SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: JUNE 30, 1999 Commission File Number 0-26582
WORLD AIRWAYS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1358276
(State of incorporation) (I.R.S. Employer Identification Number)
13873 Park Center Road, Suite 490, Herndon, VA 20171
(Address of Principal Executive Offices)
(703) 834-9200
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of the registrant's Common Stock outstanding on July 30,
1999 was 7,137,141.
<PAGE>
WORLD AIRWAYS, INC.
JUNE 30, 1999, QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets, June 30, 1999 and December 31, 1999
Condensed Statements of Operations,
Three Months Ended June 30, 1999 and 1998
Condensed Statements of Operations,
Six Months Ended June 30, 1999 and 1998
Condensed Statement of Changes in Stockholders' Deficiency,
Six months ended June 30, 1999
Condensed Statements of Cash Flows,
Six months ended June 30, 1999 and 1998
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
WORLD AIRWAYS, INC.
CONDENSED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, including restricted
cash of $470 at June 30, 1999
and $22 at December 31, 1998 $ 17,539 $ 16,893
Trade accounts receivable, less allowance for
doubtful accounts of $398 at June 30, 1999
and December 31, 1998 8,720 3,285
Other receivables 1,633 2,640
Due from affiliate, less allowance for
doubtful accounts of $1,162 at June 30, 1999
and December 31, 1998 603 1,951
Prepaid expenses and other current assets 3,230 3,580
Assets held for sale 500 500
------- -------
Total current assets 32,225 28,849
------- -------
ASSETS HELD FOR SALE 907 1,109
EQUIPMENT AND PROPERTY
Flight and other equipment 90,503 89,878
Equipment under capital leases 12,266 12,266
------- -------
102,769 102,144
Less: accumulated depreciation and amortization 37,216 33,433
------- -------
Net equipment and property 65,553 68,711
------- -------
LONG-TERM OPERATING DEPOSITS 15,870 15,855
OTHER ASSETS AND DEFERRED CHARGES, NET 1,446 1,913
------- -------
TOTAL ASSETS $ 116,001 $ 116,437
======= =======
(Continued)
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1999 1998
----------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 7,689 $ 5,213
Current maturities of long-term obligations 6,775 7,710
Accounts payable 15,311 16,494
Unearned revenue 5,070 2,329
Accrued maintenance in excess of reserves paid 9,720 8,928
Accrued salaries and wages 8,866 6,972
Accrued taxes 2,787 2,205
Other accrued liabilities 1,274 1,480
------- -------
Total current liabilities 57,492 51,331
------- -------
LONG-TERM OBLIGATIONS, NET 56,089 67,569
OTHER LIABILITIES
Deferred gain from sale-leaseback transactions, net of
accumulated amortization of $21,741 at June 30,
1999 and $21,212 at December 31, 1998 3,611 4,140
Accrued maintenance in excess of reserves paid 12,073 8,460
Accrued post-retirement benefits 2,907 2,794
Other liabilities 7,872 5,770
------- -------
Total other liabilities 26,463 21,164
------- -------
TOTAL LIABILITIES 140,044 140,064
------- -------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.001 par value (5,000,000 shares
authorized; no shares issued or outstanding at
June 30, 1999 and December 31, 1998) -- --
Common stock, $.001 par value (40,000,000 shares
authorized; 12,000,064 shares issued and 7,137,141
outstanding at June 30, 1999 and 7,000,064
outstanding at December 31, 1998) 12 12
Additional paid-in capital 43,729 42,522
Contributed capital 3,000 3,000
Accumulated deficit (29,985) (28,434)
Note receivable from WorldCorp, Inc. (1,418) (1,346)
Treasury stock, at cost (5,000,000 shares at June 30,
1999 and December 31, 1998) (39,381) (39,381)
-------- ----------
Total stockholders' deficiency (24,043) (23,627)
--------- ------------
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 116,001 $ 116,437
======== ========
See accompanying Notes to Condensed Financial Statements
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
1999 1998
----------- -----------
OPERATING REVENUES
Flight operations $ 67,320 $ 71,501
Other 172 128
------- -------
Total operating revenues 67,492 71,629
------- -------
OPERATING EXPENSES
Flight operations 19,235 18,495
Maintenance 13,197 15,068
Aircraft rent and insurance 19,550 21,352
Fuel 5,526 5,962
Flight operations subcontracted to
other carriers 1,442 652
Commissions 1,904 2,627
Depreciation and amortization 1,983 2,129
Sales, general and administrative 6,379 6,529
------- -------
Total operating expenses 69,216 72,814
------- -------
OPERATING LOSS (1,724) (1,185)
------- -------
OTHER INCOME (EXPENSE)
Interest expense (1,617) (2,059)
Interest income 256 100
Other, net (8) (19)
-------- --------
Total other expense (1,369) (1,978)
-------- --------
NET EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM (3,093) (3,163)
EXTRAORDINARY ITEM - GAIN
ON RETIREMENT OF DEBT 4,176 --
------- -------
NET EARNINGS (LOSS) $ 1,083 $ (3,163)
======= =======
BASIC EARNINGS (LOSS) PER SHARE:
Earnings (loss) before
extraordinary item $ (0.44) $ (0.44)
Extraordinary item 0.59 --
------- -------
Net earnings (loss) $ 0.15 $ (0.44)
======= =======
DILUTED EARNINGS (LOSS) PER SHARE:
Earnings (loss) before
extraordinary item $ (0.44) $ (0.44)
Extraordinary item 0.59 --
------- -------
Net earnings (loss) $ 0.15 $ (0.44)
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 7,103 7,220
====== =====
Diluted 7,103 7,220
====== =====
See accompanying Notes to Condensed Financial Statements
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
1999 1998
----------- ------------
OPERATING REVENUES
Flight operations $ 132,475 $ 140,643
Other 343 208
-------- --------
Total operating revenues 132,818 140,851
-------- --------
OPERATING EXPENSES
Flight operations 38,569 35,210
Maintenance 25,894 30,640
Aircraft rent and insurance 39,636 42,620
Fuel 10,744 11,402
Flight operations subcontracted to
other carriers 2,061 1,078
Commissions 3,781 5,277
Depreciation and amortization 3,994 4,464
Sales, general and administrative 12,052 12,937
-------- --------
Total operating expenses 136,731 143,628
-------- --------
OPERATING LOSS (3,913) (2,777)
-------- --------
OTHER INCOME (EXPENSE)
Interest expense (3,314) (3,886)
Interest income 473 482
Other, net 955 31
-------- --------
Total other expense (1,886) (3,373)
-------- --------
NET EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM (5,799) (6,150)
EXTRAORDINARY ITEM - GAIN
ON RETIREMENT OF DEBT 4,176 --
-------- ---------
NET EARNINGS (LOSS) $ (1,623) $ (6,150)
======== =========
BASIC EARNINGS (LOSS) PER SHARE:
Earnings (loss) before
extraordinary item $ (0.82) $ (0.84)
Extraordinary item 0.59 --
-------- ---------
Net earnings (loss) $ (0.23) $ (0.84)
======== =========
DILUTED EARNINGS (LOSS) PER SHARE:
Earnings (loss) before
extraordinary item $ (0.82) $ (0.84)
Extraordinary item 0.59 --
-------- ---------
Net earnings (loss) $ (0.23) $ (0.84)
======== =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 7,052 7,315
======== =========
Diluted 7,052 7,315
======== =========
See accompanying Notes to Condensed Financial Statements
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF CHANGES
IN STOCKHOLDERS' DEFICIENCY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Note
Additional Receivable Treasury Total
Common Paid-in Contributed Accumulated from Stock, Stockholders'
Stock Capital Capital Deficit WorldCorp at Cost Deficiency
------- -------- -------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1998 $ 12 $ 42,522 $ 3,000 $ (28,434) $ (1,346) $(39,381) $ (23,627)
8% Debentures converted into
Common Stock -- 1,207 -- -- -- -- 1,207
Note Receivable from
WorldCorp -- -- -- 72 (72) -- --
Net Loss -- -- -- (1,623) -- -- (1,623)
------ ------- -------- -------- ------- ------- --------
BALANCE AT
JUNE 30, 1999 $ 12 $ 43,729 $ 3,000 $ (29,985) $ (1,418) $(39,381) $ (24,043)
======== ======= ======= ======== ======= ======= ========
See accompanying Notes to Condensed Financial Statements
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
( IN THOUSANDS)
(UNAUDITED)
1999 1998
--------- ----------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD $ 16,893 $ 25,887
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) (1,623) (6,076)
Adjustments to reconcile net earnings (loss) to
cash provided (used) by operating activities:
Extraordinary gain on retirement of debt (4,176) --
Depreciation and amortization 3,994 4,464
Deferred gain recognition (529) (528)
Provision for losses on accounts receivable -- 1,187
Other 153 318
Changes in certain assets and liabilities net
of effects of non-cash transactions:
(Increase)in accounts receivable (3,080) (3,160)
(Increase) in restricted short-term investments -- (145)
Decrease in deposits, prepaid expenses
and other assets 334 3,097
Increase (decrease) in accounts payable, accrued
expenses and other liabilities 7,721 (1,459)
Increase in unearned revenue 2,741 4,499
------- -------
Net cash provided (used) by operating activities 5,535 2,197
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to equipment and property (636) (1,711)
Proceeds from disposal of equipment and property 202 446
------- -------
Net cash used by investing activities (434) (1,265)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in line of credit borrowing arrangement, net 2,476 --
Repayment of debt (6,931) (9,859)
Purchase of World Airways common stock, at cost -- (5,910)
Debt issuance costs -- (68)
Loan to WorldCorp, Inc. -- (2,015)
------- --------
Net cash used by financing activities (4,455) (17,852)
------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 646 (16,920)
------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 17,539 $ 8,967
======= ========
See accompanying Notes to Condensed Financial Statements
<PAGE>
WORLD AIRWAYS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Management believes that all adjustments necessary for a fair statement of
results have been included in the Condensed Financial Statements for the
interim periods presented, which are unaudited. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates and the results
of operations for the six months ended June 30, 1999 are not necessarily
indicitive of the results to be expected for the year endind December 31,
1999.
These interim period Condensed Financial Statements and accompanying
footnotes should be read in conjuction with the Financial Statements
contained in World Airways' Annual Report on Form 10-K for the year ended
December 31, 1998.
2. Loss per share for the three and six months ended June 30, 1999 and 1998
are computed as follows (in thousands except per-share data):
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1999
-----------------------------------------------
Earnings (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
------------- ------------- ------------
<S> <C> <C> <C>
Basic EPS before extraordinary item
Net earnings (loss) $ (3,093) 7,103 $ (0.44)
=======
Effect of Dilutive Securities
Options -- --
8% convertible debentures -- --
------- ------
Diluted EPS before extraordinary item
Net earnings (loss) $ (3,093) 7,103 $ (0.44)
======= ===== ======
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1998
-------------------------------------------------
Earnings (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
-------------- ------------- --------------
<S> <C> <C> <C>
Basic EPS
Net earnings (loss) $ (3,163) 7,220 $ (0.44)
=======
Effect of Dilutive Securities
Options -- --
8% convertible debentures -- --
------- ------
Diluted EPS
Net earnings (loss) $ (3,163) 7,220 $ (0.44)
======= ====== =======
</TABLE>
<TABLE><CAPTION>
For the Six Months Ended June 30, 1999
------------------------------------------------
Earnings (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
--------------- ------------- -------------
<S> <C> <C> <C>
Basic EPS before extraordinary item
Net earnings (loss) $ (5,799) 7,052 $ (0.82)
=======
Effect of Dilutive Securities
Options -- --
8% convertible debentures -- --
------- ------
Diluted EPS before extraordinary item
Net earnings (loss) $ (5,799) 7,052 $ (0.82)
======= ====== ========
</TABLE>
<TABLE><CAPTION>
For the Six Months Ended June 30, 1998
-------------------------------------------------
Earnings (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
-------------- ------------- --------------
<S> <C> <C> <C>
Basic EPS
Net earnings (loss) $ (6,150) 7,315 $ (0.83)
========
Effect of Dilutive Securities
Options -- --
8% convertible debentures -- --
------- ------
Diluted EPS
Net earnings (loss) $ (6,150) 7,315 $ (0.83)
======= ====== ========
</TABLE>
3. Capital Stock
In April 1999, $1,220,000 of the Company's 8% Convertible Senior Subordinated
Debentures (the "Debentures") were converted into 137,077 shares of Common
Stock. Consequently, as of June 30, 1999 WorldCorp, Inc. ("WorldCorp") and
Naluri Berhad ("Naluri") beneficially owned 49.8% and 17.1%, respectively, of
the Company's Common Stock, with the balance publicly traded.
In August 1999, the Company concluded an agreement with WorldCorp, Inc.
("WorldCorp") to settle a secured loan and other amounts totaling approximately
$1.8 million that WorldCorp owed the Company when WorldCorp filed for bankruptcy
protection in February 1999. WorldCorp returned a portion of the Company's
Common Stock it owned in exchange for forgiveness of the amounts owed. The
agreement, which was approved by the Bankruptcy Court overseeing WorldCorp's
bankruptcy proceedings, reduced WorldCorp's 49.8% ownership to approximately
40.9%.
In connection with amendments to lease agreements for the Company's fleet of
MD-11 aircraft the Company has agreed to issue warrants for the leasing
companies to acquire an aggregate of 2,000,000 shares of Common Stock for $2.50
per share. The agreements will contain anti-dilution provisions and expire in
2004.
The Company has reached a tentative agreement with the Company's cockpit
crewmembers, who are represented by the International Brotherhood of Teamsters
(the "Teamsters"). The agreement, which is subject to ratification by the full
membership and approval by the Company's Board of Directors, provides for the
establishment of a new Employee Stock Ownership Plan ("ESOP"). The ESOP will
acquire newly issued Common Stock of the Company. The tentative agreement is
also subject to a review of the Company's financial condition and projected
operating results by the Teamsters' independent financial consultants and the
conclusion of terms of the ESOP that are acceptable to all parties.
In August 1999, the Company announced that it was going to implement a 10% pay
reduction program for a 16 month period from Setpember 1999 throguh December
2000 for all personnel whose annual base compensation exceeds $25,000. The
reduction will apply to all management and non-management personnel. The Company
must negotiate agreements with its unionized flight attendants and dispatchers.
Althought not yet finalized, it is planned the program will include a feature to
issue World Airways Common Stock in exchange for the salary reduction.
4. Commitments and Contingencies
The Company expects that a Service Bulletin will soon be issued by the
manufacturer of its aircraft that will require the replacement of insulation
blankets in its fleet of aircraft within the next four years. The Company has
not yet completed cost estimates for replacing the blankets but understands the
replacement of the insulation could cost between $1.5 million and $4 million per
aircraft.
The Company faces arbitration and a demand for yet to be determined damages
resulting from threatened legal action by a foreign company that the Company
improperly terminated an aircraft services agreement with the foreign company.
The Company also has agreed to mediation, but faces arbitration as a result of a
continuing dispute over the cancellation of a charter program with another
company. The Company does not believe the resolution of these matters will have
a material adverse effect on the Company's financial condition or results of
operations.
The Company's flight attendants have filed a grievance challenging the use of
foreign flight attendant crews on wet leased flights performed during the 1999
Hadj. The issue is likely to be submitted to an arbitrator whose decision could
have a material adverse impact on the financial condition or results of
operations of the Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Part I, Item 2 of this report should be read in conjunction with Part II, Item 7
of World Airways, Inc. ("World Airways" or "the Company") Annual Report on Form
10-K for the year ended December 31, 1998. The information contained herein is
not a comprehensive management overview and analysis of the financial condition
and results of operations of the Company, but rather updates disclosures made in
the aforementioned filing.
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (the "Act"). Therefore, this
report contains forward looking statements that are subject to risks and
uncertainties, including, but not limited to, the reliance on key strategic
alliances, fluctuations in operating results and other risks detailed from time
to time in the Company's filings with the Securities and Exchange Commission.
These risks could cause the Company's actual results for 1999 and beyond to
differ materially from those expressed in any forward looking statements made
by, or on behalf of, the Company.
OVERVIEW
GENERAL
For the second quarter ended June 30, 1999, the Company's operating revenues
were $67.5 million, the operating loss was $1.7 million and the net loss before
an extraordinary gain on the retirement of debt was $3.1 million. The loss per
share before the extraordinary gain was $0.44 for both basic and diluted
earnings per share ("EPS") computed on an average of 7.1 million shares. For the
comparable period in 1998 the operating revenues were $71.6 million, the
operating loss was $1.2 million, the net loss was $3.2 million and the basic and
diluted EPS was also a loss of $0.44 based on an average of 7.2 million shares.
The extraordinary gain resulted from the purchase and retirement of $5.7 million
of the Company's outstanding 8% Convertible Subordinated Debentures for $1.5
million. Earnings per share for the quarter after the extraordinary gain were
$0.15.
For the first six months of 1999, the Company's operating revenues were $132.8
million, the operating loss was $3.9 million, the net loss before extraordinary
gain was $5.8 million and the loss per share was $0.82 for both basic and
diluted EPS based on 7.1 million average shares. For the comparable period in
1998 the operating revenues were $140.9 million, the operating loss was $2.8
million, the net loss was $6.2 million and the basic and diluted EPS was a loss
of $0.84 based on 7.3 million average shares. The extraordinary gain reduced the
basic and diluted loss per share for the six months to $0.23.
SIGNIFICANT CUSTOMER RELATIONSHIPS
During the first six months of 1999, the Company's business relied heavily on
its contracts with the U.S. Air Force's ("USAF") Air Mobility Command ("AMC")
and Malaysian Airline System Berhad ("Malaysian Airlines"). In 1999 these
customers provided approximately 49.3% and 13.7%, respectively, of the Company's
revenues and 34.6% and 12.8%, respectively, of block hours flown. In 1998 these
customers provided approximately 39.2% and 19.7%, respectively, of the Company's
revenues and 26.0% and 19.7%, respectively, of block hours flown.
As a result of its contracts with the USAF, Malaysia and other customers, the
Company had an overall contract backlog at June 30, 1999 of $148.0 million,
compared to $226.9 million at June 30, 1998. Approximately $88.7 million of the
backlog relates to operations during the remainder of 1999. Approximately 20.1%
of the backlog relates to its contracts with the USAF and 18.7% relates to its
contracts with Malaysian Airlines.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Total block hours decreased 118 hours, or 1.3%, to 8,686 hours in the first
quarter of 1999 from 8,804 hours in 1998, with an average of 11.6 available
aircraft during in 1999 compared to an average of 12 in 1998. Average daily
utilization (block hours flown per day per aircraft) was 8.3 hours in 1999 and
8.1 hours in 1998. In 1999 wet lease, or ACMI, contracts accounted for 61.7% of
the block hours, a decrease from 69.2% in 1998. The decrease in ACMI hours
reflects a decrease in passenger flying partially offset by an increase in cargo
flying. Passenger ACMI flying decreased principally due to a reduction in Hadj
flying in 1999. Cargo ACMI flying increased as a result of the efforts initiated
in 1998 to increase cargo business. In 1999 full service flying accounted for
36.4% of the block hours, an increase from 28.4% in 1998, because of more flying
for the USAF.
Operating Revenues. Revenues from flight operations decreased $3.7 million, or
5.3%, to $67.3 million in 1999 from $71.0 million in 1998. This decrease is
primarily due to a combination of a decrease in the average yield, or revenue
per block hour, and the decrease in block hours flown in 1999.
Operating Expenses. Total operating expenses decreased $3.6 million, or 4.9%, in
1999 to $69.2 million from $72.8 million in 1998.
Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft cost, fuel and maintenance. Also
included are expenses related to flight dispatch and flight operations
administration. Flight operations expenses increased $0.7 million, or 4.0%, in
1999. This increase resulted primarily from an increase in full service flying
which necessitated the employment of additional flight attendants that increased
costs by approximately $1.6 million. A reduction in pilots generated cost
reductions of approximately $1.0 million.
Maintenance expenses decreased $1.9 million, or 12.4%, in 1999. This decrease
reflects the 1.3% decrease in block hours flown and continuing efforts the
Company has been making to reduce operating costs.
Aircraft rent and insurance costs decreased $1.8 million, or 8.4%, in 1999. This
decrease resulted primarily from decreases in rent expense for the Company's
MD-11 aircraft negotiated with the aircraft lessors in 1998.
Fuel expenses decreased $0.4 million, or 7.3%, in 1999 due to a reduction in the
average cost of fuel per gallon which more than offset an increase in the
number of gallons of fuel consumed as a result of an increase in full service
flying in 1999.
Subcontract flying increased $0.7 million to $1.4 million in 1999 from $0.7
million in 1998 as the result of having to outsource more block hour flying due
to aircraft in maintenance.
Commissions decreased $0.7 million in 1999, or 27.5%, principally as a result of
commissions being required for Hadj flying in 1998.
Depreciation and amortization decreased $0.1 million, or 6.9%, in 1999. This
decrease resulted primarily from no amortization of MD-11 preoperating costs
being fully amortized in 1998.
Sales, general and administrative expenses decreased $0.1 million, or 2.3%, in
1999, primarily as a result of a $0.6 million reduction in general insurance
costs that was partially offset by increases in other cost areas.
Non-operating income and expense, net improved by $0.6 million in 1999 primarily
because of a $0.4 million reduction in interest on lower average debt and a $0.2
increase in interest income on average higher cash.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Total block hours decreased 685 hours, or 3.9%, to 17,028 hours in the first
half of 1999 from 17,713 hours in 1998, with an average of 11.8 available
aircraft in 1999 and 12.0 available aircraft in 1998. Average daily utilization
(block hours flown per day per aircraft) was 8.0 hours in 1999 and 8.3 hours in
1998. In 1999 wet lease, or ACMI, contracts accounted for 63.6% of the block
hours, a decrease from 73.2% in 1998. The decrease in ACMI hours reflects a
decrease in passenger flying partially offset by an increase in cargo flying.
Passenger ACMI flying decreased principally due to the end of a contract with
Philippine Air Lines ("PAL") in the first quarter of 1998 and a reduction in
Hadj flying in 1999. Cargo ACMI flying increased as a result of the efforts
initiated in 1998 to increase cargo business. In 1999 full service flying
accounted for 34.3% of the block hours, an increase from 24.2% in 1998,
primarily because of more flying for the USAF.
Operating Revenues. Revenues from flight operations decreased $8.1 million, or
5.8%, to $132.5 million in 1999 from $140.6 million in 1998. This decrease is
primarily due to a 3.9% decrease in block hours flown in 1999 as well as a
decrease in the average yield, or average revenue per block hour.
Operating Expenses. Total operating expenses decreased $6.9 million, or 4.8%, in
1999 to $136.7 million from $143.6 million in 1998.
Flight operations expenses increased $3.4 million, or 9.5%, in 1999. This
increase resulted primarily from an increase in full service flying which
necessitated the employment of additional flight attendants that increased costs
by approximately $3.1 million. A reduction in the number of pilots generated
cost reductions of approximately $1.6 million. Increased AMC flying for the USAF
resulted in increased costs of approximately $1.3 million for passenger food,
air to ground communications and aircraft handling.
Maintenance expenses decreased $4.7 million, or 15.5%, in 1999. This decrease
reflects the 3.9% decrease in block hours flown and an additional maintenance
accrual of $1.4 million relating to an engine overhaul in the first half of
1998.
Aircraft rent and insurance costs decreased $3.0 million, or 7.0%, in 1999. This
decrease resulted primarily from decreases in rent expense for the Company's
MD-11 aircraft negotiated with the aircraft lessors in 1998.
Fuel expenses decreased $0.7 million, or 5.8%, in 1999 due to a 23.1% reduction
in the average cost of fuel per gallon which more than offset a 22.5% increase
in the number of gallons of fuel consumed as a result of an increase in full
service flying in 1999.
Commissions decreased $1.5 million in 1999, or 28.3%, principally as a result of
commissions being paid for Hadj flying and PAL flying in 1998 that were not paid
in 1999.
Depreciation and amortization decreased $0.5 million, or 10.5%, in 1999. This
decrease resulted primarily from no amortization of MD-11 preoperating costs in
1999.
Sales, general and administrative expenses decreased $0.9 million, or 6.8%, in
1999, primarily as a result of a $1.2 million reduction in general insurance
costs.
Non-operating income and expense, net improved by $1.5 million in 1999 primarily
because of a $1.0 million gain on the sale of a portion of the Company's
interest in an industry-owned organization and a $0.6 million reduction in
interest expense because of lower average debt outstanding in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company is highly leveraged. At June 30, 1999 the Company's cash and cash
equivalents totaled $17.5 million and the ratio of the Company's current assets
to its current liabilities ("current ratio") was 0.6:1. Also, as of June 30,
1999, the Company had outstanding long-term debt and capital leases of $56.1
million and notes payable and current maturities of long term obligations of
$14.5 million. In addition, the Company has significant long-term obligations
relating to operating leases for aircraft and spare engines.
As part of its ongoing efforts to control and reduce costs, the Company has
hired CIBC World Markets Corp. ("CIBC") as financial advisor to assist the
Company with a restructuring and recapitalization of the Company's balance
sheet. The Company and CIBC are examining as part of these efforts whether the
interest payment due August 26, 1999 on the Company's outstanding $43 million 8%
Convertible Debentures should be made within the 30 day grace period mandated
under the Indenture governing the Debentures. In the event the Company does not
make the interest payment within the grace period and does not reach an
agreement with the Debenture holders with respect to the payment, it could have
a material adverse impact on the Company's financial condition. The Company is
continuing to review all of its options and the possible implications of not
paying the interest.
CASH FLOWS FROM OPERATING ACTIVITIES
Operating activities generated $5.5 million in cash in the six months ended June
30, 1999 compared to generating $2.2 million in the comparable period in 1998.
The increase in 1999 is mainly due to increases of $7.7 million in accounts
payable, accrued expenses and other current liabilities and $2.7 million in
unearned revenue that more than offset an increase of $3.1 million in accounts
receivable. The increase in 1998 principally reflects depreciation and
amortization of $4.5 million, a non-cash provision for losses on accounts
receivable of $1.2 million and a net increase of $2.8 million in current working
capital (current assets less current liabilities) that more than offset the $6.1
million net loss incurred during the period.
CASH FLOWS FROM INVESTING ACTIVITIES
Investing activities used $0.4 million in cash in the six months ended June 30,
1999, compared to using $1.3 million in the comparable period in 1998. In both
periods cash was used primarily for the purchase of rotable spare parts and
computer hardware and software.
CASH FLOWS FROM FINANCING ACTIVITIES
Financing activities used $4.5 million in cash in the six months ended June 30,
1999 compared to using $17.9 million in the comparable period in 1998. In 1999
cash was principally used for the repayment of debt. In 1998, cash was used
primarily for the purchase of shares of the Company's common stock for an
aggregate cost of $5.9 million, to loan WorldCorp $2.0 million, and to repay
$9.9 million of debt.
OTHER MATTERS
YEAR 2000
The Company's program to review its computer systems and address the issue of
computer programs and chips being unable to distinguish between the year 1900
and year 2000 continues to progress as planned. The Company now fully expects
that all of its hardware, operating systems and software will either be replaced
or upgraded to be Year 2000 compliant by the end of the third quarter of 1999.
Through June 30, 1999 the Company's costs have totaled approximately $120,000
and estimated additional costs to be incurred are approximately $90,000.
The manufacturers of the aircraft and engines and other aircraft components used
by the Company have provided considerable information in which they have assured
the Company that their equipment is Year 2000 compliant. However, the Company is
continuing with its internal efforts to independently verify that its aircraft
are Year 2000 compliant.
World Airways has identified its critical business partners and has requested
Year 2000 readiness statements from them. Statements have been received from
a number of those requested and the Company is continuing to seek
certification or warranties regarding Year 2000 readiness from the other.
The International Air Transport Association ("IATA") is in the process of
establishing a database of information on Year 2000 compliance efforts of
aviation authorities and airports worldwide. World Airways is evaluating the
degree of access to the database it will require in conjunction with its
worldwide flight activities. The Company is also developing contingency plans in
the event some of its flight activites after 1999 are scheduled into airports or
geographical areas that are not fully compliant and there are concerns about the
safety of flight operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Part I, Item 3 of this report should be read in conjunction with Part II, Item
7a of World Airways, Inc. ("World Airways" or "the Company") Annual Report on
Form 10-K for the year ended December 31, 1998. The information contained herein
is not a quantitative and qualitative discussion about market risk the Company
faces, but rather updates disclosures made in the aforementioned filing.
World Airways continues to not have any material exposure to market risks.
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1999 Annual Meeting of Shareholders of World Airways, Inc. was held on June
9, 1999. A total of 5,649,509 shares were present or represented by proxy at the
meeting. This represented approximately 79.2% of the Company's shares
outstanding.
The indicviduals named below were elected or reelected to a three-year term as
Class I Directors:
Name Votes Received Votes Withheld
- ------------------ -------------- --------------
Daniel J. Altbello 5,548,949 100,560
Mark M. Feldman 5,550,199 99,310
Hollis L. Harris 5,569,799 79,710
Peter M. Sontag 5,567,249 82,260
The indicviduals named below were elected or reelected to a two-year term as
Class III Directors:
Name Votes Received Votes Withheld
- ------------------- -------------- --------------
Wilbur L. Ross, Jr. 5,559,799 89,710
Rodger R. Krouse 5,559,799 89,710
Russell L. Ray, Jr., A. Scott Andrews, John C. Backus, Jr., Lim Kheng Yew and
Wan Malek Ibrahim all continue as Directors of the Company.
An amendment to the World Airways, Inc. 1995 Stock Option Plan was ratified and
approved with 4,190,247 shares voted for, 170,763 shares voted against, 23,248
shares abstaining and 1,265,251 shares not voting.
The selection of KPMG LLP as the independent certified public accountants and
auditor for the Company for the year ending December 31, 1999 was ratified, with
5,634,441 shares voting for, 6,570 shares voting against and 8,498 shares
abstaining.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
No. Description
----- ------------
10.14 Amendment and Restated Employment
Agreement dated July 8, 1999 between
Hollis L. Harris and the Company. Filed Herewith
10.20 Employment Agreement dated June 1, 1999
between Andrew Gilbert Morgan, Jr. and
the Company. Filed Herewith
27 Financial data schedule for the quarter
ended June 30, 1999. Filed Herewith
(b) Reports on Form 8-K
None
* * * * * * * * * * * * * *
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD AIRWAYS, INC.
By: /s/ Gilberto M. Duarte, Jr.
Principal Accounting and Financial Officer
Date: August 16, 1999
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (hereinafter referred to as the
"Agreement", between World Airways, Inc., a Delaware corporation (hereinafter
referred to as "World" or "the Company") and Hollis L. Harris hereinafter
referred to as ("Harris") is entered into this 8th day of July, 1999, and
restates, amends and replaces in its entirety without a break in continuity, the
Employment Agreement in effect between the parties dated May 1, 1999.
WHEREAS, Harris is serving as World's Chief Executive Officer and Chairman of
the Board of Directors, and
WHEREAS, Harris relinquished the position of President to Mr. Andrew G. Morgan
effective June 1, 1999, and
WHEREAS, Harris and the Company wish to correct the provision relating to
exercisability of options in the event of a Change in Control (as defined
herein).
NOW, THEREFORE, World and Harris, in consideration of the foregoing and other
mutual covenants and promises contained herein, the sufficiency of which are
hereby acknowledged, hereby agree as follows:
1. ACCEPTANCE OF EMPLOYMENT. Subject to the terms and conditions set forth
below, World agrees to employ Harris and Harris accepts such employment.
2. TERM. The period of employment shall be from May 1, 1999, through December
31, 2001, unless further extended or sooner terminated as hereinafter set forth.
In the absence of notice, this Agreement shall be renewed on the same terms and
conditions for one year from the date of expiration. Not later than June 30,
2000, Harris shall initiate discussions with the World Airways Board of
Directors (hereinafter "Board") regarding the renewal of this Agreement. At that
time, if Harris wishes to renew this Agreement on different terms, Harris shall
give written notice to the Chairman of the Executive Committee of the Board. If
the Board does not wish to renew this Agreement at its expiration, or wishes to
renew on different terms, the Board shall give written notice to Harris no later
than June 30, 2000.
3. POSITION AND DUTIES. Harris shall continue to serve as Chief Executive
Officer and Chairman of the Board with the duties performed as of June 1, 1999,
as those duties may be changed from time to time. The Board will have reasonable
latitude to make changes in Harris' responsibilities, except that Harris'
responsibilities may not be modified in a way that would be inconsistent with
the status of President, Chief Executive Officer and Chairman of the Board.
Following a Change of Control (as hereinafter defined), Harris' responsibilities
may not be changed without mutual agreement. Harris agrees to render his
services to the best of his abilities and will comply with all policies, rules
and regulations of the company and will advance and promote to the best of his
ability the business and welfare of the Company. Harris shall devote all of his
working time, attention, knowledge and skills solely to the business and
interest of World. Harris may not accept any other engagement with or without
compensation which would affect his ability to devote all of his working time
and attention to the business and affairs of World without the prior written
approval of the Board pursuant to a resolution duly adopted by the affirmative
vote of a majority of the entire membership of the Board, excluding the vote of
Harris. Harris agrees to accept assignments on behalf of World or affiliated
companies commensurate with his responsibilities hereunder, except that the
terms and conditions of assignments exceeding 60 consecutive days outside the
Washington, DC metropolitan area will require mutual agreement.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Harris shall receive a minimum salary of $350,000 per
annum payable in accordance with the payroll procedures for World's
salaried employees in effect during the term of this Agreement.
(b) PERFORMANCE STOCK OPTIONS. Harris has been granted (i) 100,000
options to purchase World's Common Stock, par value $.001 per share
("World Airways Common Stock") pursuant to the 1995 World Airways Stock
Option Plan (the "Plan") as set forth in the Stock Option Agreement
between World and Harris dated April 2, 1999 (the "Option Agreement No.
1"), and (ii) 900,000 options to purchase World's Common Stock pursuant
to the 1999 Chief Executive Stock Option Plan (the "CEO Plan") as set
forth in the Stock Option Agreement between World and Harris dated April
2, 1999 (the two option grants together referred to as the "Options"). In
the event of a Change in Control as defined below, all Options granted
shall be immediately exercisable.
(c) EQUITY OWNERSHIP. Harris agrees to purchase $100,000.00 worth of
common stock or debentures of the Company.
(d) BUSINESS EXPENSES. Harris shall be entitled to reimbursement of
reasonable business related expenses from time to time consistent with
World's policies, including, without limitation, submitting in a timely
manner appropriate documentation of such expenses.
(e) FRINGE BENEFITS. Harris shall be entitled to participate in all
employee benefit plans made available from time to time to all executives
of World in accordance with the terms of such plans. In the event this
Agreement is terminated by either party for any reason other than death
or for cause, Harris may participate in World's health and other benefit
programs for a period of one year from the date of Harris' termination,
or until Harris obtains comparable coverage, whichever is earlier.
(f) PERSONNEL POLICIES, CONDITIONS AND BENEFITS. Except as otherwise
provided herein, Harris' employment shall be subject to the personnel
policies and benefits plans which apply generally to World's employees as
the same may be interpreted, adopted, revised or deleted from time to
time, during the term of this Agreement, by World in its sole discretion.
While this Agreement is in effect, Harris shall accrue vacation at the
rate of one month per year and such vacation shall be taken in accordance
with the Company's procedures.
(g) INDEMNIFICATION; D&O INSURANCE. Subject to Section 6(f) of this
Agreement, World shall provide (or cause to be provided) to Harris
indemnification against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlements in connection with any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by
or in the right of World) by reason of his being or having been an
officer, director or employee of World or any affiliated entity, advance
expenses (including attorneys' fees) incurred by Harris in defending any
such civil, criminal, administrative or investigative action, suit or
proceeding and maintain directors' and officers' liability insurance
coverage (including coverage for securities-related claims) upon
substantially the same terms and conditions as set forth in the
Indemnification Agreement dated April 15, 1999, between Harris and World
Airways, Inc. (the "Indemnity Agreement").
5. TERMINATION OF EMPLOYMENT.
(a) DEATH. Harris' employment hereunder shall terminate upon his death,
in which event World shall have no further obligation to Harris or his
estate with respect to compensation, other than the disposition of life
insurance and related benefits and accrued and unpaid base salary and
incentive compensation, if any, for periods prior to the date of
termination pursuant to the terms of the respective employee benefits and
incentive compensation plans then in effect.
(b) BY WORLD FOR DISABILITY. If Harris incurs a disability and such
disability continues for a period of twelve (12) consecutive months, then
World may terminate this Agreement upon written notice to Harris, in
which event World shall have no obligation to Harris with respect to
compensation under Section 4(a) of this Agreement. The term "disability"
means a physical or mental illness that will prevent Harris from
performing the essential functions of his job for at least twelve (12)
months or is likely to result in death. If Harris becomes entitled to
Social Security benefits payable on account of disability, he will be
deemed conclusively to be disabled for purposes of this Agreement.
(c) BY WORLD FOR CAUSE.
(i) Except under the circumstances set forth in 5(c)(ii) below,
the Chairman of the Executive Committee of the Board pursuant to a
resolution duly adopted by the affirmative vote of a majority of
the entire membership of the Board, excluding the vote of Harris,
at a meeting of the Board may terminate this Agreement, subject to
Section 6(f) and those provisions that survive this Agreement, for
Cause. "Cause" shall be defined as (A) sustained performance
deficiencies which are communicated to Harris in written
performance appraisals and/or other written communications
(including, but not limited to memos and/or letters) by the
Chairman of the Executive Committee of the Board pursuant to a
resolution duly adopted by the affirmative vote of a majority of
the entire membership of the Board, excluding the vote of Harris,
(B) gross misconduct, including significant acts or omissions
constituting dishonesty, intentional wrongdoing or malfeasance,
whether or not relating to the business of World, (C) commission
of a felony or any crime involving fraud or dishonesty, or (D) a
material breach of this Agreement.
(ii)In the event of a Change of Control, as defined below, Harris
may only be terminated for Cause pursuant to a resolution duly
adopted pursuant to a resolution duly adopted by the affirmative
vote of a majority of the entire membership of the Board,
excluding the vote of Harris, at a meeting of the Board finding
that, in the good faith opinion of the Board, Harris was guilty of
conduct set forth in 5(c)(i)(A), (B), (C) or (D) provided,
however, that Harris may not be terminated for Cause hereunder
unless: (1) Harris receives prior written notice of World's
intention to terminate this Agreement for Cause and the specific
reasons therefore; and (2) Harris has an opportunity to be heard
by World's Board and be given, if the acts are correctable, a
reasonable opportunity to correct the act or acts (or non-action)
giving rise to such written notice. If the Board by resolution
duly adopted by the affirmative vote of a majority of the entire
membership of the Board finds that Harris fails to make such
correction after reasonable opportunity to do so, this Agreement
may be terminated for Cause.
(d) BY WORLD FOR OTHER THAN CAUSE. In the event the Board terminates this
Agreement for reasons other than Cause or Disability as defined in
sub-paragraph (c) above, World will pay to Harris within ten (10) days of
notice of termination (or, in the case of incentive bonus compensation,
if any, within ten (10) days of determination of amounts payable under
the applicable bonus plan) twenty-four month's base salary, in each case
including deferred salary and/or bonus compensation, if any, payable
under this Agreement. In addition, all granted but unvested stock Options
shall become immediately exercisable. In the event that any payment to
Harris under this paragraph is subject to any federal or state excise
tax, World shall pay to Harris an additional amount equal to the excise
tax imposed including additional federal and state income and excise
taxes as a result of the payments under this paragraph, and such payment
will be made when the excise tax and income taxes are due; provided,
however, that Harris agrees to assist World Airways by using his best
efforts to structure matters so that any payment to Harris under this
paragraph is not subject to any federal or state excise tax. Whether an
excise tax is payable, and the amount of the excise tax and additional
income taxes payable, shall be determined by World's accountants and
World shall hold Harris harmless for any and all taxes, penalties, and
interest that may become due as a result of the failure to properly
determine that an excise tax is payable or the correct amount of the
excise tax and additional income taxes, together with all legal and
accounting fees reasonably incurred by Harris in connection with any
dispute with any taxing authority with respect to such determinations
and/or payments. In the event of a disagreement between World and Harris
as to whether the termination was for Cause, that issue shall be
submitted by Harris within twenty (20) days of the notice of termination
to binding arbitration, or any objection to World's determination that
termination is for Cause shall be waived.
(e) BY HARRIS FOR GOOD REASON. Harris may terminate his employment
hereunder (for purposes of this Agreement "Good Reason") after giving at
least 30 days notice in the event that, without Harris' consent: (i)
World relocates its general and administrative offices or Harris' place
of employment to an area other than the Washington, D.C. Standard
Metropolitan Statistical Area, (ii) he is assigned any duties
substantially inconsistent with Section 3 hereof, (iii) World reduces his
annual base salary as in effect on the date hereof or as the same may be
increased from time to time; (iv) World fails, without Harris' consent,
to pay Harris any portion of his current compensation, or to pay him any
portion of an installment of deferred compensation under any deferred
compensation program of World, within seven (7) days of the date such
compensation is due; (v) World fails to continue in effect any
compensation plan in which Harris participates which is material to
Harris' total compensation, unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made with respect to
such plan, or to continue Harris' participation therein (or in such
substitute or alternative Plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of Harris'
participation relative to other participants; (vi) World fails to
continue to provide Harris with benefits substantially similar to those
enjoyed by Harris under any of World's pension, life insurance, medical,
health and accident, or disability plans in which Harris was
participating, World takes any action which would directly or indirectly
materially reduce any of such benefits or deprive Harris of any material
fringe benefit enjoyed by Harris; (vii) World terminates, or proposes to
terminate, Harris' employment hereunder contrary to the requirements of
Section 5(c) hereof (for purposes of this Agreement, no such termination
or purported termination shall be effective) and Harris has submitted the
matter to arbitration, as set forth in Section 5(d); or (viii) the Board
approves the liquidation or dissolution of World prior to the end of this
Agreement. In the event that Harris decides to terminate this Agreement
and his employment with World or any successor in interest in accordance
with the provisions of this Section 5(e), World shall have the same
obligations as set forth in Section 5(d) hereof. Any other payments due
or actions required under this paragraph shall be made as lump sums or
taken within 10 days of termination of the Agreement.
(f) By Harris for Other Than Good Reason. Notwithstanding the above,
Harris may upon giving reasonable notice, not to be less than six months,
terminate this Agreement without further obligation on the part of Harris
or World.
(g) CHANGES OF CONTROL. For purposes of this Agreement, a "Change of
Control" includes the occurrence of any one or more of the following
events:
(i) any Person, other than the Company, is or becomes the
Beneficial Owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), directly
or indirectly, of securities of World representing more than 50%
of the combined voting power of World's then outstanding
securities; or
(ii) during any period of two (2) consecutive years (not including
any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board of World
and any new director (other than a director designated by a Person
who has entered into an agreement with World to effect a
transaction described in clause (i), (iii) or (iv) or this Section
5 (f)) whose election by the Board of World or nomination for
election by the stockholders of World was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the shareholders of World approve a merger or consolidation
of World with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of World
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of World or any of its affiliates,
at least 50% of the combined voting power of the voting securities
of World or such surviving entity outstanding immediately after
such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of World (or similar
transaction) in which no Person acquires more than 50% of the
combined voting power of World's then outstanding securities; or
(iv) the shareholders of World approve a plan of complete
liquidation of World or an agreement for the sale or disposition
by World of all or substantially all of World's assets.
(h) "PERSON" DEFINED. For purposes of this Section, "Person" shall have
the meaning given in Section (3)(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) World or WorldCorp, Inc. or any of their subsidiaries or
affiliates; (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of World or WorldCorp, Inc. or any of their
subsidiaries; (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities; or (iv) a corporation owned,
directly or indirectly, by the stockholders of World or WorldCorp, Inc.
in substantially the same proportions as their ownership of stock of
World or WorldCorp, Inc.
(i) NOTICE OF TERMINATION. Termination of this Agreement by World or
termination of this Agreement by Harris shall be communicated by written
notice to the other party hereto, specifically indicating the termination
provision relied upon.
(j) COMPANY PROPERTY. At the termination of Harris' employment, whether
voluntary or involuntary, Harris shall return all company property,
including without limitation all electronic and paper files and documents
and all copies thereof.
6. CONFIDENTIALITY/RESTRICTIVE COVENANT.
(a) Harris recognizes and acknowledges that he will acquire during his
employment with World information that is confidential to World and that
represents valuable, special and unique assets of World ("Confidential
Information"). Such Confidential Information (whether or not reduced to
tangible form) includes, but is not limited to: trade secrets; financing
documents and information; financial data; new product information;
copyrights; information relating to schedules and locations; cost and
pricing information; performance features; business techniques; business
methods; business and marketing plans or strategies; business dealings
and arrangements; business objectives; customer information; sales
information; acquisition, merger or business development plans or
strategies; research and development projects; legal documents and
information; personnel information; and any and all other information
concerning World's business and business practices that is not generally
known or made available to the public or to World's competitors which, if
misused or disclosed, could adversely affect the business of World.
Harris agrees that he will not, during employment with World and for a
period of two (2) years following termination of employment for any
reason, whether voluntary or involuntary, with or without Cause, directly
or indirectly:
(i) disclose any Confidential Information to any person, company or
other entity (other than authorized persons employed by or
affiliated with World who, in the interest of World, have a
business need to know such information), or
(ii) use any Confidential Information in any way, except as required by
his duties to World or by law, unless he obtains World's prior
written approval of such disclosure or use. World's rights under
this Section shall be cumulative to, and shall not limit, World's
rights under the Virginia Uniform Trade Secrets Act or any other
state or federal trade secret or unfair competition statute or
law. The parties hereto stipulate that as between them, the
foregoing matters are important, material, and confidential and
gravely affect the successful conduct of the business of World,
and World's good will, and that any breach of the terms of this
paragraph shall be a material breach of this Agreement.
(b) While employed by World and for a period of two (2) years following
termination of employment for any reason, whether voluntary or
involuntary, with or without Cause, Harris agrees that he will not,
directly or indirectly, either as principal, agent, employee, employer,
owner, stockholder (owning more than 5% of a corporation's shares),
partner, contractor, consultant or in any other individual or
representative capacity:
(i) Request, induce or attempt to induce any customer of World: (A) to
terminate or curtail any business relationship with World or (B)
to establish or attempt to establish a similar business
relationship with a person or entity other than World;
(ii) Solicit, cause, encourage or in any way assist any person or
entity to solicit, any aviation business from any person or entity
who at such time is, or within the preceding twelve (12) months,
had been a customer of World, unless such customer of World was
also already a customer of such other person or entity on the date
of Harris' termination;
(iii) Induce or attempt to induce any of World's officers, directors, or
employees to terminate their employment or relationship with
World, or induce or attempt to induce any such persons to provide
aviation-related services or services similar to those they
provide for World for any other person, firm or organization.
(c) Harris agrees that the restrictions set forth in this Agreement are
reasonable, proper, and necessitated by legitimate business interests of
World and do not constitute an unlawful or unreasonable restraint upon
Harris' ability to earn a livelihood. The parties agree that in the event
any of the restrictions in this Agreement are found to be overbroad or
unreasonable by a tribunal or court of competent jurisdiction, the
parties agree that this Agreement should be enforced to the maximum
extent allowed by applicable law, and the parties authorize and request
such court or tribunal to determine the maximum time, geographic area,
activity and other applicable limitations allowable by law and to reform
the applicable provisions to such maximum limitations.
(d) Harris acknowledges that it may be impossible to assess the monetary
damages incurred by his violation of this Agreement, or any of its terms,
and that any threatened or actual violation or breach of this Agreement,
or any of its terms, will constitute immediate and irreparable injury to
World. Therefore, Harris expressly agrees that, in addition to any and
all monetary damages and other remedies and relief available to World as
a result of Harris' violation or breach of this Agreement, World shall be
entitled to an injunction restraining Harris from violating or breaching
this Agreement, or any of its terms (and no bond or other security will
be required in connection therewith); World will be entitled to specific
performance of this Agreement; and World will be entitled to recover its
reasonable attorneys' fees and costs incurred to enforce, or prosecute or
defend any action relating to, this Agreement. In the event World
enforces this Agreement through court order or other decree, Harris
agrees that the restrictions contained in this Agreement shall remain in
effect for a period of twenty four (24) consecutive months from the
effective date of such order or decree enforcing the Agreement.
(e) Section 9 of this Agreement, relating to arbitration, shall not apply
to this Section 6. The parties agree that any dispute between them
relating to or involving this Section 6, including without limitation,
any question concerning the construction, validity, application,
interpretation or alleged breach or threatened breach of this Section 6,
shall be litigated in a court in the Commonwealth of Virginia.
(f) Section 4(h) of this Agreement and any other indemnity agreements
between Harris and World shall not apply to actions, suits or proceedings
to enforce World's rights under, or that otherwise relate to, this
Agreement, including without limitation, this Section 6.
(g) References in this Section 6 to "World" include World Airways, Inc.
and any and all of its current or future parents, subsidiaries,
affiliated companies, and divisions.
7. BENEFICIARY. The Beneficiary of any payment due and payable at the time of
Harris' death, or otherwise due upon his death, shall be such person or persons
as Harris shall designate in writing to World. If no such beneficiary shall
survive Harris, any such payments shall be made to his estate.
8. INTELLECTUAL PROPERTY.
(a) Any improvements, new techniques, processes, inventions, works,
discoveries, products or copyrightable or patentable materials made or
conceived by Harris, either solely or jointly with other person(s), (1)
during Harris' period of employment by World, during working hours; (2)
during the period after termination of his employment during which he is
retained by World as a consultant; or (3) with use of World's
intellectual property or Confidential Information, shall be the sole and
exclusive property of World without royalty or other consideration to
Harris.
(b) Harris agrees to inform World promptly and in full of such
intellectual property by a full written report setting forth in detail
the procedures used and the results achieved.
(c) Harris shall at World's request and expense execute any and all
applications, assignments, or other instruments which World shall deem
necessary to apply for, register, and/or obtain copyrights or Letters
Patent of the United States or of any foreign country, or to otherwise
protect World's interests in such intellectual property.
(d) Harris shall assign and does hereby assign to World all interests and
rights, including but not limited to copyrights, in any such intellectual
property.
9. ARBITRATION. Except as described in Section 6, above, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, under the commercial arbitration rules of the
American Arbitration Association. The prevailing party in any such arbitration,
or any court action to enforce or vacate an arbitration award, shall be entitled
to its costs and reasonable attorneys fees from the other party.
10. NO WAIVER. The failure of either party at any time to enforce any provisions
of this Agreement or to exercise any remedy, option, right, power or privilege
provided for herein, or to require the performance by the other party of any of
the provisions hereof, shall in no way be deemed a waiver of such provision at
the same or at any prior or subsequent time.
11. GOVERNING LAW. All questions concerning the construction, validity,
application and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of the State of Virginia without giving
effect to any choice of law or conflict of law provision or rule (whether of
Virginia or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than Virginia. Harris agrees to submit to personal
jurisdiction in the State of Virginia.
12. VALIDITY. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not be deemed to affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
13. SUCCESSORS. This Agreement shall inure to the benefit of and be binding upon
World, its successors and assigns, including any corporation or other business
entity which may acquire all or substantially all of World's assets or business,
or within which World may be consolidated or merged, or any surviving
corporation in a merger involving World.
14. WAIVER OF MODIFICATION OF AGREEMENT. No waiver or modification of this
Agreement shall be valid unless in writing and duly executed by both parties.
15. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
WORLD AIRWAYS, INC.
By: ____________________________
Russell L. Ray, Jr.
Chairman, Executive Committee
___________________________________
Hollis L. Harris
EMPLOYMENT AGREEMENT
This Employment Agreement between World Airways, Inc., a Delaware corporation
("World" or the "Company") and Andrew Gilbert Morgan, Jr. ("Morgan") is entered
into this 1st day of June, 1999.
WHEREAS, Morgan has agreed to serve as World's President and Chief Operating
Officer as of June 1, 1999.
NOW, THEREFORE, World and Morgan, in consideration of the foregoing and other
mutual covenants and promises contained herein, the sufficiency of which are
hereby acknowledged, hereby agree as follows:
1. ACCEPTANCE OF EMPLOYMENT. Subject to the terms and conditions set forth
below, World agrees to employ Morgan and Morgan accepts such employment.
2. TERM. The period of employment shall be from June 1, 1999, through May 31,
2002, unless further extended or sooner terminated as hereinafter set forth. In
the absence of notice, this Agreement shall be renewed on the same terms and
conditions for one year from the date of expiration. Not later than November 1,
2001, Morgan shall initiate discussions with the Chairman of the Board
(hereinafter "Chairman") regarding the renewal of this Agreement. At that time,
if Morgan wishes to renew this Agreement on different terms, Morgan shall give
written notice to the Chairman. If the Chairman does not wish to renew this
Agreement at its expiration, or wishes to renew on different terms, the Chairman
shall give written notice to Morgan no later than November 30, 2001.
3. POSITION AND DUTIES. Morgan shall continue to serve as President and Chief
Operating Officer with the duties performed as of June 1, 1999, as those duties
may be changed from time to time. The Chairman will have reasonable latitude to
make changes in Morgan's responsibilities, except that Morgan's responsibilities
may not be modified in a way that would be inconsistent with the status of
President and Chief Operating Officer. Following a Change of Control (as
hereinafter defined), Morgan's responsibilities may not be changed without
mutual agreement. Morgan agrees to render his services to the best of his
abilities and will comply with all policies, rules and regulations of the
company and will advance and promote to the best of his ability the business and
welfare of the Company. Morgan shall devote all of his working time, attention,
knowledge and skills solely to the business and interests of World. Morgan may
not accept any other engagement with or without compensation which would affect
his ability to devote all of his working time and attention to the business and
affairs of World without the prior written approval of the Chairman of the
Board. Morgan agrees to accept assignments on behalf of World or affiliated
companies commensurate with his responsibilities hereunder, except that the
terms and conditions of assignments exceeding 60 consecutive days outside the
Washington, DC metropolitan area will require mutual agreement.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Morgan shall receive a minimum salary of $225,000 per annum
payable in accordance with the payroll procedures for World's salaried employees
in effect during the term of this Agreement. Morgan agrees to participate
equally, on a percentage basis, in any across the board salary reductions
approved by senior management.
(b) PERFORMANCE STOCK OPTIONS. Morgan has been granted 500,000 options to
purchase World's Common Stock, par value $.001 per share ("World Airways Common
Stock") pursuant to the 1995 World Airways Stock Option Plan (the "Plan") as set
forth in the Stock Option Agreement between World and Morgan dated June 1, 1999
(the "Option Agreement"). In the event of a Change in Control as defined below,
all options shall be immediately exercisable.
(c) BUSINESS EXPENSES. Morgan shall be entitled to reimbursement of reasonable
business related expenses from time to time consistent with World's policies,
including, without limitation, submitting in a timely manner appropriate
documentation of such expenses.
(d) MOVING EXPENSES. Morgan shall be entitled to moving expenses not to exceed
$30,000.
(e) FRINGE BENEFITS. Morgan shall be entitled to participate in all employee
benefit plans made available from time to time to all executives of World in
accordance with the terms of such plans. In the event this Agreement is
terminated by either party for any reason other than death or for cause, Morgan
may participate in World's health and other benefit programs for a period of one
year from the date of Morgan's termination, or until Morgan obtains comparable
coverage, whichever is earlier.
(f) PERSONNEL POLICIES, CONDITIONS AND BENEFITS. Except as otherwise provided
herein, Morgan's employment shall be subject to the personnel policies and
benefits plans which apply generally to World's employees as the same may be
interpreted, adopted, revised or deleted from time to time, during the term of
this Agreement, by World in its sole discretion. While this Agreement is in
effect, Morgan shall accrue vacation at the rate of one month per year and such
vacation shall be taken in accordance with the Company's procedures.
(g) INDEMNIFICATION; D&O INSURANCE. Subject to Section 6(f) of this Agreement,
World shall provide (or cause to be provided) to Morgan indemnification against
all expenses (including attorneys' fees), judgments, fines and amounts paid in
settlements in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of World) by reason of his being or
having been an officer, director or employee of World or any affiliated entity,
advance expenses (including attorneys' fees) incurred by Morgan in defending any
such civil, criminal, administrative or investigative action, suit or proceeding
and maintain directors' and officers' liability insurance coverage (including
coverage for securities-related claims) upon substantially the same terms and
conditions as set forth in the Indemnification Agreement dated June 1, 1999,
between Morgan and World Airways, Inc. (the "Indemnity Agreement").
5. TERMINATION OF EMPLOYMENT.
(a) DEATH. Morgan's employment hereunder shall terminate upon his
death, in which event World shall have no further obligation to Morgan or his
estate with respect to compensation, other than the disposition of life
insurance and related benefits and accrued and unpaid base salary and incentive
compensation, if any, for periods prior to the date of termination pursuant to
the terms of the respective employee benefits and incentive compensation plans
then in effect.
(b) BY WORLD FOR DISABILITY. If Morgan is unable, or fails, to perform
services pursuant to this agreement through illness or physical or mental
disability and such failure or disability shall exist for twelve (12)
consecutive months, then World may terminate this Agreement upon written notice
to Morgan, in which event World shall have no obligation to Morgan with respect
to compensation under Section 4(a) of this Agreement. If Morgan becomes entitled
to Social Security benefits payable on account of disability, he will be deemed
conclusively to be disabled for purposes of this Agreement.
(c) BY WORLD FOR CAUSE.
(i) Except under the circumstances set forth in 5(c)(ii)
below, the Chairman of the Board may terminate this Agreement
for Cause. "Cause" shall be defined as (A) gross misconduct,
including significant acts or omissions constituting
dishonesty, intentional wrongdoing or malfeasance, whether or
not relating to the business of World, or (B) commission of a
felony or any crime involving fraud or dishonesty.
(ii) In the event of a Change of Control, as defined below,
Morgan may only be terminated for Cause pursuant to a
resolution duly adopted by the affirmative vote of a majority
of the entire membership of the Board, at a meeting of the
Board finding that, in the good faith opinion of the Board,
Morgan was guilty of conduct set forth in 5(c)(i)(A), or (B),
provided, however, that Morgan may not be terminated for Cause
hereunder unless: (1) Morgan receives prior written notice of
World's intention to terminate this Agreement for Cause and
the specific reasons therefore; and (2) Morgan has an
opportunity to be heard by World's Board and be given, if the
acts are correctable, a reasonable opportunity to correct the
act or acts (or non-action) giving rise to such written
notice. If the Board, by resolution duly adopted by the
affirmative vote of a majority of the entire membership of the
Board, finds that Morgan fails to make such correction after
reasonable opportunity to do so, this Agreement may be
terminated for Cause.
(d) BY WORLD FOR OTHER THAN CAUSE. In the event the Board terminates this
Agreement for reasons other than Cause or Disability as defined in sub-paragraph
(c) above, World will pay to Morgan within ten (10) days of notice of
termination (or, in the case of incentive bonus compensation, if any, within ten
(10) days of determination of amounts payable under the applicable bonus plan)
twenty-four months base salary, in each case including deferred salary and/or
bonus compensation, if any, payable under this Agreement. In addition, all
granted but unvested stock options under the Option Agreements shall become
immediately exercisable. In the event that any payment to Morgan under this
paragraph is subject to any federal or state excise tax, World shall pay to
Morgan an additional amount equal to the excise tax imposed including additional
federal and state income and excise taxes as a result of the payments under this
paragraph, and such payment will be made when the excise tax and income taxes
are due; provided, however, that Morgan agrees to assist World Airways by using
his best efforts to structure matters so that any payment to Morgan under this
paragraph is not subject to any federal or state excise tax. Whether an excise
tax is payable, and the amount of the excise tax and additional income taxes
payable, shall be determined by World's accountants and World shall hold Morgan
harmless from any and all taxes, penalties, and interest that may become due as
a result of the failure to properly determine that an excise tax is payable or
the correct amount of the excise tax and additional income taxes, together with
all legal and accounting fees reasonably incurred by Morgan in connection with
any dispute with any taxing authority with respect to such determinations and/or
payments.
(e) BY MORGAN FOR GOOD REASON. Morgan may terminate his employment hereunder
(for purposes of this Agreement "Good Reason") after giving at least 30 days
notice in the event that, without Morgan's consent, (i) World relocates its
general and administrative offices or Morgan's place of employment to an area
other than the Washington, D.C. Standard Metropolitan Statistical Area, (ii) he
is assigned any duties substantially inconsistent with Section 3 hereof, (iii)
World reduces his annual base salary as in effect on the date hereof or as the
same may be increased from time to time, except as provided in Section 4(a)
above; (iv) World fails, without Morgan's consent, to pay Morgan any portion of
his current compensation, or to pay him any portion of an installment of
deferred compensation under any deferred compensation program of World, within
seven (7) days of the date such compensation is due; (v) World fails to continue
in effect any compensation plan in which Morgan participates which is material
to Morgan=s total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such plan,
or to continue Morgan=s participation therein (or in such substitute or
alternative Plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of Morgan's participation relative to
other participants; (vi) World fails to continue to provide Morgan with benefits
substantially similar to those enjoyed by Morgan under any of World's pension,
life insurance, medical, health and accident, or disability plans in which
Morgan was participating, World takes any action which would directly or
indirectly materially reduce any of such benefits or deprive Morgan of any
material fringe benefit enjoyed by Morgan; (vii) World terminates, or proposes
to terminate, Morgan's employment hereunder contrary to the requirements of
Section 5(c) hereof (for purposes of this Agreement, no such termination or
purported termination shall be effective); or (viii) the Board approves the
liquidation or dissolution of World prior to the end of this Agreement. In the
event that Morgan decides to terminate this Agreement and his employment with
World or any successor in interest in accordance with the provisions of this
Section 5(e), World shall have the same obligations as set forth in Section 5(d)
hereof. Any other payments due or actions required under this paragraph shall be
made as lump sums or taken within 10 days of termination of the Agreement.
(f) BY MORGAN FOR OTHER THAN GOOD REASON. Notwithstanding the above,
Morgan may upon giving reasonable notice, not to be less than six months,
terminate this Agreement without further obligation on the part of Morgan or
World.
(g) CHANGES OF CONTROL. For purposes of this Agreement, a "Change of
Control" includes the occurrence of any one or more of the following events:
(i) any Person, other than the Company, is or becomes the Beneficial
Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), directly or indirectly, of
securities of World representing more than 50% of the combined voting
power of World's then outstanding securities; or
(ii) during any period of two (2) consecutive years (not including any
period prior to the execution of this Agreement), individuals who at
the beginning of such period constitute the Board of World and any new
director (other than a director designated by a Person who has entered
into an agreement with World to effect a transaction described in
clause (i), (iii) or (iv) or this Section 5 (f)) whose election by the
Board of World or nomination for election by the stockholders of World
was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
(iii) the shareholders of World approve a merger or consolidation of
World with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of World
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or being converted into voting securities of
the surviving entity), in combination with the ownership of any trustee
or other fiduciary holding securities under an employee benefit plan of
World or any of its affiliates, at least 50% of the combined voting
power of the voting securities of World or such surviving entity
outstanding immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a recapitalization of
World (or similar transaction) in which no Person acquires more than
50% of the combined voting power of World's then outstanding
securities; or
(iv) the shareholders of World approve a plan of complete liquidation
of World or an agreement for the sale or disposition by World of all or
substantially all of World's assets.
(h) "PERSON" DEFINED. For purposes of this Section, "Person" shall have
the meaning given in Section (3)(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i)
World or WorldCorp, Inc. or any of their subsidiaries or affiliates; (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
World or WorldCorp, Inc. or any of their subsidiaries; (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders of World
or WorldCorp, Inc. in substantially the same proportions as their ownership of
stock of World or WorldCorp, Inc.
(i) NOTICE OF TERMINATION. Termination of this Agreement by World or
termination of this Agreement by Morgan shall be communicated by written notice
to the other party hereto, specifically indicating the termination provision
relied upon.
(j) COMPANY PROPERTY. At the termination of Morgan's employment,
whether voluntary or involuntary, Morgan shall return all company property,
including without limitation all electronic and paper files and documents and
all copies thereof.
6.CONFIDENTIALITY.
(a) Morgan recognizes and acknowledges that he will acquire during his
employment with World information that is confidential to World and that
represents valuable, special and unique assets of World ("Confidential
Information"). Such Confidential Information (whether or not reduced to tangible
form) includes, but is not limited to: trade secrets; financing documents and
information; financial data; new product information; copyrights; information
relating to schedules and locations; cost and pricing information; performance
features; business techniques; business methods; business and marketing plans or
strategies; business dealings and arrangements; business objectives; customer
information; sales information; acquisition, merger or business development
plans or strategies; research and development projects; legal documents and
information; personnel information; and any and all other information concerning
World's business and business practices that is not generally known or made
available to the public or to World's competitors or is not readily
ascertainable by other means, which, if misused or disclosed, could adversely
affect the business of World. Morgan agrees that he will not, during employment
with World and for a period of two (2) years following termination of employment
for any reason, whether voluntary or involuntary, with or without Cause,
directly or indirectly:
(i) disclose any Confidential Information to any person, company or
other entity (other than authorized persons employed by or affiliated
with World who, in the interest of World, have a business need to know
such information), or
(ii) use any Confidential Information in any way, except as required by
his duties to World or by law, unless he obtains World's prior written
approval of such disclosure or use. World's rights under this Section
shall be cumulative to, and shall not limit, World's rights under the
Virginia Uniform Trade Secrets Act or any other state or federal trade
secret or unfair competition statute or law. The parties hereto
stipulate that as between them, the foregoing matters are important,
material, and confidential and gravely affect the successful conduct of
the business of World, and World's good will, and that any breach of
the terms of this paragraph shall be a material breach of this
Agreement.
(b) Section 4(f) of this Agreement and any other indemnity agreements
between Morgan and World shall not apply to actions, suits or proceedings to
enforce World's rights under, or that otherwise relate to, this Agreement,
including without limitation, this Section 6.
(c) References in this Section 6 to "World" include World Airways, Inc.
and any and all of its current or future parents, subsidiaries, affiliated
companies, and divisions.
7. BENEFICIARY. The Beneficiary of any payment due and payable at the time of
Morgan's death, or otherwise due upon his death, shall be such person or persons
as Morgan shall designate in writing to World. If no such beneficiary shall
survive Morgan, any such payments shall be made to his estate.
8. INTELLECTUAL PROPERTY.
(a) Any improvements, new techniques, processes, inventions, works,
discoveries, products or copyrightable or patentable materials made or conceived
by Morgan, either solely or jointly with other person(s), (1) during Morgan's
period of employment by World, during working hours; (2) during the period after
termination of his employment during which he is retained by World as a
consultant; or (3) with use of World's intellectual property or Confidential
Information, shall be the sole and exclusive property of World without royalty
or other consideration to Morgan.
(b) Morgan agrees to inform World promptly and in full of such
intellectual property by a full written report setting forth in detail the
procedures used and the results achieved.
(c) Morgan shall at World's request and expense execute any and all
applications, assignments, or other instruments which World shall deem necessary
to apply for, register, and/or obtain copyrights or Letters Patent of the United
States or of any foreign country, or to otherwise protect World's interests in
such intellectual property.
(d) Morgan shall assign and does hereby assign to World all interests
and rights, including but not limited to copyrights, in any such intellectual
property.
9. NO WAIVER. The failure of either party at any time to enforce any provisions
of this Agreement or to exercise any remedy, option, right, power or privilege
provided for herein, or to require the performance by the other party of any of
the provisions hereof, shall in no way be deemed a waiver of such provision at
the same or at any prior or subsequent time.
10. GOVERNING LAW. All questions concerning the construction, validity,
application and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of the State of Virginia without giving
effect to any choice of law or conflict of law provision or rule (whether of
Virginia or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than Virginia. Morgan agrees to submit to personal
jurisdiction in the State of Virginia.
11. VALIDITY. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not be deemed to affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
12. SUCCESSORS. This Agreement shall inure to the benefit of and be binding upon
World, its successors and assigns, including any corporation or other business
entity which may acquire all or substantially all of World's assets or business,
or within which World may be consolidated or merged, or any surviving
corporation in a merger involving World.
13. WAIVER OF MODIFICATION OF AGREEMENT. No waiver or modification of this
Agreement shall be valid unless in writing and duly executed by both parties.
14. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
WORLD AIRWAYS, INC.
By:____________________________
Hollis L. Harris
Chairman and CEO
_______________________________
Andrew Gilbert Morgan, Jr.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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