SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 |_| Soliciting Material Under Rule
|_| Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
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)(4) 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 8, 2007
------------------
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 Bank of America, America Room, Second
Floor, 100 Federal Street, Boston, Massachusetts, on Tuesday May 8, 2007 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 2010 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 9, 2007 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, 2006 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
AMERICAN BILTRITE INC.
Henry W. Winkleman
Secretary
Wellesley Hills, Massachusetts
April 12, 2007
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 8, 2007 at the Bank of
America, America Room, Second 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, e-mail 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 12, 2007.
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, or if no instruction is
given in the proxy as to how to vote the shares, the shares will be voted FOR
the proposal to elect four directors to be voted at the Meeting. If shares are
held in "street name" through a broker, bank or other nominee, written
instructions should be provided to the broker, bank or nominee on how to vote
those shares if you wish to direct how those shares will be voted on that
proposal. To ensure that your broker, bank or nominee receives your
instructions, you should promptly complete, sign and send to your broker, bank
or nominee in the envelope enclosed with this proxy statement the voting
instruction form which is also enclosed.
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 written notice of revocation delivered to the
Secretary of the Company before the Meeting or by voting the shares subject to
such proxy in person at the Meeting. If you hold your shares through a broker,
bank or other nominee, you will need to contact them to revoke any proxy granted
by them with respect to your shares. Attendance at the Meeting in person will
not be deemed to revoke a proxy unless the stockholder votes the shares which
are subject to the proxy in person at the Meeting. If you plan to attend the
Meeting and wish to vote in person, the Company will give you a ballot at the
Meeting; however, if your shares are held in the name of your broker, bank or
other nominee, you must obtain from your broker, bank or other nominee and bring
to the Meeting a "legal proxy" authorizing you to vote your "street name" shares
held at the close of business on March 9, 2007.
On March 9, 2007, 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 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
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, 2006 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.
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, 2006
and this proxy statement is delivered may obtain a separate Annual Report on
Form 10-K for the year ended December 31, 2006 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, 2006 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, 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 term for each class is three
years with the term for one class expiring at successive Annual Meetings of
Stockholders. Stockholders are being asked to elect four Class II directors at
the Meeting. The accompanying proxy will be voted for the election of the
nominees named in Class II below unless otherwise instructed. The term of those
Class II directors elected at the Meeting will expire at the Annual Meeting of
Stockholders held in 2010 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 following the Meeting, together with a statement as
to the period during which he or she has served as a director of the Company.
Business Experience Expiration of
Name (Age) and Other Directorships Present Term
---------- ----------------------- ------------
Nominees
CLASS II
Leo R. Breitman (66) Former Chairman and CEO, Fleet Bank - Massachusetts. 2007
Director of the Company since 2004.
John C. Garrels III (67) Former Director, Global Banking, The First National Bank of 2007
Boston, a national banking association. Director of the
Company since 1977.
James S. Marcus (77) Former General Partner, Goldman, Sachs & Co., investment 2007
bankers. Director of the Company since 1971.
Roger S. Marcus (61) Chairman of the Board and Chief Executive Officer of the 2007
Company. Director of the Company since 1981. Chairman of the
Board of Directors and Chief Executive Officer of Congoleum
Corporation a majority-owned subsidiary of the Company
("Congoleum").
2
Business Experience Expiration of
Name (Age) and Other Directorships Present Term
---------- ----------------------- ------------
Incumbent Directors
CLASS III
Mark N. Kaplan, Esq. (77) Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP, 2008
attorneys. Director of the Company since 1982. Director of:
DRS Technologies Inc.; Autobytel Inc.; REFAC Optical Group;
Volt Information Sciences, Inc.; and Congoleum Corporation.
Natalie S. Marcus (90) Investor. Director of the Company since 1992. 2008
William M. Marcus (69) Executive Vice President and Treasurer of the Company. 2008
Director of the Company since 1966. Director of Aqua Bounty
Technologies, Inc. and Congoleum Corporation.
Kenneth I. Watchmaker (64) Former Executive Vice President and Chief Financial Officer of 2008
Reebok International Ltd., a designer and marketer of sports
and fitness products. Director of the Company since 1995.
CLASS I
Gilbert K. Gailius (75) Former Vice President-Finance and Chief Financial Officer of 2009
the Company. Director of the Company since 1983.
Richard G. Marcus (59) President and Chief Operating Officer of the Company. 2009
Director of the Company since 1982. Vice Chairman of the
Board of Directors of Congoleum Corporation.
Frederick H. Joseph (70) Managing Director, Morgan Joseph & Co., investment banking 2009
firm from 2001 to present. Director of the Company since
1997. Director of Watsco Inc.
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.
Individuals who together beneficially own approximately 57.8% of the
outstanding Common Stock as of March 9, 2007 have identified themselves as
persons who have in the past taken, and may in the future take, actions which
direct or cause the direction of the management of the Company, and their voting
of shares of Common Stock in a manner consistent with each other. Accordingly,
these individuals 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") and Rule 13d-5 thereunder. In light of the existence of this
"group," the Company is a "controlled company," as that term is defined in
Section 801 of the American Stock Exchange ("AMEX") Company Guide. As a result
of the Company's status as a "controlled company," it may avail itself of
exceptions to the AMEX's corporate governance standards that generally require a
company whose stock is listed for trading on the AMEX to have a majority of its
board of directors consist of independent directors, to have director
nominations selected or recommended for the board's selection by either a
nominating committee comprised solely of independent directors or by a majority
of the independent directors and to have officer compensation determined or
recommended to the board for determination either by a compensation committee
comprised of independent directors or by a majority of the independent
directors. Pursuant to the AMEX's independence standards, the Company's Board of
Directors has determined that the following seven of its 11 directors are
independent: Leo R. Breitman, Gilbert K. Gailius, John C. Garrels III, Frederick
H. Joseph, Mark N. Kaplan, James S. Marcus, and Kenneth I. Watchmaker.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES FOR CLASS II 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 (61) Chief Executive Officer of the Company. Chief 1981
Executive Officer of Congoleum Corporation since
1993.
Richard G. Marcus (59) President and Chief Operating Officer of the 1982
Company. Vice Chairman of Congoleum Corporation
since 1994.
William M. Marcus (69) Executive Vice President and Treasurer of the 1966
Company.
Howard N. Feist III (50) Vice President-Finance and Chief Financial Officer 2000
of the Company. Chief Financial Officer and
Secretary of Congoleum Corporation since 1988.
J. Dennis Burns (66) Vice President and General Manager, Tape Products 1985
Division.
Jean Richard (62) Vice President and General Manager, American 2000
Biltrite (Canada) Ltd.
Henry W. Winkleman (62) Vice President, Corporate Counsel, and Secretary 1989
of the Company.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, together with the accompanying text and footnotes,
sets forth, as of March 9, 2007, (a) the holdings of Common Stock of each
director of the Company and of each person nominated for election as a director
of the Company at the Meeting, (b) the holdings of 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 of the Company as a group
and (c) the names, addresses and holdings of Common Stock of each person who, to
the Company's knowledge, beneficially owns 5% or more of the Common Stock. The
information set forth in the footnotes to the following table with respect to
Congoleum stock is as of March 9, 2007.
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 943,223(3)(4) 27.4%
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Richard G. Marcus 559,538(3)(5) 15.8
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
Roger S. Marcus 544,937(3)(6) 15.4
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
William M. Marcus 385,734(3)(7) 11.0
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481
J. Dennis Burns 15,104(8) *
Mark N. Kaplan 6,500(9) *
Gilbert K. Gailius 14,500(10) *
John C. Garrels III 5,300(10) *
Howard N. Feist III 30,000(11) *
Kenneth I. Watchmaker 4,500(10) *
James S. Marcus 4,700(10) *
Frederick H. Joseph 4,500(12) *
Leo R. Breitman 2,000(10) *
All directors and executive officers as a group (15 2,253,536(13) 59.1
persons)
5% Beneficial Owners, other than persons listed above
Dimensional Fund Advisors, Inc. 219,565(14) 6.4
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90491
Wilen Management Company, Inc. 191,502(15) 5.6
2360 West Joppe Road, Suite 226
Lutherville, MD 21093.
----------
* Represents beneficial ownership of less than 1% of Common Stock outstanding.
(1) Addresses are given only for beneficial owners of more than 5% of the
Common Stock outstanding.
(2) Unless otherwise noted, the nature of beneficial ownership is sole voting
and/or investment power.
5
(3) As of the date shown, these shares were among the 2,154,832 shares, or
approximately 57.8%, of the outstanding Common Stock beneficially owned by
the following persons, who have in the past taken, and may in the future
take, actions which direct or cause the direction of the management 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) Exchange Act and Rule
13d-5 thereunder: 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 and 151,100 shares of the
Class A Common Stock of Congoleum. These shares on a combined basis
represent approximately 69.4% of the voting power of the outstanding
capital stock of Congoleum. Each of the named individuals may be deemed a
beneficial owner of these Congoleum shares.
(4) Natalie S. Marcus has sole voting and investment power over 790,723
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 4,500
shares, which are issuable upon exercise of options exercisable within 60
days of the date of this proxy statement.
(5) Richard G. Marcus has sole voting and investment power over 315,538
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
100,000 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 8,651 shares, of which shares Mr. Marcus
disclaims beneficial ownership. Mr. Marcus also has the right to acquire
160,000 shares of Class A common stock of Congoleum, which are issuable
upon exercise of options exercisable within 60 days of the date of this
proxy statement.
(6) Roger S. Marcus has sole voting and investment power over 300,937 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
100,000 shares, which are issuable upon exercise of options exercisable
within 60 days of the date of this proxy statement. Mr. Marcus also has
the right to acquire 160,000 shares of Class A common stock of Congoleum
which are issuable upon exercise of options exercisable within 60 days of
the date of this proxy statement.
(7) William M. Marcus has sole voting and investment power over 305,734
shares. Mr. Marcus also has the right to acquire 80,000 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.
Mr. Marcus also has the right to acquire 4,000 shares of common stock of
Congoleum which are issuable upon exercise of options exercisable within
60 days of the date of this proxy statement.
(8) J. Dennis Burns has sole voting and investment power over 3,104 shares.
Mr. Burns has the right to acquire 12,000 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 4,500, 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 4,500 shares of Class A
Common Stock 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 4,500 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 2,500
shares which are issuable upon exercise of options exercisable within 60
days of the date of this proxy statement. Mr. Leo R. Breitman 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.
6
(11) Howard N. Feist III has the right to acquire 30,000 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. Mr. Feist also has the right to acquire 12,000 shares of
Class A Common Stock of Congoleum, that are issuable upon exercise of
options exercisable within 60 days of the date of this proxy statement.
The total number of shares of Class A Common Stock of Congoleum
beneficially owned by Mr. Feist represents less than 1% of the voting
power of the outstanding capital stock of Congoleum.
(12) Frederick H. Joseph has the right to acquire 4,500 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 518,277 shares of Class A Common Stock of Congoleum
and 4,395,605 shares of Class B Common Stock of Congoleum, which combined
as a group, represent 70.4% 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 9, 2007.
(15) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on January 26, 2006.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
officers and beneficial owners of more than 10% of the Common Stock to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock. Based solely upon a review of Forms 3,
4, and 5 furnished to the Company during or in respect of the fiscal year ended
December 31, 2006, the Company is not aware of any director or officer of the
Company or any beneficial owner of more than 10% of Common Stock who has not
timely filed reports required by Section 16(a) of the Exchange Act during or in
respect of such fiscal year.
DIRECTOR COMPENSATION AND COMMITTEES
During 2006, the Board held seven meetings. Each director who was not an
officer and employee of the Company received a director's fee of $15,000 and
$2,000 for each of the four regular Board meetings attended, and each member of
the Audit Committee received $3,000 for each Audit Committee meeting attended
during 2006. The directors do not receive a fee for telephonic meetings. In
2006, each director attended at least 75% of the total number of meetings of the
Board of Directors, except Frederick H. Joseph, and 75% of the total number of
meetings of the committees of the Board on which each Director serves.
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 Bank of America 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.
Pursuant to the Company's 1999 Stock Option Plan for Non-Employee
Directors, on July 1, 2006, each director of the Company was granted an option
to purchase 500 shares of Common Stock, which options then became fully
exercisable on January 1, 2007 in accordance with the terms of that plan.
In 2006, Mark N. Kaplan also serves as a director of Congoleum and as a
member of Congoleum's Compensation Committee. In that capacity, Mr. Kaplan
received an annual director's fee of $15,000 and $2,000 for each of the four
regular meetings of the Board of Directors of Congoleum that he attended in
2006. In addition, Congoleum directors are eligible to have their contributions
to qualified charitable organizations matched by Congoleum in an aggregate
amount up to $5,000 per director per year. In 2006, pursuant to Congoleum's 1999
Stock Option Plan for Non-Employee Directors, Mr. Kaplan was granted an option
to purchase 500 shares of Congoleum Class A common stock, which options then
became fully exercisable on January 1, 2007 in accordance with the terms of that
plan.
7
The Board periodically evaluates the appropriate level and form of
compensation for board and committee service by non-employee directors and
adopts changes to the level and form of compensation for the provision of these
services when appropriate. Historically, the Company has not retained
compensation consultants (and did not do so in 2006) to help the Directors
determine the amount and form of director and committee member compensation.
The Company's Compensation Committee consists of three members, each of
whom is an independent director as determined under the AMEX listing standards.
The Compensation Committee met once during 2006. The members of the Compensation
Committee are Messrs. Mark N. Kaplan (Chairman), John C. Garrels 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 plans, pension and retirement plans, and
other benefits. Other processes and procedures for the consideration and
determination of executive compensation are described below under "Compensation
Discussion and Analysis." Those processes and procedures generally also apply to
executive officers of the Company who are not "named executive officers" (as
defined below under "Compensation Discussion and Analysis"). In certain
instances, the Compensation Committee may delegate limited authority to the
President of the Company to determine the compensation for certain officers of
the Company who are not named executive officers. Historically, the Compensation
Committee has not retained compensation consultants (and did not do so in 2006)
to help it determine the amount and form of executive compensation. The
Compensation Committee does not have a charter.
The Company has an Audit Committee composed of independent directors as
determined under AMEX's listing standards and the applicable rules of the
Securities and Exchange Commission. The members of the Audit Committee are
Messrs. Kenneth I. Watchmaker (Chairman), John C. Garrels III, and James S.
Marcus. Information regarding the functions performed by the Audit Committee,
and the number of meetings held during 2006, is set forth in the Audit Committee
Report included in this proxy statement. The Board of Directors has determined
that the Company has at least one audit committee financial expert serving on
its Audit Committee. The Audit Committee financial expert is Kenneth I.
Watchmaker who is an independent director as defined in AMEX's listing
standards. A copy of the Charter of the Audit Committee of the Board of
Directors of American Biltrite Inc. as Amended and Restated by the Board of
Directors on March 13, 2007 is available on the Company's website at
www.ambilt.com.
The Company does not have a standing nominating committee or formal
procedure for nomination of directors. The Board of Directors believes that this
is appropriate in light of the Company's ownership structure, which includes
individuals who together beneficially own approximately 57.8% of the outstanding
Common Stock as of March 9, 2007 and who have identified themselves as persons
who have in the past taken, and may in the future take, actions which direct or
may cause the direction of the management of the Company, and their voting of
shares of Common Stock in a manner consistent with each other. Accordingly,
these individuals may be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Exchange Act and Rule 13d-5 thereunder. In light of the
existence of this "group," the Company is a "controlled company," as that term
is defined in Section 801 of the AMEX Company Guide. As a result of the
company's status as a "controlled company" it may avail itself of an exception
to the AMEX rule that generally requires a company whose stock is listed for
trading on the AMEX to have director nominations selected or recommended for the
board's selection by either a nominating committee comprised of independent
directors or by a majority of the independent directors. All members of the
Board of Directors participate in the consideration of director nominees. The
Board does not have a policy with regard to the consideration of any director
candidates recommended by security holders. The Board of Directors believes that
such a policy is not necessary because the directors have access to a sufficient
number of excellent candidates from which to select a nominee when a vacancy
occurs on the Board and because the Board includes the controlling stockholders
of the Company. Individual directors will generally recommend candidates to the
controlling stockholders and, if acceptable, will submit that person's name for
consideration by the Board. The Board generally seeks candidates with a broad
business background and who may also have a specific expertise in such areas as
law, accounting, banking, or investment banking. All members of the Board of
Directors are encouraged, but not required, to attend the Company's annual
meeting of stockholders. All members of the Board of Directors attended the
annual meeting of stockholders held in 2006.
8
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 and
discussed the audited financial statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2006 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 U.S. 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 Audit Committee under generally accepted auditing standards. 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, as amended,
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 2006.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board has approved) that the
Company's 2006 audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2006 for filing with the
Securities and Exchange Commission. The Audit Committee has also appointed Ernst
& Young LLP as the Company's independent auditors for 2007.
AUDIT COMMITTEE
Kenneth I. Watchmaker, Chairman
John C. Garrels III
James S. Marcus
COMPENSATION DISCUSSION AND ANALYSIS
The following compensation discussion and analysis describes the
compensation awarded to, earned by or paid to the Company's Chairman of the
Board and Chief Executive Officer (who is the Company's principal executive
officer), the Company's Vice President-Finance and Chief Financial Officer (who
is the Company's principal financial officer) and the Company's three other most
highly compensated officers, as determined in accordance with the regulations of
the Securities and Exchange Commission (collectively, the "named executive
officers").
Compensation Philosophy
The Company's compensation philosophy is to provide executive compensation
programs which provide compensation reflecting both corporate performance and
individual responsibilities and performance. The Compensation Committee
administers the Company's executive compensation strategy with a view towards
relating 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. Additional objectives of the Company's
compensation strategy include providing compensation programs which attract and
retain the best possible executives, motivate those executives to achieve the
Company's business goals and recognize individual contributions and overall
business results.
Compensation Process
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/her current duties and
responsibilities, and inflationary trends. The annual compensation review
permits an ongoing evaluation of
9
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 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's process also includes a review of the
performance of each of the named executive officers for each fiscal year, the
results of which are taken into account in establishing salary and bonus levels,
as discussed in more detail below. In reviewing the individual performance of
the Chief Financial Officer and the other named officers (other than the Chief
Executive Officer), the Compensation Committee takes into account the views of
Roger S. Marcus, the Chief Executive Officer. In addition, the Compensation
Committee takes into account the full compensation package afforded by the
Company (including its subsidiaries) to the individual named executive officer.
The Compensation Committee believes that this program balances both the mix of
cash and equity compensation, the mix of currently-paid and longer-term
compensation, and the security of pension or retirement benefits in a way that
furthers the compensation objectives discussed above.
Elements of Compensation
The material elements of the Company's executive compensation consist of
base salary, annual cash bonus opportunities and stock options. The Company has
established certain additional elements to the Company's executive compensation
program, including, split-dollar insurance arrangements, pension and 401(k)
benefits, health and welfare coverage and certain limited perquisites. The
Compensation Committee's policies with respect to each of these elements are
discussed 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 and
performance 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. The Compensation Committee may also
take into account additional factors as it deems appropriate, which may include
such considerations as salaries paid by the Company's competitors for executives
in comparable positions.
In addition to the criteria listed above, with respect to the base salary
of each of the named executive officers, the Compensation Committee also took
into account the length of each officer's service with the Company and his
increasing responsibilities in the course of such service. For 2006, the base
salary of each of the named executive officers was increased by approximately 3%
over the base salary rate in effect for 2005.
Annual Bonus
The Company's executive officers are eligible for an annual cash bonus.
Annual bonuses are determined in the discretion of the Compensation Committee 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. While
annual bonuses are awarded at the sole discretion of the Compensation Committee,
the Compensation Committee has adopted a guideline for paying bonuses to each of
the Company's Chief Executive Officer and Chief Operating Officer 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 the payment of bonuses, the
Compensation Committee also considers the views of the Chief Executive Officer
and discusses with him the appropriate bonuses for all named executive officers,
including himself. The Compensation Committee believes that providing
discretionary annual bonuses serves the goals of the Company's compensation
philosophy by allowing the Committee to make determinations based upon an
examination of all the circumstances of the Company's and the applicable named
executive officer's performance during a year, which the Committee believes
encourages the named executive officers to strive for superior performance.
In accordance with the general policy of awarding bonuses to the named
executive officers based principally on overall Company earnings, the
Compensation Committee did not award any bonuses to any of the named executive
10
officers in 2006. Certain other executive officers were awarded an annual bonus
by the Compensation Committee based on the financial performance of the
subsidiaries over which such executive officers have responsibility and
oversight.
Stock Options
Under the Company's 1993 Stock Award and Incentive Plan, as amended and
restated as of March 4, 1997 (the "1993 Plan"), stock options may be granted to
the Company's executive officers, including named executive officers, as well as
to other employees. Stock options are granted to the Company's executive
officers by the Compensation Committee in its discretion. Currently, the
Compensation Committee sets 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 by providing executives with an opportunity to acquire an
ownership interest in the Company and by providing a vehicle which can provide
compensation to the executive if the price of the Common Stock appreciates.
Under the 1993 Plan, stock options are granted with an exercise price
equal to the market price of the Common Stock on the date of grant and vest over
time, subject to continued service with the Company. 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.
As previously reported in 2005, the Board of Directors approved the
vesting of all outstanding and unvested stock options held by executive officers
and employees under the 1993 Plan. The primary purpose for accelerating the
vesting of those options was to enable the Company to avoid recognizing future
compensation expense that would have been required to be recognized with respect
to those stock options upon the adoption of FASB Statement No. 123R,
"Share-Based Payments," which the Company adopted effective with the start of
its 2006 fiscal year. The Compensation Committee, using similar factors to those
used to determine base salaries and annual bonuses, as well as considering the
above-noted acceleration of all outstanding and unvested stock options in 2005,
did not grant any new stock option awards to named executive officers in 2006.
Certain of the named executive officers are executive officers or
directors of Congoleum. In those capacities, Congoleum may grant these named
executive officers equity awards of Congoleum. At December 31, 2006, the named
executive officers held options to purchase shares of Congoleum common stock at
set forth under "Executive Compensation," that appears later in this proxy
statement.
While the Company does not have severance or change in control agreements,
the 1993 Plan provides for acceleration of unvested stock options upon a change
in control of the Company. Currently, there are no unvested options held to
purchase Common stock by named executive officers.
Retirement Benefits
401(k) Plan Deferred Compensation
The Company maintains the 401(k) Savings Investment Plan (the "401 (k)
Plan"), a qualified 401(k) plan, to provide tax-advantaged savings vehicles to
all employees, including named executive officers. The Company makes matching
contributions to the 401(k) Plan to encourage employees to save money for their
retirement. This plan, and the Company's contributions to it, enhances the range
of benefits that the Company offers all employees and the Company's ability to
attract and retain employees. Under the terms of the 401(k) Plan, qualified
employees may defer up to 15% of their eligible pay. The Company's matching
contributions to named executive officers under the 401(k) Plan is determined by
the level of participation and contribution of each named executive officer and
is described below in the Summary Compensation Table.
Defined Benefit Plan
The Company also maintains a qualified defined benefit pension plan, The
Retirement Plan for Salaried Employees and Certain Hourly Employees of American
Biltrite Inc. Each of the named executive officers is a participant in the
Company's defined benefit pension plan, which provides retirement benefits based
on a formula that factors final average compensation and years of service. More
detail regarding the benefits to the named executive officers under the defined
benefit plan is set forth below in the table entitled "Pension Benefits Table."
11
Supplemental Retirement Benefits
In 1996, the Compensation Committee established supplemental retirement
benefits for certain executive officers of the Company. These supplemental
retirement benefits were proposed and approved as a means of addressing the
substantial inequity to executive officers created by the Internal Revenue Code
imposed cap on credited compensation under the Company's qualified defined
benefit pension plan described above. In addition, the Company previously
entered into split-dollar life insurance agreements for the benefit of each of
the named executive officers in order to provide these supplemental retirement
benefits and to address this inequity. 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 named executive officer, subject to various terms and conditions.
The Company has not paid premiums under these agreements since 2001 because such
payments may be considered prohibited loans under the Sarbanes-Oxley Act of
2002. Because of this prohibition, as well as tax law changes, the Compensation
Committee has determined these split dollar agreements are no longer a viable
means of achieving their intended purpose and is considering alternatives. The
split-dollar life insurance agreements with William M. Marcus and Roger S.
Marcus have been terminated. The split-dollar life insurance agreements with the
other named executive officers remain in effect, but as stated above, the
Company is no longer paying premiums under those agreements.
Health and Welfare Benefits
The Company maintains an Executive Medical Program for the benefit of
corporate officers, including named executive officers. Under the Executive
Medical Program, corporate officers are reimbursed for certain of the medical
expenses not covered by the corporate officers' health insurance plan that are
incurred throughout the year. In addition, named executive officers are entitled
to participate in all other welfare, fringe benefit and other arrangements
generally available to other salaried employees. The Compensation Committee
believes that benefits provided under the Executive Medical Program and other
welfare benefits are reasonable and consistent with the practices of public
companies in the United States. The Compensation Committee also believes that
the Executive Medical Program and other welfare benefits assist the Company in
attracting and retaining key executives.
Perquisites
Perquisites and other benefits represent a small part of the compensation
package of executive officers, including named executive officers. The
Compensation Committee annually reviews the perquisites and other personal
benefits that the Company provides executive officers. The primary perquisites
are tax preparation, club memberships, Company-leased automobiles, a matching
gift program and reimbursement for spousal travel. The Compensation Committee's
policy with respect to each of these perquisites is discussed below and more
detail regarding the participation of named executive officers in these benefits
is set forth in the Summary Compensation Table and the associated footnotes.
Tax Preparation. Certain named executive officers are eligible for
reimbursement of annual costs associated with tax preparation. The Company
believes that tax preparation by experts reduces the amount of time and
attention that named executive officers must spend on that task, mitigates risk
of noncompliance and maximizes the net financial reward to the employee of
compensation received from the Company. Such planning also helps ensure that the
objectives of the Company's compensation programs are met and not frustrated by
unexpected tax consequences.
Club Memberships. Named executive officers are eligible for reimbursement
of annual costs associated with country club or health club memberships. The
Compensation Committee provides this benefit as an additional means of
compensating executives and as a tool for attracting and retaining executives.
Company Automobile. The Company provides automobiles to certain selected
employees, including named executive officers, which may be used for personal
travel as well as business travel.
Matching Gift Program. The Company maintains a Directors Matching Gift
Program whereby donations made by directors, including named executive officers
who are also directors, to charitable organizations may be eligible for matching
contributions by the Company to such charitable organizations. Other executive
officers may request from time to time that the Company's charitable foundation
match charitable donations made by the executive; any such matching is done at
the discretion of the foundation.
12
Spousal Travel. The Company reimburses named executive officers for the costs of
spousal travel to functions where the Company determines that it would be
appropriate for the spouse to attend.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is currently comprised of Mark N. Kaplan,
Chairman, John C. Garrels III and Kenneth I. Watchmaker, each of whom is an
independent director. The Compensation Committee has reviewed and discussed this
compensation discussion and analysis with management and has recommended to the
Board of Directors that the compensation discussion and analysis be included in
this proxy statement.
COMPENSATION COMMITTEE
Mark N. Kaplan, Chairman
John C. Garrels III
Kenneth I. Watchmaker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mark N. Kaplan, John C. Garrels III, Kenneth I. Watchmaker are the members
of the Compensation Committee of the Board during 2006, none of whom is or was
at any time during 2006 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. During 2006, the Company retained Skadden, Arps, Slate,
Meagher & Flom LLP for a variety of legal matters. The Company has retained
Skadden, Arps, Slate, Meagher & Flom LLP during 2007 and proposes to retain the
firm during the remainder of 2007. Mr. Kaplan is also a director of Congoleum
Corporation and serves on the Compensation Committee of Congoleum.
13
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
earned by or paid to the named executive officers for services rendered to the
Company and its subsidiaries in all capacities during 2006. The table also
identifies the principal capacity in which each of the named executive officers
served the Company at the end of 2006.
Summary Compensation Table
Change in
Pension Value
and
Nonqualified
Deferred
Option Compensation All Other
Name and Principal Salary Bonus Awards Earnings(3) Compensation Total
Position Year ($) ($) ($) ($) ($) ($)
----------------- ----- -------- ------ ------ ----------- ----------- -------
Roger S. Marcus(1) 2006 $605,000 -- -- $ 70,043 $ 68,681(2) $ 742,024
Chairman of the Board
and Chief
Executive Officer
Richard G. Marcus(1) 2006 605,000 -- -- 58,111 96,865(5) 754,976
President and
Chief Operating Officer
William M. Marcus (1) 2006 484,000 -- -- 20,494 100,076 559,570
Executive Vice President
and Treasurer
Howard N. Feist III 2006 279,500 -- -- 21,060(4) 26,073 326,633
Vice President-Finance
and Chief Financial
Officer
J. Dennis Burns 2006 250,000 -- -- 27,602 31,249 308,851
Vice President and
General Manager,
Tape Products Division
(1) Roger S. Marcus, Richard G. Marcus and William M. Marcus do not receive
any separately stated compensation for their services as directors of the
Company.
(2) As an officer of Congoleum, Roger S. Marcus also received Other
Compensation from Congoleum in the amount of $11,329, which is included in
the amount shown.
(3) None of the officers received Non-qualified Deferred Compensation Earnings
in 2006.
(4) Mr. Feist has an accumulated benefit under Congoleum's Salaried Retirement
Plan which is fixed in amount for past service with Congoleum. The change
in actuarial present value of his accumulated benefit shown above includes
$9,870 resulting from applying different actuarial assumptions and a
shorter discount period to that fixed benefit amount payable by the
Congoleum plan, which was earned prior to 2000.
(5) Included in Richard G. Marcus' All Other Compensation is $28,992 of
imputed interest related to a loan associated with split-dollar life
insurance policies. The split-dollar life insurance agreements remain in
effect, but as stated above, the Company is no longer paying premiums
under those agreements.
The All Other compensation is composed of the following items: company
paid group term life insurance premiums, imputed interest on the split-dollar
life insurance policies, life insurance, personal tax preparation fees, personal
use of Company automobiles, country club and club dues, executive medical
reimbursement payments, matching gifts from the Company and Congoleum, and
spousal travel. No item of All Other Compensation which is a perquisite or
personal benefit exceeds the greater of $25,000 or ten percent of the total
perquisites for any of the named executive officer other than reported above.
14
Pursuant to the terms of a personal services agreement between the Company
and Congoleum, Mr. Roger Marcus serves as the Chairman, President and Chief
Executive Officer of Congoleum and, pursuant to that agreement, devotes
substantially all of his time to his duties in those capacities. The agreement
specifically permits Mr. Roger Marcus to remain as a director and executive
officer of the Company. The agreement also provides that Mr. Richard Marcus
serve as Vice Chairman of Congoleum. The agreement further provides that in
exchange for the services of Messrs. Roger and Richard Marcus, Congoleum shall
pay the Company annually: (i) a personal services fee of $500,000 payable in
equal monthly installments and subject to annual increase (which shall be
reduced to $300,000 in the event of termination of Mr. Richard Marcus or reduced
to $200,000 in the event of termination of Mr. Roger Marcus); (ii) an annual
incentive fee, subject to Congoleum's attainment of certain business and
financial goals, as determined by a majority of Congoleum's disinterested
directors; and (iii) reimbursement for authorized business expenses. For the
year ended December 31, 2006, Congoleum paid $674,000 in personal services fees
to the Company. Except as set forth in the above Summary Compensation Table or
in the footnotes to that table, neither Mr. Roger Marcus nor Mr. Richard Marcus
received any compensation directly from Congoleum in those capacities during
2006.
Howard N. Feist III also serves as Congoleum's Chief Financial Officer and
Secretary. Except as set forth in the above Summary Compensation Table or in the
footnotes to that table, Mr. Feist received no compensation directly from
Congoleum in those capacities during 2006.
15
The following table sets forth information relating to the outstanding
equity awards of the Company and Congoleum December 31, 2006, held by each named
executive officer. No named executive officer exercised any Company or Congoleum
stock option or other equity award during 2006. The named executive officers do
not currently hold any non-option equity awards of the Company or Congoleum.
Outstanding Equity Awards at Year-End
-------------------------------------
Number of Securities
Underlying Unexercised
Options/SARS at 12/31/06
------------------------------
Option
Company Exercise Option
Granting Exercisable Unexercisable Price Expiration
Name Options (#) (#) ($) Date
-------------------- ---------- ------------ -------------- ---------- ---------
Roger S. Marcus ABI 50,000 -- $23.625 04/14/07
ABI 50,000 -- 9.650 05/23/13
Congoleum(1) 160,000 40,000(2) 2.050 07/11/12
Richard G. Marcus ABI 50,000 -- 23.625 04/14/07
ABI 50,000 -- 9.650 05/23/13
Congoleum(1) 160,000 40,000(2) 2.050 07/11/12
William M. Marcus ABI 40,000 -- 23.625 04/14/07
ABI 40,000 -- 9.650 05/23/13
Congoleum(1) 4,000 1,000(2) 2.050 07/11/12
Howard N. Feist III ABI 10,000 -- 14.062 03/07/10
ABI 20,000 -- 9.650 05/23/13
Congoleum(1) 12,000 3,000(2) 2.050 07/11/12
J. Dennis Burns ABI 6,000 -- 23.625 04/14/07
ABI 6,000 -- 9.650 05/23/13
(1) These named executive officers are executive officers or directors of
Congoleum. Congoleum granted these executive officers, in those
capacities, the options to purchase Congoleum stock set forth in the above
table.
(2) Awards vest on July 11, 2007
16
DEFINED BENEFIT PENSION PLAN
In addition to the remuneration set forth above, the Company maintains a
tax-qualified defined benefit pension plan (the "Pension Plan") for all salaried
(non-hourly) employees including the named executive officers. The following
table sets forth information on the pension benefits for the executive officers
as of December 31, 2006.
Pension Benefits Table
----------------------
Present Value of Payments
Number of Years Accumulated During
Credited Service Benefit(1) Last Fiscal
Name Plan (#) ($) Year ($)
----------------- ----------------------------- ---------- ------------ --------
Roger S. Marcus* The Retirement Plan for Salaried 39.2 $515,225 --
Employees and Certain Hourly Employees
of American Biltrite Inc.
Richard G. Marcus* The Retirement Plan for Salaried 36.3 417,497 --
Employees and Certain Hourly Employees
of American Biltrite Inc.
William M. Marcus The Retirement Plan for Salaried 43.75 695,228 --
Employees and Certain Hourly Employees
of American Biltrite Inc.
Howard N. Feist III The Retirement Plan for Salaried 7.0 44,156 --
Employees and Certain Hourly Employees
of American Biltrite Inc.
J. Dennis Burns The Retirement Plan for Salaried 22.0 366,938 --
Employees and Certain Hourly Employees
of American Biltrite Inc.
* Executive currently eligible for early retirement, as described below.
(1) Calculation based on the following valuation assumptions: Interest rate of
6%, mortality rate as of December 31, 2005, based on the 1983 Group
Annuity Mortality table, mortality rate as of December 31, 2006 based on
the RP- 2000 blended mortality table.
The Pension Plan provides non-contributory benefits based upon years of
service and average annual earnings for the 60 consecutive calendar months in
which the participating employee had the highest level of earnings during the
120 consecutive calendar months preceding retirement. Employees compensated on a
salaried basis are eligible to participate in the Pension Plan after they
complete one year of service.
The compensation used to determine a participant's benefits under the
Pension Plan includes such participant'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 $220,000 in 2006. Salary amounts listed in the Summary Compensation
Table are items of compensation covered by the period in the 120-month period
ending with the month immediately prior to termination. Social Security covered
compensation is the average of the Social Security taxable wage base for the
35-year period ending with the year in which the participant attains Social
Security retirement age.
The annual amount of pension payable at the normal retirement date (the
first day of the month following attaining age 65 with the completion of five
years of service) is 0.5% of the employee's final five year average pensionable
earnings up to his Social Security covered compensation, plus .9% of any excess
over his Social Security covered compensation, multiplied by years of credited
service, up to a maximum of 43.75 years. Employees attaining age 55 and 15 years
of service may elect early retirement and receive the benefit that would
otherwise be payable at his/her normal retirement date, reduced 0.4% for each
month that benefit commencement precedes such date.
17
DIRECTORS' COMPENSATION
The following table sets forth information concerning the fees earned or
paid-in cash, the aggregate grant date fair value of awarded stock options
computed in accordance with FAS 123R and all other compensation paid or granted
to the directors of the Company who are not named executive officers for the
year ended December 31, 2006. For additional information regarding compensation
of the Company's directors in 2006, see "Director Compensation and Committees"
which appears earlier in this proxy statement.
Fees Earned or Option All Other
Paid in Cash Awards Compensation(5) Total
Name ($) ($) ($) ($)
------------------------- ------------------ ------- ------------ -------
Kenneth I. Watchmaker $35,000 $2,580(1) $ 400 $37,980
James S. Marcus 35,000 2,580(1) 5,000 42,580
John C. Garrels III 35,000 2,580(1) 18,652(4) 42,580
Frederick H. Joseph 23,000 2,580(1) 5,000 30,580
Mark N. Kaplan 23,000 2,580(1) 25,156(4) 30,580
Natalie S. Marcus 23,000 2,580(1) 5,000 30,580
Gilbert K. Gailius 23,000 2,580(2) 5,000 30,580
Leo R. Breitman 23,000 2,580(3) 5,000 30,580
(1) Messrs. Kenneth I. Watchmaker, James S. Marcus, John C. Garrels III,
Frederick H. Joseph, Mark N. Kaplan and Mrs. Natalie S. Marcus have the
right to acquire 4,500 shares of Common stock, which are issuable upon
exercise of options exercisable within 60 days of the date of this proxy
statement.
(2) Mr. Gilbert K. Gailius has the right to acquire 2,500 shares of Common
stock, which are issuable upon exercise of options exercisable within 60
days of the date of this proxy statement.
(3) Mr. Leo R. Breitman has the right to acquire 2,000 shares of Common stock,
which are issuable upon exercise of options exercisable within 60 days of
the date of this proxy statement.
(4) The Company accrued interest for Messrs. John C. Garrels III and Mark N.
Kaplan on their deferred directors' compensation at the prime rate at the
Bank of America, Boston on a quarterly basis. The prime rate exceeded the
applicable federal long-term rate by more than 120% in each quarter. The
above market portion of the interest accrued in 2006 for Messrs. Garrels
and Kaplan was $13,652 and $20,156 respectively.
(5) All Other Compensation includes donations by the Company to qualified
charitable organizations pursuant to the Directors Matching Gift Program.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2006, 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 2007 and proposes to
retain that firm during the remainder of 2007. Mr. Mark N. Kaplan is Of Counsel
to Skadden, Arps, Slate, Meagher & Flom LLP. The Company and Congoleum employ
certain immediate family members of the Company's executive officers. In no case
did compensation paid to any of these individuals exceed $120,000 in 2006.
The Company has policies and procedures for the review, approval and
ratification of related person transactions that are required to be reported
under Regulation S-K, Item 404(a) under the Exchange Act. As part of these
policies and procedures and pursuant to the charter for the Company's Audit
Committee, the Audit Committee is responsible for reviewing and providing
oversight of related person transactions. In addition, the Company's written
corporate policies provide policies and procedures regarding conflicts of
interests that the officers or employees may have with regard to the Company.
Other aspects of the Company's policies and procedures for the review, approval
and ratification of related person transactions are not contained in a formal
writing but have been communicated to, and are periodically reviewed with, the
Company's directors and executive officers.
18
Generally, prior to a director or executive officer entering into a
related person transaction with the Company, the facts and circumstances
pertaining to the transaction, including any direct or indirect material
interest the director or executive officer or his or her immediate family
members may have in the transaction, must be disclosed to the Audit Committee
members and the Board. When a proposed related person transaction is submitted
to the Board, the Board will decide whether to authorize the Company to enter
into the proposed transaction. If a director has a personal interest in the
proposed transaction, he or she may not participate in any review, approval or
ratification of the proposed transaction. In their review of the proposed
related person transaction, the Audit Committee and Board consider relevant
facts and circumstances, including (if applicable): the benefits to the Company;
the impact on a director's independence in the event the person in question is a
director, an immediate family member of a director or an entity in which a
director is a partner, shareholder or executive officer; the availability of
other sources for comparable products or services; the terms of the transaction;
and the terms available to unrelated third parties. Related person transactions
are approved only if, based on the facts and circumstances, they are in, or not
inconsistent with, the best interests of the Company and its shareholders, as
the Board determines in good faith.
The Company monitors and periodically inquires of its directors and
executive officers as to whether they may have any direct or indirect material
interest in a related person transaction with the Company, and the Company's
written corporate policies require its employees and officers to report to the
Company's management conflicts of interest they may have with regard to the
Company.
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 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. Currently, no named executive officer holds any
unvested options granted under the 1993 Plan.
19
RELATIONSHIP WITH REGISTERED INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Ernst & Young LLP as the Company's
registered independent public accountants to audit the financial statements of
the Company for 2007. Information relating to the fees billed to the Company and
Congoleum by Ernst & Young LLP for 2005 and 2006 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 and Congoleum for 2005 and 2006 and the reviews of the Company's and
Congoleum's quarterly financial statements included in the Company's and
Congoleum's respective Quarterly Reports on Form 10-Q for 2005 and 2006 were
$957,400 and $1,116,900, respectively ($380,000 in 2005 and $405,000 in 2006 of
such fees were for services provided to Congoleum).
Audit Related Fees
The aggregate fees and expenses billed in 2005 and 2006 by Ernst & Young
LLP for professional services rendered to the Company and Congoleum for audit
related services which were primarily related to services with respect to the
Company's and Congoleum's internal controls in preparation for compliance with
Section 404 of the Sarbanes Oxley Act of 2002 for 2005 and 2006 were $164,500
and $143,700, respectively ($69,000 in 2005 and $18,700 in 2006 of such fees
were for services provided to Congoleum).
Tax Fees
The aggregate fees billed in 2005 and 2006 by Ernst & Young LLP for tax
services provided to the Company and Congoleum related to tax compliance, tax
advice, tax planning and tax examination assistance were $213,000 and $109,700,
respectively ($10,000 in 2005 and $0 in 2006 of such fees were for services
provided to Congoleum).
All Other Fees
The aggregate fees billed in 2005 and 2006 by Ernst & Young LLP for all
other services rendered to the Company other than those mentioned above were
$3,000 and $4,200, respectively ($3,000 in 2005 and $0 in 2006 of such fees were
for services provided to Congoleum). The fees related to services provided in
connection with providing assistance with reporting requirements related to the
Congoleum's filing under Chapter 11 of the United States Bankruptcy Code and
with a subsidiary's renewal of its exporter status.
Fees for services provided by Ernst & Young LLP to Congoleum are approved
by Congoleum's audit committee. The Company's Audit Committee does not
pre-approve Ernst & Young LLP's fees for services it provides to Congoleum but
considers the amounts of such fees paid when making judgments regarding Ernst &
Young LLP's independence. All audit related services, tax services and other
services provided by Ernst & Young LLP, other than those provided to Congoleum,
were pre-approved by the Audit Committee, which concluded that the provision of
such services by Ernst & Young LLP was compatible with the maintenance of that
firm's independence in the conduct of its auditing functions. The Audit
Committee's pre-approval policies and procedures are to review proposed Ernst &
Young LLP audit, audit-related, tax and other services and pre-approve such
services specifically described by the Audit Committee on an annual basis. In
addition, individual engagements anticipated to exceed pre-established
thresholds must be separately approved by the Audit Committee. Pursuant to those
policies and procedures, the Audit Committee may delegate to one or more members
of the Audit Committee pre-approval authority with respect to permitted
services. The Audit Committee did not approve any services described above
pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X of the regulations
promulgated by the Securities and Exchange Commission.
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.
20
SHAREHOLDER COMMUNICATION POLICY
The Company has established procedures for shareholders to communicate
directly with the Board of Directors on a confidential basis. Shareholders who
wish to communicate with the Board or with a particular director may send a
letter to the Secretary of the Corporation at 57 River Street, Wellesley Hills,
Massachusetts 02481 Attention: Henry W. Winkleman. The mailing envelope must
contain a clear notation indicating that the enclosed letter is a
"Shareholder-Board Communication" or "Shareholder-Director Communication." All
such letters must identify the author as a shareholder and clearly state whether
the intended recipients are all members of the Board or just certain specified
individual directors. The Secretary will make copies of all such letters and
circulate them to the Board of Directors or individual Directors addressed, as
applicable. To the extent that a shareholder wishes the communication to be
confidential, such shareholder must clearly indicate on the envelope that the
communication is "confidential." The Secretary will then forward such
communication, unopened, to the Chairman of the Board of Directors.
SUPPLEMENTAL INFORMATION
On December 31, 2003, Congoleum Corporation filed a petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. Roger S.
Marcus, Richard G. Marcus and Howard N. Feist III were executive officers of
Congoleum Corporation at the time of such filing and continue to serve in those
capacities. Also, Roger S. Marcus, Richard G. Marcus, William M. Marcus and Mark
N. Kaplan were directors of Congoleum Corporation at the time of such filing and
continue to serve in those capacities.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 2008
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 14, 2007. 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 27, 2008.
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
AMERICAN BILTRITE INC.
Henry W. Winkleman
Secretary
Wellesley Hills, Massachusetts
April 12, 2007
21