SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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American Biltrite Inc.
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(Name of Registrant as Specified In Its Charter)
American Biltrite Inc.
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AMERICAN BILTRITE INC.
57 River Street
Wellesley Hills, Massachusetts 02481
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 8, 2002
-----------------
To the Stockholders of
American Biltrite Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of
American Biltrite Inc. will be held at the FleetBoston Financial Corporation,
America Room, 2/nd Floor, 100 Federal Street, Boston, Massachusetts, on
Wednesday, May 8, 2002 at 9:00 A.M. local time, for the following purposes: /
1. To elect four directors who will hold office until the Annual Meeting of
Stockholders in 2005 and until their successors are duly elected and
qualified.
2. To transact any other business that may properly come before the meeting
or any adjournment thereof.
The close of business on March 25, 2002 has been fixed as the record date
for determining the stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournment thereof.
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 is enclosed with this proxy statement.
It is desirable that the stock of the Company should be represented as fully
as possible at the Annual Meeting. Please sign, date and return the
accompanying proxy card in the enclosed envelope, which requires no postage if
mailed in the United States. If you should attend the Annual Meeting, you may
vote in person, if you wish, whether or not you have sent in your proxy, and
your vote at the meeting will revoke any prior proxy you may have submitted.
By Order of The Board of Directors
Henry W. Winkleman
Secretary
Wellesley Hills, Massachusetts
April 5, 2002
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation, by
and on behalf of the Board of Directors (the "Board") of American Biltrite Inc.
(the "Company"), of proxies to be used in voting at the Annual Meeting of
Stockholders (the "Meeting") to be held on May 8, 2002 at the FleetBoston
Financial Corporation, America Room, 2/nd/ floor, 100 Federal Street, Boston,
Massachusetts at 9:00 A.M. local time, and at any adjournments thereof. The
principal executive offices of the Company are located at 57 River Street,
Wellesley Hills, Massachusetts 02481. The cost of preparing and mailing the
notice, proxy statement and proxy card will be paid by the Company. It is
expected that the solicitation of proxies will be by the Company by mail only,
but may also be made by overnight delivery service, facsimile, personal
interview, telephone or telegraph by directors, officers or employees of the
Company. The Company will request banks and brokers holding stock in their
names or custody, or in the names of nominees for others, to forward copies of
the proxy material to those persons for whom they hold such stock and, upon
request, will reimburse such banks and brokers for their out-of-pocket expenses
incurred in connection therewith. This proxy statement and the accompanying
proxy card were first mailed to stockholders on or about April 5, 2002.
Proxies in the accompanying form, properly executed, duly returned to the
Company and not revoked, will be voted at the Meeting (including adjournments)
in accordance with your instructions.
Any stockholder giving a proxy in the accompanying form retains the power to
revoke it at any time prior to the exercise of the powers conferred thereby by
filing a later dated proxy, by notice of revocation filed in writing with the
Secretary of the Company or by voting the shares subject to such proxy in
person at the meeting. Attendance at the Meeting in person will not be deemed
to revoke the proxy unless the stockholder affirmatively indicates at the
Meeting an intention to vote the shares in person.
On March 25, 2002, there were issued and outstanding 3,441,585 shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"). Only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the Meeting or any adjournment thereof, and those
entitled to vote will have one vote for each share held.
A quorum for the consideration of any question at the Meeting will consist
of a majority in interest of all stock issued and outstanding and entitled to
vote upon that question. A plurality of the shares represented and voting at
the Meeting at which a quorum is present is required to elect directors. On all
other matters, a majority of the shares represented and voting at the meeting
is required to decide the question. Shares represented by proxies marked
"WITHHELD" with regard to the election of directors will be counted for
purposes of determining whether there is a quorum at the Meeting, but will not
be voted in the election of directors, and, therefore, will have no effect on
the determination of the outcome of the votes on these matters.
A "broker non-vote" occurs with respect to shares as to a proposal when a
broker who holds shares of record in its name is not permitted to vote on that
proposal without instruction from the beneficial owner of the shares and no
instruction is given. A broker holding your shares in its name will be
permitted to vote such shares with respect to the proposal to elect four
directors to be voted on at the Meeting without instruction from you, and,
accordingly, broker non-votes will not occur with respect to this proposal.
1
ELECTION OF DIRECTORS
The Board is divided into three classes, the terms of which expire at
successive Annual Meetings of Stockholders. Stockholders are being asked to
elect four Class III directors at the Meeting. The accompanying proxy will be
voted for the election of the nominees named in Class III below unless
otherwise instructed. The term of those Class III directors elected at the
Meeting will expire at the Annual Meeting of Stockholders held in 2005 upon the
election and qualification of their successors. Should any person named below
be unable or unwilling to serve as a director, persons named as proxies intend
to vote for such other person as management may recommend. Each nominee is
currently a director of the Company.
The following table sets forth the name, age and principal occupation of
each of the nominees for election as director and each current director in the
classes continuing in office, together with a statement as to the period during
which he or she has served as a director of the Company.
Business Experience and Expiration of
Name (Age) Other Directories Present Terms
---------- ----------------------- -------------
Nominees
--------
CLASS III
Mark N. Kaplan, Esq. (72). Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP, 2002
attorneys. Director of the Company since 1982. Director
of: Grey Advertising Inc.; DRS Technologies Inc.;
Autobytel Inc.; REFAC Technology Development
Corporation; Volt Information Sciences, Inc.; and
Congoleum Corporation.
Natalie S. Marcus (85).... Investor. Director of the Company since 1992. 2002
William M. Marcus (64).... Executive Vice President and Treasurer of the Company. 2002
Director of the Company since 1966. Director of
Congoleum Corporation.
Kenneth I. Watchmaker (59) Executive Vice President and Chief Financial Officer of 2002
Reebok International Ltd., a worldwide designer,
marketer and distributor of sports, fitness and casual
footwear, apparel and equipment. Director of the
Company since 1995.
Incumbent Directors
-------------------
CLASS I
Gilbert K. Gailius (70)... Former Vice President-Finance and Chief Financial 2003
Officer of the Company. Director of the Company since
1983.
Richard G. Marcus (54).... President and Chief Operating Officer of the Company. 2003
Director of the Company since 1982. Vice Chairman of
the Board of Directors of Congoleum Corporation.
2
Business Experience and Expiration of
Name (Age) Other Directories Present Terms
---------- ----------------------- -------------
Incumbent Directors
-------------------
Frederick H. Joseph (65) Managing Director, Morgan Lewis Githens & Ahn 2003
since 2001. Managing Director, ING Barings LLC,
Investment Bankers from 1998 to 2001. From 1994
to 1998 was Chairman of Clovebrook Capital Corp.
Director of the Company since 1997.
CLASS II
John C. Garrels III (62) Former Director, Global Banking, The First National 2004
Bank of Boston, a national banking association.
Director of the Company since 1977.
James S. Marcus (72).... Former Limited Partner, Goldman, Sachs & Co., 2004
investment bankers. Director of the Company since
1971. Director of Insight Communications
Company, Inc.
Roger S. Marcus (56).... Chairman of the Board and Chief Executive Officer 2004
of the Company. Director of the Company since
1981. Chairman of the Board of Directors and Chief
Executive Officer of Congoleum Corporation.
Note: Natalie S. Marcus is the mother of Roger S. Marcus and Richard G. Marcus
and the aunt of William M. Marcus. James S. Marcus is not related to Natalie,
Roger, Richard or William Marcus.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ELECTION OF EACH
OF THE NOMINEES FOR CLASS III DIRECTOR.
EXECUTIVE OFFICERS
The following table sets forth certain information relating to the executive
officers of the Company.
Executive
Officer
Executive Officer (Age) Position Since
----------------------- -------- ---------
Roger S. Marcus (56).... Chief Executive Officer 1981
Richard G. Marcus (54).. President and Chief Operating Officer 1982
William M. Marcus (64).. Executive Vice President and Treasurer 1966
Howard N. Feist III (45) Vice President-Finance and Chief Financial Officer of the Company, 2000
Chief Financial Officer and Secretary of Congoleum Corporation
since 1988.
J. Dennis Burns (62).... Vice President and General Manager, Tape Products Division 1985
Jean Richard (57)....... Vice President and General Manager American Biltrite (Canada) 2000
Ltd., President and Chief Operating Officer of Group Bocenor, Inc.
from 1994 to 1999.
Edward J. Lapointe (59). Controller 1983
Henry W. Winkleman (57). Vice President, Corporate Counsel, and Secretary 1989
3
CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
The following table, together with the accompanying text and footnotes, sets
forth, as of March 25, 2002, (a) the holdings of the Common Stock of each
director of the Company and of each person nominated to become a director of
the Company, (b) the holdings of the Common Stock of each person named in the
Summary Compensation Table and of all officers and directors as a group and (c)
the names, addresses and holdings of the Company's Common Stock of each person
who owns 5% or more of its Common Stock.
Name and Address Amount and Nature of Percent of
of Beneficial Owner(1) Beneficial Ownership(2) Common Stock
---------------------- ----------------------- ------------
Directors and Executive Officers
Natalie S. Marcus........................................... 981,310(3)(4) 28.5%
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Richard G. Marcus........................................... 577,197(3)(5) 16.2
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Roger S. Marcus............................................. 574,596(3)(6) 16.1
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
William M. Marcus........................................... 403,334(3)(7) 11.4
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Gilbert K. Gailius.......................................... 12,000 --
J. Dennis Burns............................................. 19,000(8) --
Mark N. Kaplan.............................................. 4,000(9) --
John C. Garrels III......................................... 2,800(10) --
Howard N. Feist III......................................... 4,000(11) --
Kenneth I. Watchmaker....................................... 2,000(10) --
James S. Marcus............................................. 2,200(10) --
Frederick H. Joseph......................................... 2,000(12) --
All directors and executive officers as a group (15 persons) 2,321,437(13) 60.5
5% Beneficial Owners
Dimensional Fund Advisors, Inc.............................. 290,550(14) 8.4
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90491
Wilen Management Company, Inc............................... 245,802(15) 7.1
2360 West Joppe Road, Suite 226
Lutherville, MD 21093
--------
(1) Addresses are given only for beneficial owners of more than 5% of the
Common Stock.
(2) Unless otherwise noted, the nature of beneficial ownership is sole voting
and/or investment power.
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(3) As of the date shown, these shares were among the 2,257,837 shares, or
59.7%, of the outstanding Common Stock beneficially owned by the following
persons, who have identified themselves as persons who have taken, and
reasonably anticipate continuing to take, actions which direct or may cause
the direction of the management and policies of the Company and the voting
of their shares of Common Stock in a manner consistent each with the other,
and who therefore may be deemed to constitute a "group" within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); Natalie S. Marcus, Richard G. Marcus, Roger S. Marcus,
William M. Marcus and Cynthia S. Marcus (c/o American Biltrite Inc., 57
River Street, Wellesley Hills, MA 02481). The Company owns 4,395,605 shares
of the Class B Common Stock of Congoleum Corporation ("Congoleum") and
151,100 shares of the Class A Common Stock of Congoleum. These shares on a
combined basis represent 69.5% of the voting power of the outstanding
Capital Stock of Congoleum. Each of the named individuals may be deemed a
beneficial owner of these shares.
(4) Natalie S. Marcus has sole voting and investment power over 831,310 shares.
Mrs. Marcus is also a co-trustee with Richard G. Marcus and Roger S. Marcus
over 144,000 shares and trustee of a charitable trust, which holds 4,000
shares. Mrs. Marcus also has the right to acquire 2,000 shares, which are
issuable upon exercise of options currently exercisable within 60 days of
the date of this proxy statement.
(5) Richard G. Marcus has sole voting and investment power over 311,197 shares.
Mr. Marcus is also a co-trustee with Natalie S. Marcus and Roger S. Marcus
over 144,000 shares. Mr. Marcus also has the right to acquire 122,000
shares, which are issuable upon exercise of options exercisable within 60
days of the date of this proxy statement. Richard G. Marcus's wife, Beth A.
Marcus, owns 4,310 shares, of which shares Mr. Marcus disclaims beneficial
ownership.
(6) Roger S. Marcus has sole voting and investment power over 308,596 shares.
Mr. Marcus is also a co-trustee with Natalie S. Marcus and Richard G.
Marcus over 144,000 shares. Mr. Marcus also has the right to acquire
122,000 shares, which are issuable upon exercise of options exercisable
within 60 days of the date of this proxy statement. Roger S. Marcus's
daughter, Elissa G. Marcus, owns 7,210 shares, of which shares Mr. Marcus
disclaims beneficial ownership.
(7) William M. Marcus has sole voting and investment power over 305,734 shares.
Mr. Marcus also has the right to acquire 97,600 shares, which are issuable
upon exercise of options exercisable within 60 days of the date of this
proxy statement. William M. Marcus's wife, Cynthia S. Marcus, owns 9,400
shares, of which shares Mr. Marcus disclaims beneficial ownership.
(8) J. Dennis Burns has sole voting and investment power over 3,000 shares. Mr.
Burns has the right to acquire 16,000 shares, which are issuable upon
exercise of options exercisable within 60 days of the date of this proxy
statement. Mr. Burns's wife, Kristin J. Burns, owns 100 shares of Class A
Common Stock of Congoleum, which shares represent less than 1% of the
voting power of the outstanding Capital Stock of Congoleum, and of which
shares Mr. Burns disclaims beneficial ownership.
(9) Mark N. Kaplan has the right to acquire 2,000 shares which are issuable
upon exercise of options exercisable within 60 days of the date of this
proxy statement. Mr. Kaplan also owns 16,000 shares of Class A Common Stock
of Congoleum, which shares represent less than 1% of the voting power of
the outstanding Capital Stock of Congoleum.
(10) Messrs. John C. Garrels III, James S. Marcus and Kenneth I. Watchmaker
each have the right to acquire 2,000 shares, which are issuable upon
exercise of options exercisable within 60 days of the date of this proxy
statement.
5
(11) Howard N. Feist III has the right to acquire 4,000 shares which are
issuable upon exercise of options exercisable within 60 days of the date
of this proxy statement. Mr. Feist also owns 1,000 shares, and is trustee
for a custodial account which holds 1,177 shares, of Class A Common Stock
of Congoleum, which shares represent less than 1% of the voting power of
the outstanding Capital Stock of Congoleum.
(12) Frederick H. Joseph has the right to acquire 2,000 shares which are
issuable upon exercise of options exercisable within 60 days of this proxy
statement. Mr. Joseph also owns 8,000 shares of Class A Common Stock of
Congoleum, which shares represent less than 1% of the voting power of the
outstanding Capital Stock of Congoleum.
(13) All directors and executive officers as a group may be considered
beneficial owners of 177,877 shares of Class A Common Stock of Congoleum
and 4,395,605 shares of Class B Common Stock of Congoleum, which combined
represent 69.7% of the voting power of the outstanding Capital Stock of
Congoleum.
(14) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on January 30, 2002.
(15) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on January 25, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires the Company's directors,
executive officers and holders of more than 10% of the Common Stock and other
equity securities of the Company to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Common Stock and other equity securities of the Company. The Company
believes that during the year ended December 31, 2001, its officers, directors
and holders of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements except that Natalie S. Marcus had a late
filing of Form 4 in which she reported a gift of stock.
DIRECTOR COMPENSATION AND COMMITTEES
During 2001, the Board held four meetings. Each director who was not an
officer and employee of the Company received a director's fee of $15,000 per
year and $2,000 for each Board meeting attended and each Audit Committee
meeting attended during 2001. All of the directors attended all of the Board
meetings and all committee members attended all committee meetings in 2001.
Directors may elect to defer the receipt of all or a part of their fees.
Amounts so deferred earn interest, compounded quarterly, at a rate equal to the
base rate quoted by the FleetBoston Financial at the end of each quarter.
There are four standing committees of the Board. The Company's Executive
Committee consists of five members. The functions of the committee are to
advise and aid the officers of the Company in all matters concerning its
interests and the management of its business and, when the Board is not in
session, to exercise all the powers of the Board with reference to the conduct
of the business of the Company which may be lawfully delegated by the Board.
During 2001, the Executive Committee met once. The members of the Executive
Committee are Messrs. William M. Marcus, Chairman, Roger S. Marcus, Richard G.
Marcus, Mark N. Kaplan and John C. Garrels III.
6
The Company's Compensation Committee consists of three members. The
committee met once during 2001. The members of the Compensation Committee are
Messrs. Mark N. Kaplan, Chairman, John C. Garrells III and Kenneth I.
Watchmaker. The Company does not have a nominating committee of the Board.
The Company's Stock Award Committee consists of three members. The function
of the committee is to grant stock options and other employee incentives to
executive officers of the Company (including without limitation the Company's
Chief Executive Officer and the Company's four other most highly compensated
officers). The members of the Stock Award Committee are John C. Garrels III,
Chairman, James S. Marcus and Kenneth I. Watchmaker. The committee did not meet
during 2001.
The Company has an Audit Committee composed of independent directors for
which information regarding the functions performed by the Committee, its
membership, and the number of meetings held during the fiscal year, is set
forth in the Audit Committee Report included in this annual proxy statement.
The Audit Committee is governed by a written charter adopted by the Board.
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board. Management has the primary responsibility for the
financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001 with management, including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and
the Company including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of nonaudit
services with the auditors' independence.
The Committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
quarterly with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The Committee held four meetings during fiscal
year 2001.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended the
selection of the Company's independent auditors.
AUDIT COMMITTEE
Kenneth I. Watchmaker, Chairman
John C. Garrels III
James S. Marcus
7
COMPENSATION COMMITTEE REPORT
Overall Policy
The Company's executive compensation program is designed to reflect both
corporate performance and individual responsibilities and performance. The
Compensation Committee administers the Company's overall compensation strategy
in an attempt to relate executive compensation appropriately to the Company's
overall growth and success and to the executive's duties, demonstrated
abilities and, where appropriate, the performance of the operating division or
subsidiary for which the executive is responsible. The objectives of this
strategy are to attract and retain the best possible executives, to motivate
these executives to achieve the Company's business goals and to provide a
compensation package that recognizes individual contributions as well as
overall business results.
Each year, the Compensation Committee conducts a review of the Company's
executive compensation. This review includes consideration of: the relationship
between an executive's current compensation and his current duties and
responsibilities; the compensation of executive officers with similar duties
and responsibilities; and inflationary trends. The annual compensation review
permits an ongoing evaluation of the relationships among the size and scope of
the Company's operations, the Company's performance and its executive
compensation. The Compensation Committee also considers the legal and tax
effects (including without limitation the effects of Section 162(m) of the
Internal Revenue Code of 1986, as amended), of the Company's executive
compensation program in order to provide the most favorable legal and tax
consequences for the Company.
The Compensation Committee determines the compensation of the individuals
whose compensation is detailed in this proxy statement (including in the
Summary Compensation Table) and sets policies for and reviews the compensation
awarded to the Company's most highly compensated corporate executives. This
process is designed to provide consistency throughout the executive
compensation program. In reviewing the individual performance of the executives
whose compensation is described in this proxy statement (other than Roger S.
Marcus, the Company's Chief Executive Officer), the Compensation Committee
takes into account the views of Roger S. Marcus.
The key elements of the Company's executive compensation consist of base
salary, annual bonus and stock options. In 1996, the Compensation Committee
established certain additional elements to the Company's executive compensation
program, including principally splitdollar insurance arrangements. The
Compensation Committee's policies with respect to each of these elements,
including the bases for the compensation awarded to Roger S. Marcus, are
discussed below. In addition, although the elements of compensation described
below are considered separately, the Compensation Committee takes into account
the full compensation package afforded by the Company (including its
subsidiaries) to the individual, including pension benefits, insurance and
other benefits, as well as the specific elements of the program described below.
8
Base Salaries
Base salaries for executive officers are determined by considering
historical salaries paid by the Company to officers having certain duties and
responsibilities and then evaluating the current responsibilities of the
position, the scope of the operations under management and the experience of
the individual. Annual salary adjustments are determined by evaluating on an
individual basis (i) new responsibilities of the executive's position,
(ii) changes in the scope of the operations managed, (iii) the performance both
of such operations and of the executive in the position and (iv) annual
increases in the cost of living.
With respect to the base salary of Roger S. Marcus in 2001, the Compensation
Committee took into account the Company's performance (and the performance of
Congoleum Corporation, a subsidiary of the Company), the asset values created
for the Company by Congoleum Corporation under Mr. Marcus's leadership and the
assessment by the Compensation Committee of Mr. Marcus's individual performance
as Chief Executive Officer of both the Company and Congoleum Corporation. The
Compensation Committee also took into account the length of Mr. Marcus's
service to the Company and his increasing responsibilities in the course of
such service. Mr. Marcus's base salary of $540,000 for 2001 represents an
increase of 4.3% over his $517,500 base salary for 2000. The Compensation
Committee did not increase Mr. Marcus's base salary for 2002.
Annual Bonus
The Company's executive officers are eligible for an annual cash bonus.
Annual bonuses are determined on the basis of individual and corporate
performance. The most significant corporate performance measure for bonus
payments is earnings of the Company as a whole and then the relevant divisions
or subsidiaries, where appropriate. The Compensation Committee has adopted a
policy of paying bonuses to each of Roger S. Marcus and Richard G. Marcus of
approximately 3-4% of the Company's after-tax earnings, taking into account
significant exceptional or nonoperational occurrences and the actual level of
profitability for the relevant year. In determining annual bonuses, the
Committee also considers the views of Roger S. Marcus as Chief Executive
Officer and discusses with him the appropriate bonuses for all executives,
including himself.
For 2001, a substantial portion of Mr. Marcus's bonus represents payment of
the remainder of an amount received by the Company in 1995 in recognition of
Mr. Marcus's extraordinary efforts in accomplishing the public offering and
recapitalization of Congoleum Corporation. The Committee had not awarded this
balance to Mr. Marcus previously due to tax considerations, and the Company has
had the benefit of the cash in the interim. Roger S. Marcus was awarded an
aggregate bonus of $425,000 for 2001 (which amount included the amount referred
to in the previous two sentences). For 2000, he was awarded a bonus of
$450,000. A portion of Mr. Marcus's 2001 bonus was based on earnings for the
Company as a whole in accordance with the Compensation Committee policy set
forth above. Consideration was also given to his performance as Chief Executive
Officer of the Company and as Chief Executive Officer of Congoleum Corporation,
taking into account certain payments by Congoleum Corporation to the Company
relating to, among other things, Mr. Marcus's service as Chief Executive
Officer of Congoleum Corporation. In awarding Mr. Marcus's aggregate bonus, the
Compensation Committee also considered the performance of the Common Stock and
Mr. Marcus's role in promoting the long-term strategic growth of the Company.
9
Stock Options
Under the Company's 1993 Stock Award and Incentive Plan as amended, stock
options are granted to the Company's executive officers. Stock options are
granted to the Company's executive officers by the Compensation Committee or
the Stock Award Committee, as appropriate. Currently, these Committees set
guidelines for the size of stock option awards based on factors similar to
those used to determine base salaries and annual bonus. Stock options are
designed to align the interests of executives with those of the stockholders.
Under the 1993 Stock Award and Incentive Plan, stock options are typically
granted with an exercise price equal to the market price of the Common Stock on
the date of grant and vest over time. This approach is designed to encourage
the creation of stockholder value over the long term since the full benefit of
options granted under the plan cannot be realized unless stock price
appreciation occurs over time.
In December 2001, the Compensation Committee of Congoleum Corporation
approved an offer to exchange outstanding options for new options. Pursuant to
the offer to exchange, eligible option holders of Congoleum, including Roger S.
Marcus, were allowed to exchange all options granted to them by Congoleum under
its 1995 Stock Option Plan or Congoleum's 1999 Stock Option Plan For
Non-Employee Directors for new options to be granted under those same plans not
earlier than six months and one day after the date Congoleum canceled the
options tendered to and accepted by it. The offer to exchange expired at 12:00
Midnight, Eastern time, on January 3, 2002. Pursuant to the offer to exchange,
Congoleum accepted for cancellation options to purchase 678,000 shares of its
Class A Common Stock, including options to purchase 200,000 shares held by Mr.
Marcus. Congoleum anticipates that it will issue the new options on or about
July 5, 2002. The new options will be exercisable for the same number of shares
of Congoleum's Class A Common Stock as the canceled options. The exercise price
of the new options to be granted to Mr. Marcus will be equal to the fair market
value as of the date of grant and will vest annually in equal installments over
a five year period beginning on the first anniversary of the date of grant. The
Compensation Committee considered the effect of the Congoleum option exchange
on the compensation of the Company's executive officers when determining other
elements of compensation.
Supplemental Benefits
In 1996, the Compensation Committee established supplemental benefits for
certain executive officers of the Company. These supplemental benefits were
proposed and approved as a means of addressing the substantial inequity to the
five most highly compensated executive officers of the Company created by the
cap on credited compensation under the Company's qualified pension plan
described below under the caption "Defined Benefit Pension Plan." Effective as
of December 20, 1996, the Company entered into split-dollar life insurance
agreements for the benefit of each of William M. Marcus, Richard G. Marcus and
Roger S. Marcus. In 1997, the Company entered into a similar agreement for the
benefit of J. Dennis Burns and in 2000, the Company entered into a similar
agreement for the benefit of Howard N. Feist III. Under these contracts, the
Company agreed to pay a portion of premiums due over a specified time period on
certain variable life insurance policies providing life insurance protection
for the family of each executive officer, subject to various terms and
conditions. Although the Company is only obligated under the agreements to pay
a portion of the executives' policy premiums, the Company has paid and may
continue to pay the full premium under any of the policies or reimburse the
executives for some or all of their portion of the premiums under one or more
of their respective policies covered by the agreements. Premiums paid under the
split-dollar agreements are reflected in the Summary Compensation Table set
forth below under the column entitled "All Other Compensation." Under each of
the split-dollar agreements, the Company is entitled to all of the net premiums
paid by it upon termination of the agreement in
10
accordance with its terms. Each life insurance policy subject to a split-dollar
agreement has been assigned to the Company as collateral to secure recovery by
the Company of the premiums paid by it on that policy.
Company Agreements
No executive officer of the Company has an employment agreement with the
Company.
Conclusion
Through the programs described above, a significant portion of the Company's
executive compensation is linked directly to individual and corporate
performance. In 2001, approximately 36% of the Company's executive compensation
consisted of performance-based variable elements. In the case of Roger S.
Marcus, approximately 44% of his 2001 compensation consisted of
performance-based variable elements. The Compensation Committee intends to
continue the policy of linking executive compensation to corporate and
individual performance, recognizing that the ups and downs of the business
cycle from time to time may result in an imbalance for a particular period.
COMPENSATION COMMITTEE
Mark N. Kaplan, Chairman
John C. Garrels III
Kenneth I. Watchmaker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board during 2001 are
listed above, none of whom is or was at any time during 2001 or at any previous
time an officer or employee of the Company. Mark N. Kaplan is presently Of
Counsel to Skadden, Arps, Slate, Meagher & Flom LLP, a law firm used for a
number of matters by the Company in 2001 and proposed to be retained in 2002.
Mr. Kaplan is also a director of Congoleum Corporation.
11
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
earned by or paid to the Company's Chairman of the Board and Chief Executive
Officer and the Company's four other most highly compensated officers for
services rendered to the Company and its subsidiaries in all capacities during
each of the last three years. The table also identifies the principal capacity
in which each of the named executives served the Company at the end of 2001.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation Awards
------------------ ------------------
Securities Securities
Underlying Underlying
ABI Comgoleum All Other
Name and Principal Year Salary($) Bonus($) Options Options Compensation($)(1)
------------------ ---- --------- -------- ---------- ---------- ------------------
Roger S. Marcus.................... 2001 540,000 425,000 196,800
Chairman of the Board and 2000 517,500 450,000 196,800
Chief Executive Officer 1999 492,500 575,000 196,400
Richard G. Marcus.................. 2001 540,000 425,000 156,800
President and Chief Operating 2000 517,500 450,000 156,800
Officer 1999 492,500 575,000 156,400
William M. Marcus.................. 2001 432,000 160,000 5,000(2) 226,800
Executive Vice President 2000 414,000 360,000 226,800
and Treasurer 1999 394,000 400,000 226,400
Howard N. Feist III................ 2001 237,500 45,000 10,000 61,800
Vice President-Finance and 2000 230,000 90,000 61,800
Chief Financial Officer
J. Dennis Burns.................... 2001 215,000 25,000 18,800
Vice President and General Manager, 2000 205,000 100,000 18,800
Tape Products Division 1999 195,000 85,000 18,400
--------
(1) The amounts disclosed in this column include:
(a) Company contributions of $6,800 in each of 2001 and 2000 and $6,400 in
1999, under the Section 401(k) Savings Investment Plan on behalf of each
individual listed;
(b) payment by the Company of $10,000 in each of 2001, 2000, and 1999 to
individual life insurance trusts for Roger S. Marcus, Richard G. Marcus
and William M. Marcus; and
(c) premiums paid by the Company in 2001, 2000 and 1999 under split-dollar
insurance arrangements on behalf of Roger S. Marcus, Richard G. Marcus,
William M. Marcus and J. Dennis Burns, totaling $180,000, $140,000,
$210,000 and $12,000, respectively for each year. In 2001 and 2000,
$55,000 was paid under these arrangements on behalf of Howard N. Feist
III.
12
(2) Subsequent to December 31, 2001, Mr. Marcus tendered pursuant to the
Congoleum Corporation's offer to exchange all options to purchase the
Congoleum Corporation's Class A common stock that had been granted to him.
On January 4, 2002, the Congoleum Corporation accepted and canceled those
tendered options. Pursuant to the terms of Congoleum Corporation's offer to
exchange, Congoleum Corporation will grant a new option to Mr. Marcus not
earlier than six months and one day following the date Congoleum
Corporation canceled those options tendered by him to Congoleum
Corporation. Currently, Congoleum Corporation anticipates granting the new
option to Mr. Marcus on or about July 5, 2002. The new option will be
exercisable for the same number of shares of Congoleum Corporation's Class
A common stock as the canceled options. The exercise price of the new
option will be equal to the fair market value as of the date of grant as
determined under the Congoleum Corporation's 1995 Stock Option Plan, as
amended, and will generally vest annually in equal installments over a five
year period beginning on the first anniversary of the date of grant of the
new option.
STOCK OPTIONS
The table below sets forth information relating to stock option exercises in
2001 by the named executive officers of the Company and the number and value of
each such officer's unexercised in-the-money options/SARs on December 31, 2001
based upon the difference between exercise price and closing price per share at
fiscal year-end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options/SARs at FY-End
------------------------------ ---------------------------------
Company Shares
Granting Acquired on Value
Name Options Exercise (#) Realized ($) Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
---- --------- ------------ ------------ --------------- ----------------- --------------- -----------------
Roger S. ABI 122,000 10,000 0 0
Marcus......... Congoleum 180,000(1) 20,000(1) 0 0
Richard G. ABI 122,000 10,000 0 0
Marcus......... Congoleum 180,000(1) 20,000(1) 0 0
William M. ABI 89,600 8,000 0 0
Marcus......... Congoleum 2,000(1) 3,000(1) 0 0
Howard N. ABI 4,000 6,000 0 0
Feist III...... Congoleum 9,000(1) 6,000(1) 0 0
J. Dennis Burns ABI 4,000 27,200 14,800 1,200 0 0
--------
(1) Subsequent to December 31, 2001, Roger S. Marcus, Richard G. Marcus,
William M. Marcus and Howard N. Feist III tendered pursuant to Congoleum's
offer to exchange all options to purchase Congoleum's Class A Common Stock
that had been granted to them. On January 4, 2002, Congoleum accepted and
canceled those tendered options. Pursuant to the terms of Congoleum's offer
to exchange, Congoleum will grant new options to Roger S. Marcus, Richard
G. Marcus, William M. Marcus and Howard N. Feist III on or about July 5,
2002. The new options will be exercisable for the same number of shares of
Congoleum's Class A Common Stock as the canceled options. The exercise
price of the new options will be equal to the fair market value as of the
date of grant as determined under Congoleum's 1995 Stock Option Plan, as
amended, and will generally vest annually in equal installments over a five
year period beginning on the first anniversary of the date of grant of the
new options.
13
DEFINED BENEFIT PENSION PLAN
In addition to the remuneration set forth above, the Company maintains a
tax-qualified defined benefit pension plan (the "Pension Plan"). The following
table shows for various income and service levels, the annual benefits payable
under the Pension Plan, commencing at normal retirement at age 65. These
benefits are presented on a five years certain and life thereafter basis and
reflect any reduction for Social Security or other offset amounts that may
apply.
PENSION PLAN TABLE
Remuneration Years of Service
------------ ------------------------------------------------
15 20 25 30 35 40 45
------ ------ ------ ------ ------ ------ ------
$200,000.. 20,700 27,600 34,500 41,400 48,300 55,200 60,400
$300,000.. 20,700 27,600 34,500 41,400 48,300 55,200 60,400
$400,000.. 20,700 27,600 34,500 41,400 48,300 55,200 60,400
$500,000.. 20,700 27,600 34,500 41,400 48,300 55,200 60,400
The Pension Plan provides non-contributory benefits based upon years of
service and average annual earnings for the 60 consecutive months in which the
participating employee had the highest level of earnings during the 120
consecutive months preceding retirement.
The compensation used to determine a person's benefits under the Pension
Plan is such person's salary (including amounts deferred as salary reduction
contributions to any applicable tax-qualified plans maintained under Sections
401(k) or 125 of the Code). The Internal Revenue Service has limited the
maximum compensation for benefit purposes to $170,000 in 2001. Salary amounts
listed in the Summary Compensation Table are items of compensation covered by
the Pension Plan.
The table below sets forth certain information relating to the Pension Plan
with respect to the five most highly compensated executive officers of the
Company.
2001 Remuneration Credited Years
Name Covered by Plan of Service
---- ----------------- --------------
Roger S. Marcus.... $170,000 34
Richard G. Marcus.. 170,000 31
William M. Marcus.. 170,000 41
Howard N. Feist III 170,000 20
J. Dennis Burns.... 170,000 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2001, the Company retained the services of the law firm Skadden,
Arps, Slate, Meagher & Flom LLP for a variety of legal matters. The Company has
retained Skadden, Arps, Slate, Meagher & Flom LLP during 2002 and proposes to
retain that firm at times during the remainder of 2002. Mr. Kaplan is of
counsel to Skadden, Arps, Slate, Meagher & Flom LLP.
14
CHANGE OF CONTROL ARRANGEMENTS
Under the terms of the Company's 1993 Stock Award and Incentive Plan, as
amended and restated as of March 4, 1997 (the "1993 Plan"), all outstanding
awards granted under that plan that were not previously exercisable and vested
will become fully vested and exercisable if: (i) any person (other than an
exempt person (as defined in the succeeding sentence)) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two consecutive years,
individuals who at the beginning of that two-year period constitute the entire
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction of the
type referred to in clauses (i), (iii) or (iv) of this paragraph) whose
election to the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then in office
who either were directors at the beginning of that two-year period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board; (iii) the Company's
stockholders approve a merger or consolidation of the Company with any other
corporation, other than (a) a merger or consolidation which would result in the
Company's voting securities outstanding immediately prior to the consummation
of that transaction representing 50% or more of the combined voting power of
the surviving or parent entity outstanding immediately after the merger or
consummation or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
(other than an exempt person) acquires 50% or more of the combined voting power
of the Company's then outstanding voting securities; or (iv) the Company's
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale of all, or substantially all of, the Company's assets
(or any transaction having a similar effect). For purposes of the 1993 Plan, an
"exempt person" means (a) the Company, (b) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, (c) any
corporation owned, directly or indirectly, by the Company's stockholders in
substantially the same proportions as their ownership of the Company, or (d)
any person or group of person who, immediately prior to the adoption of the
1993 Plan owned more than 50% of the combined voting power of the Company's
then outstanding voting securities.
15
CUMULATIVE TOTAL STOCKHOLDER RETURN
The graph that follows compares the cumulative total stockholder return of
the Common Stock to the cumulative returns of the American Stock Exchange
Market Value Index and a Peer Group Index which includes companies in Standard
Industrial Classification (SIC) code number 3089--Plastic Products, N.E.C.
[CHART]
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES
AND/OR BROAD MARKETS
AMERICAN AMEX MARKET PLASTICS
BILTRITE INDEX PRODUCTS, NEC
------ ------ ------
1996 100.00 100.00 100.00
1997 109.79 120.33 122.66
1998 95.42 118.69 121.98
1999 68.13 147.98 117.78
2000 70.64 146.16 78.24
2001 72.76 139.43 92.89
16
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Ernst & Young LLP as
independent auditors to audit the financial statements of the Company for 2002.
Fees billed by Ernst & Young LLP for 2001 are as follows:
Audit Fees
The aggregate fees and expenses billed by Ernst & Young LLP for professional
services rendered for the audit of the financial statements of the Company for
2001 and the reviews of the Company's quarterly financial statements included
in the Company's Forms 10-Q for 2001 were $610,700.
Financial Information Systems Design and Implementation Fees
There were no fees billed by Ernst & Young LLP for services related to
financial information systems design and implementation rendered to the Company
during 2001.
All Other Fees
The aggregate fees billed by Ernst & Young LLP for all other services
rendered to the Company other than those mentioned above were $230,000 which
related to audits of the Company's retirement plans as well as consultation
related to tax planning and compliance.
The Company's Audit Committee has considered whether the provision of the
non-audit services provided by Ernst & Young LLP to the Company is compatible
with maintaining Ernst & Young's independence and concluded that it is.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting, will be given an opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the year 2002 Annual
Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must be
received by the Company at the Company's principal executive offices by
December 11, 2002. In order for stockholder proposals made outside of Rule
14a-8 under the Exchange Act to be considered "timely" within the meaning of
Rule 14a-4(c) under the Exchange Act, such proposals must be received by the
Company at the Company's principal executive offices by February 24, 2003.
OTHER MATTERS
Management of the Company has no knowledge of any other matters which may
come before the Meeting and does not itself intend to present any such other
matters. However, if any such other matters shall properly come before the
Meeting or any adjournment thereof, the persons named as proxies will have
discretionary authority to vote the shares represented by the accompanying
proxy in accordance with their best judgment.
By Order of the Board of Directors
Henry W. Winkleman
Secretary
Wellesley Hills, Massachusetts
April 5, 2002
17
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE AMERICAN BILTRITE INC.
ANNUAL MEETING OF STOCKHOLDERS MAY 8, 2002 1. ELECTION OF CLASS III With- For All
This proxy is solicited on behalf of the Board of Directors DIRECTORS (except as For hold Except
marked to the contrary [ ] [ ] [ ]
The undersigned hereby appoints Roger S. Marcus, Richard G. below):
Marcus and William M. Marcus and each of them, as attorneys and
proxies, with full power of substitution, to represent and to Nominees: Mark N. Kaplan Natalie S. Marcus
vote, as designated below, at the Annual Meeting of Stockholders William M. Marcus Kenneth I. Watchmaker
of American Biltrite Inc. (the "Company") to be held at the
FleetBoston Financial Corporation, America Room, 2nd Floor, 100
Federal Street, Boston, Massachusetts on Wednesday, May 8, 2002, INSTRUCTION: To withhold authority to vote for any
at 9:00 A.M., local time, and at any adjournment thereof, all individual nominee, mark "For All Except" and write
shares of Common Stock of the Company which the undersigned could that nominee's name in the space provided below.
vote if present in such manner as such proxies may determine on ------------------------------------------------------------
any matters which may properly come before the meeting and to
vote on the following as specified hereon. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
PROPOSAL. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED
TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
Note: Signature(s) should agree with name(s) as printed
hereon. All joint owners and fiduciaries should sign. When
signing as attorney, executor, administrator, trustee,
guardian or custodian for a minor, please give full title as
such. If a corporation, please sign full corporate name and
indicate the signer's office of authority. If a partner,
sign in partnership name by authorized person.
Please be sure to sign and -------------------
date this Proxy in the box below. Date
---------------------------------------------------------------------
------ Stockholder sign above ------ Co-holder (if any) sign above---
--------------------------------------------------------------------------------
Detach above card, sign, date and mail in
postage-paid envelope provided.
AMERICAN BILTRITE INC.
------------------------------------------------------------------------------
PLEASE FILL IN DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POST-PAID RETURN ENVELOPE
------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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