EXHIBIT 10(f)
EXTENSION OF EMPLOYMENT AGREEMENT
This extension agreement is made and entered into as of November 14, 1996,
by and between Transworld Systems Inc., a California Corporation (the "Company")
and Xxxxxx Xxxxxxxx (the "Employee").
WHEREAS, the Employee is currently employed by the Company under a contract
dated July 1, 1995 (the "Employment Agreement"); and
WHEREAS, the Company and the Employee have agreed (a) to extend the
Employment Agreement for an additional two (2) years and (b) to amend the
Employment Agreement as extended in the manner hereafter set forth,
NOW THEREFORE, in consideration of the premises and mutual promises and
agreements hereinafter set forth, the parties hereby agree that the Employment
Agreement is extended and amended as follows:
1. The first line of paragraph (B) of Article FIRST is amended to read as
follows:
"(B) The Employee shall serve as the President and Chief Executive
Officer".
2. The date "June 30, 1997" in paragraphs (A) and (C) of Article SECOND
and paragraphs (F) and (G) of Article THIRD is amended to read "June 30, 1999."
3. The following sentence is added to paragraph (B)(i) of Article THIRD:
"Subject to the terms of this Employment Agreement, for each of the
Fiscal Years of the Company ending June 30, 1998 and June 30, 1999, the
Employee also shall be entitled to receive bonuses as set forth in Schedule
2, annexed hereto."
4. Paragraph (B)(ii) of Article THIRD is amended to read in full as
follows:
"(ii) For purposes hereof, "Adjusted Pretax Income" shall mean the
net income of the Company and its subsidiaries, if any, as reported to
Union for the twelve (12) months ended June 30, before Federal and state
income taxes, and before (a) goodwill amortization expense, (b) bonus
expense for Xxxxxx Xxxx, (c) Employee's bonus expense in respect of periods
after July 1, 1995, (d) mortgage interest expense, if any, related to the
land and buildings that are currently owned by the Company in Rohnert Park,
California, and (e) any payment made by the Company to Xxxxxx Xxxx pursuant
to Article FOURTH (C) of Xxxxxx Xxxx'x Employment Agreement with the
Company."
5. The following is added to paragraph (B)(iii) of Article THIRD:
",except that the Company shall contribute for each full fiscal year
after June 30, 1997 during which Employee is employed hereunder Thirty
Thousand Dollars ($30,000) to such non-qualified retirement plan
established for him."
6. Paragraph (D) of Article THIRD is amended to read in full as follows:
"(D) The Company shall procure and keep in force during the term of
this Agreement for the benefit of the Employee a policy of term, "split
dollar" or other life insurance, to be determined at the sole discretion of
the chief executive officer of The Union Corporation, in the face amount of
$1,000,000, provided that such insurance can be obtained by the Company at
a commercially reasonable cost. The Company shall pay all of the premiums
payable on such insurance, provided that the Company shall only be required
to pay the normal rate for "non-rated" males of the Employee's age, and all
or portion of the cost of such premiums shall be additional compensation to
the Employee. Any such compensation shall not be deemed to be "Base
Salary" for the purposes of this Agreement. The beneficiary of such
insurance shall be designated by the Employee, and the owner of the
insurance policy shall be the Employee or his assigns. The Employee agrees
to submit to any physical examination required by any prospective insurer,
and will otherwise cooperate with the Company in connection with any
insurance on the Employee which the Company may wish to obtain. If a
"split dollar" policy has been obtained, the Company shall have the right
to return of the premiums that the Company has paid from the proceeds of
the policy when such proceeds are paid or from the cash value of the
policy, if any, if the policy shall be cashed in before the death of the
insured, and the Company
2
shall have the right to receive reasonable assurances (including an
irrevocable endorsement if appropriate/available) from the owner of the
policy that the Company will be paid such amounts. It is acknowledged and
agreed that the obligations of the Company under this paragraph only relate
to the payment of the premiums in respect of the policy as provided herein.
The Company shall have no further obligations with respect to the policy
and it shall be Employee's responsibility to take whatever actions may be
necessary to keep the policy in effect."
7. In each place where the date "June 30, 1999" appears in paragraphs (F)
and (G) of Article THIRD, it shall be replaced with the date "June 30, 2001."
8. The following paragraphs (H) and (I) shall be added to Article THIRD:
"(H) Upon the Employee's retirement from regular employment with the
Company, he will receive at the Company's expense medical insurance
coverage comparable to the present plan of the Company for the remainder of
his life; provided that if the cost of such coverage exceeds the normal
rate for non-rated males of the Employee's age, the Employee will be
required to reimburse the Company for the amount of such excess."
"(I) The Union Corporation will recommend to its Stock Option
Committee that Employee be granted an option to purchase Twenty-Five
Thousand (25,000) shares of The Union Corporation common stock. If such
option is granted by the Stock Option Committee, the exercise price and
other terms and conditions of such option shall be determined by the
Committee at the time of grant."
9. The attached Schedule 2 is added to the Employment Agreement.
10. Paragraph (B)(iii) of Article THIRD is clarified and modified as set
forth in this Section 10. The Company shall contribute all amounts previously
earned, including all accrued interest, under paragraph (B)(iii) of Article
THIRD to a Rabbi Trust. With respect to amounts hereafter payable under
paragraph
3
(B)(iii) of Article THIRD the parties agree that the Employee must be employed
by the Company on June 30 of each fiscal year to earn the non-qualified
retirement plan contribution for the applicable fiscal year. Subject to the
foregoing, the Company agrees to contribute beginning with the fiscal year
ending June 30, 1997, amounts earned under paragraph (B)(iii) of Article THIRD
to the Rabbi Trust no later than July 15 following the end of the fiscal year
for which it is earned. The Trustee shall be instructed to retain separate
records with respect to such contributions and any income, gains, losses and
expenses with respect thereto.
A. The administrative costs and expenses with respect to
establishing and maintaining such Rabbi Trust shall be paid by the Company and
shall not be deducted from the Rabbi Trust. However, the Company shall not be
obligated to pay for any costs, expenses or losses relating to the purchases,
sales or holding of assets and investments by the Rabbi Trust, which costs,
expenses and losses shall be borne solely by the Rabbi Trust.
B. Subject to the Employee satisfying the employment requirements
hereunder, the Company's only obligations to the Employee and his beneficiaries,
heirs and estate regarding paragraph (B)(iii) of Article THIRD is to (i)
establish and maintain the Rabbi Trust, (ii) contribute to the Rabbi Trust all
amounts previously earned, including all accrued interest due thereon, (iii)
contribute $15,000 to the Rabbi Trust no later than July 15, 1997 and to
contribute $30,000 to the Rabbi Trust by each July 15th thereafter during the
term of this Employment Agreement
4
and (iv) pay the administration costs and expenses in accordance with paragraph
A. above. The Employee and Company hereby acknowledge and agree that all gains,
losses, earnings and expenses relating to the purchases, sales or holding of
assets and investments of the Rabbi Trust shall enure to the benefit or
detriment of the Employee and that, subject to the Employee's rights in the
event of the Company's Insolvency (as defined in the Rabbi Trust Agreement), the
payment by the Company of the administrative expenses described in paragraph A.
of this Section 10 and the payment of the applicable annual contribution(s) to
the Rabbi Trust in accordance with this paragraph B. shall relieve the Company
of any and all of its obligations under paragraph (B)(iii) of Article THIRD and
this Section 10. The amounts that the Company contributes to the Rabbi Trust
shall be an asset of the Company and shall be subject to the claims of the
Company's general creditors.
C. The Employee shall have the right to designate a beneficiary of
all of the amounts payable pursuant to paragraph (B)(iii) of Article THIRD and
this Section 10 in the event of his death and to change any beneficiary
previously designated by him. Such designation shall be made by delivering to
the Chief Financial Officer of the Company a writing dated and signed by the
Employee setting forth the name and address of the person or persons so
designated. Upon the death of the Employee, any amounts payable from the Rabbi
Trust shall be paid in accordance with such Trust Agreement and this paragraph
C. to the beneficiary or beneficiaries designated by the Employee, or, failing
such designation, to his
5
estate. Upon the termination of the Employee's regular employment with the
Company, the entire amount then allocated to his account in the Rabbi Trust,
including all earnings and accretions thereto, net of all losses and expenses
required to be borne by the Rabbi Trust pursuant to paragraph A. of this Section
10, shall be paid to the Employee (or his beneficiary or beneficiaries if such
termination occurs as a result of the death of the Employee) under one of the
following options that the Employee or such beneficiary or beneficiaries, or
failing a designated beneficiary or beneficiaries, the Employee's legal
representatives, shall select within thirty (30) days after said termination of
employment:
1. Such amount shall be paid in monthly installments as nearly
equal as practicable over a designated number of months as specified by the
person entitled to select the option, not exceeding thirty-six (36) months,
commencing thirty (30) days after the termination of the Employee's regular
employment with the Company, provided that no monthly installment except the
last shall be less than $1,000; or
2. Such amount may be applied to the purchase of an immediate
or deferred life annuity contract on the sole life of the Employee, or jointly
on the lives of the Employee and the beneficiary designated by the Employee
pursuant to this paragraph C; or
3. Such amount may be paid forthwith in a lump sum.
If more than one beneficiary is designated and the Employee's
6
spouse is a beneficiary, the option shall be selected by her if she survives
him, and otherwise by a majority of the beneficiaries.
IN WITNESS WHEREOF, each of the parties hereto has executed this Extension
of Employment Agreement as of the day and year first above written.
TRANSWORLD SYSTEMS INC.
/s/ XXXXXX XXXXXXXX By:/s/ XXXXXX X. XXXX
------------------------------ -----------------------
Xxxxxx Xxxxxxxx Xxxxxx X. Xxxx
Chairman
7
SCHEDULE 2
XXXXXX XXXXXXXX EMPLOYMENT AGREEMENT BONUS SCHEDULE
FOR FISCAL YEARS ENDED JUNE 30, 1998 AND 1999
I. The maximum bonus for the Employee for any fiscal year is Six Hundred
Thousand Dollars ($600,000).
II. For fiscal years ending in 1998 and 1999, there are four components to
the Employee's bonus, two Adjusted Pretax Income ("API") components and two
other components, as follows:
A. First API Component:
-------------------
If Transworld's The minimum bonus
API equals or exceeds based on the API
Fiscal Years the following amount: component is:
------------ -------------------- -------------
1998 & 1999 $14,000,000 $300,000
B. Second API Component:
--------------------
If API increases
by the following %
amounts over the API The additional bonus
for the preceding based on the
Fiscal Years fiscal year: API component is:
-------------- -------------------- --------------------
1998 & 1999 10.0% $105,000
15.0% $157,500
20.0% $210,000
C. Pretax Margin Component (Maximum $45,000)
-----------------------------------------
If Transworld's consolidated Pretax Margin is 20.0% or more, then the
Employee will be paid an additional bonus of $45,000. "Pretax Margin"
for purposes hereof shall mean, for any fiscal year, the percentage
derived by dividing the annual pretax income reported by Transworld to
Union (which will differ from Transworld's API for such year) by the
revenues of Transworld for such year. "Annual pretax income" shall
mean the net income of Transworld and its subsidiaries, if any, as
reported to Union before Federal and state income taxes and before (a)
goodwill amortization expense, (b) mortgage interest expense, if any,
related to the land and buildings that are currently owned by the
Company in Rohnert Park, California, and (c) any expense related to
the
8
payment, if any, made by the Company to Xxxxxx Xxxx pursuant to
Article FOURTH (C) of Xxxxxx Xxxx'x Employment Agreement with the
Company.
D. Discretionary Component (Maximum $45,000)
-----------------------------------------
Each year Xxxxxx Xxxxxxxx and the CEO of Union Corporation will agree
on the factors that will constitute the discretionary component.
9
