- 4 - In 1985, Mr. Rosi drafted an incentive compensation plan (the plan), applicable only to Messrs. Blazick and Richter, which was approved by the board of directors on October 7, 1985. The plan provided for the payment, after the close of the fiscal year, of compensation in cash and/or promissory notes. Pursuant to the terms of the plan, the first step is to calculate the "Adjusted Industry Gross Margin". The adjusted industry gross margin, or hypothetical gross profit, is the gross profit petitioner would have made on its sales if its gross profit margin had equaled the printing industry's average gross profit margin (i.e., petitioner's sales x industry average gross profit percentage = hypothetical gross profit). This hypothetical gross profit is then compared to petitioner's actual gross profit for the year. The amount by which petitioner's actual gross profit exceeds the hypothetical gross profit constitutes the incentive compensation pool. The plan allocates the incentive compensation pool to Messrs. Blazick and Richter "According to Stock Ownership" (i.e., 90 percent to Mr. Blazick and 10 percent to Mr. Richter). Under the plan, each allocation is reduced if certain contingencies occur. Mr. Blazick's allocation is reduced by inventory shortages in excess of $100,000 and by bad debts. Mr. Richter's allocation is reduced by inventory spoilage in excess of $100,000 and production rerun costs in excess of $100,000.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011