Management Incentive Plan adopted in 1959. Information concerning these plans and the awards made thereunder is set forth below.
Each of the plans requires that the board of directors submit to the stockholders, at intervals of no more than five years, the question of whether the plan, in its existing form or a revised form, shall be continued in effect. That question with respect to each plan in its existing form will be submitted to the stockholders for their consideration at the forthcoming annual meeting.
In the judgment of the board of directors, these plans have worked well and have served the best interests of the company and its stockholders. At its meeting held January 8, 1964, the board passed a resolution declaring it advisable, and recommending to the stockholders, that the Bonus Plan and the Management Incentive Plan be continued in effect in their respective existing forms.
Bonus Plan (Continuation of Which is Proposed)
The Bonus Plan permits the granting of Class B bonus awards to those who have contributed most in a general way to the success of the company by their ability, industry and loyalty. Although any officer, employee or other person engaged in the business of the company may qualify for a Class B bonus, in practice such awards are not made to persons participating under the Management Incentive Plan for the same period.
Awards of Class B bonuses are made from a Class B Bonus Fund to which is credited for each year an amount fixed by the board of directors. Such amount for any year may not be more than 10% of the adjusted net income for such year in excess of 6% of the capital employed during that year. “Adjusted net income” for any year is the company’s consolidated net income, (a) less that portion of such income representing earnings retained, after income taxes, in respect of the amount determinative of the number of participation units awardable under the Management Incentive Plan, and (b) plus (i) the interest on long-term debt, (ii) the amount credited to the Class B Bonus Fund, and (iii) the amount available for bonus awards under the Management Incentive Plan. “Capital employed” is the aggregate of capital stock, earned surplus, capital surplus and long-term debt of the company, on a consolidated basis.
Because the adjusted net income for 1963 was less than 6% of the capital employed, no amount was available for crediting to the Class B Bonus Fund for that year. The average of the annual amounts credited to that fund for the four years 1959-1962 was $763,622.
Provision is made in the Bonus Plan for the granting of Class A bonuses for conspicuous service of any nature. Such awards may be granted irrespective of the company’s earnings. Awards of this type have been made from time to time, but the aggregate amount of such awards has not been large.
The Bonus Plan permits Class A and Class B awards to be made in cash or in newly issued shares of common stock of the company (42,570 shares having been available for issue for this purpose as of January 31, 1964) or in shares of such stock purchased in the market; however, all such awards have been made entirely in cash for many years. If newly issued shares of stock should be used for this purpose in the future, such shares could not be issued at prices less than 66-2/3% of the market value thereof as determined by the board of directors in accordance with the provisions of the plan.