 176,539 --- --- 12,895
Ahmad M. Khatib 1996 191,519 --- --- 4,060/9/
Executive Vice President 1995 165,000 45,000/10/ 150,000/11/ 33,349/12/
1994 165,000 50,000 --- 6,885
Vance Fort 1996 166,363 --- --- 6,466/13/
Executive Vice President 1995 154,992 38,250/14/ 125,000/15/ 3,383/16/
1994 143,175 --- --- 5,803
Henk Guitjens 1996 192,827 49,500 150,000/17/ 10,535/18/
Senior Vice President 1995 117,403 40,000 --- 4,854/19/
Marketing & Sales 1994 --- --- --- ---
Michael E. Savage 1996 135,000 --- --- 290/20/
Vice President and 1995 135,000 30,375/21/ 120,000/22/ 225/23/
Chief Financial Officer 1994 65,000 50,000/24/ --- ---
</TABLE>
18
<PAGE>
____________________
Footnotes
/1/Excludes compensation deferred under the ESSOP, which is also available to
employees of the Company. The Company's contributions to the ESSOP accounts
of the Named Executive Officers is included in the column titled "All Other
Compensation." See footnote 4.
/2/Bonuses are listed for the year in which the bonus was earned. Most
bonuses are paid early in the year following the year in which the bonus was
earned by the individual.
/3/Includes options granted in 1996, 1995, and 1994 under World Airways' 1995
Stock Option Plan. No warrants or SARS were granted in 1996, 1995 or 1994.
/4/Amount consists of the proceeds from the exercise of stock options, and the
value of World Airways contributions to the executives ESSOP accounts of the
Named Executive Officers, and Company payments for group life term
insurance. See discussion of Employee Savings and Stock Ownership Plan at
page 15. These contributions were made in World Airways and WorldCorp shares
of common stock and are valued using closing prices on December 31, 1996.
/5/Consists of $577 in group term life insurance paid on behalf of Mr. Pollard,
$8,654 in WorldCorp contributions and $846 in World Airways contributions to
Mr. Pollard's ESSOP account .
/6/Under the Incentive Plan, President/CEO awards are determined solely by
Company net income performance compared to the Company's annual financial
plan. Consists of a mid-year bonus of $36,000 and a year-end bonus of $9,000
awarded to Mr. Pollard under the Company's Incentive Plan for his
performance in 1995.
/7/Consists of options to purchase 250,000 shares of Common Stock granted to
Mr. Pollard under the Option Plan.
/8/Consists of $884 in group term life insurance paid on behalf of Mr.
Pollard and $9,240 in WorldCorp contributions to Mr. Pollard's ESSOP
account.
/9/Consists of $974 in group term life insurance paid on behalf of Mr. Khatib,
$2,317 in WorldCorp contributions and $769 in World Airways contributions to
Mr. Khatib's ESSOP account.
/10/Consists of a mid-year bonus of $29,700 and a year-end bonus of $15,300
awarded to Mr. Khatib under the Company's Incentive Plan for his performance
in 1995.
/11/Consists of options to purchase 150,000 shares of Common Stock granted to
Mr. Khatib under the Option Plan.
/12/Consists of (i) $30,319 paid to Mr. Khatib as an international service
allowance; (ii) $974 in group term life insurance paid on behalf of Mr.
Khatib; and (iii) $2,056 in WorldCorp contributions to Mr. Khatib's ESSOP
account.
/13/Consists of $1,498 in group term life insurance paid on behalf of Mr. Fort,
$3,371 in WorldCorp contributions and $1,597 in World Airways contributions
to Mr. Fort's ESSOP account.
19
<PAGE>
/14/Consists of a mid-year bonus of $18,599 and a year-end bonus of $19,651
awarded to Mr. Fort under the Company's Incentive Plan for his performance
in 1995.
/15/Consists of options to purchase 125,000 shares of Common Stock granted to
Mr. Fort under the Option Plan.
/16/Consists of $1,254 in group term life insurance paid on behalf of Mr. Fort
and $2,129 in WorldCorp contributions to Mr. Fort's ESSOP account.
/17/Consists of options to purchase 150,000 shares of Common Stock granted to
Mr. Guitjens under the Option Plan.
/18/Consists of $1,035 in group term life insurance paid on behalf of Mr.
Guitjens and $9,500 in WorldCorp contributions to Mr. Guitjens ESSOP
account.
/19/Consists of $776 in group term life insurance paid on behalf of Mr.
Guitjens and $3,808 in WorldCorp contributions to Mr. Guitjens ESSOP
account.
/20/Consists of $290 in group term life insurance paid on behalf of Mr. Savage.
/21/Consists of a mid-year bonus of $16,200 and a year-end bonus of $14,175
awarded to Mr. Savage under the Incentive Plan for Mr. Savage's performance
in 1995.
/22/Consists of options to purchase 120,000 shares of Common Stock granted to
Mr. Savage under the Option Plan.
/23/Consists of $225 in group term life insurance paid on behalf of Mr. Savage.
/24/Represents incentive compensation to which Mr. Savage was entitled under the
employment offer extended to him to commence employment at the Company in
June 1994.
20
<PAGE>
THE COMPANY DID NOT GRANT ANY STOCK OPTIONS TO NAMED EXECUTIVE OFFICERS IN
1996.
The following table sets forth the number of shares covered by both
exercisable and unexercisable stock options. Also reported are the values for
"in-the-money" options.
AGGREGATED OPTION EXERCISES IN 1996
AND YEAR-END OPTION VALUES/1/
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS AT DECEMBER 31, 1996
SHARES AC- DECEMBER 31, 1996 ($)/4/
QUIRED VALUE
ON REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE $/2/ UNEXERCISABLE) UNEXERCISABLE)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles W. Pollard 0 WLDA 0 WLDA 100,000/150,000 WLDA 0/0 WLDA
20,000 WOA 73,950 WOA 130,000/0 WOA 0/0 WOA
Ahmad M. Khatib 0 WLDA 0 WLDA 30,000/120,000 WLDA 0/0 WLDA
0 WOA 0 WOA 150,000/0 WOA 0/0 WOA
Vance Fort 0 WLDA 0 WLDA 25,000/100,000 WLDA 0/0 WLDA
8,900 WOA 38,973 WOA 0/0 WOA 0/0 WOA
Henk Guitjens 0 0 0/0 0/0
Jack Brown 0 0 0/0 0/0
</TABLE>
- --------------------
/1/The information set forth in this table includes the aggregate amount of
all options granted to the Named Executive Officers by the Company and
WorldCorp. The calculations in this table are based upon a December 31, 1996,
closing price of $8.125 for World Airways on the Nasdaq National Market and a
closing price of $4.625 of WorldCorp's Common Stock on the New York Stock
Exchange. WLDA is the Nasdaq trading symbol for World Airways and WOA is the
New York Stock Exchange trading symbol for WorldCorp. Shares not specifically
designated are World Airways, or "WLDA" shares.
/2/Value based on market value of the common stock on the exercise date minus
the exercise price.
21
<PAGE>
CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements
- ---------------------
T. Coleman Andrews, III
- -----------------------
WorldCorp and T. Coleman Andrews, III, entered into an employment agreement
and a stock option agreement on August 19, 1994. The principal terms of the
employment agreement are as follows: (i) Mr. Andrews will receive a minimum
salary of $350,000 from WorldCorp per year beginning on the date of the executed
contract, a portion of which is allocated to the Company: (ii) the term of the
agreement expires on December 31, 1997, subject to a renewal and extension
provision described below; (iii) Mr. Andrews is eligible to receive bonuses
pursuant to WorldCorp's Management Incentive Compensation Plan; (iv) Mr. Andrews
received a grant of options to purchase 800,000 shares of WorldCorp common
stock; (v) Mr. Andrews has agreed to hold a substantial number of shares of
WorldCorp common stock; and (vi) WorldCorp will maintain a $5 million life
insurance policy, the proceeds of which, in the event of Mr. Andrews' death, is
payable to Mr. Andrews' estate.
Mr. Andrews may terminate his employment in the event (i) WorldCorp
relocates its headquarters outside of the Washington, D.C. area, (ii) his duties
are diminished in a manner materially altering his responsibilities, (iii) the
board of directors of WorldCorp determines that WorldCorp should be liquidated
or dissolved during the term of the employment agreement or (iv) there is a
change in control of WorldCorp. Under the terms of the employment agreement, a
change in control includes (i) any person, other than WorldCorp, becoming the
beneficial owner of more than 50% of the then outstanding securities of
WorldCorp, (ii) certain changes involving a majority of the Board of Directors
of WorldCorp, (iii) certain mergers or acquisitions of WorldCorp with any other
corporations and (iv) the liquidation or sale of substantially all of
WorldCorp's assets. In the event Mr. Andrews exercises this termination right,
or, in the event WorldCorp terminates Mr. Andrews' employment with the Company
other than for cause (as defined in the employment agreement), WorldCorp is
obligated to pay Mr. Andrews the undiscounted remainder of his base salary then
in effect, any deferred salary and/or bonus compensation payable, and all
granted but unexercisable stock options under Mr. Andrews' stock option
agreement shall become immediately exercisable for a period of one year
following the date of termination. WorldCorp may terminate the agreement for
cause or if Mr. Andrews becomes disabled for a period of 12 months.
Mr. Andrews serves as Director and Chairman of the Board of the Company.
Mr. Andrews previously served as President & Chief Executive Officer of
WorldCorp until April 1997. He also served as the Company's Chief Executive
Officer in 1995. WorldCorp compensates Mr. Andrews directly, although a portion
of his annual salary is allocated to the Company. For fiscal year 1996 the
Company was allocated $200,000 of Mr. Andrews' annual salary by WorldCorp
pursuant to a services agreement between WorldCorp and the Company.
Ahmad M. Khatib
- ---------------
The Company has entered into an employment agreement with Ahmad M. Khatib
as of October 1, 1996, providing that Mr. Khatib will serve as Executive Vice
President of the Company until December 31, 1999, unless terminated earlier or
extended. Mr. Khatib is entitled to a base salary of $200,000 per year and
22
<PAGE>
bonuses under the Company's Incentive Plan, the right to participate in all
bonus and incentive compensation plans or arrangements made available to other
Company officers and directors and certain other benefits, including a $1
million life insurance policy. Mr. Khatib is entitled to receive stock options
in accordance with the Option Plan. The agreement terminates upon Mr. Khatib's
death. The Company may terminate the agreement upon disability which continues
for a period of 12 months, or for cause (as defined) upon the affirmative vote
of the majority of the Board of Directors. If the Board terminates Mr. Khatib's
employment without cause, Mr. Khatib is entitled to receive the remainder of the
base salary and certain other compensation due under the agreement and all
options granted to Mr. Khatib but unexercisable under the 1995 Plan will become
immediately exercisable. Mr. Khatib may terminate the agreement upon 30 days
notice under certain circumstances, including a substantial alteration of his
responsibilities, the Company's reduction of his compensation without his
consent or failure to pay any portion of his current compensation, and Board
approval of a liquidation or dissolution of the Company. If, on December 31,
1998, Mr. Khatib and the Company have not executed a new employment agreement,
and neither party has given written notice to the other that they intend to
allow the agreement to expire at the end of its term on December 31, 1999, then
Mr. Khatib's employment agreement will be automatically extended through
December 31, 2000 on the same terms and conditions.
As part of his employment agreement, Mr. Khatib has agreed that he will
hold a specified minimum number of shares of Common Stock and/or WorldCorp
common stock during the term of the agreement. Mr. Khatib is required to hold
3,746 shares of Common Stock and/or WorldCorp common stock upon the earlier of
December 31, 1996 or his exercise of 56,250 options. Mr. Khatib is required to
hold 5,625 shares of Common Stock and/or WorldCorp common stock upon the earlier
of December 31, 1997 or his exercise of 75,000 options. Mr. Khatib is required
to hold 7,500 shares of Common Stock and/or WorldCorp common stock upon the
earlier of December 31, 1998 or his exercise of 93,750 options. Mr. Khatib is
also required to hold 9,371 shares upon his exercise of 112,500 options; 11,248
shares upon his exercise of 131,250 options and 13,125 shares upon his exercise
of 150,000 options.
Pursuant to a stock option agreement between the Company and Mr. Khatib
dated May 31, 1995, Mr. Khatib has been awarded options to purchase up to
150,000 shares of Common Stock at an exercise price of $11.00 per share. The
options for 30,000 shares were exercisable at the time of the grant. The
options for the remaining 120,000 shares will become exercisable on January 31,
2003; however, the exercise date will be accelerated with respect to increments
of 30,000 shares if certain targets are achieved regarding the Company's stock
price. Pursuant to this provision, Mr. Khatib will be entitled to exercise
options to purchase 30,000 shares of Common Stock, at the $11.00 exercise price,
each time that the Common Stock trades at a price that is an increase of 25%
over the preceding eligibility level for 20 trading days. Thus, Mr. Khatib will
first be entitled to exercise options for 30,000 shares if the Common Stock
trades at or above $13.75 for 20 consecutive trading days. The same entitlement
would arise for four additional blocks of 30,000 options, at the exercise price
of $11.00 per share, if the Common Stock trades at or above $17.91, $21.49, and
$26.86 for 20 trading days each (each of these trading prices is 25% above the
price of the Common Stock at the earlier tier). Should Mr. Khatib cease to be
employed by the company or to serve in one of several other specified
capacities, options that have not become exercisable by such time will not
thereafter become exercisable. Options exercisable at such time will remain
exercisable for one year.
Charles W. Pollard
- ------------------
Mr. Pollard departed as World Airways' President and Chief Executive
Officer on March 14, 1997. Pursuant to the terms of Mr. Pollard's employment
agreement, World Airways paid Mr. Pollard on March 24, 1997, the undiscounted
remainder of his base salary of $225,000 through December 31, 1997, the
expiration date of his agreement. Of Mr. Pollard's 250,000 stock options,
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100,000 were previously exercisable. The remaining 100,000 of Mr. Pollard's
stock options became exercisable on March 14, 1997. These stock options are
exercisable at an exercise price of $11.00 per share for one year from March 14,
1997. Those options which Mr. Pollard has not exercised by March 14, 1998, will
be canceled. World Airways is also obligated to continue certain of Mr.
Pollard's medical, life and dental insurance benefits until he receives
comparable benefits from a new employer. World Airways is required to fully
fund and to vest Mr. Pollard's retirement benefit. The non-qualified retirement
benefit guarantees Mr. Pollard a retirement of at least $50,000 per year,
vesting at age 60.
Henk Guitjens
- -------------
The Company entered into a Separation from Employment Agreement and Release
with Henk Guitjens, former Senior Vice President for Marketing and Sales, dated
October 31, 1996. Mr. Guitjens was hired to perform product development and
marketing services for passenger charter, scheduled charter and scheduled
service products effective April 1, 1995. Due to unforeseen changes in the
Company's target markets for those services, the Company decided in July 1996 to
terminate all those passenger services. In exchange for his agreement to the
termination of his employment agreement and release of any claims against the
Company, the Company made a lump sum payment to Mr. Guitjens, the final
installment of which was paid on January 2, 1997. Mr. Guitjens also received the
dollar value of his accrued, unused leave and shares of WorldCorp common stock
pursuant to the World Airways Employee Savings and Stock Ownership Plan. Mr.
Guitjens had 25,000 exercisable stock options with an exercise price of $11.
Any of these options unexercised will expire on June 17, 1997. The Company also
agreed to provide standard medical, dental and life insurance benefits to Mr.
Guitjens for up to one year or until his medical benefits became effective with
a new employer. As of March 31, 1997, the Company was still providing these
benefits.
Michael E. Savage
- -----------------
Effective February 7, 1997, the Company and Mr. Savage entered into a Separation
from Employment Agreement and Release. Pursuant to this agreement, in return
for a release in favor of the Company, the Company agreed to make (i) severance
payments to Mr. Savage through August 7, 1997, (ii) make a lump sum payment in
lieu of outplacement services, (iii) make a lump sum payment of the dollar value
of all accrued but unused vacation time as of February 7, 1997, and (iv) provide
for the continuation of standard medical, dental and life insurance benefits for
a one year period from February 7, 1997. As of February 7, 1997, Mr. Savage
held 40,000 exercisable option to purchase shares of Common Stock, issued
pursuant to the Option Plan, which will expire if not exercised by Mr. Savage by
February 6, 1998.
Change in Control Agreements
- ----------------------------
The Company has issued stock options to each of the Named Executive
Officers. The option agreements provide that in the event of a termination
without cause (as defined) within two years after a Change in Control (as
defined), the executive officers' stock options shall become fully vested and
exercisable.
WorldCorp has issued stock options to certain of the Company's Named
Executive Officers. Certain of the options issued to executive officers under
the WorldCorp's 1988 Stock Option Plan prior to May 13, 1992, provided that upon
a Change of Control (as defined) the executive officer's option shall become
immediately exercisable as of the date of the Change of Control for up to double
the number of shares of WorldCorp's Common Stock for which the option is
otherwise exercisable as of the date of the Change of Control (not to exceed the
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total number of Option Shares, as defined). Other options issued to executive
officers under the WorldCorp 1988 Stock Option Plan prior to May 13, 1992,
provided that in the event of termination of the executive officer's employment
by the Company without Cause (as defined) or by the executive officer for Good
Reason (as defined) within two years after a Change of Control (as defined) the
executive officer's stock options shall become fully vested and exercisable. In
1992, WorldCorp amended and restated its 1988 Stock Option Plan. WorldCorp's
stockholders approved the amended and restated 1988 Stock Option Plan on May 13,
1992. Options issued to executive officers under the 1988 WorldCorp Stock
Option Plan as amended and restated provide that in the event of termination of
the executive officer's employment by the Company without Cause (as defined) or
by the executive officer for Good Reason (as defined) within two years after a
Change of Control (as defined) the executive officer's stock options shall
become fully vested and exercisable.
CERTAIN TRANSACTIONS
The Company operated as a wholly owned subsidiary of WorldCorp from June
1987 until February 1994 and has operated since February 1994 as a majority
owned subsidiary of WorldCorp. The Company completed an initial public offering
of its Common Stock in October 1995. Approximately 21% of the Company's
outstanding Common Stock is owned by public investors. WorldCorp owns 61.6% of
the Company's outstanding Common Stock. The remaining 17.7% is owned by MHS
Berhad, a Malaysian aviation company ("MHS").
WorldCorp and the Company historically utilized a single corporate staff
for administrative services, thus permitting the Company to utilize WorldCorp
management personnel as needed. Effective January 1, 1995, substantially all of
WorldCorp's management personnel became employees of the Company and since such
date, the Company has provided certain administrative services to WorldCorp.
WorldCorp and the Company have entered into a services agreement pursuant to
which the Company and WorldCorp will continue to provide services to each other
at negotiated rates, which the Company believes are comparable to those that
could be obtained on an arms-length basis.
WorldCorp is subject to the provisions of an indenture terminating in 2004,
which causes the Company not to pay dividends upon the occurrence of any events
of default by WorldCorp under such indenture.
Pursuant to the October 1993 MHS Stock Purchase Agreement, the Company and
WorldCorp sold 24.9% of the outstanding shares of common stock to MHS for $27.4
million (or $11.00 per share) in February 1994. In August 1994, MHS acquired
32% of the Common Stock and assumed management control of Malaysian Airlines,
one of the Company's largest customers. Effective December 31, 1994, WorldCorp
agreed to pay MHS $5.8 million pursuant to a promissory note due December 31,
1995 in exchange for (i) 5% of the outstanding shares of Common Stock which was
held by MHS, and (ii) the execution of a series of multi-year contracts between
the Company and Malaysian Airlines. WorldCorp repaid the $8.5 million note in
full on December 31, 1995. Of the $8.5 million consideration paid by WorldCorp
to MHS, $3.0 million is attributable to certain contract enhancements received
by the Company as a result of such multi-year contracts with Malaysian Airlines.
25
<PAGE>
The Company presently has two multi-year basic contracts with Malaysian
Airlines. The first agreement with Malaysian Airlines is to provide freighter
and passenger aircraft. The Company has an additional significant contract with
Malaysian Airlines under which it flies Malaysian Muslim pilgrims to Saudi
Arabia for the annual Hadj religious pilgrimage. During 1996, the Company
generated revenues of $105.4 million from Malaysian Airlines under these
agreements. The Company leases two DC10-30 aircraft from Malaysian Airlines
under leases that expire in August 1998 and December 1998. The Company paid
rent, maintenance reserves and operating deposits for these aircraft in 1996.
26
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ITEM NO. 2 -- RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP served as independent certified public
accountants for the Company in 1996 and is expected to be represented at the
Annual Meeting. A representative of KPMG Peat Marwick LLP will have an
opportunity to make a statement if the representative so desires and will be
available to respond to appropriate questions.
As of this date, the Board of Directors desires to have KPMG Peat Marwick
LLP continue as accountants for the Company for the year ending December 31,
1997. Accordingly, the Company is presenting a resolution to the meeting to
ratify the appointment by the Board of Directors. If the stockholders do not
approve the proposal, the Board of Directors will reconsider its action with
respect to the appointment of accountants. Approval of the resolution, however,
will in no way limit the Board's authority to terminate or otherwise change the
engagement of KPMG Peat Marwick LLP during the year ending December 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual Meeting
of Stockholders must be received by the Company's Secretary no later than
December 1, 1997, to be included in the Company's 1998 proxy materials.
Proposals intended for inclusion in next year's proxy statement should be
sent to the Secretary of the Company at World Airways, Inc., The Hallmark
Building, 13873 Park Center Road, Suite 490, Herndon, Virginia 20171.
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by the
Chief Executive Officer and a general discussion period during which
stockholders will have an opportunity to ask questions about the business.
The Company does not intend to bring any other matter before the meeting
and does not know of any other matter which is proposed to be brought before the
meeting. However, should any other matter properly come before the meeting, the
persons named in the enclosed proxy will have discretionary authority to vote
all proxies in accordance with their judgment on such matter.
ANNUAL REPORT
A copy of the Annual Report is being mailed to each stockholder entitled to
vote at the Annual Meeting of Stockholders. A copy of the Company's Form 10-K
is available at no charge to all stockholders.
27
<PAGE>
For a copy write to: Mark S. Lynch, Vice President and Chief Financial Officer,
World Airways, Inc., The Hallmark Building, Suite, 490, 13873 Park Center Road,
Herndon, Virginia 20171.
OTHER INFORMATION
This solicitation of proxies is made by the Board of Directors, and the
Company will bear the costs of solicitation. In addition to solicitation by
mail, proxies may also be solicited by directors, officers, and employees of the
Company, who will not receive additional compensation for such solicitation.
Brokerage firms and other custodians, nominees and fiduciaries will be
reimbursed by the Company for their reasonable expenses incurred in sending
proxy material to beneficial owners of the Common Stock. The address of World
Airways' principal executive offices is The Hallmark Building, 13873 Park Center
Road, Suite 490, Herndon, Virginia 20171, and its telephone number is (703) 834-
9200. The above notice and proxy statement are sent by order of the Board of
Directors.
Dated: April 30, 1997
By Order of the Board of Directors,
/s/ Vance Fort
-----------------------------------
VANCE FORT
Executive Vice President
and General Counsel
28
<PAGE>
- --------------------------------------------------------------------------------
DETACH HERE
WORLD AIRWAYS, INC.
THIS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JUNE 13, 1997
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R The undersigned hereby appoints RUSSELL L. RAY, JR., T. COLEMAN
O ANDREWS, III, and VANCE FORT, and each of them, the proxy or proxies of the
X undersigned, with full power of substitution, to vote all shares of Common
Y Stock, par value $.001 per share, of World Airways, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Company's headquarters in
Herndon, Virginia on June 13, 1997, at 11:00 A.M., and at any adjournments or
postponements thereof, with the same force and effect as the undersigned
might or could do if personally present thereat.
UNLESS A CONTRARY INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF DIRECTORS AS DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT AND IN FAVOR OF THE PROPOSAL TO RATIFY THE SELECTION OF THE
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1996. THIS PROXY WILL ALSO BE VOTED AT THE
DISCRETION OF THE PROXY HOLDERS ON SUCH MATTERS OTHER THAN THE TWO SPECIFIC
ITEMS AS MAY COME BEFORE THE MEETING.
A majority of such proxies or their substitutes as shall be present and
acting at the meeting, or if only one be present and acting then that one,
shall have and may exercise all of the powers of all of said proxies
hereunder.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE ---------------
AND RETURN PROMPTLY SEE REVERSE
SIDE
---------------
<PAGE>
DETACH HERE
[X] Please mark
votes as in
this example.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" authority in Item 1 and "FOR" Item 2.
1. AUTHORITY TO VOTE FOR THE FOLLOWING NOMINEES AS DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT:
NOMINEES: Russell L. Ray, Jr., Lim Kheng Yew, John C. Backus
FOR WITHHELD
[ ] [ ]
- ---------------------------------------
(INSTRUCTION: To withhold authority to
vote for one individual nominee, write
such name in the space provided above)
2. PROPOSAL TO RATIFY THE SELECTION OF FOR AGAINST ABSTAIN
KPMG PEAT MARWICK LLP as independent [ ] [ ] [ ]
public accountants for the Company
for the fiscal year ending December 31,
1997.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
PLEASE MARK DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized person. If a
partnership, please sign in full partnership name by authorized person.
