SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
American Biltrite, 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:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
AMERICAN BILTRITE INC.
57 River Street
Wellesley Hills, Massachusetts 02481
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 7, 2003
------------------
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, 2nd Floor, 100 Federal Street, Boston, Massachusetts, on
Wednesday, May 7, 2003 at 9:00 A.M. local time, for the following purposes:
1. To elect three directors who will hold office until the Annual Meeting
of Stockholders in 2006 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 27, 2003 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, 2002 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 16, 2003
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" or "ABI"), of proxies to be used in voting at the Annual Meeting
of Stockholders (the "Meeting") to be held on May 7, 2003 at the FleetBoston
Financial Corporation, America Room, 2nd 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 or telephone 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 16, 2003.
Proxies in the accompanying form, properly executed, duly returned to the
Company and not validly 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 April 7, 2003, there were issued and outstanding 3,441,551 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 for the election of directors.
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 three 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.
DELIVERY OF PROXY MATERIAL AND ANNUAL REPORTS TO HOUSEHOLDS
The Securities and Exchange Commission has implemented a rule permitting
companies and brokers, banks or other intermediaries to deliver a single copy of
an annual report and proxy statement to households at which two or more
beneficial owners reside. This method of delivery, which eliminates duplicate
mailings, is referred to as "householding." Beneficial owners sharing an address
who have been previously notified by their broker, bank or other intermediary
and have consented to householding, either affirmatively or implicitly by not
objecting to householding, will receive only one copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 and this proxy
statement.
If you hold your shares in your own name as a holder of record,
householding will not apply to your shares.
1
Beneficial owners who reside at a shared address at which a single copy of
the Company's Annual Report on Form 10-K for the year ended December 31, 2002
and this proxy statement is delivered may obtain a separate Annual Report on
Form 10-K for the year ended December 31, 2002 and/or proxy statement without
charge by sending a written request to: American Biltrite Inc., 57 River Street,
Wellesley Hills, Massachusetts 02481, attention Henry W. Winkleman, or by
calling the company at 781-237-6655. The Company will promptly deliver an Annual
Report on Form 10-K for the year ended December 31, 2002 and/or proxy statement
upon request.
Not all brokers, banks or other intermediaries may offer the opportunity to
permit beneficial owners to participate in householding. If you want to
participate in householding and eliminate duplicate mailings in the future, you
must contact your broker, bank or other intermediary directly. Alternatively, if
you want to revoke your consent to householding and receive separate annual
reports and proxy statements for each beneficial owner sharing your address, you
must contact your broker, bank or other intermediary to revoke your consent to
householding.
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 three Class I directors at the Meeting. The accompanying proxy will be
voted for the election of the nominees named in Class I below unless otherwise
instructed. The term of those Class I directors elected at the Meeting will
expire at the Annual Meeting of Stockholders held in 2006 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 DIRECTORSHIPS PRESENT TERM
---------- ----------------------- ------------
NOMINEES
--------
CLASS I
Gilbert K. Gailius (71) Former Vice President-Finance and Chief 2003
Financial Officer of the Company.
Director of the Company since 1983.
Richard G. Marcus (55) President and Chief Operating Officer of the 2003
Company. Director of the Company since 1982.
Vice Chairman of the Board of Directors of
Congoleum Corporation.
Frederick H. Joseph (66) Managing Director, Morgan Joseph & Co. 2003
investment bankers from 2001 to 2002.
Managing Director, ING Barings LLC,
investment bankers, from 1998 to 2001.
From 1994 to 1998 was Chairman of
Clovebrook Capital Corp., investment banking
consultants. Director of the Company since 1997.
2
BUSINESS EXPERIENCE AND EXPIRATION OF
NAME (AGE) OTHER DIRECTORSHIPS PRESENT TERM
---------- ----------------------- ------------
INCUMBENT DIRECTORS
CLASS II
John C. Garrels III (63) Former Director, Global Banking, The First National 2004
Bank of Boston, a national banking
association. Director of the Company since
1977.
James S. Marcus (73) Former Limited Partner, Goldman, Sachs & Co., 2004
investment bankers. Director of the
Company since 1971. Director of Insight
Communications Company, Inc.
Roger S. Marcus (57) Chairman of the Board and Chief Executive 2004
Officer of the Company. Director of the
Company since 1981. Chairman of the Board of
Directors and Chief Executive Officer of Congoleum
Corporation, a resilient flooring manufacturer and a
majority owned subsidiary of the Company
CLASS III
Mark N. Kaplan, Esq. (73) Of Counsel, Skadden, Arps, Slate, Meagher & 2005
Flom LLP, 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 (86) Investor. Director of the Company since 1992. 2005
William M. Marcus (65) Executive Vice President and Treasurer of the
Company. Director of the Company since 1966.
Director of Congoleum Corporation.
Kenneth I. Watchmaker (60) Executive Vice President and Chief Financial 2005
Officer of Reebok International Ltd., a
worldwide designer, marketer and distributor of
sports, fitness and casual footwear, apparel and
equipment. Director of the Company since 1995.
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 I DIRECTOR.
3
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 (57) Chief Executive Officer 1981
Richard G. Marcus (55) President and Chief Operating Officer 1982
William M. Marcus (65) Executive Vice President and Treasurer 1966
Howard N. Feist III (46) Vice President-Finance and 2000
Chief Financial Officer of the Company.
Chief Financial Officer and Secretary of
Congoleum Corporation since 1988.
J. Dennis Burns (63) Vice President and General Manager, 1985
Tape Products Division
Jean Richard (58) Vice President and General Manager 2000
American Biltrite (Canada) Ltd.
President and Chief Operating Officer of
Group Bocenor, Inc., a window and door
manufacturer, from 1994 to 1999.
Edward J. Lapointe (60) Controller 1983
Henry W. Winkleman (58) Vice President, Corporate Counsel, and Secretary 1989
4
CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
The following table, together with the accompanying text and footnotes,
sets forth, as of April 7, 2003, (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 that appears later in this proxy statement and of all
executive officers and directors as a group and (c) the names, addresses and
holdings of the Common Stock of each person, who to the Company's knowledge,
beneficially owns 5% or more of the Common Stock.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER(1) OWNERSHIP(2) COMMON STOCK
-------------------------- ------------- -------------
DIRECTORS AND EXECUTIVE OFFICERS
Natalie S. Marcus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965,870(3)(4) 28.0%
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Richard G. Marcus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578,017(3)(5) 16.2
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Roger S. Marcus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,416(3)(6) 16.2
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
J. Dennis Burns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,104(8) *
Mark N. Kaplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500(9) *
Gilbert K. Gailius . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500(10) *
John C. Garrels III. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300(10) *
Howard N. Feist III. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000(11) *
Kenneth I. Watchmaker. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500(10) *
James S. Marcus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700(10) *
Frederick H. Joseph. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500(12) *
All directors and executive officers . . . . . . . . . . . . . . . . . . . 2,313,241(13) 60.1
as a group (15 persons)
5% BENEFICIAL OWNERS, OTHER THAN PERSONS INCLUDED ABOVE
Dimensional Fund Advisors, Inc . . . . . . . . . . . . . . . . . . . . . . 281,450(14) 8.2
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90491
Wilen Management Company, Inc. . . . . . . . . . . . . . . . . . . . . . . 245,402(15) 7.1
2360 West Joppe Road, Suite 226
Lutherville, MD 21093.
-------------
* Represents beneficial ownership of less than 1% of Common Stock.
(1) Addresses are given only for beneficial owners of more than 5% of the
Common Stock.
5
(2) Unless otherwise noted, the nature of beneficial ownership is sole voting
and/or investment power.
(3) As of the date shown, these shares were among the 2,244,037 shares, or
59.3%, 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 with each 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 819,370 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 2,500 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 312,017 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 5,130 shares, of which shares Mr. Marcus disclaims beneficial
ownership.
(6) Roger S. Marcus has sole voting and investment power over 309,416 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 8,030 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 3,104 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, of which shares
Mr. Burns disclaims beneficial ownership.
(9) Mark N. Kaplan has sole voting and investment power over 2,000 shares. Mark
N. Kaplan has the right to acquire 2,500 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, and has the right to acquire 2,500 shares of Congoleum which are
issuable upon exercise of options exercisable within 60 days of the date of
this proxy statement 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 Gilbert K. Gailius have
sole voting and investment power over 800, 200 and 12,000 shares,
respectively. Messrs. John C. Garrels III, James S. Marcus and Kenneth I.
Watchmaker each have the right to acquire 2,500 shares, which are issuable
upon exercise of options exercisable within 60 days of the date of this
proxy statement. Mr. Gilbert K. Gailius has the right to acquire 500 shares
which are issuable upon exercise of options exercisable within 60 days of
the date of this proxy statement.
(11) Howard N. Feist III has the right to acquire 6,000 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
6
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 2,500 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 177,777 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 February 3, 2003.
(15) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on January 30, 2003.
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, 2002, its officers, directors
and holders of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements.
DIRECTOR COMPENSATION AND COMMITTEES
During 2002, 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 member of the Audit
Committee received $2,000 for the March audit Committee meeting and $3,000 for
each Audit Committee meeting attended thereafter during 2002. All of the
directors attended all of the Board meetings and all committee members attended
all committee meetings in 2002.
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.
Directors are also eligible to have their contributions to qualified
charitable organizations matched by the Company in an aggregate amount up to
$5,000 per director per year.
There are four standing committees of the Board. The Company's Executive
Committee consists of five members. The functions of the Executive 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 2002, the Executive Committee held no meetings. 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.
The Company's Compensation Committee consists of three members. The
Compensation Committee met once during 2002. The members of the Compensation
Committee are Messrs. Mark N. Kaplan, Chairman, John C. Garrells III and Kenneth
I. Watchmaker. The Compensation Committee is responsible for the review and
establishment of executive compensation including base salaries, bonuses and
criteria for their award, personnel policies, particularly as they relate to
fringe benefits, savings and investment, pension and retirement plans and other
benefits.
The Company's Stock Award Committee consists of three members. The function
of the Stock Award 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 2002.
7
The Company has an Audit Committee composed of independent directors.
Information regarding the functions performed by the Audit 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. A written
charter adopted by the Board governs the Audit Committee.
The Company does not have a nominating committee of 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 Audit Committee reviewed the
audited financial statements in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002 with management and the independent auditors,
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 Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the United
States, 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 Audit Committee under auditing standards generally accepted
in the United States. In addition, the Audit Committee discussed with the
independent auditors the auditors' independence from management and the Company
including the matters required to be discussed by Statement on Auditing
Standards No. 61, has received and reviewed written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
No. 1 and considered the compatibility of nonaudit services with the auditors'
independence.
The Audit Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Audit
Committee met 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 Audit Committee held four meetings during
fiscal year 2002.
In reliance on the reviews and discussions referred to above, the Audit
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, 2002 for filing with the Securities and Exchange
Commission. The Audit Committee and the Board have also approved the selection
of the Company's independent auditors.
AUDIT COMMITTEE
Kenneth I. Watchmaker, Chairman
John C. Garrels III
James S. Marcus
8
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 executive 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 the Company's
compensation strategy are to attract and retain the best possible executives, to
motivate those 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 material 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 split-dollar 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.
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 2002, the
Compensation Committee took into account the Company's performance (and the
performance of Congoleum Corporation, a majority-owned subsidiary of the
Company) 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 was not
increased during 2002.
9
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 non-operational 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.
Roger S. Marcus was awarded a bonus of $150,000 for 2002. For 2001, he was
awarded a bonus of $425,000. 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 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.
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, as amended, 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
Corporation under its 1995 Stock Option Plan or Congoleum Corporation'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 Corporation 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 Corporation 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. On July 11,
2002 Congoleum Corporation issued new options to Mr. Marcus 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 options granted to Mr. Marcus
was $2.05, which was 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.
10
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 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. The Company did not pay premiums under these agreements in 2002 because
it is not clear whether such payments could be considered prohibited loans under
the Sarbanes-Oxley Act of 2002. Because of this potential prohibition, as well
as recent tax law changes, the Compensation Committee is evaluating this program
to determine the best course of action.
EMPLOYMENT 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 2002, approximately 19% of the Company's executive compensation
consisted of performance-based variable elements. In the case of Roger S.
Marcus, approximately 21% of his 2002 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 2002 are
listed above, none of whom is or was at any time during 2002 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 2002. The Company has retained Skadden,
Arps, Slate, Meagher & Flom LLP during 2003 and proposes to retain the firm
during the remainder of 2003. Mr. Kaplan is also a director of Congoleum
Corporation and serves on the Audit and Compensation Committees of Congoleum.
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
collectively, the "named executive 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 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-----------------------
SECURITIES SECURITIES
UNDERLYING UNDERLYING
ANNUAL COMPENSATION ABI CONGOLEUM ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS OPTIONS
COMPENSATION ($)(1)
--------------------------------- ---- --------- -------- ---------- ---------- -------------
Roger S. Marcus . . . . . . . . . . . 2002 550,000 150,000 -- 200,000 16,000
Chairman of the Board and 2001 540,000 425,000 -- -- 196,800
Chief Executive Officer 2000 517,500 450,000 -- -- 196,800
Richard G. Marcus . . . . . . . . . . 2002 550,000 150,000 -- 200,000 16,000
President and 2001 540,000 425,000 -- -- 156,800
Chief Operating Officer 2000 517,500 450,000 -- -- 156,800
William M. Marcus . . . . . . . . . . 2002 440,000 120,000 -- 5,000 16,000
Executive Vice President and 2001 432,000 160,000 -- -- 226,800
Treasurer 2000 414,000 360,000 -- -- 226,800
Howard N. Feist III . . . . . . . . . 2002 247,500 35,000 -- 15,000 6,000
Vice President-Finance And 2001 237,500 45,000 -- -- 61,800
Chief Financial Officer 2000 230,000 90,000 10,000 -- 61,800
J. Dennis Burns . . . . . . . . . . . 2002 223,300 20,000 -- -- 6,000
Vice President and 2001 215,000 25,000 -- -- 18,800
General Manager, 2000 205,000 100,000 -- -- 18,800
Tape Products Division
----------------
(1) The amounts disclosed in this column include:
(a) Company contributions of $6,000 in 2002 and $6,800 in each of 2001 and
2000, 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 2002, 2001, and 2000 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 and 2000 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, and $210,000 and $12,000, respectively for each year. In
2001 and 2000, $55,000 was paid under these arrangements on behalf of
Howard N. Feist III.
12
STOCK OPTIONS
The table below sets forth information relating to stock option grants by
Congoleum Corporation in 2002 to the named executive officers of the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS EMPLOYEES IN PRICE ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
---- ------------- ---------------- -------- ----------------- --------- ---------
Roger S. Marcus. . . . . . . . . . 200,000(1) 30.6 2.05 7/10/12 0 0
Richard G. Marcus. . . . . . . . . 200,000(1) 30.6 2.05 7/10/12 0 0
William M. Marcus. . . . . . . . . 5,000(2) .8 2.05 7/10/12 0 0
Howard N. Feist III. . . . . . . . 15,000(1) 2.3 2.05 7/10/12 0 0
(1) The options were granted pursuant to Congoleum's 1995 Stock Option Plan and
vest over five years at the rate of 20% per year beginning on the first
anniversary of the date of the grant, subject to acceleration as the
Compensation Committee of Congoleum, in its sole discretion, deems
appropriate. The term of such option grants is ten years from the date of
grant, which was July 11, 2002.
(2) The options were granted pursuant to Congoleum's 1999 Stock Option Plan for
Non-Employee Directors and vest 100% six months from the date of grant. The
term of such option grant is ten years from the date of grant, which was
July 11, 2002.
The table below sets forth information relating to stock option exercises
in 2002 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,
2002 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
NUMBER OF ECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
COMPANY SHARES AT FY-END AT FY-END
GRANTING ACQUIRED VALUE ----------------------------- --------------------------------
NAME OPTIONS ON EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE (#)EXERCISABLE UNEXERCISABLE($)
--------------- --------- --------------- ------------- -------------- ------------- -------------- ----------------
Roger S.............. ABI -- -- 122,000 0 0 0
Marcus Congoleum -- -- -- 200,000(1) 0 0
Richard G............ ABI -- -- 122,000 0 0 0
Marcus Congoleum -- -- -- 200,000(1) 0 0
William M............ ABI -- -- 97,600 0 0 0
Marcus Congoleum -- -- -- 5,000(1) 0 0
Howard N............. ABI -- -- 6,000 4,000 0 0
Feist III Congoleum -- -- -- 15,000(1) 0 0
J. Dennis............ ABI -- -- 16,000 0 0 0
Burns
-----------------
(1) Subsequent to December 31, 2001, Roger S. Marcus, Richard G. Marcus,
William M. Marcus and Howard N. Feist III tendered, pursuant to Congoleum
Corporation's offer to exchange, all their respective options to purchase
Congoleum Corporation's Class A Common Stock that had been previously
granted to them and which had not been previously exercised or expired. On
January 4, 2002, Congoleum Corporation accepted and canceled those tendered
options. Pursuant to the terms of Congoleum Corporation's offer to
exchange, Congoleum Corporation granted new options to Roger S. Marcus,
Richard G. Marcus, William M. Marcus and
13
Howard N. Feist III on July 11, 2002. The new options are 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 options is $2.05
which was equal to the fair market value as of the date of grant as
determined under 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 options.
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
YEARS OF
SERVICE
REMUNERATION 15 20 25 30 35 40 45
------------ ------ ------ ------ ------ ------ ------ ------
$200,000 . . . . . . . . . . . 24,600 32,800 41,100 49,300 57,500 65,700 71,800
$300,000 . . . . . . . . . . . 24,600 32,800 41,100 49,300 57,500 65,700 71,800
$400,000 . . . . . . . . . . . 24,600 32,800 41,100 49,300 57,500 65,700 71,800
$500,000 . . . . . . . . . . . 24,600 32,800 41,100 49,300 57,500 65,700 71,800
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 Internal Revenue Code of 1986, as amended). The Internal
Revenue Service has limited the maximum compensation for benefit purposes to
$200,000 in 2002. 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.
2002 REMUNERATION CREDITED YEARS
NAME COVERED BY PLAN OF SERVICE
---- ----------------- --------------
Roger S. Marcus . . . . . . . . . . . . . $200,000 35
Richard G. Marcus . . . . . . . . . . . . 200,000 32
William M. Marcus . . . . . . . . . . . . 200,000 42
Howard N. Feist III . . . . . . . . . . . 200,000 21
J. Dennis Burns . . . . . . . . . . . . . 200,000 18
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2002, 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 2003 and proposes to
retain that firm during the remainder of 2003. Mr. Kaplan is of counsel to
Skadden, Arps, Slate, Meagher & Flom LLP.
The Company and Congoleum are parties to a Joint Venture Agreement entered
into in December 1992 (the "Joint Venture Agreement"), pursuant to which the
Company ultimately contributed the assets and certain liabilities of its United
States flooring business to Congoleum in return for cash and an equity interest
in Congoleum. Pursuant to the Joint Venture Agreement, the Company is obligated
to indemnify Congoleum for liabilities incurred by Congoleum which were not
assumed by Congoleum pursuant to the Joint Venture Agreement, and Congoleum is
obligated to indemnify the Company for, among other things, all liabilities
relating to the Company's former United States tile flooring operations. From
January 1, 2002 through April 4, 2003, the Company paid Congoleum $0, and
Congoleum paid the Company $261,000, pursuant to their respective
indemnification obligations under the Joint Venture Agreement.
During 2002, the Company employed Mr. William M. Marcus's son in a
marketing position, with compensation paid (including salary, value of company
provided automobile, and 401(k) match) for 2002 of $70,645. The Company and
Congoleum Corporation also engaged Mr. Richard G. Marcus's daughter to provide
consulting services for which she was paid $3,929. During 2002, Congoleum
Corporation employed Mr. Roger S. Marcus's two daughters, both in marketing
positions, with compensation paid (including salary, value of company provided
automobile, 401(k) match, and pay in lieu of medical benefits, as applicable)
for 2002 of $71,749 and $73,334 respectively, and employed his son-in-law in an
administrative position. Congoleum Corporation also employed Mr. Richard G.
Marcus's son in a marketing position with compensation paid (including salary,
value of company provided automobile and 401(k) match) of $66,650.
The Company and K&M Associates L.P., a Rhode Island limited partnership
("K&M") of which the Company has a controlling interest, make some of its
business travel and lodging arrangements for its employees through Winkleman
Travel, a travel agency owned by Joseph Winkleman, the brother of Henry W.
Winkleman, Vice President, Corporate Counsel and Secretary of the Company. Since
January 1, 2002, the Company and K&M have made business travel and lodging
arrangements with Winkleman Travel in excess of $100,000 in the aggregate.
Winkleman Travel earns commissions from the provider of the travel and lodging
as well as through service fees charged to the Company and K&M for the booking
and writing of airline tickets.
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
15
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 persons 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.
Under the terms of the Company's Deferred Compensation Plan, effective as
of June 1, 1999 (the "Plan"), the entire unpaid balance of each of the deferred
compensation accounts then maintained by the Company for any officer or key
employee of the Company who participates in the Plan (each a "Participant")
shall be paid in a single lump sum amount to the Participant no later than the
date of a change in control (as defined in the succeeding sentence) of the
Company. A "change in control" will be deemed to occur 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 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 persons who, immediately prior to the adoption of the Plan owned more
than 50% of the combined voting power of the Company's then outstanding voting
securities.
16
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.
[PERFORMANCE GRAPH]
1997 1998 1999 2000 2001 2002
AMERICAN BILTRITE INC. 100.00 86.92 62.06 64.34 66.27 46.05
SIC CODE INDEX 100.00 99.45 96.02 63.79 75.73 67.29
AMEX MARKET INDEX 100.00 98.64 122.98 121.47 115.87 111.25
17
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board selected Ernst & Young LLP as independent auditors to audit the
financial statements of the Company for 2003. Fees billed by Ernst & Young LLP
for 2002 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 2002 and the reviews of the Company's quarterly financial statements
included in the Company's Quarterly Reports on Form 10-Q for 2002 were $665,000.
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 2002.
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, internal control reviews,
attest services not required by statute or regulation, and consultations
concerning financial accounting and reporting matters not classified as audit,
as well as tax services related to planning, advice 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 2003 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
18, 2003. 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 March 2, 2004.
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 16, 2003
18
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE AMERICAN BILTRITE INC. WITH- FOR ALL
FOR HOLD EXCEPT
1. ELECTION OF CLASS I DIRECTORS [ ] [ ] [ ]
ANNUAL MEETING OF STOCKHOLDERS MAY 7, 2003 (except as marked to the contrary
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS below):
The undersigned hereby appoints Roger S. Marcus, Richard G. NOMINEES: GILBERT K. GAILIUS FREDERICK H. JOSEPH
Marcus and William M. Marcus and each of them, as attorneys RICHARD G. MARCUS
and proxies, with full power of substitution, to represent
and to vote, as designated below, at the Annual Meeting of
Stockholders of American Biltrite Inc. (the "Company") to be INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
held at the FleetBoston Financial Corporation, America Room, INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE
2nd Floor, 100 Federal Street, Boston, Massachusetts on THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
Wednesday, May 7, 2003, at 9:00 A.M., local time, and at any
adjournment thereof, all shares of Common Stock of the
Company which the undersigned could 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 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH
following as specified hereon. 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.
-----------------------------
Please be sure to sign and date Note: Signature(s) should agree with name(s) as printed
this Proxy in the box below. 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
--- Stockholder sign above ----- Co-holder (if any) sign above -- such. If a corporation, please sign full corporate name and
indicate the signer's office of authority. If a partner, sig
in partnership name by authorized person. Please be sure to
sign and date this Proxy in the box below.
+ +
^ 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 POSTAGE-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.
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------