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
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 9, 2006
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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 9, 2006 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 2009 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 10, 2006 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, 2005 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 7, 2006
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 9, 2006 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 7, 2006.
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 three directors to be voted at the Meeting. If shares are
held in "street name" through a broker, written instructions should be provided
to the broker 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 receives your
instructions, you should promptly complete, sign and send to your broker 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 or
other custodian, you will need to contact them to revoke your proxy. 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. 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 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 10, 2006.
On March 10, 2006, 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
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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, 2005 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, 2005
and this proxy statement is delivered may obtain a separate Annual Report on
Form 10-K for the year ended December 31, 2005 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, 2005 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 2009 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 (74) Former Vice President-Finance and Chief Financial Officer of 2006
the Company. Director of the Company since 1983.
Richard G. Marcus (58) President and Chief Operating Officer of the Company. 2006
Director of the Company since 1982. Vice Chairman of the
Board of Directors of Congoleum Corporation.
Frederick H. Joseph (69) Managing Director, Morgan Joseph & Co. investment bankers from 2006
2001 to present. Managing Director, ING Barings LLC,
investment bankers, from 1998 to 2001. Director of the Company
since 1997. Director of Watsco Inc.
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Business Experience and Expiration of
Name (Age) Other Directorships Present Term
---------- ------------------- ------------
Incumbent Directors
CLASS II
Leo R. Breitman (65) Former Chairman and CEO, Fleet Bank - Massachusetts. 2007
Director of the Company since 2004.
John C. Garrels III (66) Former Director, Global Banking, The First National Bank of 2007
Boston, a national banking association. Director of the
Company since 1977.
James S. Marcus (76) Former General Partner, Goldman, Sachs & Co., investment 2007
bankers. Director of the Company since 1971.
Roger S. Marcus (60) 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.
CLASS III
Mark N. Kaplan, Esq. (76) Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP, 2008
attorneys. Director of the Company since 1982. Director of:
DRS Technologies Inc.; Autobytel Inc.; REFAC Technology
Development Corporation; Volt Information Sciences, Inc.; and
Congoleum Corporation.
Natalie S. Marcus (89) Investor. Director of the Company since 1992. 2008
William M. Marcus (68) 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 (63) Former Executive Vice President and Chief Financial Officer of 2008
Reebok International Ltd. 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.
Individuals who together beneficially own approximately 58.0% of the
outstanding Common Stock as of March 10, 2005 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, and
Rule13d-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, John C. Garrels III,
Frederick H. Joseph, Mark N. Kaplan, James S. Marcus, Gilbert K. Gailius and
Kenneth I. Watchmaker.
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES FOR CLASS I DIRECTOR.
EXECUTIVE OFFICERS
The following table sets forth certain information relating to the
executive officers of the Company.
Executive Officer
Executive Officer (Age) Position Since
----------------------- -------- -----
Roger S. Marcus (60) Chief Executive Officer of the Company. Chief 1981
Executive Officer of Congoleum Corporation since
1993
Richard G. Marcus (58) President and Chief Operating Officer of the 1982
Company. Vice Chairman of Congoleum Corporation
since 1994
William M. Marcus (68) Executive Vice President and Treasurer of the 1966
Company
Howard N. Feist III (49) 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 (61) Vice President and General Manager, American 2000
Biltrite (Canada) Ltd.
Henry W. Winkleman (61) Vice President, Corporate Counsel, and Secretary 1989
of the Company.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, together with the accompanying text and footnotes,
sets forth, as of March 10, 2006, (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. The information set forth in
the footnotes to the following table with respect to Congoleum stock are as of
March 10, 2006.
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
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481 950,773(3)(4) 27.6%
Richard G. Marcus
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481 558,388(3)(5) 15.8
Roger S. Marcus
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481 543,787(3)(6) 15.4
William M. Marcus
c/o American Biltrite Inc.
57 River Street
Wellesley Hills, MA 02481 385,734(3)(7) 11.0
J. Dennis Burns 15,104(8) *
Mark N. Kaplan 6,000(9) *
Gilbert K. Gailius 14,000(10) *
John C. Garrels III 4,800(10) *
Howard N. Feist III 30,000(11) *
Kenneth I. Watchmaker 4,000(10) *
James S. Marcus 4,200(10) *
Frederick H. Joseph 4,000(12) *
Leo R. Breitman 1,500(10) *
All directors and executive officers as a group (15 persons) 2,255,286(13) 59.2
5% Beneficial Owners, other than persons included above
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90491 197,750(14) 5.8
Wilen Management Company, Inc.
2360 West Joppe Road, Suite 226
Lutherville, MD 21093. 245,802(15) 7.1
----------
* Represents beneficial ownership of less than 1% of Common Stock outstanding.
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(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.
(3) As of the date shown, these shares were among the 2,160,082 shares, or
approximately 58.0%, 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 approximately 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 Congoleum
shares.
(4) Natalie S. Marcus has sole voting and investment power over 798,773
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 4,000
shares, which are issuable upon exercise of options currently exercisable
within 60 days of the date of this proxy statement.
(5) Richard G. Marcus has sole voting and investment power over 314,388
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 7,501 shares, of which shares Mr. Marcus
disclaims beneficial ownership. Mr. Marcus also has the right to acquire
120,000 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 299,787 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 120,000 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 3,000 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 4,000 shares which are issuable
upon exercise of options exercisable within 60 days of the date of this
proxy statement. Mr. Kaplan also owns 16,000 shares of Class A Common
Stock of Congoleum, and has the right to acquire 4,000 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, 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 4,000 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 2,000
shares which are issuable upon exercise of options exercisable within 60
days of the date of this proxy
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statement. Mr. Leo R. Breitman has the right to acquire 1,500 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 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 9,000 shares of
common stock 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. 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 4,000 shares which are
issuable upon exercise of options exercisable within 60 days of this proxy
statement. Mr. Joseph also owns 8,000 shares of Class A Common Stock of
Congoleum, which shares represent less than 1% of the voting power of the
outstanding capital stock of Congoleum.
(13) All directors and executive officers as a group may be considered
beneficial owners of 425,777 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 70.2% 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 6, 2006.
(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 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. 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, 2005, the Company is not aware of any director or
officer of the Company or any holder of more than 10% of the 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, except that Roger S. Marcus had a late
filing of a Form 4 pursuant to which he reported a gift of Common Stock to his
daughter.
DIRECTOR COMPENSATION AND COMMITTEES
During 2005, 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 per
year 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 2005. The Directors do not receive a fee for telephonic
meetings. In 2005, each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors and 75% of the aggregate of
the total number of meetings of the committees of the Board on which each
Director serves except James S. Marcus with respect to Board of Directors
meetings only.
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, 2005, each director of the Company was granted an option
to purchase 500 shares of the Common Stock. Each of those options was originally
scheduled to become fully exercisable on January 1, 2006; however, on November
10, 2005, the Board of Directors accelerated, as of that date, the vesting of
all the Company's then outstanding options to purchase the Common Stock granted
under the Company's Stock Award and Incentive Plan, as amended and restated as
of March 4, 1997, and 1999 Stock Option Plan for Non-Employee Directors. As a
result, those options became fully vested and exercisable as of that date.
7
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 a
director's fee of $15,000 for the year and $2,000 for each of the four regular
meetings of the board of directors of Congoleum held in 2005. Pursuant to
Congoleum's director compensation policies, directors of Congoleum 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 Bank of America base rate
at the end of each quarter. In addition, Congoleum directors are also 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 2005,
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.
The Company's Compensation Committee consists of three members. The
Compensation Committee met once during 2005. 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 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. Garrells III, and James S.
Marcus. 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. 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. The written charter adopted by the Board
that governs the Audit Committee has been filed with the Securities and Exchange
Commission and is available upon request from the Company.
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 58% of the outstanding
Common Stock as of March 10, 2006 and who have identified themselves as persons
who have in the past taken, and in the future may 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 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. Pursuant to the AMEX's
corporate governance rules, a "controlled company" 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 shareholders of the Company. Individual directors will generally
recommend candidates to the controlling shareholders 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 2005.
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, 2005 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 generally accepted accounting principles, their
judgments as
8
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, 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 2005.
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 2005 audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2005 for filing with the
Securities and Exchange Commission. The Audit Committee has also appointed Ernst
& Young LLP as the Company's independent auditors for 2006.
AUDIT COMMITTEE
Kenneth I. Watchmaker, Chairman
John C. Garrels III
James S. Marcus
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/her current 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 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.
9
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 2005, the
Compensation Committee took into account the Company's performance (including
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.
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.
For 2005, Roger Marcus received a bonus of $150,000. A portion of Mr.
Marcus's 2005 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. 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. Mr. Marcus was not awarded a bonus in 2004.
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 Company's 1993 Stock Award and Incentive Plan, as amended and
restated as of March 4, 1997, 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.
On November 10, 2005, the Board of Directors approved the vesting of all
outstanding and unvested stock options held by directors, officers, and
employees under the Company's 1993 Stock Award and Incentive Plan, as amended
and restated as of March 4, 1997, and the Company's 1999 Stock Option Plan for
Non-Employee Directors. 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 which started on January 1, 2006. The Company expects the acceleration to
reduce the stock option expense it otherwise would have been required to record
beginning with fiscal year 2006 by approximately $799,000 in the aggregate on a
pre-tax basis.
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." The Company
entered into split-dollar life insurance agreements for the benefit of each of
William M. Marcus, Richard G. Marcus, Roger S. Marcus, J. Dennis Burns and
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.
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 recent 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 agree- ments with
Mr. William M. Marcus and Mr. Roger S. Marcus have been terminated.
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 2005, 18% of the Company's executive compensation consisted of
performance-based variable elements. In the case of Roger S. Marcus, 20% of his
2005 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 2005 are
listed above, none of whom is or was at any time during 2005 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 2005,
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 2006 and proposes to retain the firm during the remainder of 2006. Mr.
Kaplan is also a director of Congoleum Corporation and serves on the Audit and
Compensation Committees of Congoleum.
CODE OF ETHICS
The Company has adopted a code of ethics (as that term is defined in Item
406 of Regulation S-K of the regulations promulgated by the SEC) that applies to
the principal executive officer, principal financial officer, principal
accounting officer and controller and all other employees of the Company. The
text of the Company's code of ethics is posted on our Internet website
www.ambilt.com or may be obtained without charge by sending a written request to
Mr. Henry W. Winkleman, Secretary of the Company, at the Company's offices at 57
River Street, Wellesley Hills, Massachusetts 02481.
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 2005.
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
----------------------------- -------------------------------
Securities
Securities Underlying All Other
Underlying Congoleum Compensation
Name and Principal Position Year Salary ($) Bonus ($) ABI Options Options ($)(1)
------------------------------ -------- ------------- ----------- ------------- ------------- ----------------
Roger S. Marcus 2005 587,500 150,000 -- -- 16,870
Chairman of the Board and 2004 572,500 0 50,000 -- 16,501
Chief Executive Officer 2003 557,500 0 -- -- 16,186
Richard G. Marcus 2005 587,500 150,000 -- -- 16,870
President and 2004 572,500 0 50,000 -- 16,501
Chief Operating Officer 2003 557,500 0 -- 16,186
William M. Marcus 2005 470,000 105,000 -- -- 16,639
Executive Vice President and 2004 458,000 0 40,000 -- 16,222
Treasurer 2003 446,000 0 -- -- 16,186
Howard N. Feist III 2005 270,300 50,000 -- -- 5,168
Vice President-Finance 2004 263,100 0 20,000 -- 5,034
and Chief Financial Officer 2002 255,600 25,000 -- -- 7,715
J. Dennis Burns
Vice President and 2005 243,000 20,000 -- -- 4,958
General Manager, 2004 236,700 0 6,000 -- 4,838
Tape Products Division 2003 230,000 0 -- -- 7,860
-----------
(1) The amounts disclosed in this column include:
(a) Company contributions of $3,150 in 2005, $3,075 in 2004 and $6,000
in 2003, under the Company's 401(k) Savings Investment Plan, on
behalf of each individual listed;
(b) Payment by the Company of $10,000 in each of 2005, 2004, and 2003 to
individual life insurance trusts for Roger S. Marcus and Richard G.
Marcus and $9,985 in 2005 and $10,000 in each of 2004 and 2003 for
William M. Marcus; and
(c) Company paid group-term life insurance premiums on behalf of Roger
S. Marcus, Richard G. Marcus, William M. Marcus, Howard N. Feist III
and J. Dennis Burns totaling, in 2005, $3,720, $3,720, $3,504,
$2,018 and $1,808, respectively, in 2004, $3,426, $3,426, $3,147,
$1,959 and $1,763, respectively, and in 2003, $186, $186, $186,
$1,715 and $1,860, respectively.
12
The following table sets forth information relating to stock option
exercises in 2005 by the named executive officers of the Company and the number
and value of each such officer's unexercised in-the-money options/SARs on
December 31, 2005 based upon the difference between the per share exercise price
of the stock option and closing price per share of Common Stock and Class A
common stock of Congoleum, as applicable, at fiscal year-end.
Aggregated Option/SAR Exercises and Year-End Value Table
Number of Securities Value of Unexercised
Underlying Unexercised In-the Money
Options/SARS at 12/31/05 Options/SARs at 12/31/05
----------------------------- ------------------------------
Company Shares Value
Granting Acquired on Realized Exercisable Unexercisable Exercisable Unexercisable
Name Options Exercise (#) ($) (#) (#) ($) ($)
------------------- ---------- ------------- ---------- ------------ -------------- ------------- --------------
Roger S. Marcus ABI - - 100,000 - 67,500 -
Congoleum - - 120,000 80,000 72,000 48,000
Richard G. Marcus ABI - - 100,000 - 67,500 -
Congoleum - - 120,000 80,000 72,000 48,000
William M. Marcus ABI - - 80,000 - 54,000 -
Congoleum - - 3,000 2,000 1,800 1,200
Howard N. Feist III ABI - - 30,000 - 27,000 -
Congoleum - - 9,000 6,000 5,400 3,600
J. Dennis Burns ABI - - 12,000 - 8,100 -
Congoleum - - - - - -
13
DEFINED BENEFIT PENSION PLAN
In addition to the remuneration set forth above, the Company maintains a
tax-qualified defined benefit pension plan (the "Pension Plan"). The following
table shows for various income and service levels, the annual benefits payable
under the Pension Plan, commencing at normal retirement at age 65. These
benefits are presented on a five years certain and life thereafter basis and
reflect any reduction for Social Security or other offset amounts that may
apply.
APPROXIMATE ANNUAL PENSION AT AGE 65
Years of Service
---------------------------------------------------------------------------------------------
Final Average
Annual Compensation 15 20 25 30 35 40 45
------------------- ---------- ---------- ---------- ---------- --------- ---------- ---------
$200,000...................... $24,100 $32,100 $40,100 $48,200 $56,200 $64,200 $70,200
$300,000...................... 25,400 33,900 42,400 50,900 59,300 67,800 74,200
$400,000...................... 25,400 33,900 42,400 50,900 59,300 67,800 74,200
$500,000...................... 25,400 33,900 42,400 50,900 59,300 67,800 74,200
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
$210,000 in 2005. Salary amounts listed in the Summary Compensation Table are
items of compensation covered by the Pension Plan. A person's benefits under the
Pension Plan are subject to deduction for Social Security and other offset
amounts that may apply, including offsets for service credited under the pension
plan of a subsidiary.
The table below sets forth certain information relating to the Pension
Plan with respect to the named executive officers.
2005 Remuneration Credited Years
Name Covered by Plan of Service
---- --------------- ----------
Roger S. Marcus ...................... $210,000 38
Richard G. Marcus .................... 210,000 35
William M. Marcus .................... 210,000 45
Howard N. Feist III .................. 210,000 24
J. Dennis Burns ...................... 210,000 21
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2005, 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 2006 and proposes to
retain that firm during the remainder of 2006. Mr. Kaplan is Of Counsel to
Skadden, Arps, Slate, Meagher & Flom LLP.
During 2005, the Company employed Mr. William M. Marcus' son in a
marketing position, with compensation paid (including salary, value of company
provided automobile, and 401(k) match) for 2005 of $87,274. During 2005,
Congoleum Corporation employed Mr. Roger S. Marcus' daughter in a marketing
position, with compensation paid (including salary, value of company provided
automobile, 401(k) match, and pay in lieu of medical benefits, as applicable)
for 2005 of $76,408, and employed his son-in-law in an administrative position
with compensation paid (including salary and 401(k) match) of $64,222. All of
these employment relationships are expected to continue during 2006.
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.
15
CUMULATIVE TOTAL STOCKHOLDER RETURN
The graph that follows compares the cumulative total stockholder return of
the Common Stock to the cumulative returns of the American Stock Exchange Market
Value Index and a Peer Group Index which includes companies in Standard
Industrial Classification (SIC) code number 3089 - Plastic Products, N.E.C.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG AMERICAN BILTRITE INC.,
AMEX MARKET INDEX AND SIC CODE INDEX
[PERFORMANCE GRAPH HERE IN PRINTED MATERIALS; DATA POINTS BELOW]
------------------------ FISCAL YEAR ENDING ---------------------
COMPANY/INDEX/MARKET 12/29/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/30/2005
American Biltrite 100.00 103.00 71.57 60.14 89.04 84.75
Plastics Products, NEC 100.00 118.73 105.49 124.67 150.52 146.97
AMEX Market Index 100.00 95.39 91.58 124.66 142.75 157.43
ASSUMES $100 INVESTED ON JAN. 1, 2001
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2005
16
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected Ernst & Young LLP as independent auditors
to audit the financial statements of the Company for 2006. Fees billed by Ernst
& Young LLP for 2004 and 2005 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 2004 and 2005 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 2004 and 2005 were
$1,001,000 and $957,400, respectively ($340,000 in 2004 and $380,000 in 2005 of
such fees were for services provided to Congoleum).
Audit Related Fees
The aggregate fees and expenses billed 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 2004 and 2005 were $40,000 and $164,500,
respectively ($20,000 in 2004 and $69,000 in 2005 of such fees were for services
provided to Congoleum).
Tax Fees
The aggregate fees billed 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 in 2004 and 2005 were $245,000 and $213,000,
respectively ($10,000 in 2004 and $0 in 2005 of such fees were for services
provided to Congoleum).
All Other Fees
The aggregate fees billed by Ernst & Young LLP for all other services
rendered to the Company other than those mentioned above for 2004 and 2005 were
$69,000 and $3,000. respectively, which related to services in connection with
Congoleum's filing a petition under Chapter 11 of the federal Bankruptcy Code.
Fees for services provided to Congoleum Corporation are approved by
Congoleum's audit committee. The Company's Audit Committee does not pre-approve
fees for services for Congoleum but considers the amounts of such fees paid when
making judgments regarding independence. All audit related services, tax
services and other services, 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 policy and procedure is to review proposed Ernst & Young LLP audit,
audit-related services, tax services 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. The policy authorizes the Audit
Committee to 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 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.
17
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 year 2007 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
8, 2006. 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 21, 2007.
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 7, 2006
18