World Fuel Services 2005 Annual Report Download - page 77

WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Asia and Latin America, as well as potential future terrorist activities and possible military retaliation. Any credit
losses, if significant, will have a material adverse effect on our financial position and results of operations.
Sales and Purchase Commitments
As of December 31, 2005, fixed sales and purchase commitments under our derivative program amounted to
approximately $72.3 million and $227.1 million, respectively.
Employment Agreements
Our Chairman and CEO and President and Chief Operating Officer (“COO”) have employment agreements,
which among other provisions, provide for an individual base salary of $0.5 million, an employment period that
expires in July 2007, and termination severance benefits. Pursuant to these employment agreements, our CEO
and COO are eligible to receive an annual bonus upon achievement of performance targets. For 2003 and 2004,
the bonus performance targets were based on diluted earnings per share growth and the bonus payout ranged
from 15% of base salary if at least 5% diluted earnings per share growth was achieved, to 200% of base salary if
diluted earnings per share growth equaled or exceeded 15%. For 2005, the bonus performance targets were based
on net income growth and the bonus payout ranged from 15% of base salary if at least 5% net income growth
was achieved, to 200% of base salary if net income growth equaled or exceeded 15%. For 2003, 2004 and 2005,
our CEO and COO each earned an annual bonus equal to 200% of base salary. As of December 31, 2004 and
2005, $2.1 million was included in accrued expenses and other current liabilities in the accompanying
consolidated balance sheets.
In addition, prior to May 2004, the payment of any portion of the bonus causing the compensation of any of
the above two executives to exceed $1.0 million during any fiscal year was deferred and accrues interest at the
U.S. Prime rate, until a fiscal year during the employment term in which the executive earns less than $1.0
million; provided, however, that in the event of the executive’s death, the termination of the executive for any
reason, or the expiration of the employment agreement, the deferred portion of any bonus, including any interest
earned thereon, shall be paid to the executive within ten days of such death, termination or expiration. As of
December 31, 2004 and 2005, $0.1 million was deferred under the employment agreements of our Chairman and
President. Such deferred compensation was included in deferred compensation and other long-term liabilities in
the accompanying consolidated balance sheets. Following shareholder approval of our 2003 Executive Incentive
Plan in May 2004, the deferral of compensation as described above is no longer required.
Pursuant to their employment agreements, our CEO and COO each is entitled to receive a cash severance
payment if: (a) we terminate the executive for any reason other than death, disability or cause; (b) the executive
resigns for good reason (generally a reduction in his responsibilities or compensation, or a breach by us), or
resigns for any reason following a change of control; or (c) we elect not to renew the executive’s employment
agreement upon expiration, for any reason other than cause. The severance payment is equal to two times the
executive’s average salary and bonus during the three-year period preceding termination; provided, if (i) the
termination occurs within three years after a change of control the multiple set forth above will be three instead
of two, and (ii) in the case of a non-renewal, as described in item (c) above, the multiple will be one and the
severance will be paid in 26 equal installments over a one year period. Upon any such termination, we will
continue to provide coverage to the executive under our group insurance plans for up to three years, and all of the
executive’s stock options, SSARs and stock grants will immediately vest.
We have also entered into employment agreements with certain of our other executive officers and key
employees. These agreements provide for minimum salary levels, and, in most cases, bonuses which are payable
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