SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only (as permitted by
Rule 14a 6(c)(2)
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CONGOLEUM CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
_________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
CONGOLEUM CORPORATION
P.O. Box 3127
Mercerville, New Jersey 08619
-------------------
NOTICE OF ANNUAL MEETING TO BE HELD
MAY 14, 1998
-------------------
To The Stockholders of
Congoleum Corporation
Notice is hereby given that the Annual Meeting of the Stockholders (the
"Annual Meeting") of Congoleum Corporation (the "Company") will be held in
Conference Room 6, 8th Floor, Fleet Bank, 1 Federal Street, Boston,
Massachusetts on Thursday, May 14, 1998 at 1:00 P.M. local time, for the
following purposes:
1. To elect three Class B directors who will hold office until the
Annual Meeting of Stockholders in 2001 and until their successors
are duly elected and qualified.
2. To transact any other business that may properly come before the
Annual Meeting or any adjournment thereof.
The close of business of March 26, 1998 has been fixed as the record date
for determining the stockholders of the Company entitled to notice of, and to
vote at, the Annual Meeting and any adjournments thereof.
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 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.
By Order of the Board of Directors
CONGOLEUM CORPORATION
Howard N. Feist III
Secretary
Mercerville, New Jersey
March 27, 1998
<PAGE>
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation, by
and on behalf of the Board of Directors of Congoleum Corporation (the
"Company"), of proxies to be used in voting at the Annual Meeting of
Stockholders (the "Meeting") of the Company to be held on May 14, 1998 in
Conference Room 6, 8th Floor, Fleet Bank, 1 Federal Street, Boston,
Massachusetts at 1:00 P.M. local time, and at any adjournments thereof. The
principal executive offices of the Company are located at 3705 Quakerbridge
Road, Mercerville, New Jersey 08619. The cost of preparing and mailing the
notice, proxy statement and proxy will be paid by the Company. It is expected
that the solicitation of proxies will be by mail only, but may also be made by
personal interview, mail, telephone or telegraph by directors, officers or
employees of the Company. The Company will request banks and brokers holding
stock in their names or custody, or in the names of nominees for others, to
forward copies of the proxy material to those persons for whom they hold such
stock and to request authority for the execution of proxies 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 3, 1998.
Proxies in the accompanying form, properly executed and duly returned to
the Company and not revoked, will be voted at the Meeting (including
adjournments). Where a specification is made by means of the ballot provided in
the proxies regarding any matter presented to the Meeting, such proxies will be
voted in accordance with such specification. If no instructions are specified in
a signed proxy with respect to the matters being voted upon, the shares
represented by such proxy will be voted (i) FOR the election of the nominees for
director listed below, and (ii) in the discretion of the proxy holder as to
other matters that may properly come before the Meeting. Proxies indicating
stockholder abstentions will be counted for purposes of determining whether
there is a quorum at the Meeting, but will not be voted in the election of
directors, and, therefore, will have no effect on the determination of the
outcome of the votes on these matters. Shares represented by "broker non-votes"
(i.e., shares held by brokers or nominees that are represented at the Meeting
but with respect to which the broker or nominee is not empowered to vote on a
particular proposal) will be counted for purposes of determining whether there
is a quorum at the Meeting, but will not be voted in the election of directors
and, therefore, will have no effect on the determination of the outcome of the
votes on these matters.
Any stockholder giving a proxy in the accompanying form retains the power
to revoke it at any time prior to the exercise of the powers conferred thereby
by filing a later dated proxy, by notice of revocation filed in writing with the
Secretary of the Company or by voting the shares subject to such proxy in person
at the Meeting. Attendance at the Meeting in person will not be deemed to revoke
the proxy unless the stockholder affirmatively indicates at the Meeting an
intention to vote the shares in person.
On March 26, 1998, there were 4,282,800 shares of the Company's Class A
common stock and 4,755,000 shares of the Company's Class B common stock
outstanding. 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 of Class A common
stock held and two votes for each share of Class B common stock held.
<PAGE>
2
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1997 is enclosed with this proxy statement.
A quorum for the Meeting will consist of the holders of a majority of the
stock entitled to vote at the Meeting. A plurality of the shares represented at
the Meeting at which a quorum is present and voting is required to elect
directors and any other matters that may properly come before the Meeting,
except as otherwise required by the laws of Delaware.
PROPOSAL 1 - ELECTION OF DIRECTORS; SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Board of Directors of the Company is divided into three classes, as
nearly equal in size as possible, with staggered terms of three years which
expire at successive Annual Meetings of Stockholders. The accompanying proxy
will be voted for the election of the nominees named in Class B below unless
otherwise instructed. The term of those Class B directors elected at this
Meeting will expire at the Annual Meeting of Stockholders held in 2001 upon the
election and qualification of their successors. Should any person named below be
unable or unwilling to serve as a director, persons acting under the proxy
intend to vote for such other person as management may recommend. Each nominee
is currently a director of the Company. The persons named in the accompanying
proxy intend to vote for the election of the nominees identified below unless
authority to vote for one or more of such nominees is specifically withheld in
the proxy. The Board of Directors is informed that all the nominees are willing
to serve as directors, but if any of them should decline to serve or become
unavailable for election as a director at the Meeting, an event which the Board
of Directors does not anticipate, the persons named in the proxy will vote for
such nominee or nominees as may be designated by the Board of Directors unless
the Board of Directors reduces the number of directors accordingly.
The following table sets forth the name, age and principal occupation of
each of the nominees for election as director (all of whom currently serve as
directors), and each current director in the classes continuing in office, and
the period during which he has served as a director of the Company and when such
term expires. The tables, together with the accompanying text and footnotes,
also set forth the holdings of each director of the Company and of each person
nominated to become a director of the Company, as of March 26, 1998.
<PAGE>
3
<TABLE>
<CAPTION>
(a) Security Ownership of Nominees and Directors
Percent of
Name, Age, Principal Occupation Shares of Common Stock Combined
During the Past 5 Years Director Term Owned Beneficially as of Percent of Voting
and Directorships Since Expires March 26, 1998 Class Power
----------------- ----- ------- -------------- ----- -----
Nominees for Director
Class B
<S> <C> <C> <C> <C> <C>
Mark N. Kaplan, Esq.
Age 68. Partner of Skadden, Arps, Slate,
Meagher & Flom LLP, Attorneys. Director
of American Biltrite, Grey Advertising Inc.,
DRS Technologies, Inc., REFAC
Technology Development Corporation, Volt
Information Sciences, Inc., and Movie Fone,
Inc. 1995 1998 1,000 * *
Richard G. Marcus
Age 50. Vice Chairman of the Company.
Director, President, and Chief Operating
Officer of American Biltrite. 1993 1998 4,395,605(1)(2)(3)(4)(5) 92.4% 63.7%
David N. Hurwitz
Age 62. President and Chief Executive
Officer of Goodson Newspaper Group. 1995 1998 -- * *
Incumbent Directors
Class A
William M. Marcus
Age 60. Director, Executive Vice President,
and Treasurer of American Biltrite.
Director Reebok International, Ltd. 1993 2000 4,395,605(1)(2)(3)(4) 92.4% 63.7%
C. Barnwell Straut
Age 72. Managing Director of Hillside
Capital Incorporated. 1986 2000 7,000 * *
Class C
Roger S. Marcus
Age 52. Chairman of the Board, Chief
Executive Officer and President of the
Company. Chairman of the Board, Chief
Executive Officer and Director of American
Biltrite. 1993 1999 4,395,605(1)(2)(3)(4) 92.4% 63.7%
John N. Irwin III
Age 44. Managing Director of Hillside
Capital Incorporated. 1986 1999 359,395(1)(6) 7.6% 5.2%
Cyril C. Baldwin, Jr.
Age 70. Chairman of the Board of Cambrex
Corporation, Director of Church & Dwight. 1995 1999 2,000 * *
</TABLE>
<PAGE>
4
- ----------
*Less than 1%
(1) The shares of Class B common stock are convertible into an equal number of
shares of Class A common stock without the requirement of any further
action upon their sale or other transfer by Hillside Capital or American
Biltrite Inc. ("American Biltrite") to a person or entity other than one
of its affiliates. In addition, shares of Class B common stock may be
converted into an equal number of shares of Class A common stock at any
time at the option of the holders thereof and shall be converted into an
equal number of shares of Class A common stock upon the adoption of a
resolution to such effect by a majority of the entire Board of Directors
of the Company and the holders of a majority of the outstanding shares of
Class B common stock voting as a separate class. In the event of a "change
in control" of American Biltrite, all of its shares of Class B common
stock shall be automatically converted into an equal number of shares of
Class A common stock without the requirement of any further action.
(2) Refers to the shares of Class B common stock shown as owned of record by
American Biltrite with respect to which each of the named individuals may
be deemed to be the beneficial owner. Each of the named individuals is a
director of the Company and a director, officer and stockholder of
American Biltrite. Each of the named individuals disclaims beneficial
ownership of such shares. The address of each of the named individuals is
c/o American Biltrite Inc., 57 River Street, Wellesley Hills, MA 02181.
(3) A majority of the outstanding shares of American Biltrite are beneficially
owned by Natalie S. Marcus, Cynthia S. Marcus and the named individuals,
who 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 American Biltrite and their voting of shares of American
Biltrite 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. Natalie S. Marcus is the mother of
Roger S. Marcus and Richard G. Marcus and the aunt of William M. Marcus.
Cynthia S. Marcus is the wife of William M. Marcus.
(4) Richard G. Marcus and Roger S. Marcus are brothers and William M. Marcus
is their cousin.
(5) In February 1996, Mr. Richard G. Marcus entered into a settlement
agreement in the form of a consent decree with the Securities and Exchange
Commission (the "Commission") in connection with the Commission's
investigation covering trading in American Biltrite Inc.'s Common Stock by
an acquaintance of Mr. Marcus. Mr. Marcus, without admitting or denying
the Commission's allegations of securities laws violations, agreed, among
other things, to the entry of a permanent injunction against future
violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act
of 1934.
(6) Refers to the shares of Class B common stock shown as owned of record by
Hillside Capital Incorporated ("Hillside Capital") with respect to which
Mr. Irwin may be deemed the beneficial owner. Mr. Irwin is a director of
the Company and a director and officer of Hillside Capital and indirectly
owns a majority of its issued and outstanding shares of its capital stock.
Mr. Irwin disclaims beneficial ownership of such shares. The address of
Mr. Irwin is c/o Hillside Capital Incorporated, 405 Park Avenue, New York,
NY 10022.
<PAGE>
5
(b) Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of Class A common
stock and Class B common stock beneficially owned by (a) each person who owns of
record, or is known by the Company to own beneficially, more than 5% of the
Company's Class A common stock and/or Class B common stock, (b) each person who
is named in the Summary Compensation Table hereinafter set forth as an executive
officer as of December 31, 1997 and (c) all executive officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
Shares of
Common Stock Percent of
Name, and Address Title Owned Beneficially Percent of Combined
of Beneficial Owners of Class As of March 26, 1998 Class Voting Power
-------------------- -------- -------------------- ----- ------------
<S> <C> <C> <C> <C>
American Biltrite Inc. Class B 4,395,605(1) 92.4% 63.7%
57 River Street
Wellesley Hills, MA 02181
Hillside Capital Incorporated Class B 359,395(2) 7.6% 5.2%
405 Park Avenue
New York, NY 10022
David L. Babson & Co. Inc. Class A 998,500(3)(4) 23.3% 7.2%
One Memorial Drive
Cambridge, MA 02142
The TCW Group, Inc. Class A 546,400(3)(5) 12.8% 4.0%
865 South Figueroa Street
Los Angeles, CA 90017
Franklin Resources, Inc. Class A 365,700(3)(6) 8.5% 2.6%
777 Mariners Island Blvd
P.O. Box 7777
San Mateo, CA 99403
Clark Estates, Inc. Class A 404,000(3)(7) 9.4% 2.9%
30 Wall Street
New York, NY 10005
Goldman, Sachs & Co. Class A 276,500(3)(8) 6.5% 2.0%
85 Broad Street
New York, NY 10004
U.S. Bancorp Class A 274,500(3)(9) 6.4% 2.0%
United States National Bank
of Oregon
111 S.W. Fifth Avenue
Portland, OR 97204
Babson Enterprise Fund, Inc. Class A 283,800(3)(10) 6.6% 2.0%
BMA Tower, 12th Floor
700 Karnes Blvd
Kansas City, MO 64108-3306
Roger S. Marcus(11) Class A 90,000(12) 2.1% *
Class B 4,395,605(1) 92.4% 63.7%
Robert N. Agate(11) Class A 8,850(13) * *
Howard N. Feist III(11) Class A 8,177(13) * *
Dennis P. Jarosz(11) Class A 8,200(14) * *
<PAGE>
6
Anthony C. Prestipino(11) Class A 5,000(15) * *
All directors and executive officers Class A 244,250(16) 5.7% 1.7%
as a group (16 persons) Class B 4,755,000 100.0% 68.9%
</TABLE>
- ----------
*Less than 1%
(1) Represents shares of Class B common stock held of record by American
Biltrite. See footnote 2 to the table above for a description of the
persons who may be deemed to be the beneficial owners of these shares.
(2) See footnote 6 to the table above for a description of the person who may
be deemed to be the beneficial owner of these shares.
(3) Based on information contained in a Schedule 13G filed with the Commission
which indicates that such shares were acquired solely for investment
purposes as of December 31, 1997.
(4) David L. Babson & Co. Inc. is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, and is considered
"beneficial owner" in the aggregate of 998,500 shares of Class A common
stock.
(5) The TCW Group, Inc. (through certain wholly owned subsidiaries TCW Asset
Management Company and The Trust Company of the West) is considered the
"beneficial owner" in the aggregate of 546,400 shares of Class A common
stock. TCW Asset Management Company is an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940 and The Trust
Company of the West is a bank as defined in Section 3(A)(6) of the
Securities Exchange Act of 1934. Mr. Robert Day is an individual who may
be deemed to control the TCW Group, Inc. The address of Mr. Day is 200
Park Avenue, Suite 2200, New York, New York 10166.
(6) Franklin Resources, Inc. is a parent holding company with direct and
indirect investment advisory subsidiaries which may be deemed to be, for
purposes of Rule 13d-3 under the Securities Exchange Act of 1934, the
"beneficial owner" in the aggregate of 365,700 shares of Class A common
stock. Mr. Charles B. Johnson and Mr. Rupert H. Johnson, Jr. are
individuals who may be deemed to control Franklin Resources, Inc. Their
address is 777 Mariners Island Boulevard, San Mateo, California 94404.
(7) Clark Estates, Inc. is a New York corporation which provides management
and administrative services relating primarily to financial matters for
several individual members of the Clark family and to certain
institutional and trust accounts affiliated with the Clark family, and is
considered "beneficial owner" in the aggregate of 404,000 shares of Class
A common stock.
(8) Goldman, Sachs & Co. is a broker/dealer registered under Section 15 of the
Securities Exchange Act of 1934 and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, and is considered
"beneficial owner" in the aggregate of 276,500 shares of Class A common
stock.
(9) U.S. Bancorp (together with certain wholly owned subsidiaries, Qualivest
Capital Management and United States National Bank of Oregon) is
considered "beneficial owner" in the aggregate of 274,500 shares of Class
A common stock. U.S. Bancorp is a national bank as defined in Section
3(A)(6) of the Securities Exchange Act of 1934.
(10) Babson Enterprise Fund, in its capacity as an investment company, may be
deemed the beneficial owner of 283,800 shares of common stock of the
issuer, the shares of which are owned by shareholders of the Fund.
(11) The address of each of the executive officers named in the Summary
Compensation Table hereinafter set forth is c/o Congoleum Corporation,
3705 Quakerbridge Road, P.O. Box 3127, Mercerville, New Jersey 08619.
(12) Includes 90,000 shares of Class A common stock issuable upon the exercise
of options which are currently exercisable or exercisable within 60 days
of March 26, 1998.
(13) Includes 7,000 shares of Class A common stock issuable upon the exercise
of options which are currently exercisable or exercisable within 60 days
of March 26, 1998.
(14) Includes 5,700 shares of Class A common stock issuable upon the exercise
of options which are currently exercisable or exercisable within 60 days
of March 26, 1998.
(15) Includes 5,000 shares of Class A common stock issuable upon the exercise
of options which are currently exercisable or exercisable within 60 days
of March 26, 1998.
(16) Includes an aggregate of 225,700 shares issuable upon the exercise of
options which are currently exercisable or exercisable within 60 days of
March 26, 1998.
<PAGE>
7
(c) Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and the beneficial owners of more
than 10 percent of the Class A common stock to file reports of ownership and
changes in ownership of their equity securities of the Company. Directors and
executive officers of the Company and such beneficial owners file such reports
with the Commission and the New York Stock Exchange. Directors and executive
officers and such beneficial owners are required to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of Forms 3, 4 and 5 and
amendments thereto received by the Company, and written representations from
certain directors and executive officers and such beneficial owners of the
Company that no Forms 5 were required for such persons, the Company believes
that all Section 16(a) filing requirements applicable to its directors and
executive officers and such beneficial owners were complied with during 1997.
DIRECTOR COMPENSATION AND COMMITTEES
During 1997, the Board of Directors of the Company held five meetings,
including one telephonic meeting. Each director attended at least 75% of the
aggregate of all meetings of the Board of Directors plus the total number of
meetings of all committees of the Board on which he serves, except C. Barnwell
Straut who attended 40% of the meetings. Each director who is not an officer and
employee of the Company or American Biltrite is entitled to receive a director's
fee of $10,000 per year and $1,250 for each Board meeting and each Audit
Committee meeting attended.
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
Bank of Boston base rate at the end of each quarter.
The Company has an Audit Committee consisting of three members, all of
whom are non-employee directors. The Audit Committee recommends engagement of
the independent auditors, considers the fee arrangement and scope of the audit,
reviews the financial statements and the independent auditors' report, reviews
the activities and recommendations of the Company's internal auditors, considers
comments made by the independent auditors with respect to the Company's internal
control structure, and reviews internal accounting procedures and controls with
the Company's financial and accounting staff. During 1997, the Audit Committee
held three meetings. The members of the Audit Committee are David N. Hurwitz,
Chairman, Cyril C. Baldwin, Jr. and Mark N. Kaplan.
The Company has a Compensation Committee consisting of three members, all
of whom are non-employee directors. The Compensation Committee is responsible
for making recommendations to the Board concerning executive compensation
including base salaries, bonuses and criteria for their award, stock option
plans, stock option grants, health and life insurance and other benefits. The
Compensation Committee met one time during 1997. The members of the Compensation
Committee are Mark N. Kaplan, Chairman, Cyril C. Baldwin, Jr. and David N.
Hurwitz. The Company does not have a Nominating Committee.
<PAGE>
8
COMPENSATION COMMITTEE REPORT
Overall Policy
The Company's executive compensation program is designed to reflect both
corporate performance and individual responsibilities and performance. The
Compensation Committee administers the Company's overall compensation strategy
in an attempt to relate executive compensation appropriately to the Company's
overall growth and success and to the executive's duties and demonstrated
abilities. The objectives of this strategy are to attract and retain the best
possible executives, to motivate these executives to achieve the Company's
business goals and to provide a compensation package that recognizes individual
contributions as well as overall business results.
Each year the Compensation Committee conducts a review of the Company's
executive compensation. This review includes consideration of: the relationship
between an executive's current compensation and his current duties and
responsibilities; the compensation of executive officers with similar duties and
responsibilities; and inflationary trends. The annual compensation reviews
permit an ongoing evaluation of the relationship between the size and scope of
the Company's operations, its performance and its executive compensation. The
Compensation Committee also considers the legal and tax effects (including
without limitation the effects of Section 162(m) of the Internal Revenue Code of
1986, as amended) of the Company's executive compensation program in order to
provide the most favorable legal and tax consequences for the Company and its
executive officers.
The Compensation Committee determines the compensation of the individuals
whose compensation is detailed in this proxy statement and sets policies for and
reviews the compensation awarded to the 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 detailed in this proxy statement, the
Compensation Committee takes into account the views of Roger S. Marcus, the
Company's Chief Executive. Because Mr. Marcus provides his services to the
Company pursuant to a Personal Services Agreement between the Company and
American Biltrite Inc., the Compensation Committee does not review Mr. Marcus'
compensation, which is administered by the disinterested directors of the Board
as a whole.
The key elements of the Company's executive compensation consist of base
salary, annual bonus and stock options. The Compensation Committee's policies
with respect to each of these elements 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 to the individual, including pension benefits, insurance
and other benefits, as well as the program described below.
<PAGE>
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 new responsibilities of the executive's position, changes in
the scope of the operations managed, the performance of such operations, the
performance of the executive in the position and annual increases in the cost of
living.
Annual Bonus
The Company's executive officers are eligible for an annual cash bonus.
Annual bonuses are determined on the basis of corporate performance. The most
significant corporate performance measure for bonus payments is earnings of the
Company. In determining annual bonuses, the Compensation Committee also
considers the views of Mr. Marcus as Chief Executive Officer and discusses with
him the appropriate bonuses for all executives.
Stock Options
Under the Company's 1995 Stock Option Plan, stock options may be granted
to the Company's executive officers. 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.
Under the 1995 Stock Option Plan, stock options are typically granted with
an exercise price equal to the market price of the Company's Class A 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 the compensation package cannot be realized unless stock price
appreciation occurs over time.
Conclusion
Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance. 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
Cyril C. Baldwin, Jr.
David N. Hurwitz
<PAGE>
10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1997 were Mark N.
Kaplan, Cyril C. Baldwin, Jr. and David N. Hurwitz, none of whom is or was at
any time during 1997 an officer or employee of the Company. Mark N. Kaplan is
a partner in Skadden, Arps, Slate, Meagher & Flom LLP, a law firm retained by
Congoleum Corporation in 1997 and proposed to be retained in 1998. Mr. Kaplan
is also a director of American Biltrite.
EXECUTIVE COMPENSATION
The table that follows 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 executive officers
for services rendered to the Company 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 during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying
Other Annual Options All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)(1) (Shares) Compensation($)(2)
- --------------------------- ---- --------- -------- ------------------ -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Roger S. Marcus 1997 * * *
Chairman, President 1996 * * *
and Chief Executive 1995 * * 150,000 *
Officer
Howard N. Feist III 1997 148,393 30,000 5,000 8,933
Senior Vice President 1996 142,833 60,000 -- 7,170
- Finance 1995 136,167 50,000 10,000 8,197
and Chief Financial
Officer
Robert N. Agate 1997 148,074 30,000 5,000 8,913
Senior Vice President 1996 142,083 60,000 -- 7,132
- Manufacturing 1995 136,875 50,000 10,000 8,240
Dennis P. Jarosz 1997 142,966 30,000 5,000 8,606
Senior Vice President 1996 137,500 60,000 6,500 6,858
- Marketing 1995 125,792 50,000 3,500 7,573
Anthony C. Prestipino 1997 141,300 30,000 5,000 8,285
Senior Vice President 1996 135,625 60,000 130,801 10,000 5,461
- Sales 1995 21,028 15,000 -- --
</TABLE>
- ----------
(1)Amount shown represents relocation expenses.
(2)Amounts shown for each officer consist of amounts contributed by the Company
to the Company's 401(k) Plan for the designated fiscal year that are
allocated to such officer.
(*)Pursuant to the terms of a Personal Services Agreement between American
Biltrite and the Company, American Biltrite agreed that Roger S. Marcus would
devote substantially all of his business time to serving as Chief Executive
Officer of the Company and Richard G. Marcus would serve as Vice Chairman of
the Company. In consideration of this agreement, the Company agreed to pay
American Biltrite a personal services fee and a contingent incentive fee,
conditioned upon the attainment of financial and business objectives as
determined by the Board of Directors of the Company. The Company paid
$980,060, $1,265,000, and $1,030,000 in personal services and incentive fees
for the years ended December 31, 1995, 1996 and 1997, respectively.
<PAGE>
11
1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan became effective upon the
consummation of the Company's initial public offering in February 1995. Pursuant
to the 1995 Stock Option Plan, certain directors, employees and officers of the
Company will be given the opportunity to acquire shares of Class A common stock
through the grant of options. Such options may be either incentive stock options
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonqualified stock options. A maximum of 550,000 shares of Class A
common stock were originally authorized for issuance with respect to options
granted under the 1995 Stock Option Plan, subsequently increased to 800,000 in
1997. The material features of the 1995 Stock Option Plan are described below.
The purpose of the 1995 Stock Option Plan is to promote the long-term
success of the Company by providing financial incentives to key employees who
are in positions to make significant contributions toward success. The 1995
Stock Option Plan is designed to attract individuals of outstanding ability to
employment with the Company, to provide key employees with a proprietary
interest in the Company, and to encourage such employees to continue their
employment with the Company and to render superior performance during such
employment.
The 1995 Stock Option Plan is administered by the Compensation Committee
of the Board of Directors, which has authority to determine the employees to
whom awards will be granted, the form and amount of the awards, the dates of
grant, vesting periods, and other terms of each award.
The 1995 Stock Option Plan provides for both incentive stock options, as
defined in Section 422 of the Code, and nonqualified stock options. All options
are granted at an exercise price per share equal to not less than 100% of the
fair market value of the Class A common stock on the date the option is granted.
The Company receives no consideration upon the granting of an option. Full
payment of the option exercise price must be made by the optionee when an option
is exercised. The exercise price may be paid in cash or in such other form as
the Company may approve, including shares of Class A common stock valued at
their fair market value on the date of option exercise. The proceeds received by
the Company from the sale of shares under the 1995 Stock Option Plan are used
for general corporate purposes. Options granted under the 1995 Stock Option Plan
are not exercisable sooner than 12 months after the date of grant, vest
incrementally over a five-year period, and are not exercisable later than 10
years after the date of grant. Options are not transferable by the holder other
than by will or applicable laws of descent and distribution.
The grant of an incentive stock option generally has no immediate federal
income tax consequences to the Company or the holder. If the holder of the
incentive stock option sells the shares of Class A common stock received on the
exercise thereof more than two years after the date the incentive stock option
was granted to the holder and more than one year after the date of exercise of
the incentive stock option, the difference between the sale proceeds and the
exercise price of the option will be eligible for long-term capital gain or loss
treatment. In such event, no amount will be taxable as ordinary income and the
Company will not be entitled to a deduction for federal income tax purposes.
<PAGE>
12
However, in general, the difference between the fair market value of the Class A
common stock on the date of exercise and the exercise price will be included in
the holder's alternative minimum taxable income for alternative minimum tax
purposes. Whether or not a holder of such an option would be subject to
alternative minimum tax depends on such individual's particular tax situation.
If the holder disposes of the shares of Class A common stock acquired upon the
exercise of an incentive stock option or applies such stock to the exercise of
another option prior to the end of the holding periods described above (a
"disqualifying disposition"), the difference between the fair market value of
the Class A common stock on the date of exercise and the exercise price is
taxable as ordinary income in the year of disposition and any excess of the
amount realized on disposition over the value of the Class A common stock on the
date of exercise is eligible for long-term or short-term capital gain treatment
depending on how long the shares were held. If, in a disqualifying disposition,
the holder sells the Class A common stock for less than its fair market value on
the date he or she exercised the incentive stock option, then, generally, only
the amount of the difference between the amount realized on the disposition and
the purchase price will be treated as ordinary income. If the holder of an
incentive stock option makes a disqualifying disposition, the Company generally
will be entitled to a deduction equal to the amount treated as ordinary income
to such holder for the Company's taxable year in which such holder recognizes
such income.
The grant of a nonqualified stock option has no immediate federal income
tax consequences to the Company or the holder. The exercise of a nonqualified
stock option will require the holder to include in the holder's gross income the
amount by which the fair market value of the acquired shares on the exercise
date (or, in the case of certain employees who are officers or directors subject
to the profit recapture provisions of Section 16(b) of the Securities Exchange
Act of 1934, in certain circumstances thereafter) exceeds the exercise price. An
officer or director may avoid this six-month deferral provision by electing
under Section 83(b) of the Code to realize the income with respect to the
exercise of the option at the time of exercise.
The Company is required by the Code to withhold income and employment
taxes from the employee's wages or to receive a payment from the employee to
provide for the taxes on the ordinary income which is considered to have been
paid in shares of Class A common stock to the holder upon exercise of the option
or, in the case of an employee subject to Section 16(b) of the Securities
Exchange Act of 1934 who does not make a Section 83(b) election, at the end of
the six-month period following such exercise.
The Company is entitled to an income tax deduction (provided applicable
withholding requirements are met) equal to the amount of ordinary income
included as compensation in the gross income of the holder for the taxable year
of the Company during which the holder includes such amount in the holder's
income.
The closing price of the Company's Class A common stock as reported on the
New York Stock Exchange on March 3, 1998 was $10.19 per share. There is no
market for the Class B common stock (but shares of Class B common stock are
convertible, on a share-for-share basis, into shares of Class A common stock
under certain conditions).
<PAGE>
13
At December 31, 1997 (the end of the Company's 1997 fiscal year), options
were outstanding under the 1995 Option Plan to purchase an aggregate of 511,900
shares of Class A common stock.
<PAGE>
14
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Percent of
Total Potential Realizable Value at
Number of Options Assumed Annual Rates of
Securities Granted Stock Price Appreciation
Underlying in Exercise or for Option Term(2)
Options Fiscal Base Price Expiration -----------------------------
Name Granted#(1) Year(1) (per share) Date 5% 10%
---- ---------- ------ --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Dennis P. Jarosz 5,000 8.9% $14.25 02/02/07 $44,809 $113,554
Anthony C. Prestipino 5,000 8.9% 14.25 02/02/07 44,809 113,554
Howard N. Feist III 5,000 8.9% 14.25 02/02/07 44,809 113,554
Robert N. Agate 5,000 8.9% 14.25 02/02/07 44,809 113,554
</TABLE>
(1) All options granted in fiscal year 1997 were granted pursuant to the 1995
Stock Option Plan. All options granted to the named executive officers
vest over five years at the rate of 20% per year beginning on the first
anniversary of the date of the grant, subject to acceleration as the
Compensation Committee, in its sole discretion, deems appropriate.
(2) These amounts represent certain assumed rates of appreciation which are
provided for illustrative purposes only. Actual gains, if any, on stock
option exercises and Class A common stock holdings are dependent on the
future performance of the Class A common stock and overall stock market
conditions. There is no assurance that the amounts reflected will be
realized.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In The Money Options
Acquired Options at 12/31/97 at 12/31/97
on Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger S. Marcus -- -- 60,000 90,000 $ -- $ --
Howard N. Feist III -- -- 4,000 11,000 -- --
Robert N. Agate -- -- 4,000 11,000 -- --
Dennis P. Jarosz -- -- 2,700 12,300 488 1,950
Anthony C. Prestipino -- -- 2,000 13,000 750 3,000
</TABLE>
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. 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.
<PAGE>
15
The table below sets forth certain information relating to the Pension
Plan with respect to the five most highly compensated executive officers of the
Company at December 31, 1997. Roger S. Marcus is not eligible to participate in
the Pension Plan because he is an employee of American Biltrite.
1997 Credited
Remuneration Years
Name Covered by Plan of Service
---- --------------- ----------
Roger S. Marcus -- --
Howard N. Feist III $160,000 16
Robert N. Agate 160,000 16
Dennis P. Jarosz 160,000 25
Anthony C. Prestipino 160,000 2
The following table is based on the present Pension Plan formula. Actual
benefits will differ depending on the employee's years of service and whether
the employee was previously employed by the Company or the Tile Division of
American Biltrite.
The compensation used to determine a person's benefits under the Pension
Plan includes such person's salary (including amounts deferred as salary
reduction contributions to any applicable tax-qualified plans maintained under
Sections 401(k) or 125 of the Code) and annual bonuses. The Internal Revenue
Service has limited the maximum compensation for benefit purposes to $160,000.
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.
APPROXIMATE ANNUAL PENSION AT AGE 65
Total Years of Service as a Plan Member
----------------------------------------------------------------
Final Average
Compensation 15 20 25 30 35
------------ ------ ------ ------- ------ -------
$100,000 $11,700 $15,700 $19,600 $23,500 $27,400
125,000 15,100 20,200 25,200 30,200 35,300
150,000 18,500 24,700 30,800 37,000 43,100
175,000 19,800 26,500 33,100 39,700 46,300
200,000 19,800 26,500 33,100 39,700 46,300
225,000 19,800 26,500 33,100 39,700 46,300
250,000 19,800 26,500 33,100 39,700 46,300
<PAGE>
16
EMPLOYMENT ARRANGEMENTS
Pursuant to the terms of a Personal Services Agreement dated March 11,
1993, as amended, between the Company and American Biltrite, American Biltrite
agreed that Roger S. Marcus would serve as the Chief Executive Officer of the
Company and in connection therewith, would devote substantially all of his time
to his duties in such capacity; provided, however, that Mr. Marcus would be
entitled to remain as a director and executive officer of American Biltrite. The
Personal Services Agreement has an initial term of five years and has been
extended for an additional five years, subject to earlier termination in the
event of death, disability, cause or the termination of Mr. Marcus' affiliation
with American Biltrite, and may be further extended for successive one-year
periods if the parties so elect. Effective February 8, 1995, the Personal
Services Agreement was amended to provide, among other things, that Richard G.
Marcus will serve as Vice Chairman of the Company. For the year ended December
31, 1997, the Company paid $530,000 pursuant to the amended Personal Services
Agreement and accrued $500,000 for the 1997 contingent incentive fee, which was
paid in January 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the terms of a Business Relations Agreement between the
Company and American Biltrite (i) the Company granted American Biltrite the
right to purchase the Company's vinyl and vinyl composition tile at a price
equal to the lower of 120% of the Company's fully absorbed manufacturing costs
for such tile and the lowest price paid by any of the Company's other customers
and the exclusive right and license (including the right to sublicense) to
distribute such tile in Canada, (ii) American Biltrite granted the Company the
non-exclusive right to purchase floor tile and urethane from American Biltrite
at a price equal to the lower of 120% of American Biltrite's fully absorbed
manufacturing costs for such products and the lowest price paid by any of
American Biltrite's other customers, (iii) the Company agreed to provide
American Biltrite with data processing services for a period of 18 months
following the consummation of the transactions contemplated by the Acquisition
at a cost equal to American Biltrite's internally allocated costs for such data
processing services immediately prior to such consummation, (iv) the Company
agreed to reimburse American Biltrite for any insurance premiums retroactively
imposed relating to claims against American Biltrite in connection with the
business or operation of the Tile Division (other than certain specified claims)
and (v) American Biltrite agreed to have its tape division supply paper slitting
services to the Company at a cost equal to American Biltrite's internally
allocated costs for providing such services immediately prior to the
consummation of the transactions contemplated by the Acquisition. The agreements
referred to clauses (i) and (ii) above terminate on the fifteenth anniversary of
the date of the Business Relations Agreement, subject to renewal for successive
one-year periods if the parties so elect. The agreement referred to in clause
(v) above is terminable at any time by the Board of Directors of the Company or
American Biltrite. The Business Relations Agreement has an initial term of
fifteen years and may be extended for successive one-year periods if the parties
so elect. For the twelve months ended December 31, 1997, the Company had
purchases of $5.3 million from American Biltrite and sales of $1.0 million
pursuant to this Business Relations Agreement.
In connection with its program to repurchase shares of the Company's Class
A common stock and Class B common stock, the Company purchased an aggregate of
500,000 shares of Class B common stock from Hillside Capital Incorporated in a
private transaction on December 22, 1997
<PAGE>
17
at a purchase price of $9.25 per share, or $4,625,000 in the aggregate. John N.
Irwin III, a director of the Company, is a director of and the indirect,
majority stockholder of Hillside Capital Incorporated. C. Barnwell Straut, a
director of the Company, is a director of and a minority stockholder of
Hillside Capital Incorporated.
CUMULATIVE TOTAL SHAREHOLDER RETURN
The graph that follows compares the monthly cumulative total shareholder
return of the Company's Class A common stock to the monthly cumulative returns
of the New York Stock Exchange Market Value Index and a Peer Group Index which
includes companies in Media General Financial Services Industry Group 058 -
Other Building Materials.
Congoleum NYSE Market
Measurement Period Corporation MG Group Index Index
------------------ ----------- -------------- -----
02/02/95 100.00 100.00 100.00
03/31/95 112.50 108.53 105.93
06/30/95 100.00 119.43 113.97
09/30/95 78.50 125.97 121.88
12/31/95 80.37 130.76 128.55
03/31/96 71.96 131.21 135.86
06/30/96 85.98 134.53 140.96
09/30/96 96.26 131.86 144.65
12/31/96 103.74 145.49 154.65
03/31/97 89.72 144.06 157.39
06/30/97 87.85 160.69 182.82
09/30/97 83.64 168.10 197.56
12/31/97 82.24 170.48 203.62
<PAGE>
18
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP as
the Company's independent public auditors for 1998. Representatives of Ernst &
Young LLP are expected to be present at the Meeting and 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.
Effective March 28, 1996, the Company engaged Ernst & Young LLP as its new
independent auditors to audit the Company's financial statements, replacing
Coopers & Lybrand L.L.P. This action was approved by the Audit Committee of the
Company's Board of Directors. Coopers & Lybrand L.L.P.'s report on the Company's
financial statements for fiscal year 1995 did not contain any adverse opinion,
disclaimer of opinion or qualification or modification as to uncertainty, audit
scope or accounting principles. During fiscal year 1995, there were no
disagreements between the Company and Coopers & Lybrand L.L.P. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of Coopers &
Lybrand L.L.P., would have caused it to make a reference to the subject matter
of the disagreements in connection with its report. During fiscal year 1995, and
the subsequent interim period preceding March 28, 1996, neither the Company nor
anyone on its behalf consulted Ernst & Young LLP regarding either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report nor oral advice
was provided to the Company by Ernst & Young LLP.
STOCKHOLDER PROPOSALS
Proposals of security holders intended to be presented at the next annual
meeting of stockholders of the Company in May 1999 must be received by the
Company at its principal executive offices no later than November 25, 1998.
OTHER MATTERS
The management 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
CONGOLEUM CORPORATION
Howard N. Feist III
Secretary
Mercerville, New Jersey
March 27, 1998
<PAGE>
PROXY
CONGOLEUM CORPORATION
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 14, 1998
The undersigned hereby appoints Roger S. Marcus, Richard G. Marcus and
Howard N. Feist III, jointly and severally, proxies, with full power of
substitution and with discretionary authority, to vote all the shares of Class A
common stock, par value $.01 per share, of Congoleum Corporation, a Delaware
corporation ("Congoleum"), which the undersigned is entitled to vote at the 1998
Annual Meeting of Stockholders of Congoleum to be held on Thursday, May 14, 1998
in conference Room 6, 8th floor, Fleet Bank, 1 Federal Street, Boston,
Massachusetts at 1:00 P.M., local time, or at any adjournments or postponements
thereof (the "Annual Meeting"), hereby revoking any proxy heretofore given.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE>
|X| Please mark votes as in this example.
1. Election of Directors.
Nominees: Mark N. Kaplan, Esq., Richard G. Marcus and David N. Hurwitz.
FOR WITHHELD
|_| |_|
|_| ______________________________________
For all nominees except as noted above
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY WILL BE VOTED
IN FAVOR OF THE PROPOSAL LISTED ABOVE AND IN THE DISCRETION OF THE PROXIES ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
Please sign, date and return this proxy card promptly in the enclosed envelope.
Please sign exactly as your name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature: _____________ Date: _________ Signature: ____________ Date: ________
