<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TOOTSIE ROLL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TOOTSIE ROLL INDUSTRIES, INC.
7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629
March 27, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
your Company to be held on Monday, May 5, 1997, at 9:00 A.M., Eastern Daylight
Savings Time, in Room 1200, Mutual Building, 909 East Main Street, Richmond,
Virginia.
At the meeting, in addition to the election of five directors and a proposal
to ratify the appointment of Price Waterhouse LLP as independent auditors of the
Company, you are being asked to consider and vote upon a proposal to amend the
Company's Articles of Incorporation to increase the number of authorized shares
of Common Stock and Class B Common Stock and a proposal to approve the Tootsie
Roll Industries, Inc. Bonus Incentive Plan.
The formal Notice of the Annual Meeting of Shareholders and the Proxy
Statement follow. It is important that your shares be represented and voted at
the meeting, regardless of the size of your holdings. Accordingly, please
promptly mark, sign and date the enclosed proxy and return it in the enclosed
envelope, whether or not you intend to be present at the Annual Meeting of
Shareholders.
Sincerely,
Melvin J. Gordon Ellen R. Gordon
CHAIRMAN OF THE BOARD AND PRESIDENT AND
CHIEF EXECUTIVE OFFICER CHIEF OPERATING OFFICER
<PAGE>
TOOTSIE ROLL INDUSTRIES, INC.
7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 5, 1997
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of TOOTSIE
ROLL INDUSTRIES, INC. will be held in Room 1200, Mutual Building, 909 East Main
Street, Richmond, Virginia, on Monday, May 5, 1997, at 9:00 A.M., Eastern
Daylight Savings Time, for the following purposes:
1. To elect the full board of five directors;
2. To consider and vote upon a proposal to amend Article FOURTH of the
Company's Articles of Incorporation to (i) increase the number of
authorized shares of Common Stock from 25,000,000 shares to 50,000,000
shares and (ii) increase the number of authorized shares of Class B
Common Stock from 10,000,000 shares to 20,000,000 shares;
3. To consider and vote upon a proposal to approve the Tootsie Roll
Industries, Inc. Bonus Incentive Plan;
4. To consider and act upon ratification of the appointment of Price
Waterhouse LLP as independent auditors for the Company for the fiscal
year ending December 31, 1997; and
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on March 11, 1997 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof. The relative voting rights of the Company's Common Stock and Class B
Common Stock in respect of the Annual Meeting and the matters to be acted upon
at such meeting are described in the accompanying Proxy Statement.
Your attention is directed to the accompanying Proxy, Proxy Statement and
1996 Annual Report of Tootsie Roll Industries, Inc.
By Order of the Board of Directors
William Touretz, SECRETARY
Chicago, Illinois
March 27, 1997
NOTE: PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
TOOTSIE ROLL INDUSTRIES, INC.
7401 SOUTH CICERO AVENUE
CHICAGO, ILLINOIS 60629
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS -- MAY 5, 1997
------------------------
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Tootsie Roll Industries, Inc. of the accompanying proxy
for the Annual Meeting of Shareholders of the Company to be held on Monday, May
5, 1997, and at any adjournments thereof. The purpose of the meeting is for the
shareholders of the Company to: (1) elect five directors to terms of office
expiring at the 1998 Annual Meeting of Shareholders; (2) consider and vote upon
a proposal to amend Article FOURTH of the Company's Articles of Incorporation to
(i) increase the number of authorized shares of Common Stock from 25,000,000
shares to 50,000,000 shares and (ii) increase the number of authorized shares of
Class B Common Stock from 10,000,000 shares to 20,000,000 shares; (3) consider
and vote upon a proposal to approve the Tootsie Roll Industries, Inc. Bonus
Incentive Plan; (4) consider and act upon a proposal to ratify the appointment
of Price Waterhouse LLP as independent auditors of the Company for the fiscal
year ending December 31, 1997; and (5) transact such other business as may
properly come before the meeting and any adjournments thereof.
Proxies in the accompanying form, properly executed and received by the
Company prior to the meeting and not revoked, will be voted as directed therein
on all matters presented at the meeting. In the absence of a specific direction
from the shareholder, proxies will be voted for the election of all named
director nominees, for the proposal to amend the Company's Articles of
Incorporation, for the proposal to approve the Tootsie Roll Industries, Inc.
Bonus Incentive Plan and for ratification of the appointment of Price Waterhouse
LLP as the Company's independent auditors. The Board of Directors does not know
of any other matters to be brought before the meeting; however, if other matters
should properly come before the meeting it is intended that the persons named in
the accompanying proxy will vote thereon at their discretion. Any shareholder
may revoke his or her proxy by giving written notice of revocation to the
Secretary of the Company at any time before it is voted, by executing a
later-dated proxy which is voted at the meeting or by attending the meeting and
voting his or her shares in person.
The Board of Directors has fixed the close of business on March 11, 1997 as
the record date for the determination of shareholders of the Company entitled to
receive notice of and to vote at the Annual Meeting of Shareholders to be held
on May 5, 1997, and at any adjournments thereof. As of the close of business on
March 11, 1997, there were outstanding and entitled to vote 15,551,943 shares of
Common Stock and 7,377,110 shares of Class B Common Stock. Each share of Common
Stock is entitled to one vote and each share of Class B Common Stock is entitled
to ten votes, and therefore the Common Stock will be entitled to a total of
15,551,943 votes and the Class B Common Stock will be entitled to a total of
73,771,100 votes. The Common Stock and the Class B Common Stock will vote
together as a single class with respect to the election of directors and all
other matters submitted to the Company's shareholders at the meeting, except
with respect to the proposal to amend Article FOURTH of the Company's Articles
of Incorporation ("Proposal 2"). The approval of Proposal 2 will require the
affirmative vote of more than two-thirds of the outstanding shares of Common
Stock and Class B Common Stock voting separately. This Proxy Statement and the
enclosed form of proxy are being mailed to shareholders of the Company on or
about March 27, 1997.
The entire cost of soliciting proxies in the accompanying form will be borne
by the Company. Proxies will be solicited by mail, and may be solicited
personally by directors, officers or regular employees of the Company who will
not receive special compensation for such services. In addition, the Company has
1
<PAGE>
retained D.F. King & Co., Inc. to assist in the solicitation of proxies and will
pay such firm a fee, estimated to be $4,500, plus reimbursement of direct
out-of-pocket expenses incurred by such firm in soliciting proxies. Upon
request, the Company will reimburse brokers, dealers, banks and trustees, or
their nominees, for reasonable expenses incurred by them in forwarding proxy
material to beneficial owners of shares of the Company's Common Stock and Class
B Common Stock.
VOTING INFORMATION
A shareholder may, with respect to the election of directors (i) vote for
the election of all named director nominees, (ii) withhold authority to vote for
all named director nominees or (iii) vote for the election of all named director
nominees other than any nominee with respect to whom the shareholder withholds
authority to vote by so indicating in the appropriate space on the proxy. A
shareholder may, with respect to each other proposal to be considered and voted
upon at the meeting (i) vote "FOR" the proposal, (ii) vote "AGAINST" the
proposal or (iii) "ABSTAIN" from voting on the proposal. Proxies properly
executed and received by the Company prior to the meeting and not revoked will
be voted as directed therein on all matters presented at the meeting. In the
absence of a specific direction from the shareholder, proxies will be voted for
the election of all named director nominees, for the proposal to amend Article
FOURTH of the Company's Articles of Incorporation, for the proposal to approve
the Tootsie Roll Industries, Inc. Bonus Incentive Plan and for ratification of
the appointment of Price Waterhouse LLP as the Company's independent auditors.
If a proxy indicates that all or a portion of the votes represented by such
proxy are not being voted with respect to a particular matter, such non-votes
will not be considered present and entitled to vote on such matter, although
such votes may be considered present and entitled to vote on other matters and
will count for purposes of determining the presence of a quorum.
The affirmative vote of a plurality of the votes present in person or by
proxy at the meeting and entitled to vote in the election of directors is
required to elect directors. Thus, assuming a quorum is present, the five
persons receiving the greatest number of votes will be elected to serve as
directors. Withholding authority to vote for a director(s) and non-votes with
respect to the election of directors will not affect the outcome of the election
of directors. The affirmative vote of the holders of more than two-thirds of the
outstanding shares of Common Stock and of the Class B Common Stock, each class
voting separately, is required to approve and adopt the proposal to amend
Article FOURTH of the Company's Articles of Incorporation. Therefore, non-votes
and abstentions with respect to such matter have the legal effect of a vote
against such matter. If a quorum is present at the meeting, in order to approve
the Tootsie Roll Industries, Inc. Bonus Incentive Plan and to ratify the
appointment of Price Waterhouse LLP as the Company's independent auditors, the
number of votes cast favoring each action must exceed the number of votes cast
opposing the action. Accordingly, non-votes and abstentions with respect to
these two matters will not affect the determination of whether such matters are
approved.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
It is the intention of the persons named in the accompanying proxy to vote
for the election of each of the five persons named in the table below as a
director of the Company to serve until the 1998 Annual Meeting of Shareholders
and until his or her successor is duly elected and qualified. All of such
nominees are now directors of the Company, having been previously elected as
directors by the shareholders of the Company. In the event any of the nominees,
all of whom have expressed an intention to serve if elected, fail to stand for
election, the persons named in the proxy presently intend to vote for a
substitute nominee designated by the Board of Directors. The information
concerning the nominees and their shareholdings has been furnished by them to
the Company.
The following table sets forth information with respect to the five nominees
for election as directors:
<TABLE>
<CAPTION>
NAME, AGE AND OTHER POSITIONS, PERIOD SERVED AS DIRECTOR AND
IF ANY, WITH COMPANY BUSINESS EXPERIENCE DURING PAST 5 YEARS
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Melvin J. Gordon, 77; Chairman of the Director since 1952; Chairman of the Board since 1962; Director and
Board and Chief Executive Officer(1)(2) President of HDI Investment Corp., a family investment company.
Ellen R. Gordon, 65, President and Chief Director since 1969; President since 1978; Director and Vice-
Operating Officer(1)(2) President of HDI Investment Corp., a family investment company;
director of CPC International since 1991.
Charles W. Seibert, 82(3)(4) Director since 1978; retired; Vice-President of Citibank through
February, 1974 and consultant to several banks since 1974.
William Touretz, 82, Secretary(1) Director since 1974; Treasurer 1969-79; Secretary since 1978;
part-time consultant to Company and subsidiaries since 1980.
Lana Jane Lewis-Brent, 50(3)(4) Director since 1988; President of Paul Brent Designer, Inc. since
1992 (art publishing); former President of Sunshine-Jr. Stores,
Inc. (convenience stores).
</TABLE>
- ------------------------
(1) Member of the Executive Committee. When the Board of Directors is not in
session, the Executive Committee has the powers of the Board in the
management of the business and affairs of the Company, other than certain
actions which under the laws of the Commonwealth of Virginia must be
approved by the Board of Directors. The Executive Committee held four
meetings in 1996.
(2) Melvin J. Gordon and Ellen R. Gordon are husband and wife.
(3) Member of the Audit Committee. The Audit Committee (a) annually recommends
to the Board of Directors the appointment of independent public accountants
for the Company and subsidiaries; (b) reviews the scope of audits; (c)
approves the non-audit services of the independent public accountants for
the Company and subsidiaries and their fees for audit and non-audit
services; and (d) receives, reviews and takes action deemed appropriate with
respect to audit reports submitted. The Audit Committee held two meetings
during 1996.
(4) Member of the Compensation Committee. The Compensation Committee was
established in December 1996 to administer the Tootsie Roll Industries, Inc.
Bonus Incentive Plan (see Proposal 3 below) and in this capacity will make
or recommend awards under such plan. The Compensation Committee held one
meeting during 1996.
The Company does not have a nominating committee.
The Board of Directors held four meetings during 1996. Mr. and Mrs. Gordon
do not receive fees for their service on the Board of Directors or committees.
Other directors receive an annual fee of $17,500 plus $1,250 per meeting
attended for service on the Board of Directors. Each member of the Audit
Committee and the Compensation Committee receives $1,250 per meeting attended.
Mr. Seibert, as the Chairman of the Audit Committee, receives an additional
annual fee of $5,500. Additionally, William
3
<PAGE>
Touretz receives an annual fee of $3,000 for service on the Executive Committee
and also earned a fee of $65,000 in 1996 for investment consulting and corporate
secretary services. During 1995, all of the directors attended at least 75
percent of the meetings of the Board of Directors and (if they were members of
the Executive Committee, Audit Committee or Compensation Committee) the
Executive Committee, Audit Committee and Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NAMED
DIRECTOR NOMINEES.
OWNERSHIP OF COMMON STOCK AND CLASS B COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 11, 1997, information with
respect to the beneficial ownership of the Company's Common Stock and Class B
Common Stock by each person known to the Company to be the beneficial owner of
more than five percent of such Common Stock or Class B Common Stock. The
information has been furnished to the Company by such persons or derived from
filings with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK AND CLASS B
COMMON STOCK OWNED
BENEFICIALLY AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP(1) OUTSTANDING
----------------------------------- SHARES OF
NAME DIRECT INDIRECT CLASS
- --------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Melvin J. Gordon............................. Common 477,015 -- 3.1%
............................... Class B 477,015 -- 6.5%
Ellen R. Gordon.............................. Common 3,064,159 14,492(2) 19.8%
............................... Class B 3,064,159 14,492(2) 41.7%
Melvin J. Gordon
and Ellen R. Gordon,
jointly as fiduciaries..................... Common -- 1,927,777(3) 12.4%
............................... Class B -- 1,927,777(3) 26.1%
Leigh R. Weiner.............................. Common 593,719 141,360(4) 4.7%
............................... Class B 806,611 175,906(4) 13.3%
IDS Life Capital
Resource Fund(5)........................... Common 1,250,000 -- 8.0%
............................... Class B -- -- --
</TABLE>
- ------------------------
The address of Mr. and Mrs. Gordon is c/o Tootsie Roll Industries, Inc.,
7401 South Cicero Avenue, Chicago, Illinois 60629. The address of Mr. Weiner
is c/o Becker Ross Stone DeStefano & Klein, 317 Madison Ave., New York, New
York 10017-5372. The address of IDS Life Capital Resource Fund is IDS Tower
10, Minneapolis, Minnesota 55440.
(1) The persons named in the above table have sole investment and voting power
over the shares indicated therein as being owned directly and share
investment and voting power over the shares indicated therein as being owned
indirectly.
(2) Held as co-trustee of the Company's pension plan.
(3) Includes 1,715,247 shares each of Common Stock and Class B Common Stock held
by Mr. and Mrs. Gordon as fiduciaries for their children and 212,530 shares
each of Common Stock and Class B Common Stock owned by a charitable
foundation in which members of the Gordon family are interested.
(4) Includes 28,035 shares of Common Stock and 17,176 shares of Class B Common
Stock held by Mr. Weiner's wife (of which he disclaims beneficial
ownership), 69,932 shares of Common Stock and 52,284 shares of Class B
Common Stock held Mr. Weiner or by his wife as custodian for their children
and 43,393 shares of Common Stock and 106,446 shares of Class B Common Stock
held by a charitable foundation in which Mr. Weiner and members of his
family are interested.
4
<PAGE>
(5) The information as to IDS Life Capital Resource Fund is derived from a
statement on Schedule 13G with respect to the Common Stock, filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934. Such statement discloses that IDS Life
Capital Resource Fund has sole voting power with respect to all such shares
and shares dispositive power with respect to all such shares with American
Express Financial Corporation, an investment adviser registered under the
Investment Advisors Act of 1940 located at IDS Tower 10, Minneapolis,
Minnesota 55440, and American Express Company, a parent holding company
located at American Express Tower, 200 Vesey Street, New York, New York
10285.
OWNERSHIP OF COMMON STOCK AND CLASS B COMMON STOCK BY MANAGEMENT
The following table sets forth, as of March 11, 1997, information with
respect to the beneficial ownership of the Company's Common Stock and Class B
Common Stock by each director, by each executive officer who is named in the
summary compensation table included in this proxy statement, and by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK AND
CLASS B COMMON STOCK
OWNED BENEFICIALLY
AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP(1) OUTSTANDING
----------------------------------- SHARES OF
NAME DIRECT INDIRECT CLASS
- ------------------------------------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Melvin J. Gordon.......................... Common (2) (2) (2)
............................. Class B (2) (2) (2)
Ellen R. Gordon........................... Common (2) (2) (2)
............................. Class B (2) (2) (2)
Charles W. Seibert........................ Common 488 -- (3)
............................. Class B 488 -- (3)
William Touretz........................... Common -- -- (3)
............................. Class B 677 3,106 (3)
Lana Jane Lewis-Brent..................... Common 1,617 5,052 (3)
............................. Class B -- -- (3)
John W. Newlin, Jr........................ Common 4,416 547 (3)
............................. Class B 4,416 547 (3)
Thomas E. Corr............................ Common -- -- (3)
............................. Class B -- -- (3)
G. Howard Ember Jr........................ Common -- -- (3)
............................. Class B -- -- (3)
All directors and executive officers as a
group (9 persons)....................... Common 3,547,695 1,947,868 35.3%
............................. Class B 3,546,755 1,945,922 74.5%
</TABLE>
- ------------------------
(1) The persons named in the above table have sole investment and voting power
over the shares indicated therein as being owned directly and share
investment and voting power over the shares indicated therein as being owned
indirectly.
(2) See the table under the caption "Ownership of Common Stock and Class B
Common Stock by Certain Beneficial Owners" above for shareholdings of Mr.
and Mrs. Gordon.
(3) Less than 1% of the outstanding shares.
5
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of the
Company's Common Stock or Class B Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and New York
Stock Exchange. Such persons are also required to furnish the Company with
copies of all such reports.
Based solely on its review of the copies of such reports received by the
Company, and written representations from certain reporting persons, the Company
is pleased to note that its directors, executive officers and greater than ten
percent shareholders filed all required reports during or with respect to fiscal
year 1996.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following summary compensation table sets forth the compensation for the
last three calendar years of the Chairman and Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company serving at the end of 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
--------------------------------------- RESTRICTED ---------- ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP COMPENSATION
POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS (1)(2)(3)
- -------------------------- ---- ---------- ---------- ------------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Melvin J. Gordon 1996 $ 804,000 $ 595,000 $ 0 $ 0 0 $ 0 $ 760,014
Chairman and CEO 1995 730,000 480,000 0 0 0 0 541,806
1994 670,000 415,000 0 0 0 0 562,244
Ellen R. Gordon 1996 $ 733,000 $ 590,000 $ 0 $ 0 0 $ 0 $ 734,816
President and Chief 1995 665,000 475,000 0 0 0 0 522,446
Operating Officer 1994 605,000 410,000 0 0 0 0 542,884
John W. Newlin, Jr. 1996 $ 434,000 $ 195,000 $ 0 $ 0 0 $ 0 $ 314,637
Vice President/ 1995 394,000 161,000 0 0 0 0 165,428
Manufacturing 1994 358,000 140,000 0 0 0 0 149,743
Thomas E. Corr 1996 $ 370,000 $ 225,000 $ 0 $ 0 0 $ 0 $ 292,121
Vice President/ 1995 336,000 180,000 0 0 0 0 147,320
Marketing and Sales 1994 305,000 146,000 0 0 0 0 126,050
G. Howard Ember Jr. 1996 $ 250,000 $ 152,000 $ 0 $ 0 0 $ 0 $ 230,461
Vice President/Finance 1995 227,000 119,000 0 0 0 0 97,109
1994 206,000 92,000 0 0 0 0 82,082
</TABLE>
- ------------------------------
(1) "All Other Compensation" includes (i) contributions to the Company's
pension, profit-sharing and excess benefit plans, (ii) annual awards to the
Company's Career Achievement Plan ("CAP") in the form of deferred
compensation with vesting and forfeiture provisions and (iii) benefits under
the Company's split dollar life insurance plan (see note 3 below).
(2) For 1996, (i) contributions to the Company's pension, profit-sharing and
excess benefit plans, (ii) CAP awards and (iii) split dollar life insurance
benefits were, respectively, as follows: $110,608, $0 and $649,406 for
Melvin J. Gordon; $85,410, $0 and $649,406 for Ellen R. Gordon; $73,170,
$221,000 and $20,467 for John W. Newlin, Jr.; $67,788, $214,000 and $10,333
for Thomas E. Corr; and $44,328, $177,000 and $9,133 for G. Howard Ember Jr.
(3) In 1993, the Board of Directors approved a split dollar life insurance plan
for Melvin J. Gordon and Ellen R. Gordon that replaced benefits that were
already earned under the Company's CAP and previous split dollar insurance
programs pursuant to which Mr. and Mrs. Gordon received awards during the
years 1982 through 1992. In 1996, the Board of Directors approved an
additional split dollar life insurance plan for Mr. and Mrs. Gordon, a
portion of which replaced benefits previously earned under deferred
compensation and excess benefit plans. Although the Company will fully
recover all premiums paid for the split dollar life insurance after
approximately 16 years, the plan includes a compensation element for the
additional benefits attributable to the Company's cost for advancing the
premium payments. The compensation element represents the total expected
cost of the benefits provided allocable to the service provided by Melvin J.
Gordon and Ellen R. Gordon during the year.
6
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
During 1996, the entire Board of Directors was responsible for determining
the compensation structure and amounts for the executive officers of the
Company. This report describes the policies and rationale for the Board in
establishing the principal components of compensation for the executive officers
during 1996.
EXECUTIVE COMPENSATION POLICY
The Company's compensation program is designed to encourage and reward both
individual effort and teamwork leading to improvement in the Company's financial
performance and attainment of the Company's principal long-term objective of
profitably building the Company's well-known brands. The Company's executive
officer compensation program is balanced between short-term and long-term
compensation and incentives. The program is comprised of base salary, annual
cash incentive bonuses, annual awards to the Company's Career Achievement Plan
("CAP"), split-dollar insurance plans, and pension, profit-sharing and excess
benefit plans generally available to employees of the Company. The Board of
Directors believes that this program will lead to increased shareholder value on
a long-term basis.
BASE SALARY
The Board of Directors annually reviews each executive officer's salary. The
Board considers the following with respect to the determination of an individual
executive officer's base salary:
- Performance and contribution to the Company, including length of service
in the position;
- Comparative compensation levels of other companies, including periodic
compensation studies performed by independent compensation and benefit
consultants;
- Overall competitive environment for executives and the level of
compensation considered necessary to attract and retain executive talent;
and
- Historical compensation and performance levels for the Company.
Companies used in comparative analyses for the purpose of determining each
executive officer's salary are selected periodically with the assistance of
professional compensation consultants. Selection of such companies is based on a
variety of factors, including market capitalization and industry classification.
The companies used in these comparative analyses include some of the companies
in the Peer Group used in the Performance Graph, as well as other companies. The
Board of Directors believes that the Company's primary competitors for executive
talent are companies with a similar market capitalization and, accordingly,
relies on a broad array of companies in various industries for comparative
analyses.
ANNUAL INCENTIVES AND OTHER AWARDS
Annual incentive bonuses and CAP and split-dollar insurance awards are made
at the discretion of the Board of Directors to executive corporate officers in
order to recognize and reward each individual executive officer's contribution
to the Company's overall performance in terms of both financial results and
attainment of individual and Company goals.
The annual cash incentive bonus is designed to reward executives, as well as
other management personnel, for their contributions to the Company's financial
performance during the recently completed year.
The annual CAP award and split dollar life insurance program is principally
designed to provide an incentive to executive officers to achieve both
short-term and long-term financial and other goals, including strategic
objectives. These programs are also designed to provide an incentive for the
executive to remain with the Company on a long-term basis. These awards are
determined by the Board of Directors based on the performance of the Company and
the executive's contribution to the growth and success of the Company.
7
<PAGE>
The Board of Directors considers both achievement of strategic objectives
and financial performance measures in determining compensation levels. Although
the Board of Directors does not use a fixed formula for determining annual
incentive and other awards, the following measures of Company performance were
considered in the determination of 1996 bonuses and awards:
- Earnings per share;
- Increase in sales of core brands and total sales;
- Return on assets;
- Return on equity; and
- Net earnings as a percentage of sales.
The awards for 1996 recognize the Company's achievement of record
profitability for the year and the high level of achievement on other measures
of financial performance.
RATIONALE OF CEO COMPENSATION
The Board of Directors established the compensation of Melvin J. Gordon,
Chairman of the Board of Directors and Chief Executive Officer, using the same
criteria that were used to determine the other executive officers' compensation
as discussed above. In addition, the Board considered Mr. Gordon's leadership of
the Company in achieving the Company's strategic and long-term objectives. A
substantial portion of his compensation was at risk, in the form of annual cash
incentive bonus. It is the Board's opinion that Mr. Gordon's compensation
package was based on an appropriate assessment of the Company's performance, his
individual performance and competitive standards.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Internal Revenue Code limits the tax deductibility of executive
compensation in certain circumstances. In the event a portion of executive
compensation were not tax deductible, the Board of Directors may require the
executive to defer the non-deductible portion of compensation until such time
the compensation may be deductible by the Company. Mr. and Mrs. Gordon elected
to defer a portion of their 1996 bonus so that all of their 1996 compensation
may be deducted by the Company. In order to enable the Company to receive
federal income tax deductions for the compensation paid to the executive
officers of the Company in future years, the Compensation Committee of the Board
of Directors has established, subject to shareholder approval, the Tootsie Roll
Industries, Inc. Bonus Incentive Plan. See Proposal 3.
The foregoing report has been approved by the Board of Directors, the
members of which are:
Melvin J. Gordon
Ellen R. Gordon
Charles W. Seibert
William Touretz
Lana Jane Lewis-Brent
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above under "Report on Executive Compensation," during 1996 the
Board of Directors of the Company was responsible for determining the
compensation of the executive officers of the Company. Mr. Gordon is the
Chairman of the Board and Chief Executive Officer of the Company, Mrs. Gordon is
President and Chief Operating Officer of the Company, and Mr. Touretz is the
Secretary of the Company. Mr. and Mrs. Gordon each serves as a director and
executive officer of certain family investment companies. The board of directors
of these companies is responsible for determining the compensation of the
executive officers, including Mr. and Mrs. Gordon (who serve on the Board of
Directors of the Company).
8
<PAGE>
PERFORMANCE GRAPH
The following performance graphs compare the Company's cumulative total
shareholder return on the Company's Common Stock for a ten-year period (December
31, 1986 to December 31, 1996) and a five-year period (December 31, 1991 to
December 31, 1996) with the cumulative total return of Standard & Poor's 500
Stock Index ("S&P 500") and the Dow Jones Industry Food Index ("Peer Group",
which includes the Company).
TEN-YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOOTSIE ROLL PEER GROUP S&P 500
<S> <C> <C> <C>
1986 100.00 100.00 100.00
1987 121.18 102.00 105.25
1988 123.13 121.87 122.73
1989 155.34 173.36 161.62
1990 179.70 188.89 156.60
1991 334.74 261.42 204.31
1992 365.57 265.00 219.88
1993 346.62 250.89 242.04
1994 311.31 270.43 245.24
1995 415.90 335.42 337.39
1996 431.62 398.06 414.86
</TABLE>
FIVE-YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOOTSIE ROLL PEER GROUP S&P 500
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 109.21 101.39 107.62
1993 103.55 94.41 118.46
1994 93.00 101.52 120.03
1995 124.25 127.44 165.13
1996 128.94 147.15 203.05
</TABLE>
- ------------------------
*Assumes (i) $100 invested on December 31 of the first year of the chart in each
of the Company's Common Stock, the Dow Jones Industry Food Index and the S&P
500 and (ii) the reinvestment of dividends.
9
<PAGE>
PROPOSAL 2
PROPOSAL TO AMEND ARTICLE FOURTH OF THE COMPANY'S
ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK AND CLASS B COMMON STOCK
GENERAL
At its meeting of December 10, 1996, the Company's Board of Directors
unanimously approved and recommended for adoption by the shareholders an
amendment to Article FOURTH of the Company's Articles of Incorporation ("Article
FOURTH"), which would (i) increase the number of authorized shares of Common
Stock, par value 69 4/9 cents per share, from 25,000,000 shares to 50,000,000
shares and (ii) increase the number of authorized shares of Class B Common
Stock, par value 69 4/9 cents per share, from 10,000,000 shares to 20,000,000
shares. While the proposed amendment to Article FOURTH will affect the number of
shares of Common Stock and Class B Common Stock authorized to be issued, no
rights, preferences, powers, qualifications, limitations or restrictions as
currently exist for either class of common stock will be affected in any way by
the proposed amendment.
BACKGROUND AND PURPOSE OF THE PROPOSED AMENDMENT
As of March 11, 1997, there were 15,551,943 shares of Common Stock and
7,377,110 shares of Class B Common Stock issued and outstanding. In addition, as
of that date, there were 7,377,110 shares of Common Stock reserved for issuance
upon the conversion of the outstanding shares of Class B Common Stock.
Therefore, the Company has only 2,070,947 shares of Common Stock and 2,622,890
shares of Class B Common Stock available for future issuance as of March 11,
1997.
Although there are no current plans to issue further shares of either class
of common stock other than the annual three percent (3%) stock dividend on
outstanding shares of Common Stock and Class B Common Stock and issuances which
may be made upon the conversion of Class B Common Stock, the Board of Directors
believes the proposal to increase the number of authorized shares of both
classes of common stock is in the best interests of the Company and its
shareholders. If the proposed amendment to Article FOURTH is approved by the
shareholders, the Company would have additional shares available for issuance,
and the Board of Directors would have the flexibility to act in a timely manner
to take advantage of favorable market conditions and other opportunities with
respect to stock splits, stock dividends, financings, acquisitions or other
appropriate corporate actions. Such availability of an increased number of
authorized shares will eliminate the delays and expense involved in first
conducting a special meeting of shareholders in order to issue additional shares
when needed.
DESCRIPTION OF COMMON STOCK AND CLASS B COMMON STOCK
Each share of Common Stock and Class B Common Stock is equal in respect of
rights to dividends and other distributions in cash, stock or property of the
Company (including distributions in liquidation), and neither the Common Stock
nor the Class B Common Stock carries preemptive rights. However, the two classes
of common stock differ in several respects as is more fully described below.
The Common Stock is entitled to one vote for each share outstanding on all
matters, and the Class B Common Stock is entitled to ten votes for each share
outstanding on all matters. Each action submitted to a vote of shareholders
(including the election of directors) is generally voted on by holders of the
Common Stock and the Class B Common Stock voting together as a single class.
However, the affirmative vote of the holders of more than two-thirds of the
outstanding shares of Common Stock and of the Class B Common Stock, each voting
separately as a class, is required to authorize (i) additional shares of either
class of common stock, (ii) any merger or consolidation of the Company with or
into any other corporation or any statutory exchange of shares to which the
Company is a party or (iii) any dissolution of the Company; provided that, in
the case of any such merger or consolidation, the holders of the Common Stock
and of the Class B Common Stock will not each be entitled to vote separately as
a class on any such matter if the other party to such merger or consolidation is
a majority-owned subsidiary of the Company.
10
<PAGE>
The affirmative vote of the holders of the Common Stock and of the Class B
Common Stock, each voting separately as a class, is also required to approve
other amendments to the Articles of Incorporation of the Company that alter or
change the powers, preferences or special rights of their respective class of
stock so as to affect them adversely and any other matters as may require class
votes under the Virginia Stock Corporation Act. There is no provision in the
Company's Articles of Incorporation permitting cumulative voting.
Article FOURTH further provides that Class B Common Stock is generally not
transferrable by a holder; however, each holder of shares of Class B Common
Stock has the right at any time to convert each such share into one share of
Common Stock, which shares are fully transferrable. In addition, the Class B
Common Stock is transferrable by a holder to or among "Permitted Transferees,"
which are principally the Class B shareholder's spouse or children (including
adopted children); any lineal descendant of a great grandparent of such Class B
shareholder (and their spouses); an executor, administrator, guardian or
conservator of the Class B shareholder; trusts for the sole benefit of the Class
B shareholder's family members; and certain types of charitable and other
organizations.
The Company may not issue additional shares of Class B Common Stock except
in connection with stock splits, stock dividends or similar distributions. In
addition, the Company's Board of Directors may not declare a stock split or
dividend on the Class B Common Stock without declaring a similar stock split or
dividend on the Common Stock.
If at any time the number of "outstanding" shares of Class B Common Stock as
reflected on the stock transfer books of the Company falls below 14% of the
aggregate number of "outstanding" shares of Common Stock and Class B Common
Stock, then, immediately upon the occurrence of such event, all the outstanding
shares of Class B Common Stock shall be automatically converted into shares of
Common Stock, on a share-for-share basis. For purposes of the immediately
preceding sentence: (1) the number of shares of Common Stock "outstanding" at
any time shall not include any shares of Common Stock which, after May 15, 1987,
are (a) issued in exchange for the assets or stock of other entities (including
pursuant to a merger or other business combination), (b) sold by the Company for
value, (c) issued upon conversion of convertible securities issued in exchange
for the assets or stock of other entities or sold by the Company for value or
(d) issued as a stock split or dividend with respect to shares issued or sold
pursuant to clauses (a), (b) or (c) above; and (2) any shares of Common Stock or
Class B Common Stock repurchased by the Company shall no longer be deemed
"outstanding" from and after the date of repurchase.
In the event the Common Stock is delisted from the New York Stock Exchange
("NYSE") or the NYSE commences proceedings for delisting and the Common Stock
will be precluded by rule or law from being quoted on the National Association
of Securities Dealers Automated Quotation System or a successor automated
quotation system, the Board of Directors will have the right to immediately
convert each share of Class B Common Stock into one share of Common Stock.
POSSIBLE EFFECTS OR CONSEQUENCES OF THE PROPOSED AMENDMENT
If the proposed amendment is approved by the shareholders, the authorized
but unissued and unreserved shares of Common Stock may be issued by the Board of
Directors at such times, to such persons and for such consideration as the Board
may deem appropriate without further shareholder approval, except as may be
required by Virginia law, the rules of any national securities exchange on which
the shares of Common Stock are listed at the time, or other applicable laws or
regulations as may be in effect from time to time. As indicated above,
additional shares of Class B Common Stock may not be issued except in connection
with stock splits, stock dividends or similar distributions with respect to both
classes of common stock. The Company has regularly paid an annual three percent
(3%) stock dividend on outstanding shares of Common Stock and Class B Common
Stock. There are no commitments relating to the issuance of additional shares at
this time except those shares of Common Stock to be issued upon conversions of
Class B Common Stock. The Company does, from time to time, investigate possible
acquisitions, but it is not possible to state whether any such acquisition will
materialize or, if so, whether the issuance of additional stock would be
desirable or required.
11
<PAGE>
Although it is not the purpose of the proposed amendment to Article FOURTH,
the unissued and unreserved shares of Common Stock could be used by the Board of
Directors in an attempt to discourage or make more difficult a change in control
of the Company or otherwise be used to defend against a merger or takeover
attempt. For example, additional shares of Common Stock could be issued by the
Company, thereby diluting the stock ownership of all existing shareholders
(including that of management and of persons seeking to obtain control of the
Company) and increasing the cost of acquiring a given percentage of the
Company's outstanding stock. The Board of Directors has no knowledge of any
effort by any person or group to obtain control of the Company.
Depending on the purpose, terms and conditions of any issuance of stock, the
issuance of additional shares of Common Stock could have the effect of diluting
earnings and book value per share of both the Common Stock and the Class B
Common Stock and the shareholders' proportionate interests in the Company. In
addition, stock splits or dividends on the Common Stock and the Class B Common
Stock will have an effect on the relative voting power of the classes of common
stock as to matters which are voted on by holders of the Common Stock and the
Class B Common Stock voting together as a single class. However, as indicated
above, certain extraordinary matters require the affirmative vote of both
classes of common stock, each voting separately by class.
PROPOSED AMENDMENT
Only the first paragraph of Article FOURTH of the Company's Articles of
Incorporation is proposed to be amended. All of the other provisions of Article
FOURTH will remain unchanged. If the proposed amendment is approved by the
shareholders, the first paragraph of Article FOURTH will be as follows:
1. AUTHORIZED SHARES. The total number of shares of all classes of
capital stock which the corporation shall have authority to issue is seventy
million (70,000,000), consisting of fifty million (50,000,000) shares of
Common Stock, par value 69 4/9 cents per share ("Common Stock"), and twenty
million (20,000,000) shares of Class B Common Stock, par value 69 4/9 cents
per share ("Class B Common Stock").
The proposed amendment to Article FOURTH of the Articles of Incorporation
requires the affirmative vote of more than two-thirds of the outstanding shares
of Common Stock and Class B Common Stock, each voting separately as a class.
It is anticipated that Mr. and Mrs. Gordon and the officers and directors of
the Company, who may be deemed to own beneficially 35.3% and 74.5% of the Common
Stock and the Class B Common Stock, respectively, will vote in favor of the
proposed amendment. In light of the importance of the proposed amendment, the
Board of Directors urges all shareholders to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S ARTICLES OF INCORPORATION.
PROPOSAL 3
APPROVAL OF THE TOOTSIE ROLL INDUSTRIES, INC.
BONUS INCENTIVE PLAN
Effective January 1, 1997, the Compensation Committee has established,
subject to shareholder approval, the Tootsie Roll Industries, Inc. Bonus
Incentive Plan (the "Plan"). The Plan was adopted to ensure the tax
deductibility of the annual bonus that may be earned by executive officers of
the Company. Under the Plan, certain key employees (including employees who are
also directors) designated by the Compensation Committee ("Eligible Employees")
may receive annual incentive compensation determined by pre-established
performance goals. If a quorum is present at the meeting, in order for
shareholders to approve the Plan, the number of votes cast favoring the action
must exceed the number of votes cast opposing the action.
12
<PAGE>
The Plan has been designed to enable the Company to receive federal income
tax deductions for awards paid under the Plan to certain executive officers,
even if any such executive officer's compensation exceeds $1,000,000 in any
year. Under amendments to the Internal Revenue Code (the "Code") adopted in
1993, corporations whose stock is publicly traded generally will not be entitled
to deduct remuneration paid to "covered employees" to the extent that payments
for any year to any such employee exceed $1,000,000, unless the payments are
made under qualifying performance-based compensation plans. The Company believes
that if the Plan is approved by the shareholders, compensation paid in
accordance with the Plan will qualify as performance-based compensation under
the Code, although the Company has not requested or received, and does not
expect to receive, a ruling from the Internal Revenue Service to that effect.
Currently, "covered employees" include the Chief Executive Officer and the four
most highly compensated executive officers other than the Chief Executive
Officer as of the end of the most recent fiscal year.
The following is a summary of the proposed features of the Plan, which is
qualified in its entirety by reference to the Plan, a copy of which is annexed
hereto as Exhibit A.
BONUS INCENTIVE PAYOUTS--GENERAL
The Compensation Committee shall no later than the 90th day of each year:
select the Eligible Employees; determine the Performance Goals (defined below)
that must be achieved in order for awards to be paid under the Plan; and
determine the total amount which may be available for payout to Eligible
Employees based upon the relative level of attainment of the Performance Goals.
At the end of each year, the Compensation Committee shall certify, in writing,
whether the Performance Goals were satisfied and to what extent they were
satisfied and shall determine the total amount available for payout based upon
the extent to which the Performance Goals established by the Compensation
Committee were achieved. In its sole discretion, the Compensation Committee may
reduce the size of or eliminate the total amount available for payment and
determine the share, if any, of the available amount to paid to each Eligible
Employee. For purposes of the Plan, "Performance Goals" means (i) consolidated
pre-tax income, (ii) return on average equity or (iii) return on average assets.
Performance Goals may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
Such Performance Goals may be particular to a line of business, subsidiary or
other unit or may be based on the performance of the Company generally.
Awards under the Plan will be paid in cash. The awards may be payable
immediately, on a deferred basis or in installments.
The amounts of any awards that may be payable to Eligible Employees under
the Plan in future years cannot currently be determined. In addition, since
awards are based upon Performance Goals which are tied to a specific year, the
amounts which Eligible Employees would have received for 1996 if the Plan had
been in effect are also not determinable. For 1997, the Chairman and Chief
Executive Officer and the President and Chief Operating Officer are the only
Eligible Employees. The maximum payment to any Eligible Employee who is a
"covered employee" under Section 162(m) of the Code during any one-year period
shall in no event exceed $1,500,000. The Plan is intended to ensure the tax
deductibility of the annual bonus that may be earned by executive officers of
the Company.
AMENDMENT AND TERMINATION
The Board of Directors may at any time terminate, in whole or in part, or
from time to time amend the Plan; provided, however, that neither termination
nor amendment of the Plan shall have the effect of reducing or eliminating any
award theretofore earned but unpaid under the Plan. The Board of Directors may
at any time and from time to time delegate to the Compensation Committee any or
all of its authority to amend or terminate the Plan. Any amendment to the Plan
shall be approved by the Company's shareholders if required by Section 162(m) of
the Code.
13
<PAGE>
ADMINISTRATION
The Plan shall be administered by a committee designated by the Board of
Directors consisting solely of two or more members of the Board of Directors
each of whom is an "outside director" within the meaning of Section 162(m) of
the Code. The Compensation Committee has been designated by the Board for this
purpose. The Compensation Committee shall have authority to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to it and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. The determinations of the Compensation Committee pursuant to its
authority under the Plan shall be conclusive and binding.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summarizes the operation of Section 162(m) of the Code but
does not purport to describe all tax consequences of the Plan. Section 162(m) of
the Code denies a federal income tax deduction for certain compensation in
excess of $1,000,000 per year paid to the Chief Executive Officer and the four
other most highly-paid executive officers of a publicly traded corporation.
Certain types of compensation, including compensation based on performance
goals, are excluded from this deduction limit. In order for compensation to
qualify for this exception: (i) it must be paid solely on account of the
attainment of one or more performance goals; (ii) the performance goals must be
established by a committee consisting solely of two or more outside directors;
(iii) the material terms under which the compensation is to be paid, including
the performance goals, must be disclosed to and approved by shareholders in a
separate vote prior to payment; and (iv) prior to payment, the committee must
certify that the performance goals and any other material terms were in fact
satisfied. In addition, satisfaction of the requirements set forth in (iii) and
(iv) above must be made conditions to the right of the executive to receive the
performance-based compensation. The Company believes that if the Plan is
approved by the shareholders, any compensation paid in accordance with the Plan
will qualify as performance-based compensation under the Code, although the
Company has not requested or received, and does not expect to receive, a ruling
from the Internal Revenue Service to that effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN.
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF
PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS
The Board of Directors has appointed Price Waterhouse LLP, independent
public accountants, as the independent auditors for the Company for the fiscal
year ending December 31, 1997. Price Waterhouse LLP has been the Company's
independent auditors since 1968. Although not required by the Company's Articles
of Incorporation or Bylaws, the Board of Directors deems it to be in the best
interest of the Company to submit to the shareholders a proposal to ratify the
appointment of Price Waterhouse LLP and recommends a vote in favor of such
ratification. It is not expected that representatives of Price Waterhouse LLP
will attend the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials for
the 1998 Annual Meeting of Shareholders, any shareholder proposals should be
addressed to Tootsie Roll Industries, Inc., 7401 South Cicero Avenue, Chicago,
Illinois 60629, Attention: Ellen R. Gordon, President, and must be received no
later than December 1, 1997. In addition, the Company's Bylaws establish an
advance notice procedure for shareholder proposals to be brought before the 1998
Annual Meeting of Shareholders, including proposed nominations of persons for
election to the Board of Directors. The 1998 Annual Meeting of Shareholders is
expected to be held on May 4, 1998. A shareholder proposal or nomination
14
<PAGE>
intended to be brought before the 1998 Annual Meeting of Shareholders must be
received by the Secretary on or after February 3, 1998 and on or prior to March
5, 1998.
GENERAL
The Board of Directors does not know of any matters other than the foregoing
that will be presented for consideration at the Annual Meeting. However, if
other matters should be properly presented at the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote thereon in
accordance with their best judgment pursuant to the discretionary authority
granted in the proxy.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1996 is being mailed herewith.
A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS MAY
BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO TOOTSIE ROLL INDUSTRIES,
INC., 7401 SOUTH CICERO AVENUE, CHICAGO, ILLINOIS 60629, ATTENTION: G. HOWARD
EMBER JR., VICE PRESIDENT/FINANCE. A REASONABLE CHARGE WILL BE MADE FOR
REQUESTED EXHIBITS.
By Order of the Board of Directors
William Touretz
SECRETARY
Chicago, Illinois
March 27, 1997
15
<PAGE>
EXHIBIT A
TOOTSIE ROLL INDUSTRIES, INC.
BONUS INCENTIVE PLAN
SECTION 1. PURPOSE. The purpose of the Tootsie Roll Industries, Inc. Bonus
Incentive Plan (the "Plan") is to provide incentives to certain key employees
whose performance in fulfilling the responsibilities of their positions can have
a major impact on the profitability and future growth of Tootsie Roll
Industries, Inc. (the "Company") and its subsidiaries, and to ensure that the
compensation paid to senior executives pursuant to this Plan remains deductible
by the Company under Internal Revenue Code Section 162(m).
SECTION 2. DEFINITIONS. For the purposes of the Plan, the following terms
shall have the meanings indicated:
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.
"COMMITTEE" shall mean the Compensation Committee designated pursuant to
Section 3.
"COMPANY" shall mean Tootsie Roll Industries, Inc.
"EFFECTIVE DATE" shall mean the first day of January of the year in
which the Plan is approved by shareholders of the Company.
"INCENTIVE PAYMENT" means a payment under this Plan made in cash to a
Participant, subject to Section 4 of the Plan.
"INCENTIVE PERIOD" means the calendar year, except to the extent the
Committee determines a longer period.
"PARTICIPANT" shall mean an employee of the Company selected by the
Committee in accordance with Section 4(a) who is eligible to receive an
Incentive Payment for an Incentive Period.
"PERFORMANCE GOALS" mean (i) consolidated pre-tax income, (ii) return on
average equity, or (iii) return on average assets. Performance Goals may be
absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated. Such Performance
Goals may be particular to a line of business, subsidiary or other unit or
may be based on the performance of the Company generally. Such Performance
Goals may cover such period as may be specified by the Committee.
"PLAN" shall mean this Tootsie Roll Industries, Inc. Bonus Incentive
Plan and any amendments thereto.
"SECTION 162(M)" shall mean Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the regulations and other authorities thereunder
promulgated by the Internal Revenue Service of the Department of the
Treasury.
SECTION 3. ADMINISTRATION.
a. COMMITTEE. The Plan shall be administered by a Committee designated by
the Board of Directors consisting solely of two or more members of the Board of
Directors each of whom is an "outside director" within the meaning of Section
162(m). The Committee shall have authority to determine the terms of all
Incentive Payments hereunder, including without limitation, the Participants to
whom, and the time or times at which payments are made, the amount of the
Participant's Incentive Payments, the Incentive Period to which each Incentive
Payment shall relate, the actual dollar amount to be paid, and when the
Incentive Payments shall be made (which payments may, without limitation, be
made during or after an Incentive Period, on a deferred basis or in
installments).
b. COMMITTEE AUTHORITY. Subject to the express provisions of the Plan, the
Committee shall have authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it and to
A-1
<PAGE>
make all other determinations deemed necessary or advisable for the
administration of the Plan. The determinations of the Committee pursuant to its
authority under the Plan shall be conclusive and binding.
c. COMMITTEE DETERMINATIONS. All determinations by the Committee shall be
made by the affirmative vote of a all of its members, but any determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
SECTION 4. PARTICIPANTS AND DETERMINATION OF PERFORMANCE GOALS AND
INCENTIVE PAYMENTS.
a. PARTICIPANTS. Subject to the provisions of the Plan, no later than the
90th (ninetieth) day of each Incentive Period the Committee will select key
employees (including employees who are also directors) of the Company or any of
its subsidiaries who will participate in the Plan and be eligible to earn
Incentive Payments under the Plan with respect to such Incentive Period, and
determine the amount of such Incentive Payments and the conditions under which
they may be earned.
b. The Committee shall, in its sole discretion, for each such Incentive
Period determine and establish in writing the following:
(i) The Performance Goals applicable to the Incentive Period; and
(ii) The performance/payout schedule detailing the total amount which
may be available for payout to all Participants as Incentive Payments based
upon the relative level of attainment of the Performance Goals.
c. After the end of each Incentive Period, the Committee shall:
(i) Certify in writing, prior to the unconditional payment of any
Incentive Payment, whether the Performance Goals for the Incentive Period
were satisfied and to what extent they were satisfied;
(ii) Determine the total amount available for Incentive Payments
pursuant to the performance/ payout schedule established in Section 4(b)(ii)
above, which amount shall be based upon the extent to which the Performance
Goals established by the Committee for the Incentive Period have been
achieved;
(iii) In its sole discretion, reduce the size of or eliminate the total
amount available for payment for an Incentive Period; and
(iv) In its sole discretion, determine the share, if any, of the
available amount to be paid to each Participant as that Participant's
Incentive Payment and authorize payment of such amount.
d. The Incentive Payment for any Incentive Period for each Participant who
is a "covered employee" under Section 162(m) of the Code shall in no event
exceed $1,500,000.
SECTION 5. GENERAL PROVISIONS.
a. ADJUSTMENTS TO PERFORMANCE GOALS. Performance Goals shall be calculated
without regard to any change in accounting standards required by the Financial
Accounting Standards Board after the Performance Goals are established,
extraordinary items within the meaning of Accounting Principles Board Opinion
No. 30, and foreign currency translation adjustments.
b. NO ASSIGNMENT. No portion of any Award under the Plan prior to the
payment thereof may be assigned or transferred other than by will or by the laws
of descent and distribution.
c. WITHHOLDING. The Company shall have the right to deduct from any Award
under the Plan any federal, state, local or other taxes required by law to be
withheld or paid in connection with such Award.
d. NO ADDITIONAL PARTICIPANT RIGHTS. The selection of an individual for
participation in the Plan shall not give such Participant any right to be
retained in the employ of the Company, and the right of the Company to dismiss
or discharge any such Participant, or to terminate any arrangement pursuant to
which any such Participant provides services to the Company, is specifically
reserved.
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<PAGE>
e. OTHER COMPENSATION ARRANGEMENTS. The benefits provided for Participants
under the Plan shall be in addition to other forms of compensation to or in
respect of such Participants. Nothing contained in the Plan shall prevent the
Company or any subsidiary of the Company from adopting or continuing in effect
other compensation arrangements, which arrangements may be either generally
applicable or applicable only in specific cases.
f. LIABILITY. The establishment of the Plan shall not confer upon any
Participant any legal or equitable right against the Company, except as
expressly provided in the Plan. The Board of Directors and the Committee shall
be entitled to rely on the advice of counsel and other experts, including the
independent accountants for the Company. No member of the Board of Directors or
of the Committee or any officers of the Company or its subsidiaries shall be
liable for any act or failure to act under the Plan, except in circumstances
involving bad faith on the part of such member or officer.
SECTION 6. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors
may at any time terminate, in whole or in part, or from time to time amend the
Plan; provided, however, that neither termination nor amendment of the Plan
shall have the effect of reducing or eliminating any Award theretofore earned
but unpaid under the Plan. The Board of Directors may at any time and from time
to time delegate to the Committee any or all of its authority under this Section
6. Any amendment to the Plan shall be approved by the Company's shareholders if
required by Section 162(m).
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<PAGE>
PROXY
TOOTSIE ROLL INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of TOOTSIE ROLL INDUSTRIES, INC. (the
"Company") hereby appoints ELLEN R. GORDON, WILLIAM TOURETZ, MICHAEL L. SOFFIN
and AUGUSTUS C. EPPS, JR., and each of them, as the undersigned's proxies (with
the power of substitution) to vote all the shares of Common Stock and/or Class B
Common Stock of the Company which the undersigned would be entitled to vote at
the annual meeting of shareholders of such Company to be held on May 5, 1997 at
9:00 A.M. (EDST) and any adjournment thereof, on the matters set forth on the
reverse side hereof.
This Proxy will be voted in accordance with instructions specified on the
reverse side, but in the absence of any instructions will be voted "FOR" Items
(1), (2), (3), (4) and (5). If any other business is presented at the meeting,
the proxies are authorized to vote thereon in their discretion. The
undersigned hereby revokes any proxy heretofore given.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
A RETURN ENVELOPE IS ENCLOSED.
<PAGE>
The Board of Directors recommends a vote FOR the Board of Directors'
nominees and FOR the Proposals listed below.
PROXY /X/
Please Mark your votes as this example
(1)--Election of Directors: Melvin J. Gordon, Ellen R. Gordon, Lana Jane
Lewis-Brent, Charles W. Siebert, William Touretz.
FOR all nominees listed above (except as marked to the contrary above) / /
WITHHOLD AUTHORITY to vote for all nominees listed above / /
(Instructions: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list above.)
(2)--Amend the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock from 25,000,000 to 50,000,000 and
Class B Common Stock from 10,000,000 to 20,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
(3)--Approve the Tootsie Roll Industries, Inc. Bonus Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
(4)--Ratify the appointment of Price Waterhouse LLP as auditors for
the fiscal year 1997.
FOR AGAINST ABSTAIN
/ / / / / /
(5)--In their discretion, transact any other business that may
properly come before such meeting.
FOR AGAINST ABSTAIN
/ / / / / /
The undersigned hereby revokes any proxy heretofore given. This proxy will
be voted in accordance with instructions specified above, but in the absence
of any instructions will be voted "FOR" Items (1), (2), (3), (4) and (5). If
any other business is presented at the meeting, the proxies are authorized to
vote thereon in their discretion.
SIGNATURE:_____________________________________________________________________
SIGNATURE:_____________________________________________________________________
DATE:__________________________________________________________________________
Signature(s) of Shareholder
PLEASE MARK YOUR CHOICE LIKE THIS / / IN BLUE OR BLACK INK
Please date and sign exactly as name appears hereon. Executors, administrators,
Trustees, etc. should so indicate when signing. If shares are held jointly,
both shareholders should sign.
