SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1996 Commission File Number 1-4773
- ---------------------- ------------
AMERICAN BILTRITE INC.
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1701350
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
57 River Street, Wellesley Hills, Massachusetts 02181
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 237-6655
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, No Par Value American Stock Exchange
- -------------------------- ------------------------
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-
K. [X]
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of March 10, 1997 was $38,620,000.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 10, 1997 was 3,630,048 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of
stockholders to be held on May 12, 1997 are incorporated by
reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
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(a) General Development of Business. American Biltrite
Inc. ("ABI") was organized in 1908 and is a Delaware corporation.
ABI operates domestically through three businesses: the Tape
Division, the Ideal Tape Division and K&M Associates L.P., a
Rhode Island limited partnership ("K&M"). ABI owns a 44% equity
interest in Congoleum Corporation ("Congoleum"), a manufacturer
and producer of resilient floor tile and sheet vinyl flooring.
The Tape Division produces adhesive-coated, pressure-sensitive
papers and films used to protect material during handling or
storage or to serve as a carrier for transferring decals or die-
cut lettering. The Ideal Tape Division produces pressure
sensitive tapes and adhesive products used for applications in
the footwear, heating, ventilating and air conditioning (HVAC),
automotive and electrical and electronic industries. In 1997,
the two divisions comprising our tape business, Tape Products in
Moorestown, NJ and Ideal Tape in Lowell, MA, will be consolidated
into a single operating division.
Outside the United States, in addition to international sales of
Tape Division and Ideal Tape Division products, Ideal Tape
operates facilities in Belgium and Singapore where bulk tape
products are converted into various sizes to quickly respond to
customer demands in the European and Asian markets. Other
international operations include: a wholly owned Canadian
subsidiary ("ABI-Canada") which produces resilient floor tile,
rubber tiles and Uni-Turf (a vinyl-based floor covering for use
in indoor sports facilities) under license from ABI and
industrial products (including conveyor belting, truck and
trailer splash guards and sheet rubber material); a 50% direct
equity interest in a Honduran producer of footwear components;
and, through the Honduran corporation, an indirect interest in a
Guatemalan foam product manufacturer.
For financial reporting purposes, as a result of the
consolidation of the accounts of Congoleum and K&M into the
financial statements of ABI, ABI operates in three industry
segments: flooring products, industrial products and jewelry.
See Note 13 of Notes to the Consolidated Financial Statements.
In 1995, ABI acquired a controlling interest in K&M, a national
supplier, distributor and servicer of a wide variety of adult,
children's and specialty items of fashion jewelry and related
accessories. ABI, through wholly owned subsidiaries, currently
owns an aggregate 82.25% interest (7% as sole general partner and
75.25% in limited partner interests) in K&M. K&M wholesales
its products to mass merchandisers and other major retailers.
It also services certain retail merchandisers' in-store
operations in fashion jewelry and related accessories departments
by assisting retailers in managing inventory and maintaining
displays.
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<PAGE>
At the beginning of 1995, ABI indirectly held an 8% limited
partner interest in K&M. During 1995 and in January of 1996, the
Company acquired, through a series of transactions by its wholly
owned subsidiaries, an additional 67.25% in limited partner
interests and a 7% sole general partner interest in K&M for an
aggregate consideration of $15.5 million in cash, notes and ABI
common stock. Specifically, during 1995 and in January of 1996,
ABI indirectly acquired 62.25% in limited partner interests for
aggregate consideration of $13 million in cash, notes and ABI
common stock and, through the merger of third-party corporations
into wholly owned ABI subsidiaries and an additional 5% in
limited partner interests and a 7% sole general partner interest
for aggregate merger consideration of $2.5 million in cash and
ABI common stock. In conjunction with these K&M transactions, a
wholly owned subsidiary of ABI also entered into agreements with
the remaining limited partners of K&M which provide the ABI
subsidiary with the option to buy, and the limited partners the
option to sell, the limited partners' respective remaining
interests in K&M for an aggregate consideration based upon a
predetermined formula which is based in part on such limited
partner's capital account balance at the time of sale. As of the
date hereof, based on K&M capital account balances as of December
31, 1996, the aggregate purchase price under the option
agreements for the remaining limited partner interests in K&M
would be $2.9 million. See Note 4 of Notes to the Consolidated
Financial Statements.
On February 8, 1995, Congoleum completed a public offering of
4,650,000 shares of Class A Common Stock at $13 per share. The
net proceeds of the offering, together with certain other funds
of Congoleum, were used to acquire a portion of Congoleum's
outstanding Class B Common Stock held by Hillside Industries
Incorporated. In conjunction with the transaction, ABI exchanged
its then existing shares of Class B Common Stock for 4,395,605
shares of a new series of Class B Common Stock. The exchange of
stock did not change the Company's 44% equity ownership interest;
however, the new shares represent 57% of the voting power of the
outstanding shares of Congoleum, giving ABI majority voting
control. The accounts of Congoleum have been consolidated with
the financial statements of ABI in 1995 and 1996.
(b) Financial Information about Industry Segments.
Business segment information is included in Item 8 in Note 13 of
Notes to the Consolidated Financial Statements.
(c) Narrative Description of Business.
Marketing, Distribution and Sales. The Tape Division's
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protective papers and films are sold domestically and throughout
the world, principally through distributors, but also directly to
certain manufacturers. Ideal Tape Division products are marketed
through the division's own sales force and by sales
representatives and distributors throughout the world. ABI's
Belgian and Singapore facilities sell these products throughout
Europe and the Far East, while all domestic and the remaining
foreign sales are generated by the Lowell facility. The business
3
<PAGE>
and operations of the Tape Division and the Ideal Tape Division
do not experience seasonal variations, and neither these
divisions nor the industry in which they operate have any
material practices with respect to working capital.
ABI-Canada's floor tile and rubber tile products are marketed in
Canada and the United States, principally through distributors
and to commercial installers. Uni-Turf is marketed in Canada and
internationally through distributors. ABI-Canada's industrial
products are marketed in Canada and the United States through
distributors and also directly to certain large end-users and
original equipment manufacturers.
Congoleum currently sells its products through distributors in
the United States and Canada, as well as directly to a limited
number of mass market retailers. Congoleum considers its
distribution network very important to maintaining competitive
position. While most of its distributors have marketed
Congoleum's products for many years, replacements are necessary
periodically to maintain the strength of the distribution
network. Although Congoleum has more than one distributor in
many of its distribution territories and actively manages its
credit exposure to its customers, the loss of a major customer
could have a materially adverse impact on Congoleum's sales, at
least until a suitable replacement was in place. Congoleum
produces goods for inventory and sells on credit to customers.
Generally, Congoleum's distributors carry inventory as needed to
meet local or rapid delivery requirements. Credit sales are
typically subject to a discount if paid within terms. The sales
pattern for Congoleum's products is seasonal, with peaks in
retail sales typically occurring during March/April/May and
September/October. Orders are generally shipped as soon as a
truckload quantity has been accumulated, and backorders can be
canceled without penalty.
The products of K&M are sold domestically and throughout the
world through its own direct sales force and, indirectly, through
a wholly owned subsidiary and through third-party sales
representatives. K&M's business and operations experience
seasonal variations. In general, fashion jewelry supply,
distribution and service businesses respond to the seasonal
demands of mass merchandisers and other major retailers, which
typically peak in preparation for end-of-year holiday shopping.
Accordingly, K&M's working capital needs tend to be greatest in
the second and third fiscal quarters, while its revenues tend to
be greater toward the end of each fiscal year, especially in the
latter part of the third quarter and the first half of the fourth
quarter.
ABI owns 50% of Compania Hulera Sula, S.A. de C.V. ("Hulera
Sula"), a Honduran corporation, which produces soles, heels,
molded soles and heels, sandals and other footwear products under
license from ABI and markets such products in certain Central
American countries. Hulera Sula owns 100% of Hulera
Sacatepequez, S.A., a Guatemalan corporation which manufactures
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and markets products in Guatemala similar to those of Hulera
Sula. Fomtex, S.A., a Guatemalan corporation 60% owned by Hulera
Sula, manufactures and markets foam mattresses, beds and other
foam products for sale in the Central American market.
Working Capital and Cash Flow. In general, ABI's working capital
- -----------------------------
requirements are not affected by accelerated delivery
requirements of major customers or by obtaining a continuous
allotment of raw material from suppliers. ABI does not provide
special rights for customers to return merchandise and does
not provide special seasonal or extended terms to its customers.
Congoleum produces goods for inventory and sells on credit to
customers. Generally, Congoleum's distributors carry inventory
as needed to meet local or rapid delivery requirements. Credit
sales are typically subject to a discount if paid within terms.
Raw Materials. All of ABI's products are internally designed and
- -------------
engineered. Generally, the raw materials required by ABI for its
manufacturing operations are available from multiple sources, and
ABI has not been dependent on any particular source of supply for
raw materials essential to its businesses. ABI's subsidiary,
Congoleum, does not have readily available alternative sources of
supply for specific designs of transfer print paper, which are
produced utilizing print cylinders engraved to Congoleum's
specifications. Although no loss of this source of supply is
anticipated, replacement could take a considerable period of time
and interrupt production of certain products. Congoleum
maintains a raw material inventory and has an ongoing program to
develop new sources which will provide continuity of supply for
its raw material requirements.
Competition. All businesses in which ABI is engaged are highly
- -----------
competitive. ABI's industrial products (including tape
products) compete with those of some of the largest fully
integrated rubber and plastic companies, as well as smaller
producers. In the floor covering field, ABI-Canada's products
compete with those of other manufacturers of rubber and vinyl
floor tiles and with all other types of floor covering.
ABI competes with other companies making similar products
principally on the basis of price, service and product
performance. In the industrial products category, there are at
least 30 competitors, principal among them being Goodyear Canada,
Inc., Minnesota Mining & Manufacturing Company, Permacel and
Shuford Mills, Inc. In floor covering products, ABI competes
with Armstrong World Industries, Inc., Domco Industries, Ltd.,
Flextile Ltd. and Mondo Rubber International, Inc. as well as
with other manufacturers of alternate floor covering products
such as carpeting, wood flooring and sheet vinyl flooring. ABI
competes broadly in all markets for its products.
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<PAGE>
The market for Congoleum's products is highly competitive.
Resilient sheet vinyl and vinyl tile compete for both residential
and commercial customers primarily with carpeting, hardwood and
ceramic tile. In residential applications, both vinyl tile and
sheet vinyl are used primarily in kitchens, bathrooms, laundry
rooms and foyers and, to a lesser extent, in playrooms and
basements. Ceramic tile is used primarily in kitchens, bathrooms
and foyers. Both hardwood flooring and carpeting are used
throughout homes. Commercial grade, resilient vinyl flooring
faces substantial competition from carpeting, ceramic tile,
rubber tile, hardwood flooring and stone in commercial
applications. Congoleum believes, based upon its market
research, that purchase decisions are influenced primarily by
fashion elements such as design, color and style, durability,
ease of maintenance, price and ease of installation. Both vinyl
tile and sheet vinyl are easy to replace for repair and
redecoration and, in Congoleum's view, have advantages over other
floor covering products in terms of both price and ease of
installation and maintenance.
Congoleum believes that it is the second largest manufacturer of
resilient vinyl flooring products in the United States, after
Armstrong World Industries, Inc. Congoleum encounters
competition from domestic and, to a much lesser extent, foreign
manufacturers. Certain of Congoleum's competitors have
substantially greater financial and other resources than
Congoleum.
K&M competes with others on the basis of product pricing and the
effectiveness of merchandising services offered. In assessing
the effectiveness of K&M products and services, customers tend to
focus on margin dollars realized from the sales of product and
return on inventory investment needed to generate sales. In its
business of wholesaling and servicing fashion jewelry and
accessory products to mass merchandising retailers, K&M has one
principal competitor, Accessory Associates Inc., offering similar
products and services. A large number of smaller companies offer
limited products and/or services.
Research and Development. ABI and Congoleum's research and
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development efforts concentrate on new product development and
expanding technical expertise in the manufacturing process. ABI
also concentrates on improving existing products while Congoleum
also concentrates on trying to increase product durability.
Expenditures for research and development were $5.5 million, $4.4
million and $4.9 million on a consolidated basis for the years
ended December 31, 1996, 1995 and 1994, respectively.
6
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Key Customers. For the year ended December 31, 1996, two
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customers of Congoleum each accounted for over 10% of ABI's
consolidated sales revenue. These customers were its distributor
to the manufactured housing market, LaSalle-Bristol, and its
distributor in the Southwest and on the West Coast, LD Brinkman &
Co. K&M sales during 1996 include sales to large customers which
account for less than 10% of ABI's consolidated sales revenue.
K&M's top three customers in terms of net sales in 1996 together
account for approximately 81% of K&M's aggregate net sales, and
the loss of any such customer would have a material adverse
effect on K&M. See Note 13 of Notes to Consolidated Financial
Statements, submitted in response to Item 8 in a separate section
of this report.
Backlog. The dollar amount of backlog of orders believed to be
- -------
firm as of December 31, 1996 and 1995 was $20,100,000 and
$18,500,000, respectively. It is anticipated that all of the
backlog as of December 31, 1996 will be filled within the current
fiscal year. There are no seasonal or other significant aspects
of the backlog. In the opinion of management, backlog is not
significant to the business of ABI.
Environmental Compliance. Because of the nature of the
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operations conducted by the Company, the Company's facilities are
subject to a broad range of federal, state, local and foreign
legal and regulatory provisions relating to the environment,
including those regulating the discharge of materials into the
environment, the handling and disposal of solid and hazardous
substances and wastes and the remediation of contamination
associated with releases of hazardous substances at Company
facilities and off-site disposal locations. ABI believes that
compliance with the federal, state, local and foreign provisions
will not have a material effect upon its capital expenditures,
earnings and competitive position. See Item 3 for certain
additional information regarding environmental matters included
in the description of legal proceedings.
Employees. As of December 31, 1996, ABI employed approximately
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2,770 people.
(d) Financial information about foreign and domestic
operations and export sales. Financial information concerning
foreign and domestic operations is included in Item 8 in Note
13 of Notes to the Consolidated Financial Statements. Export
sales from the United States were $17,931,000 in 1996,
$18,057,000 in 1995 and $10,037,000 in 1994.
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ITEM 2. PROPERTIES
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At December 31, 1996, ABI and Congoleum operated a total of nine
manufacturing plants, and ABI operated a jewelry product
distribution warehouse, as follows:
<TABLE>
<CAPTION>
Owned Industry Segment
or For Which
Location Square Feet Leased Properties Used
- -------- ----------- ------ ---------------
<S> <C> <C> <C>
Trenton, NJ 1,050,000 Owned Flooring products
Marcus Hook, PA 1,000,000 Owned Flooring products
Trenton, NJ 282,000 Owned Flooring products
Finksburg, MD 107,000 Owned Flooring products
Sherbrooke, 330,000 Owned Industrial and
Quebec flooring products
Moorestown, NJ 225,000 Owned Industrial products
Lowell, MA 58,000 Owned Industrial products
Renaix, Belgium 36,000 Owned Industrial products
Singapore 14,000 Leased Industrial products
Providence, RI 103,000 Owned Jewelry products
</TABLE>
ABI knows of no material defect in the titles to any such
properties or material encumbrances thereon. ABI considers that
all of its properties are in good condition and have been well
maintained.
It is estimated that during 1996, ABI's plants for the
manufacture of floor covering products operated at approximately
75% of aggregate capacity and its plants for the manufacture of
industrial products operated at approximately 97% of aggregate
capacity. All estimates of aggregate capacity have been made on
the basis of a five-day, three-shift operation.
ITEM 3. LEGAL PROCEEDINGS
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ABI is a co-defendant with other manufacturers and distributors
of asbestos-containing products in approximately sixty-five
lawsuits. Under certain circumstances, third parties are
contractually liable for up to the full amount of any liabilities
suffered by ABI in connection with these actions. ABI believes
that these suits are without merit and that, in any event, the
damages sought are substantially within the coverages of its
applicable liability insurance policies.
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ABI has been named as a Potentially Responsible Party ("PRP")
within the meaning of the federal Comprehensive Environmental
Response Compensation and Liability Act, as amended ("CERCLA"),
as to three sites in three separate states. At one of the three
sites, the Ideal Tape Division is also named as a PRP. Under an
agreement, the Ideal Tape Division will share a percentage of the
costs with the former owner of the Ideal Tape Division's assets.
At another of these sites ABI, together with 20 other PRPs,
recently signed a consent decree and site remediation agreement
(the "Agreements") with respect to remediation at the ILCO
Superfund site located in Leeds, Alabama (the "ILCO Site"). An
action was commenced for approval of the consent decree by the
United States against the settling PRPs in the United States
District Court for the Northern District of Alabama on January 2,
1997. The currently estimated aggregate future cost of
remediation at the ILCO Site is $37.3 million. Although ABI has
agreed to an interim cost allocation under the site remediation
agreement of about $1.5 million, based on current estimates and
analyses, ABI's final share of the aggregate remediation costs
(which will depend upon a number of factors, including the
outcome of the negotiations regarding the final allocation) could
be as high as $2.4 million payable over a period of four to seven
years. Under an agreement between ABI and The Biltrite
Corporation ("TBC"), TBC is liable for 37.5% of the remediation
costs incurred by ABI with respect to the ILCO Site. Moreover,
ABI has asserted a claim for a substantial portion of the
allocation share attributable to ABI against a third party who
the Company believes arranged for the shipment of the alleged
hazardous substances generated by ABI to the ILCO site. ABI and
the other settling PRPs also have claims against PRPs who used
the ILCO Site and have not settled. In addition, because of a
recent Alabama Supreme Court decision which resolves in favor of
policyholders several important insurance coverage issues
regarding CERCLA liability, ABI has renewed its demand that its
insurance carriers provide defense and indemnity for ABI's
liabilities at the ILCO Site. ABI also is potentially
responsible for response and remediation costs as to two state-
supervised sites.
At these five sites, ABI's liability will be based upon disposal
of allegedly hazardous waste material from its current and former
plants. Except as discussed above regarding the ILCO Site, the
exact amount of future costs to ABI resulting from such
liability, if any, is indeterminable due to such unknown factors
as the magnitude of clean-up costs, the timing and extent of the
remedial actions that may be required, determination of ABI's
liability in proportion to other responsible parties and the
extent to which costs may be recoverable from insurance.
In addition, ABI has been named as a defendant in two
environmental lawsuits. In one case, an action is pending in the
United States District Court for the District of Massachusetts
captioned Olin Corporation v. Fisons, plc, et al, commenced on
--------------------------------------
May 26, 1993. In 1964, ABI sold a former chemical manufacturing
facility. There have been three other owners between ABI and the
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present owner. It has been alleged that ABI, along with the
three other former owners (who are also defendants), is
responsible for a portion of the site's soil and groundwater
response and remediation costs. While there is insufficient
information to determine what these costs will be or the extent
of ABI's responsibility, if any, management believes that it has
legal and equitable defenses to this suit. In another suit, ABI
is alleged to have sent hazardous waste to a municipal landfill.
In order to avoid the cost of litigation, ABI has offered to
contribute $172,620 as part of $2.8 million being raised by 14
third-party defendants to reach a global settlement of the case.
The past and future costs to clean up the site are expected to be
approximately $24 million.
ABI is involved in other routine legal proceedings relating to
its business and operations. ABI does not believe that these
proceedings will have a material adverse effect in the aggregate
on ABI's results of operations or financial condition.
ABI's subsidiary, Congoleum, is also involved in the following
legal proceedings, as reported in Congoleum Corporation's Annual
Report on Form 10-K, as filed with the Commission on March 14,
1997:
As of December 31, 1996 Congoleum was named as defendant,
together in most cases with numerous other companies, in
approximately 661 currently pending lawsuits (including workers'
compensation cases) involving approximately 7,936 individuals
alleging personal injury from exposure to asbestos or asbestos-
containing products. The plaintiffs in these cases, as well as
similar cases in the past which have been settled or dismissed,
allege that they or the individuals they represent have
contracted asbestosis, pleural thickening, mesothelioma, cancer
or other lung disease as a result of exposure to asbestos in the
course of their activities as plumbers, carpenters, floor
installers, machinists, or in other capacities, either as
independent contractors or as employees of shipyards or other
industries utilizing asbestos-containing products (or, in the
workers' compensation cases, as employees of Congoleum or the
Tile Division) and that included among such products which caused
their diseases were sheet vinyl products provided by Congoleum or
resilient tile provided by the Tile Division or both. Congoleum
discontinued the manufacture of asbestos-containing sheet vinyl
products in 1983, and the Tile Division ceased manufacturing
asbestos-containing tile products in 1984. In general, asbestos-
containing products have not been found to pose a health risk
unless the asbestos becomes airborne. All of the asbestos in
asbestos-containing sheet vinyl and tile products sold by
Congoleum or the Tile Division was fully bonded or encapsulated
during the manufacturing process. Congoleum has issued warnings
not to remove asbestos-containing flooring by sanding or other
methods that allow the asbestos fibers to become airborne.
Although there can be no assurance, Congoleum believes, based
upon the nature of its asbestos-containing products and its
experience with cases to date, that any potential liability from
pending personal injury claims relating to Congoleum's asbestos-
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<PAGE>
containing resilient vinyl products will not have a material
adverse effect in the aggregate on its results of operations or
financial position.
Together with a large number (in most cases, hundreds) of other
companies, Congoleum is named as a PRP in pending proceedings
under CERCLA and similar state laws. In four instances, although
not named as a PRP, Congoleum has received a "Request for
Information." These pending proceedings currently relate to ten
waste disposal sites in New Jersey, Pennsylvania, Maryland,
Connecticut and Delaware in which recovery from generators of
hazardous substances is sought for the cost of cleaning up the
contaminated waste disposal sites. Although there can be no
assurances, Congoleum anticipates that these proceedings will be
resolved over a period of years for amounts (including legal fees
and other defense costs) which Congoleum believes based on
current estimates of liability and, in part, on insurance
coverage agreements, will not have a material adverse effect in
the aggregate on the Company's results of operations or financial
position.
On July 15, 1994, Kentile Floors, Inc. ("Kentile"), a debtor-in-
possession pursuant to Chapter 11 of the United States Bankruptcy
Code, commenced an adversary proceeding against Congoleum in the
Bankruptcy Court for the Southern District of New York. The
complaint asserts that Congoleum tortiously interfered with
certain of Kentile's contracts with its distributors when those
distributors terminated their agreements with Kentile to become
distributors of Congoleum's floor tile. Kentile seeks $15.0
million in damages on account of the alleged interference.
Although Congoleum's motion to have the proceeding dismissed on
the pleadings was denied, Congoleum believes that Kentile's claim
is without merit and intends to vigorously contest the lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
______________________________________________________
The registrant's Common Stock is traded on the American Stock
Exchange (ticker symbol ABL). The approximate number of record
holders of the Company's Common Stock at March 10, 1997 was 500.
High and low stock prices and dividends for the last two years
were:
<TABLE>
<CAPTION>
Sales Price of Common Shares
----------------------------
1996 1995
Quarter ---- ----
Ended High Low High Low
--------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31 22 5/8 18 7/8 35 1/4 27 1/4
June 30 21 18 1/2 29 7/8 22 3/4
September 30 20 3/4 18 1/2 25 7/8 21 3/8
December 31 23 1/8 19 7/8 24 1/8 18 7/8
<CAPTION>
Cash Dividends Per Common Share
-------------------------------
Quarter
Ended 1996 1995
----- ---- -----
<S> <C> <C>
March 31 $ .10 $ .0625
June 30 .10 .0875
September 30 .10 .1000
December 31 .10 .1000
----- -------
$ .40 $ .3500
===== =======
</TABLE>
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- ----------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $417,961 $404,473 $106,145 $103,851 $156,668
Earnings before
other items 13,103 10,811 4,900 3,022 3,827
Non-controlling
interests (6,804) (4,706)
Equity in earnings of
joint venture 7,361 2,349
Net earnings 6,299 6,105 12,261 5,371 3,827
Total assets 324,966 303,487 82,804 71,697 96,297
Long-term debt 106,721 110,919 4,188 6,249 17,661
Number of shares used
in computing primary
earnings per share 3,728,860 3,791,476 3,769,134 3,738,844 3,643,984
Primary earnings per
share 1.69 1.61 3.25 1.44 1.05
Cash dividends per common
share .40 .35 .14375 .075 .075
</TABLE>
1993 reflects the effect of the formation of the Congoleum joint
venture. 1995 and 1996 reflect the consolidation of Congoleum and K&M.
See Note 4 of Notes to the Consolidated Financial Statements.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_______________________________________________________
Results of Operations
American Biltrite Inc. ("ABI") 1996 and 1995 revenues and
earnings include those of Congoleum Corporation ("Congoleum") for
both years and K&M Associates L.P. ("K&M") since April 1, 1995.
In 1994, ABI's share of Congoleum's net earnings was accounted
for on the equity method. In 1995, as a result of Congoleum's
initial public offering of its common stock, ABI's voting control
of Congoleum increased to 57%, requiring ABI to consolidate the
financial statements of Congoleum with those of ABI. During
1995, ABI's ownership in K&M increased from 8% to 70.5%,
requiring ABI to consolidate the financial results of K&M with
those of ABI. In 1996, ABI increased its ownership in K&M to
82.25%. In 1994, ABI only included in income amounts received
from K&M as partnership distributions and interest on partnership
capital.
Below are the consolidated income statements of the Company. For
comparative purposes, presented below is 1994 pro forma income
statement information reflecting the consolidation of Congoleum
and K&M as though it had occurred January 1, 1994. See Note 4 of
the audited financial statements.
<TABLE>
<CAPTION>
Pro forma
1996 1995 1994 1994
---- ---- ---- ----
(In millions)
<S> <C> <C> <C> <C>
Net sales $ 418.0 $ 404.5 $ 409.3 $ 106.1
Interest and other income 4.2 4.8 3.2 1.5
------- ------- ------- -------
422.2 409.3 412.5 107.6
Costs and expenses:
Cost of products sold 284.3 287.2 266.6 75.9
Selling, general and
administrative expenses 105.2 93.0 97.4 23.4
Interest 10.7 10.4 9.2 .6
------- ------- ------- -------
400.2 390.6 373.2 99.9
------- ------- ------- -------
Earnings before income taxes
and other items 22.0 18.7 39.3 7.7
Provision for income taxes 8.9 7.9 15.3 2.8
Non-controlling interests (6.8) (4.7) (11.0)
Equity in earnings of
joint venture 7.4
------- ------- ------- -------
Net earnings $ 6.3 $ 6.1 $ 13.0 $ 12.3
======= ======= ======= =======
Earnings per common share $ 1.69 $ 1.61 $ 3.41 $ 3.25
======= ======= ======= =======
14
<PAGE>
Year Ended December 31, 1996 Compared to Year Ended December 31,
1995
Net sales for the year ended December 31, 1996 were $418.0
million as compared to $404.5 million for the year ended December
31, 1995, an increase of $13.5 million or 3.3%. Sales increases
were reflected at ABI's Tape and Canadian divisions due to an
improvement in the economies in the areas serviced by these
operations. Sales increases at Congoleum were generated due to
new customers, increased demand from the manufactured housing
industry and a 2-3% price increase. Partially offsetting this at
Congoleum was a decline in purchases by a major retail customer
currently operating under bankruptcy protection. 1996 K&M sales
remained level with 1995, even though 1995 included only 9 months
of K&M's operations. Direct sales at K&M were reduced as the
Company focused on the higher margin service sales, and sales
were adversely affected by a higher level of credits and returns.
The slight decrease in other revenues to $2.4 million in 1996
from $3.0 million in 1995 is due to a small foreign exchange loss
in 1996 and the receipt of a small pre-acquisition profit
distribution from K&M in 1995. Because ABI's foreign operations
are limited and conducted in countries that historically have had
stable currencies and low inflation, ABI believes movements of
foreign currency exchange rates in the future would not
significantly affect its results of operations.
Cost of products sold in 1996 decreased to 68.0% of net sales
from 71.0% last year. This improvement was generated at both
Congoleum and ABI's Canadian division where margins improved due
to lower raw material costs, increased sales and pricing and
improved manufacturing productivity. Margin improvement also
occurred at K&M due to an increase in service sales and a
decrease in non-service sales.
Selling, general and administrative expenses increased in 1996 to
25.2% of net sales compared to 23.0% in 1995. At both ABI and
Congoleum, higher spending on marketing and new product
development programs were the primary reason for spending
increases. At Congoleum, costs associated with establishing new
distribution in Canada increased costs. At K&M, field service
and warehouse costs relating to the high level of credits and
allowances issued during the year, together with costs associated
with opening new service stores, were the principal cause of cost
increases in this area.
The provision for income taxes declined to 40% of pretax income
in 1996 from 42% in 1995 as a result of lower state taxes.
Net income for the year ended December 31, 1996 was $6.3 million,
up slightly from net income of $6.1 million for 1995. ABI and
Congoleum were profitable in 1996, while K&M operations continue
to reflect losses; however, at a lower rate than that experienced
in 1995.
15
<PAGE>
Year Ended December 31, 1995 Compared to Year Ended December 31,
1994
Net sales increased in 1995 to $404.5 million from $106.1 million
in 1994 due mainly to the 1995 inclusion of Congoleum sales of
$263.1 million and K&M sales of $34.7 million. ABI-Canada and
Tape Division 1995 sales are slightly ahead of 1994's levels and,
on a pro forma basis, Congoleum sales are slightly lower in 1995
than in the prior year due to weak retail demand, particularly
for higher priced residential products, and reduced purchases by
a major customer. Partially offsetting these decreases were
sales of new products and increased sales to the manufactured
housing segment.
Interest income increased to $1.8 million in 1995 from $.4
million in 1994. Interest income at Congoleum amounted to $1.5
million in 1995.
Other revenue increased to $3.0 million in 1995 from $1.0 million
in 1994, primarily due to the inclusion in 1995 of Congoleum and
K&M. The most significant item in other revenue is $1.1 million
royalty income earned at Congoleum, which is comparable to the
amount of royalty income earned by Congoleum in 1994.
Cost of products sold in 1995 was 71.0% of net sales and compares
favorably with 71.5% in 1994. Historically, gross margins at
Congoleum and K&M are higher than those for the rest of ABI and
did influence the improvement in gross margins for 1995. In 1995
at Congoleum, costs were higher than 1994 due to sharply higher
raw material costs. At K&M in 1995, costs were also higher than
1994 due to product mix changes.
Selling, general and administrative expenses increased to 23.0%
of net sales in 1995 from 22.1% in 1994. The reason for this
increase is the impact of expenses at K&M where these expenses
historically have been over 35% of net sales due to the retail
nature of their business. Excluding K&M from the calculation,
these percentages would be lower than last year. At both ABI and
Congoleum, this expense on a pro forma basis is lower in actual
dollars due to management control of operating expenses in light
of lower profitability in 1995. At Congoleum, this lower
spending level more than offset a $2.5 million charge to bad debt
expense related to the bankruptcy filing of a major retailer.
The effective tax rate in 1995 was 42% compared to 36% in 1994.
The primary reasons for the increase in the effective tax rate in
1995 are the consolidation of Congoleum, whose effective tax rate
is 41%, and the effect of providing deferred taxes on
undistributed domestic earnings.
Pretax earnings for 1995 of $18.7 million are higher than 1994's
pretax earnings of $7.7 million because of the inclusion in 1995
16
<PAGE>
of Congoleum and K&M earnings/loss on this line. In 1994,
Congoleum was accounted for on the equity in earnings of joint
venture line. On a pro forma basis, combining the net earnings
effect between years, the contribution to earnings from ABI,
Congoleum and K&M were lower than 1994 due to a combination
of factors which include a weak economy, raw material inflation,
competitive pricing and a sluggish retail environment. ABI-
Canada did not contribute to earnings in 1995 and K&M posted a
loss.
The effects of movement in foreign currency exchange rates were
not significant during 1995.
Liquidity and Capital Resources
At December 31, 1996, consolidated working capital was $86.7
million, the ratio of current assets to current liabilities was
2.0 to 1, and the debt to equity ratio was 1.89 to 1.
Influencing the debt to equity ratio is $87.8 million of
Congoleum debt which has no recourse to ABI. Net cash provided
by operations during 1996 was $29.0 million, generated mainly
from net earnings and depreciation. Capital expenditures for
1997 are estimated to be approximately $24 million. At ABI,
capital expenditures cover normal replacement of machinery and
equipment and process improvement purposes. At Congoleum, they
are proceeding with a major program to modernize and improve
their plant and equipment. Because of these programs at
Congoleum, capital expenditures are expected to continue at this
level for the next two to three years. Depreciation and
amortization expense is forecast at $15.5 million.
ABI has recorded what it believes are adequate provisions for
environmental remediation and product-related liabilities,
including provisions for testing for potential remediation of
conditions at its own facilities. While ABI believes its
estimate of the future amount of these liabilities is reasonable
and that they will be paid over a period of five to ten years,
the timing and amount of such payments may differ significantly
from ABI's assumptions. Although the effect of future government
regulation could have a significant effect on ABI's costs, ABI is
not aware of any pending legislation which could significantly
affect the liabilities ABI has established for these matters.
There can be no assurances that the costs of any future
government regulations could be passed along to its customers.
Certain legal and administrative claims are pending or have been
asserted against ABI, which are considered incidental to its
business. Among these claims, ABI is a named party in several
actions associated with waste disposal sites and asbestos-related
claims. These actions include possible obligations to remove or
mitigate the effects on the environment of wastes deposited at
various sites, including Superfund sites. The exact amount of
such future costs to ABI is indeterminable due to such unknown
factors as the magnitude of clean-up costs, the timing and extent
17
<PAGE>
of the remedial actions that may be required, the determination
of ABI's liability in proportion to other potentially responsible
parties and the extent to which costs may be recoverable from
insurance. ABI has recorded provisions in its financial
statements for the estimated probable loss associated with all
known environmental and asbestos-related contingencies. The
contingencies also include claims for personal injury and/or
property damage.
ABI records a liability for environmental remediation and
asbestos-related claim costs when a clean-up program or claim
payment becomes probable and the costs can be reasonably
estimated. As assessments and clean-ups progress, these
liabilities are adjusted based upon progress in determining the
timing and extent of remedial actions and the related costs and
damages. The extent and amounts of the liabilities can change
substantially due to factors such as the nature or extent of
contamination, changes in remedial requirements and technological
improvements. Estimated insurance recoveries related to these
liabilities are reflected in other noncurrent assets.
ABI has recorded its estimate of losses associated with the
foregoing claims; however, the ultimate outcome of these matters
cannot presently be determined and could possibly be material to
the results of operations or cash flows for a particular
quarterly or annual reporting period.
Cash requirements for capital expenditures, working capital, debt
service, equity investments in K&M and the current authorizations
of $4.7 million to repurchase ABI common stock, $5.0 million to
repurchase Congoleum common stock and $7.7 million to repurchase
Congoleum senior notes, are expected to be financed from
operating activities and borrowings under existing lines of
credit which at ABI are presently $34.0 million and at Congoleum
are $30.0 million.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The response to this item is submitted in a separate section of
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ----------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURES
------------------------------------
Not applicable.
PART III
Information in response to Items 10, 11, 12 and 13 is
incorporated by reference to ABI's definitive Proxy materials
relating to its Annual Meeting of Stockholders to be held May
12, 1997, to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
- ----------------------------------------------------------------
(a) (1) and (2) The response to this portion of Item 14 is
submitted as a separate section of this report.
(3) Listing of Exhibits
Exhibit No. Description
----------- -----------
3.1 (1) Restated Certificate of Incor-
poration
3.2 (5) IV By-Laws, amended and restated
as of March 13, 1991
10(3) I, V 1985 Stock Option Plan
("the 1985 Plan")
10(4) II, V Form of Agreement pursuant to
the 1985 Plan providing for
ISO's
10(5) III, V Form of Agreement pursuant to
the 1985 Plan providing for
NQSO's
10(6) VI Joint Venture Agreement dated
as of December 16, 1992 by and
among American Biltrite Inc.,
Resilient Holdings Incorporated,
Congoleum Corporation, Hillside
Industries Incorporated and
Hillside Capital Corporation
10(7) VII Closing Agreement dated as of
March 11, 1993 by and among
American Biltrite Inc.,
Resilient Holdings Incorporated,
Congoleum Corporation, Hillside
Industries Incorporated and
Hillside Capital Corporation
10(8) VIII 1993 Stock Award and Incentive
Plan
10(9) XI K&M Associates L.P. Amended and
Restated Agreement of Limited
Partnership
10(10) IX Purchase Agreement dated as of
March 31, 1995 by and among
Ocean State and certain limited
partners of K&M (filed herewith)
20
<PAGE>
10(11) IX Agreement and Plan of Merger
dated as of April 1, 1995 by and
among the Company, Jewelco
Acquisition Co., Inc., AIMPAR,
Inc., Arthur I. Maier, Bruce
Maier and Edythe J. Wagner
(filed herewith)
10(12) IX Option Agreement dated as of
April 1, 1995 by and among Ocean
State and certain limited
partners of K&M (filed herewith)
10(13) IX Agreement and Plan of Merger
dated as of May 3, 1995 by and
among the Company, Zirconia
Acquisition Co., Inc., Wilbur A.
Cowett Incorporated and Wilbur A.
Cowett (filed herewith)
10(14) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and Michael J. Glazerman, Trustee
of the Marcus Family Insurance
Trust u/t/d March 1, 1990
10(15) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Marcus Family 1990
Insurance Trust
10(16) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Marcus Family 1996
Irrevocable Insurance Trust Dated
October 28, 1996
10(17) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and The Richard G. Marcus
Irrevocable Insurance Trust of
1990 Dated June 1, 1990
10(18) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Roger S. Marcus
Irrevocable Insurance Trust Dated
Nov. 29, 1996, Richard G. Marcus,
Trustee
21
<PAGE>
10(19) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Roger S. Marcus
Irrevocable Insurance Trust Dated
Nov. 29, 1996
10(20) Split-Dollar Agreement dated as
of January 9, 1997 by and between
American Biltrite Inc. and Joseph
D. Burns
10(21) Description of Supplemental
Retirement Benefits for
Gilbert K. Gailius
11 Statement Re: Computation of
Per Share Earnings
13 Annual Report to Stockholders for
the year ended December 31, 1996
(which is not deemed to be "filed"
except to the extent that portions
thereof are expressly incorporated
by reference in this Annual Report
on Form 10-K)
21 Subsidiaries of the Registrant
(including each subsidiary's
jurisdiction of incorporation
and the name under which each
subsidiary does business)
23(1) Consent of Ernst & Young LLP,
Independent Auditors
23(2) Consent of Coopers & Lybrand, L.L.P.
Independent Accountants
99(1) X Consolidated Financial Statements and
schedule of Congoleum Corporation
for the year ended December 31, 1994
22
<PAGE>
________________
I Incorporated by reference to exhibit 10(2) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986. (1-4773)
II Incorporated by reference to exhibit 10(3) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986. (1-4773)
III Incorporated by reference to exhibit 10(4) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986. (1-4773)
IV Incorporated by reference to the exhibits to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
V Compensatory plans required to be filed as exhibits
pursuant to Item 14(c) of Form 10-K.
VI Incorporated by reference to the exhibits filed with
the Company's Current Report on Form 8-K filed
December 21, 1992.
VII Incorporated by reference to the exhibits filed with
the Company's Current Report on Form 8-K filed
March 25, 1993.
VIII Incorporated by reference to the exhibits to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
IX Incorporated by reference to the exhibits to the
Company's Current Report on Form 8-K as amended
by the Form 8-K/A filed respectively on May 17, 1995
and July 17, 1995.
X Incorporated by reference to Item 14 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1994.
XI Incorporated by reference to Item 14 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995
(b) Reports on Form 8-K. None.
(c) Exhibits - the response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules - the response to this portion of
Item 14 is submitted as a separate section of this report.
23
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 8, Item 14 (a) (1) and (2), (c) and (d)
List of Financial Statements and Financial Statement Schedules
Financial Statements and Supplementary Data
Financial Statement Schedules
Year Ended December 31, 1996
AMERICAN BILTRITE INC.
Wellesley Hills, Massachusetts
24
<PAGE>
FORM 10-K -- ITEM 14 (a) (1) and (2)
American Biltrite Inc. and Subsidiaries
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of American
Biltrite Inc. and subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated balance sheets - December 31, 1996 and 1995
Consolidated statements of earnings -
Years ended December 31, 1996, 1995 and 1994
Consolidated statements of stockholders' equity -
Years ended December 31, 1996, 1995 and 1994
Consolidated statements of cash flows -
Years ended December 31, 1996, 1995 and 1994
Notes to consolidated financial statements
The following financial statement schedules of American Biltrite
Inc. and subsidiaries are included in Item 14 (d):
Schedule II - Valuation and qualifying accounts
The Consolidated Financial Statements of Congoleum Corporation
for the year ended December 31, 1994 are incorporated by
reference to Item 14 of Part IV of ABI's Annual Report on Form
10-K for the year ended December 31, 1994, filed as Exhibit 99(1)
hereto.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.
25
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Stockholders
American Biltrite Inc.
We have audited the accompanying consolidated balance sheets
of American Biltrite Inc. and subsidiaries (the Company) as
of December 31, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity, and cash flows
for each of the three years in the period ended December 31,
1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based
on our audits. The 1994 financial statements of Congoleum
Corporation (a corporation in which the Company has a 44%
interest) have been audited by other auditors whose report
has been furnished to us; insofar as our opinion on the 1994
consolidated financial statements relates to data included
for Congoleum Corporation, it is based solely on their
report.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the
report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and, for 1994, the
report of other auditors, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of American Biltrite Inc.
and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth
therin.
/s/ Ernst & Young LLP
- ---------------------
Boston, Massachusetts
March 4, 1997
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Congoleum Corporation
We have audited the balance sheet of Congoleum Corporation
as of December 31, 1994 and the related statements of
operations, changes in stockholders' equity and cash flows
for the year then ended December 31, 1994. We have also
audited the financial statement schedule listed in the Index
as Item 14(a) of the Congoleum Corporation 10K for the year
ended December 31, 1994. These financial statements and
financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Congoleum Corporation as of December 31, 1994,
and the results of its operations and its cash flows for
the year ended December 31, 1994, in conformity with
generally accepted accounting principles. In addition, in
our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material
respects, the information required to be included therein.
/s/Coopers & Lybrand L.L.P.
- ---------------------------
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 24, 1995
27
<PAGE>
</TABLE>
<TABLE>
American Biltrite Inc. and Subsidiaries
Consolidated Balance Sheets (Notes 1 and 4)
(In thousands of dollars)
<CAPTION>
December 31
1996 1995
-----------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 33,658 $ 39,297
Short-term investments 17,500
Accounts and notes receivable, less allowances
of $4,935 in 1996 and $6,477 in 1995 for
doubtful accounts and discounts 34,849 30,708
Inventories 81,058 82,853
Prepaid expenses and other current assets 8,660 11,268
-----------------------
Total current assets 175,725 164,126
Other assets:
Goodwill, net 24,510 23,579
Deferred income taxes 3,068 2,873
Other assets 9,779 8,614
-----------------------
37,357 35,066
Property, plant and equipment, net 111,884 104,295
-----------------------
Total assets $324,966 $303,487
=======================
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
December 31
1996 1995
-----------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks $ 10,250
Accounts payable 27,745 $ 29,094
Accrued expenses 49,856 44,819
Current portion of long-term debt 1,156 3,207
-----------------------
Total current liabilities 89,007 77,120
Long-term debt, less current portion 105,565 107,712
Other liabilities 49,735 48,180
Non-controlling interests 18,898 12,679
Stockholders' equity
Common stock, without par value--authorized
15,000,000 shares, issued 4,607,902 shares 19,469 19,469
Retained earnings 56,920 52,096
Equity adjustment from foreign currency
translation (1,921) (2,334)
Minimum pension liability (877) (445)
-----------------------
73,591 68,786
Less cost of shares of common stock in
treasury (977,854 shares in 1996 and
937,966 shares in 1995) 11,830 10,990
-----------------------
Total stockholders' equity 61,761 57,796
-----------------------
Total liabilities and stockholders' equity $324,966 $303,487
=======================
</TABLE>
[FN]
See accompanying notes.
29
<PAGE>
<TABLE>
American Biltrite Inc. and Subsidiaries
Consolidated Statements of Earnings (Notes 1 and 4)
(In thousands of dollars, except per share data)
<CAPTION>
Year ended December 31
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales $417,961 $404,473 $106,145
Interest 1,807 1,765 416
Other 2,422 3,026 1,039
-------------------------------------
422,190 409,264 107,600
Costs and expenses:
Cost of products sold 284,305 287,177 75,870
Selling, general and
administrative expenses 105,164 92,965 23,410
Interest 10,747 10,402 606
-------------------------------------
400,216 390,544 99,886
-------------------------------------
Earnings before income taxes
and other items 21,974 18,720 7,714
Provision for income taxes 8,871 7,909 2,814
-------------------------------------
13,103 10,811 4,900
Non-controlling interests (6,804) (4,706)
Equity in earnings of joint
venture 7,361
-------------------------------------
Net earnings $ 6,299 $ 6,105 $ 12,261
=====================================
Earnings per common share:
Primary $ 1.69 $ 1.61 $ 3.25
=====================================
Fully diluted $ 1.68 $ 1.61 $ 3.24
=====================================
</TABLE>
[FN]
See accompanying notes.
30
<PAGE>
<TABLE>
American Biltrite Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands of dollars)
<CAPTION>
Foreign
Currency Minimum
Common Retained Translation Pension Treasury
Stock Earnings Adjustment Liability Stock
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $18,997 $38,843 $(1,724) $12,160
Net earnings 12,261
Dividends declared ($.14375
per share) (512)
Effects of Congoleum capital
transactions (948)
Foreign currency translation
adjustment (713)
Exercise of stock options (79)
Purchase of treasury stock 2
------------------------------------------------------
Balance at December 31, 1994 18,997 49,644 (2,437) 12,083
Net earnings 6,105
Dividends declared ($.35 per
share) (1,276)
Effects of Congoleum capital
transactions (2,377)
Foreign currency translation
adjustment 103
Exercise of stock options (512)
Tax benefits associated with
the exercise of stock
options 472
Purchase of treasury stock 1,593
Issuance of treasury stock
in connection with K&M
transactions (2,174)
Minimum pension liability
adjustment, net of tax
benefit $(445)
------------------------------------------------------
Balance at December 31, 1995 19,469 52,096 (2,334) (445) 10,990
Net earnings 6,299
Dividends declared ($.40 per
share) (1,458)
Effects of Congoleum capital
transactions (17)
Foreign currency translation
adjustment 413
Exercise of stock options (39)
Purchase of treasury stock 879
Minimum pension liability
adjustment, net of tax
benefit (432)
------------------------------------------------------
Balance at December 31, 1996 $19,469 $56,920 $(1,921) $(877) $11,830
======================================================
</TABLE>
[FN]
See accompanying notes.
31
<PAGE>
<TABLE>
American Biltrite Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Notes 1 and 4)
(In thousands of dollars)
<CAPTION>
Year ended December 31
1996 1995 1994
----------------------------------
<S> <C> <C> <C>
Operating activities
Net earnings $ 6,299 $ 6,105 $12,261
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 13,874 12,104 2,715
Provision for doubtful accounts 750 2,522 189
Equity in earnings of joint venture (7,361)
Deferred income taxes 1,934 2,393 298
Accounts and notes receivable (5,062) 2,685 (43)
Inventories 1,495 (5,355) (3,597)
Prepaid expenses and other current assets 1,733 (718) (155)
Accounts payable and accrued expenses 2,315 (7,007) 3,561
Non-controlling interests 6,804 4,706
Other (1,165) (1,631) (270)
----------------------------------
Net cash provided by operating activities 28,977 15,804 7,598
Investing activities
Purchases of short-term investments (45,000) (22,005) (8,190)
Proceeds from sales of short-term
investments 27,500 50,300 5,895
Investments in property, plant and
equipment (19,869) (14,121) (8,599)
Business acquisitions, net of cash
acquired (1,680) (5,274)
Redemption of preferred stock by equity
investee 5,000
Other 692
----------------------------------
Net cash provided (used) by investing
activities (39,049) 8,900 (5,202)
Financing activities
Long-term borrowings 15,000
Payments on long-term debt (19,457) (3,436) (2,072)
Short-term borrowings 10,250 12,000
Payments on short-term borrowings (1,000)
Payment of loans from affiliates (5,792)
Net proceeds from Congoleum equity offering 56,219
Repurchase of Congoleum class B shares (60,450)
Other (2,298) (2,971) (435)
----------------------------------
Net cash provided (used) by financing
activities 3,495 (4,430) (3,507)
Effect of foreign exchange rate changes
on cash 938 (678) (534)
----------------------------------
Increase (decrease) in cash and cash
equivalents (5,639) 19,596 (1,645)
Cash and cash equivalents at beginning
of year (including Congoleum Corporation
in 1996 and 1995) 39,297 19,701 6,528
----------------------------------
Cash and cash equivalents at end of year $33,658 $39,297 $ 4,883
==================================
</TABLE>
[FN]
See accompanying notes.
32
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of American Biltrite Inc. and its wholly-owned subsidiaries
(referred to as ABI) as well as entities over which it has
voting control. As described in Note 4, ABI in 1995 gained
voting control over Congoleum Corporation (Congoleum) and
K&M Associates L.P. (K&M). (ABI, Congoleum, and K&M are
collectively referred to as the Company.) Until 1995, the
Company's investments in Congoleum and K&M were accounted
for under the equity method and cost method, respectively.
Intercompany accounts and transactions, including
transactions with associated companies which result in
intercompany profit, are eliminated.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents
Cash equivalents represent highly-liquid debt instruments
with maturities of three months or less at the date of
purchase. The carrying value of cash equivalents
approximates fair value.
Short-Term Investments
Investments in A1/P1 commercial paper with a maturity
greater than three months, but less than six months, at the
time of purchase are considered to be short-term
investments. The carrying amount of the commercial paper
approximates fair value due to its short maturity.
33
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost or market. Cost
is determined by the last-in, first-out (LIFO) method for
most of the Company's domestic inventories and the first-in,
first-out (FIFO) method for the Company's foreign
inventories.
Property, Plant and Equipment
These assets are stated at cost. Expenditures for
maintenance, repairs and renewals are charged to expense;
major improvements are capitalized. Depreciation, which is
determined using the straight-line method, is provided over
the estimated useful lives (30 to 40 years for buildings and
building improvements, 10 to 15 years for production
equipment and heavy duty vehicles, and 3 to 10 years for
light duty vehicles and office furnishings and equipment).
Debt Issue Costs
Costs incurred in connection with the issuance of long-term
debt have been capitalized and are being amortized over the
life of the related debt agreements. Such costs, net of
accumulated amortization, amounted to $2,359,000 and
$3,014,000 at December 31, 1996 and 1995, respectively, and
are included in other noncurrent assets.
Goodwill
The excess of purchase cost over the fair value of the
net assets acquired (goodwill) established by Congoleum
is being amortized on a straight-line basis over 40 years.
Goodwill associated with the K & M transactions (see Note 4)
is being amortized over 20 years. At each balance sheet
date, the Company evaluates the recoverability of its
goodwill using certain financial indicators, such as
historical and future ability to generate income from
operations. Accumulated amortization amounted to $5,394,000
and $4,376,000 at December 31, 1996 and 1995, respectively
34
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies (continued)
Impairment of Long-Lived Assets
In the event that facts and circumstances indicate the
Company's assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's
carrying amount to determine if a write-down to fair market
value is required.
Revenue Recognition
The Company records revenue, net of a provision for
estimated returns and allowances, upon shipment.
Income Taxes
The Company provides for income taxes based upon earnings
reported for financial statement purposes. Deferred tax
assets and liabilities are determined based on temporary
differences between the financial reporting and tax bases of
assets and liabilities.
Stock-Based Compensation
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation. SFAS No. 123 requires the
recognition of, or disclosure of, compensation expense for
grants of stock options or other equity instruments issued
to employees based on their fair value at the date of grant.
As permitted by SFAS No. 123, the Company elected the
disclosure requirements instead of recognition of
compensation expense and therefore will continue to apply
existing accounting rules.
Research and Development Costs
Expenditures relating to the development of new products are
charged to operations as incurred and amounted to
$5,513,000, $4,441,000 and $1,425,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
35
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies (continued)
Foreign Currency Translation
All balance sheet accounts of foreign subsidiaries are
translated at the current exchange rate and income statement
items are translated at the average exchange rate for the
period; resulting translation adjustments are made directly
to a separate component of stockholders' equity. Realized
exchange gains and losses (immaterial in amount) are
included in current operations.
Issuances of Stock by Subsidiaries
The Company accounts for issuances of stock by its
subsidiaries as capital transactions.
Earnings Per Common Share
Primary earnings per share have been computed based upon the
weighted-average number of common shares outstanding during
the year, adjusted for the dilutive effect of shares
issuable upon the exercise of stock options determined based
upon average market price for the period.
Fully diluted earnings per share have been computed based
upon the weighted-average number of common shares
outstanding during the year, adjusted for the dilutive
effect of shares issuable upon the exercise of stock
options, determined based upon the higher of the average
price for the period or the period-ending market price.
Pending Accounting Standards
In October 1996, the Accounting Standards Executive
Committee (AcSEC) of the American Institute of Certified
Public Accountants issued SOP 96-1, "Environmental
Remediation Liabilities." SOP 96-1 provides authoritative
guidance on the recognition, measurement, display, and
disclosure of environmental remediation liabilities and is
effective January 1, 1997 for the Company. The adoption of
SOP 96-1 is not expected to have a material effect on the
consolidated financial statements.
36
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
2. Inventories
Inventory at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
----------------------
(In thousands)
<S> <C> <C>
Finished goods $ 55,356 $ 54,629
Work-in-process 9,315 11,984
Raw materials and supplies 16,387 16,240
----------------------
$ 81,058 $ 82,853
======================
</TABLE>
At December 31, 1996, domestic inventories determined by the
LIFO inventory method amounted to $58,312,000 ($59,293,000
at December 31, 1995). If the FIFO inventory method had
been used for these inventories, they would have been
$329,000 lower and $1,782,000 higher at December 31, 1996
and 1995, respectively.
3. Property, Plant and Equipment
A summary of the major components of property, plant and
equipment is as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
----------------------
(In thousands)
<S> <C> <C>
Land and improvements $ 5,451 $ 5,452
Buildings 45,294 42,133
Machinery and equipment 158,050 145,543
Construction-in-progress 12,561 8,893
----------------------
221,356 202,021
Less accumulated depreciation 109,472 97,726
----------------------
$111,884 $104,295
======================
</TABLE>
Depreciation expense amounted to $12,151,000, $11,274,000
and $2,715,000 in 1996, 1995 and 1994, respectively.
37
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
4. Related-Party Transactions
Included in other assets on the accompanying balance sheets
is ABI's investment in Compania Hulera Sula, S.A., a 50%-
owned associate. The investment is accounted for on the cost
method due to the uncertainty of the political climate and
currency restrictions in Honduras. At December 31, 1996 and
1995, ABI's investment was $1,100,000.
1996 and 1995 Transactions
On February 8, 1995, Congoleum completed a public offering
of 4,650,000 shares of Class A Common Stock at $13 per
share. The net proceeds of the offering, together with
certain other funds of Congoleum, were used to acquire a
portion of Congoleum's outstanding Class B Common Stock held
by Hillside Industries Incorporated. As a result of these
transactions, ABI recorded a charge to stockholders' equity
of $2,377,000 in 1995. In conjunction with these
transactions, the Company exchanged its shares of Class B
Common Stock for 4,395,605 shares of a new series of Class B
Common Stock (the foregoing transactions are collectively
referred to as the Congoleum transactions). The exchange of
stock did not change the Company's 44% ownership interest,
however, the new shares represent 57% of the voting shares
of Congoleum, giving ABI majority voting control.
Accordingly, the accounts of Congoleum have been
consolidated into the financial statements of the Company
beginning in 1995.
During 1995, the Company purchased an additional 55.5%
limited partnership interest and 7% sole general partnership
interest in K&M, a national jewelry supplier (the K&M
transactions). The K&M transactions were completed in a
series of transactions for aggregate consideration of
$13,605,000 and were accounted for using the purchase
method. Goodwill of $10,863,000 was recorded in connection
with these transactions and is being amortized using the
straight-line method over a 20-year life.
The first series of transactions, in which ABI acquired
50.5% limited partnership interest and 7% sole general
partnership interest, were completed effective April 1,
1995, and provided ABI voting control over K&M.
Accordingly, the accounts of K&M have been consolidated in
the financial statements of ABI since April 1, 1995. The
second transaction, in which ABI acquired an additional 5%
limited partnership interest, was completed in August 1995.
38
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
4. Related-Party Transactions (continued)
In January 1996, ABI acquired an additional limited
partnership interest of 11.75% for consideration of
$1,939,000. At December 31, 1996, ABI owns an 82.25%
partnership interest in K&M.
In conjunction with the K&M transactions, ABI also entered
into agreements with the remaining limited partners of K&M,
providing ABI the option to buy, and providing the limited
partners of K&M the option to sell, the remaining
partnership interests in K&M. If all of the remaining
limited partnership interests in K&M were to be purchased by
ABI, the purchase price would amount to approximately
$2,929,000 at December 31, 1996.
Prior to the completion of the K&M transactions, ABI held an
8% limited partnership interest in K&M, which it accounted
for using the cost method.
The following pro forma financial statements give effect to
the K&M and Congoleum transactions as though they had
occurred on January 1, 1994 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Year ended
December 31
1994
------------
<S> <C>
Revenue $409,300
============
Net earnings $ 12,950
============
Earnings per common share:
Primary $ 3.41
============
Fully diluted $ 3.40
============
</TABLE>
39
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
4. Related-Party Transactions (continued)
1994 Transactions
On January 25, 1994, Congoleum completed a public offering
of $90,000,000 senior notes due 2001. The net proceeds were
used to (i) redeem approximately $30,000,000 of preferred
stock and accrued dividends (including ABI's $5,000,000
preferred stock investment); (ii) repay approximately
$30,000,000 of indebtedness and accrued interest; (iii)
purchase outstanding warrants for approximately $8,500,000
and (iv) fund working capital requirements. In connection
with the purchase of outstanding warrants, ABI charged
$948,000 to retained earnings to reflect the reduction in
the equity of Congoleum.
ABI and Congoleum provide certain goods and services to each
other pursuant to agreements which were negotiated at arms
length at the time of the formation of the joint venture.
Purchase and sales transactions with Congoleum during 1994
were approximately $3,800,000 and $4,500,000, respectively.
5. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------------------
(In thousands)
<S> <C> <C>
Accrued advertising and
sales promotions $20,666 $18,780
Employee compensation and
related benefits 12,832 11,226
Interest 3,745 3,861
Environmental liabilities 3,267 3,127
Other 9,346 7,825
---------------------
$49,856 $44,819
=====================
</TABLE>
40
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
6. Financing Arrangements
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-----------------------
(In thousands)
<S> <C> <C>
9.0% Senior Notes, due 2001 $ 87,750 $ 90,000
Line of credit obligations 15,000 12,000
9.65% notes 2,000
Other notes 3,971 6,919
-----------------------
106,721 110,919
Less current portion 1,156 3,207
-----------------------
$105,565 $107,712
=======================
</TABLE>
The 9.0% Senior Notes are obligations of ABI's subsidiary,
Congoleum. The Senior Notes have no recourse to the assets
of ABI and K&M, and are redeemable at the option of
Congoleum, in whole or in part, at any time on and after
February 1, 1998 at a predetermined redemption price
(ranging from 103% to 100%), plus accrued and unpaid
interest to the date of redemption. As a result of
Congoleum's consummation of its initial public stock
offering in 1995, it may use all or a portion of the
proceeds of such offering on or before the third anniversary
of the issuance of the Senior Notes to redeem up to 25% of
the aggregate principal amount of the Senior Notes
originally issued at a redemption price of 108%, plus
accrued and unpaid interest to the date of redemption.
During 1996, Congoleum's Board of Directors approved a
program to repurchase up to $10 million of its outstanding
Senior Notes either in the open market or in privately
negotiated transactions. At December 31, 1996, Congoleum
had repurchased $2,250,000 of its Senior Notes. In
connection with the repurchase, Congoleum also wrote off a
portion of the debt issuance cost associated with the
repurchased Senior Notes. Net loss associated with the
senior note repurchase was immaterial to the financial
statements, and is included in other expense for the period
ended December 31, 1996. The fair value of the Senior Notes,
estimated based on the quoted market price, was
approximately $87,311,000 at December 31, 1996.
41
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
6. Financing Arrangements (continued)
In January 1996, ABI entered into a credit agreement with an
insurance company (the Agreement) providing for the issuance
of senior promissory notes aggregating $30 million. In
January 1996, $15 million principal amount of notes were
issued (Series A Notes). The Series A Notes bear interest
at 6.71% per annum and are payable in annual installments of
$3 million beginning in 1999. ABI, with the consent of the
lender, may issue through January 1998 the additional $15
million of promissory notes available under the agreement.
All notes issued under the Agreement are obligations of ABI
and have no recourse to the assets of Congoleum or K&M. The
fair value of the Series A Notes approximates their carrying
value at December 31, 1996.
Of the $15 million proceeds from the Series A Notes
offering, the Company used $12 million to repay amounts due
under its line of credit arrangements and $2 million to
retire its 9.65% notes. Accordingly, such amounts are
classified as long-term obligations at December 31, 1995.
Other notes mainly comprise promissory notes issued in
connection with the K&M transactions (described in Note 4),
which bear interest at 1% above the First National Bank of
Boston's base lending rate ( 8.25% at December 31, 1996),
and are repayable through 1999. The carrying value of the
other notes approximates fair value.
42
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
6. Financing Arrangements (continued)
The Company, at December 31, 1996, had revolving and other
short-term agreements providing for secured and unsecured
borrowings up to $64 million with interest accruing at
variable rates, which at December 31, 1996 ranged from 6.9%
to 8.25%. At December 31, 1996, the weighted-average
interest rate on the $10.25 million outstanding under these
arrangements, which is unsecured, was approximately 7%. The
carrying value of amounts outstanding under these agreements
at December 31, 1996, approximates fair value. Commitment
fees and compensating balance requirements associated with
these agreements are insignificant.
The terms of the Company's loan agreements impose certain
restrictions on its ability to incur additional indebtedness
and call for the maintenance of specific levels of working
capital and minimum net worth and restrict the payment of
cash dividends to holders of common stock and other capital
distributions as defined. At December 31, 1996, retained
earnings which were unrestricted as to such distributions
amounted to $3,602,000.
Interest paid on all outstanding debt amounted to
$10,825,000 in 1996, $10,111,000 in 1995 and $804,000 in
1994.
Principal payments on the Company's long-term obligations
due in each of the next five years are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 1,156
1998 1,156
1999 4,156
2000 3,000
2001 90,750
</TABLE>
43
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
7. Other Liabilities
Other liabilities consist of the following:
<TABLE>
<CAPTION>
1996 1995
-----------------------
(In thousands)
<S> <C> <C>
Pensions $13,882 $14,304
Postretirement benefits 10,249 10,615
Environmental remediation and
product related liabilities 10,926 10,415
Accrued worker's compensation 4,871 4,462
Deferred income taxes 4,707 3,736
Accrued compensation 1,119 1,534
Other 3,981 3,114
----------------------
$49,735 $48,180
======================
</TABLE>
8. Pension Plans
The Company sponsors several noncontributory defined benefit
pension plans covering substantially all employees. Amounts
funded annually by the Company are actuarially determined
using the projected unit credit and unit credit method and
are equal to or exceed the minimum required by government
regulations. Pension fund assets are invested in a variety
of equity and fixed-income securities.
The components of net periodic pension cost were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------
(In thousands)
<S> <C> <C> <C>
Service cost--benefits earned
during the period $ 1,495 $ 1,268 $ 360
Interest cost on projected
benefit obligation 4,706 4,767 924
Actual return on plan assets (4,393) (8,558) (432)
Net amortization and deferral (158) 4,400 (300)
------------------------------
Net periodic pension cost $ 1,650 $ 1,877 $ 552
==============================
</TABLE>
44
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
8. Pension Plans (continued)
The following tables present a reconciliation of the plans
funded status to amounts recorded in the consolidated
balance sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Plans Whose Plans Whose
Assets Exceed Accumulate
Accumulated Benefits
Benefits Exceed Assets
----------------------------
(In thousands)
<S> <C> <C>
December 31, 1996:
Actuarial present value of benefit
obligations:
Vested benefit obligations $ 8,575 $ 57,784
=========================
Accumulated benefit obligations $ 8,641 $ 59,322
Projected benefit obligations $ 10,411 $ 59,826
Plan assets at fair market value 13,957 43,402
-------------------------
Projected benefit obligations less
than (in excess of) plan assets 3,546 (16,424)
Unrecognized net loss (gain) (4,157) 5,773
Unrecognized net obligation (asset) (227) 1,258
Unrecognized prior service cost (1) (2,446)
Adjustment required to recognize
minimum liability (4,331)
-------------------------
Accrued pension liability ($3,127
included in accrued expenses) $ (839) $(16,170)
=========================
</TABLE>
45
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to consolidated Financial Statements
December 31, 1996
8. Pension Plans (continued)
<TABLE>
<CAPTION>
Plans Whose Plans Whose
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
-----------------------------
(In thousands)
<S> <C> <C>
December 31, 1995:
Actuarial present value of benefit
obligations:
Vested benefit obligations $ 8,291 $ 57,264
=============================
Accumulated benefit obligations $ 8,347 $ 58,758
=============================
Projected benefit obligations $10,267 $ 58,994
Plan assets at fair market value 12,160 42,801
-----------------------------
Projected benefit obligations less
than (in excess of) plan assets 1,893 (16,193)
Unrecognized net loss (gain) (2,392) 4,683
Unrecognized net obligation (asset) (248) 1,549
Unrecognized prior service cost (1) (2,803)
Adjustment required to recognize
minimum liability (3,193)
-----------------------------
Accrued pension liability ($2,401
included in accrued expenses) $ (748) $(15,957)
=============================
</TABLE>
Key assumptions used in developing the actuarial present
value of the Company's benefit obligations are as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------
<S> <C> <C>
Weighted-average discount rate 7% 7%
Rate of increase in future
compensation levels 5%-5.5% 5%-5.5%
</TABLE>
The expected long-term rate of return on plan assets
assumptions used to develop net periodic pension cost ranged
from 7% to 9% in 1996 and 1995 and was 8% in 1994.
46
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
9. Postretirement Benefits Other than Pensions
The Company provides certain health care and life insurance
benefits for certain retirees of Congoleum. The
determination of benefit cost for post retirement plans is
based on plan provisions. These benefits are provided
through insurance companies whose premiums are based on
benefits paid or claims experienced.
Net periodic post retirement benefits cost for the years
ended December 31, 1996 and 1995, is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Service cost-benefits earned
during the year $ 141 $ 137
Interest cost on post retirement
benefit obligation 484 480
Amortization of prior service cost (447) (524)
Amortization of losses 90 47
----------------------
Total expense $ 268 $ 140
======================
</TABLE>
At December 31, 1996 and 1995, the actuarial and recorded
liabilities for these post retirement benefits, none of
which have been funded, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
Accumulated post retirement benefit
obligations:
Retirees and dependents $ (4,136) $ (3,319)
Fully eligible active plan
participants (999) (1,076)
Other active employees (2,355) (2,432)
Unrecognized prior service cost (3,633) (4,944)
Unrecognized net loss 303 648
-----------------------
Accrued post retirement benefit
obligations (10,820) (11,123)
Less current portion 571 508
-----------------------
Noncurrent post retirement benefit
obligation $ (10,249) $ (10,615)
======================
</TABLE>
A weighted-average assumed discount rate of 7.0% was used to
measure the accumulated post retirement benefit obligation
as of December 31, 1996 and 1995. The annual rate of
increase in the per capita cost of covered health
care benefits was assumed to be 10.1% in 1996; the
rate was assumed to decrease gradually to 5.0% over
the next 10 years and remain level thereafter. An
increase of one percent in the assumed health care
47
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
9. Postretirement Benefits Other than Pensions (continued)
cost trend rates for each future year would have increased
the aggregate of service and interest cost components of net
periodic post retirement benefit cost by $86,000 and $87,000
for the years ended December 31, 1996 and 1995 and would
have increased the post retirement benefit obligation by
$798,000 and $783,000 as of December 31, 1996 and 1995,
respectively.
10. Commitments and Contingencies
Leases
The Company occupies certain warehouse and office space and
uses certain equipment and motor vehicles under lease
agreements expiring at various dates through 2001. The
leases generally require the Company to pay for utilities,
insurance, taxes and maintenance, and some contain renewal
options. Total rent expense charged to operations was
$3,179,000 in 1996, $3,142,000 in 1995 and $1,060,000 in
1994.
Future minimum payments relating to operating leases are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $2,854
1998 1,421
1999 770
2000 317
2001 231
--------
Total future minimum lease payments $5,593
========
</TABLE>
48
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
10. Commitments and Contingencies (continued)
Contingent Liabilities
Certain legal and administrative claims are pending or have
been asserted against the Company, which are considered
incidental to its business. Among these claims, the Company
is a named party in several actions associated with waste
disposal sites and asbestos-related claims. These actions
include possible obligations to remove or mitigate the
effects on the environment of wastes deposited at various
sites, some of which are properties previously owned by the
Company. The amount of such future cost is indeterminable
due to such unknown factors as the magnitude of clean-up
costs, the timing and extent of the remedial actions that
may be required, the determination of the Company's
liability in proportion to other potentially responsible
parties, the effects of joint and several liability at
Superfund sites, and the extent to which costs may be
recoverable from insurance. The contingencies also include
claims for personal injury and/or property damage.
The Company records a liability for environmental
remediation and asbestos-related claim costs when a clean-up
program or claim payments become probable and the costs can
be reasonably estimated. As assessments and clean-ups
progress, these liabilities are adjusted based upon progress
in determining the timing and extent of remedial actions and
the related costs and damages. The extent and amounts of
the liabilities can change substantially due to factors such
as the nature or extent of contamination, changes in
remedial requirements and technological improvements. The
recorded liabilities are not reduced by the amount of
estimated insurance recoveries. Such estimated insurance
recoveries of $3,939,000 are reflected in other noncurrent
assets at December 31, 1996 and are considered probable of
recovery.
The Company has recorded its estimate of loss associated
with the foregoing claims, however, the ultimate outcome of
these matters cannot presently be determined.
49
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
11. Income Taxes
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and
liabilities as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-----------------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Accruals and reserves $20,080 $19,525
Credit carryforwards 969 761
-----------------------
Total deferred tax assets 21,049 20,286
Deferred tax liabilities:
Depreciation 13,013 12,897
Inventory 1,861 1,705
Undistributed domestic earnings 1,916 1,384
Foreign taxes 941 1,037
Other 1,722 336
-----------------------
Total deferred tax liabilities 19,453 17,359
-----------------------
Net deferred tax asset $ 1,596 $ 2,927
=======================
</TABLE>
Credit carryforwards consist primarily of alternative
minimum tax credits and foreign tax credits.
50
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
11. Income Taxes (continued)
The components of earnings before income taxes are:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
-----------------------------------
(In thousands)
<S> <C> <C> <C>
Domestic $20,037 $17,330 $5,461
Foreign 1,937 1,390 2,253
------------------------------------
$21,974 $18,720 $7,714
====================================
</TABLE>
Significant components of the provision for income taxes are
as follows:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 5,887 $ 4,007 $ 1,580
Foreign 339 537 477
State 711 972 459
------------------------------------
Total current 6,937 5,516 2,516
Deferred 1,934 2,393 298
------------------------------------
$ 8,871 $ 7,909 $ 2,814
====================================
</TABLE>
Deferred income taxes include provisions of $532,000,
$414,000 and $781,000 during 1996, 1995 and 1994 for ABI's
share of the undistributed earnings of Congoleum, which does
not file a consolidated tax return with ABI.
51
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
11. Income Taxes (continued)
The reconciliation of income tax computed at the U.S.
federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
----------------------------------
<S> <C> <C> <C>
U.S. statutory rate 35% 35% 34%
State income taxes, net of
federal benefits 4 5 4
Tax effects of foreign
operations (1)
Undistributed domestic
earnings 2 2
Other (1) (1)
----------------------------------
Effective tax rate 40% 42% 36%
==================================
</TABLE>
Undistributed earnings of foreign subsidiaries aggregated
approximately $16,152,000 at December 31, 1996, which, under
existing law, will not be subject to U.S. tax until
distributed as dividends. Because the earnings have been or
are intended to be reinvested in foreign operations, no
provision has been made for U.S. income taxes that may be
applicable thereto.
Income taxes paid amounted to approximately $4,526,000 in
1996, $8,509,000 in 1995 and $1,442,000 in 1994.
52
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
12. Stock Option Plans
ABI Stock Plans
During 1993, ABI adopted a stock award and incentive plan
which permits the issuance of options, stock appreciation
rights (SARs), limited SARs, restricted stock, restricted
stock units and other stock-based awards to selected
employees and independent contractors of the Company. The
plan reserved 400,000 shares of common stock for grant and
provides that the term of each award be determined by the
committee of the Board of Directors (Committee) charged with
administering the plan.
Under the terms of the plan, options granted may be either
non-qualified or incentive stock options and the exercise
price, determined by the Committee, may not be less than the
fair market value of a share on the date of grant. SARs and
limited SARs granted in tandem with an option shall be
exercisable only to the extent the underlying option is
exercisable and the grant price shall be equal to the
exercise price of the underlying option. During 1993,
294,800 stock options were granted. No stock options or
SARs were granted during the three years ended December 31,
1996. In addition, the Committee may grant restricted stock
to participants of the plan at no cost. Other than the
restrictions which limit the sale and transfer of these
shares, participants are entitled to all the rights of a
shareholder. No restricted stock or restricted stock units
were granted during the three years ended December 31, 1996.
During 1985, ABI adopted a stock option plan which permits
the issuance of 300,000 shares of common stock to key
executives. Under the terms of the plan, options granted
may be either non-qualified or incentive stock options and
are issued at prices ranging from 85% to 100% of fair market
value at the date of grant. Options granted under the plan
are exercisable in installments; however, no options are
exercisable within one year or later than ten years from the
date of grant.
53
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
12. Stock Option Plans (continued)
The following tables summarize information about ABI's
stock options.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Share Exercise Price Shares Exercise Price Shares Exercise Price
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
year 349,440 $15.17 435,460 $13.46 448,600 $13.24
Granted
Exercised (5,800) 6.76 (83,180) 6.17 (13,140) 6.08
Forfeited (1,000) 7.00 (2,840) 16.18
-------- -------- --------
Outstanding at
end of year 342,640 15.60 349,440 15.18 435,460 13.46
======== ======== ========
Options
exercisable
at year end 227,024 155,004 174,020
Available for
grant at end
of year 107,840 107,840 120,800
</TABLE>
<TABLE>
<CAPTION>
Number Number Weighted-Average
Option Outstanding at Exercisable at Remaining
Grant Date 12/31/96 12/31/96 Contractual Life Exercisable
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 1991 53,600 53,600 4.3 years $ 7.00
August 1993 289,040 173,424 6.7 years 16.88
</TABLE>
54
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
12. Stock Option Plans (continued)
Congoleum Stock Option Plan
Effective with its public offering, Congoleum adopted the
1995 stock option plan (the plan). Under the plan, options
to purchase up to 550,000 shares of Congoleum's Class A
common stock may be issued to officers and key employees.
Congoleum has proposed to amend the plan to increase the
number of shares to be issued from 550,000 to 800,000, an
increase of 250,000 shares, subject to shareholder
approval. These options may be either incentive stock
options or non-qualified stock options, and the option price
must be at least equal to the fair value of Congoleum's
Class A common stock on the date of grant. All options
granted have ten-year terms and vest over five years at the
rate of 20% per year beginning on the first anniversary of
the date of grant.
A summary of Congoleum's stock option plan as of December
31, 1996 and 1995, and changes during the years then ended
is presented below:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 481,000 $ 13.00
Granted 22,000 10.63 498,000 $ 13.00
Forfeited (18,500) 13.00 (17,000) 13.00
-------- --------
Outstanding at
end of year 484,500 12.89 481,000 13.00
Options exercisable
at year end 94,100 --
Stock options available
for future issuance 65,500 69,000
</TABLE>
55
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
12. Stock Option Plans (continued)
Pro Forma Disclosure
Pro forma disclosure, as required by FASB Statement No. 123,
regarding net income and earnings per share has been
determined as if the Company had accounted for its employee
stock options under the fair value method of the statement.
The fair value for these options was estimated at the date
of the grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for 1996 and
1995, respectively: option forfeiture of 15%; risk-free
interest rates of 5.99% and 5.90%; no dividends; volatility
factors of the expected market price of the Company's common
stock of .388; and a weighted-average expected life of the
options of seven years.
For purposes of pro forma disclosures the estimated fair
value of the options ($103,000 for the 1996 grant and
$2,832,000 for the 1995 grant) is amortized to expense over
the options' vesting period. The initial impact on pro
forma net income may not be representative of compensation
expense in future years, when the effect of the amortization
of multiple awards would be reflected in the pro forma
disclosures.
The Company's pro forma information follows (in thousands,
except for pro forma earnings per share):
<TABLE>
<CAPTION>
1996 1995
--------------------
(In thousands)
<S> <C> <C>
Net income $6,299 $6,105
Estimated pro forma compensation
expense from stock options:
1995 Grant (249) (228)
1996 Grant (8)
--------------------
Pro forma net income $6,042 $5,877
====================
Pro forma earnings per share:
Primary $ 1.64 $ 1.57
Fully diluted 1.63 1.57
</TABLE>
56
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
13. Industry Segments
The Company operates in three principal industries:
industrial, flooring and jewelry products. Vinyl and vinyl
composition floor coverings are manufactured by the flooring
group with distribution primarily through floor covering
distributors, retailers and contractors for commercial and
residential use. The industrial products group principally
manufactures pressure-sensitive tape, sheet rubber packing,
matting, footwear heels and soles, and conveyor belting.
These products are marketed through distributors as well as
directly to original equipment manufacturers and end users.
The accounts of Congoleum are included in the flooring
products segment in 1995. The jewelry segment reflects the
results of K&M Associates L.P. which is a national costume
jewelry supplier to the mass merchandiser markets. The
Company considers all revenues and expenses except interest
expense and investment income and all assets except
investments in affiliated companies to be of an operating
nature and, accordingly, allocates them to industry segments
regardless of the profit center in which recorded.
Information on Business Segments
- --------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------
(In thousands)
<S> <C> <C> <C>
Net sales:
Flooring products $286,970 $277,528 $ 18,386
Industrial products 96,619 92,208 87,759
Jewelry 34,372 34,737
--------------------------------------
Consolidated $417,961 $404,473 $106,145
======================================
Operating profits:
Flooring products $ 26,265 $ 22,015 $ 209
Industrial products 6,927 7,826 7,804
Jewelry (2,278) (2,484)
Interest expense and
investment income (8,940) (8,637) (299)
--------------------------------------
Consolidated $ 21,974 $ 18,720 $ 7,714
======================================
</TABLE>
57
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
13. Industry Segments (continued)
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------
(In thousands)
<S> <C> <C> <C>
Identifiable assets:
Flooring products $231,895 $218,232 $ 13,784
Industrial products 60,475 53,625 58,792
Jewelry 31,496 30,530
Investments in affiliated
companies 1,100 1,100 10,228
-------------------------------------
Consolidated $324,966 $303,487 $ 82,804
Depreciation and amortization:
Flooring products $ 10,723 $ 9,466 $ 978
Industrial products 2,255 2,053 1,737
Jewelry 896 585
-------------------------------------
Consolidated $ 13,874 $ 12,104 $ 2,715
=====================================
Capital expenditures:
Flooring products $ 13,309 $ 11,126 $ 1,747
Industrial products 6,473 2,820 6,852
Jewelry 87 175
-------------------------------------
Consolidated $ 19,869 $ 14,121 $ 8,599
=====================================
</TABLE>
In 1996, three customers of K&M accounted for approximately
36%, 28% and 17%, respectively, of the jewelry segment net
sales. Also in 1996, two customers accounted for 21% and
19%, respectively, of the flooring industry segment net
sales. The loss of any one of these customers could
adversely affect the results of operations of the respective
segment.
58
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
13. Industry Segments (continued)
In 1995, three customers of K&M accounted for approximately
29%, 26% and 23%, respectively, of the jewelry segment net
sales. Also in 1995, two customers each accounted for 20%,
respectively, of the flooring industry segment net sales.
In 1996 and 1995, K&M incurred significant operating losses
stemming from an adverse retail environment and certain
unsuccessful merchandising programs. The Company has made
personnel changes and implemented new operating strategies.
Management believes, based upon its operating plans, it will
be able to recover the carrying value of its investment in
K&M. However, to the extent that future results vary from
existing plans, the carrying value of goodwill generated in
connection with the acquisition of K&M may need to be
adjusted.
Amounts included in the above information relating to ABI's
foreign operations are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Net
Sales and Sales to
Other Unaffiliated Operating Identifiable Depreciation Capital
Income Customer Profit Assets Expense Expenditures
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996: $65,163 $59,655 $1,937 $31,459 $1,691 $1,441
=================================================================================
1995: $56,303 $56,230 $1,390 $28,684 $1,576 $1,701
=================================================================================
1994:
Canada $35,995 $35,844 $1,219 $21,248 $1,311 $2,719
Other 14,013 13,774 1,034 8,327 191 326
---------------------------------------------------------------------------------
Total $50,008 $49,618 $2,253 $29,575 $1,502 $3,045
=================================================================================
</TABLE>
59
<PAGE>
American Biltrite Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
13. Industry Segments (continued)
Intersegment and interarea sales include an element of
profit which has been eliminated in consolidation.
Operating profit is total revenue less operating expenses,
excluding interest and general corporate expenses.
Identifiable assets by industry include both assets directly
identified with those operations and an allocable share of
jointly used assets.
The vast majority of the Company's sales are to select
flooring distributors and retailers located in the United
States. Economic and market conditions, as well as the
individual financial condition of each customer, are
considered when establishing allowances for losses from
doubtful accounts.
14. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------
(In thousands of dollars, except per
share amounts)
<S> <C> <C> <C> <C>
1996
Net sales $89,905 $110,175 $111,263 $106,618
Gross profit 25,149 35,753 35,987 36,767
Net earnings (loss) (210) 1,640 1,744 3,125
Net earnings (loss) per
share:
Primary (.06) .45 .48 .84
Fully diluted (.06) .44 .47 .84
1995
Net sales $89,691 $101,289 $107,441 $106,052
Gross profit 27,529 31,730 30,180 27,857
Net earnings 2,019 2,127 1,552 407
Net earnings per
share:
Primary .53 .56 .41 .11
Fully diluted .53 .56 .41 .11
</TABLE>
60
<PAGE>
<TABLE>
American Biltrite Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
Year ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<CAPTION>
- --------------------------------------------------------------------------------------------------------
COL. A | COL.B | COL. C | COL. D | COL. E | COL. F | COL. G |
- --------------------------------------------------------------------------------------------------------|
| | Additions | | |
|-------------------------------------| | |
| | | Charged to | | | |
| Balance at | Charged to | Other | | | |
|Beginning of| Costs and | Accounts-- | | Deductions--| Balance at |
Description | Period | Expenses | Describe | Other | Describe | End of Period|
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
- ----
Allowances for doubtful
accounts and cash
discounts $6,477 $ 2,885 $ 4,427 (A) $4,935
==============================================================================
Reserve for returns
and markdowns $3,301 $11,342 $10,763 (A) $3,880
==============================================================================
1995
- ----
Allowances for doubtful
accounts and cash
discounts $1,466 $ 4,097 $5,408 (B) $ 4,494 (A) $6,477
==============================================================================
Reserve for returns
and markdowns $ 8,365 $2,521 (C) $ 7,585 (A) $3,301
==============================================================================
1994
- ----
Allowances for doubtful
accounts and cash
discounts $1,277 $ 2,189 $ 2,000 (A) $1,466
==============================================================================
</TABLE>
[FN]
(A) Represents accounts charged off during the year, net of recoveries
(B) Represents allowances for Congoleum as of January 1, 1995 and K&M as of
April 1, 1995
(C) Represents reserve for returns and markdowns for K&M as of April 1, 1995
61
<PAGE>
Pursuant to the requirement of Section 13 or 15 (d) of
the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the
undersigned,
AMERICAN BILTRITE INC.
(Registrant)
Date: March 4, 1997 by: /s/ Gilbert K. Gailius
--------------------- -------------------------
Gilbert K. Gailius, Vice
President Finance, Chief Financial
Officer and Director
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: March 4, 1997 by: /s/ Roger S. Marcus
------------------ ----------------------
Roger S. Marcus, Chairman of the
Board, Chief Executive Officer
and Director
Date: March 4, 1997 by: /s/ Richard G. Marcus
------------------ -----------------------
Richard G. Marcus, President, Chief
Operating Officer and Director
Date: March 4, 1997 by: /s/ William M. Marcus
------------------ -----------------------
William M. Marcus, Executive Vice
President, Treasurer, Chairman of
the Executive Committee and Director
Date: March 4, 1997 by: /s/ John C. Garrels, 3rd
------------------ --------------------------
John C. Garrels, 3rd, Director
Date: March 4, 1997 by: /s/ Mark N. Kaplan
------------------ ---------------------
Mark N. Kaplan, Director
Date: March 4, 1997 by: /s/ Edward J. Lapointe
------------------ ------------------------
Edward J. Lapointe, Controller
62
<PAGE>
EXHIBITS INDEX
Exhibit No. Description
----------- -----------
3.1 (1) Restated Certificate of Incor-
poration
3.2 (5) IV By-Laws, amended and restated
as of March 13, 1991
10(3) I, V 1985 Stock Option Plan
("the 1985 Plan")
10(4) II, V Form of Agreement pursuant to
the 1985 Plan providing for
ISO's
10(5) III, V Form of Agreement pursuant to
the 1985 Plan providing for
NQSO's
10(6) VI Joint Venture Agreement dated
as of December 16, 1992 by and
among American Biltrite Inc.,
Resilient Holdings Incorporated,
Congoleum Corporation, Hillside
Industries Incorporated and
Hillside Capital Corporation
10(7) VII Closing Agreement dated as of
March 11, 1993 by and among
American Biltrite Inc.,
Resilient Holdings Incorporated,
Congoleum Corporation, Hillside
Industries Incorporated and
Hillside Capital Corporation
10(8) VIII 1993 Stock Award and Incentive
Plan
10(9) XI K&M Associates L.P. Amended and
Restated Agreement of Limited
Partnership
10(10) IX Purchase Agreement dated as of
March 31, 1995 by and among
Ocean State and certain limited
partners of K&M (filed herewith)
63
<PAGE>
10(11) IX Agreement and Plan of Merger
dated as of April 1, 1995 by and
among the Company, Jewelco
Acquisition Co., Inc., AIMPAR,
Inc., Arthur I. Maier, Bruce
Maier and Edythe J. Wagner
(filed herewith)
10(12) IX Option Agreement dated as of
April 1, 1995 by and among Ocean
State and certain limited
partners of K&M (filed herewith)
10(13) IX Agreement and Plan of Merger
dated as of May 3, 1995 by and
among the Company, Zirconia
Acquisition Co., Inc., Wilbur A.
Cowett Incorporated and Wilbur A.
Cowett (filed herewith)
10(14) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and Michael J. Glazerman, Trustee
of the Marcus Family Insurance
Trust u/t/d March 1, 1990
10(15) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Marcus Family 1990
Insurance Trust
10(16) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Marcus Family 1996
Irrevocable Insurance Trust Dated
October 28, 1996
10(17) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and The Richard G. Marcus
Irrevocable Insurance Trust of
1990 Dated June 1, 1990
10(18) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Roger S. Marcus
Irrevocable Insurance Trust Dated
Nov. 29, 1996, Richard G. Marcus,
Trustee
64
<PAGE>
10(19) Split-Dollar Agreement dated as
of December 20, 1996 by and
between American Biltrite Inc.
and the Roger S. Marcus
Irrevocable Insurance Trust Dated
Nov. 29, 1996
10(20) Split-Dollar Agreement dated as
of January 9, 1997 by and between
American Biltrite Inc. and Joseph
D. Burns
10(21) Description of Supplemental
Retirement Benefits for
Gilbert K. Gailius
11 Statement Re: Computation of
Per Share Earnings
13 Annual Report to Stockholders for
the year ended December 31, 1996
(which is not deemed to be "filed"
except to the extent that portions
thereof are expressly incorporated
by reference in this Annual Report
on Form 10-K)
21 Subsidiaries of the Registrant
(including each subsidiary's
jurisdiction of incorporation
and the name under which each
subsidiary does business)
23(1) Consent of Ernst & Young LLP,
Independent Auditors
23(2) Consent of Coopers & Lybrand, L.L.P.
Independent Accountants
99(1) X Consolidated Financial Statements and
schedule of Congoleum Corporation
for the year ended December 31, 1994
65
<PAGE>
________________
I Incorporated by reference to exhibit 10(2) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986. (1-4773)
II Incorporated by reference to exhibit 10(3) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986. (1-4773)
III Incorporated by reference to exhibit 10(4) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986. (1-4773)
IV Incorporated by reference to the exhibits to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
V Compensatory plans required to be filed as exhibits
pursuant to Item 14(c) of Form 10-K.
VI Incorporated by reference to the exhibits filed with
the Company's Current Report on Form 8-K filed
December 21, 1992.
VII Incorporated by reference to the exhibits filed with
the Company's Current Report on Form 8-K filed
March 25, 1993.
VIII Incorporated by reference to the exhibits to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
IX Incorporated by reference to the exhibits to the
Company's Current Report on Form 8-K as amended
by the Form 8-K/A filed respectively on May 17, 1995
and July 17, 1995.
X Incorporated by reference to Item 14 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1994.
XI Incorporated by reference to Item 14 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995
66
<PAGE>
Exhibit 3.1(1)
[NOTE: THE FOLLOWING RESTATED CERTIFICATE OF
INCORPORATION HAS BEEN FURTHER RESTATED, FOR PURPOSES OF
FILING THE SAME WITH THE SECURITIES AND EXCHANGE
COMMISSION ONLY, TO GIVE EFFECT TO THE CERTIFICATES OF
AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF
AMERICAN BILTRITE INC. FILED WITH THE SECRETARY OF STATE
OF THE STATE OF DELAWARE ON MAY 30, 1995 AND MAY 15, 1996.]
RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN BILTRITE INC.
AMERICAN BILTRITE INC., a corporation organized
on November 29, 1954 under the name American Biltrite
Rubber Co. Inc., hereby amends and restates its
Certificate of Incorporation, pursuant to Sections 228,
242 and 245 of the General Corporation Law of the State
of Delaware, to read in its entirety as follows:
FIRST: The name of the Corporation is AMERICAN
BILTRITE INC. (hereinafter, the "Corporation").
SECOND: The respective names of the County and
of the City within the county in which the registered
office of the Corporation is to be located in the State
of Delaware are the County of Kent and the City of Dover.
The name of the registered agent of the Corporation is
The Prentice-Hall Corporation System, Inc. The street
and number of said registered office and the address by
street and number of said registered agent is 32
Lockerman Square, Suite L-100, Dover, Delaware.
THIRD: The purpose of the Corporation is to
engage in any lawful act or activity for which
corporations may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
FOURTH: The total number of shares of capital
stock of all classes which the Corporation shall have the
authority to issue is sixteen million (16,000,000)
shares. Fifteen million (15,000,000) shares shall be
Common Stock, par value $.01 per share, and one million
(1,000,000) shares shall be Preferred Stock, par value
$.01 per share.
A. PREFERRED STOCK
1. The Board of Directors is authorized to provide
for the issuance of all or any shares of the
Preferred Stock, in one or more classes or
series, and to fix for each such class or
series such voting powers, full or limited, or
no voting powers, and such distinctive
designations, preferences and relative,
participating, optional or other special rights
and such qualifications, limitations or
restrictions thereof, as shall be stated and
expressed in the resolution or resolutions
adopted by the Board of Directors providing for
the issuance of such class or series and as may
be permitted by the GCL, including, without
limitation, the authority to provide that any
such class or series may be (a) subject to
redemption at such time or times and at such
price or prices; (b) entitled to receive
dividends (which may be cumulative or non-
cumulative) at such rates, on such conditions,
and at such times, and payable in preference
to, or in such relation to, the dividends
payable on any other class or classes or any
other series; (c) entitled to such rights upon
the dissolution of, or upon any distribution of
the assets of, the Corporation; or (d)
convertible into, or exchangeable for, shares
of any other class or classes of stock, or of
any other series of the same or any other class
or classes of stock, of the Corporation at such
price or prices or at such rates of exchange
and with such adjustments; all as may be stated
in such resolution or resolutions.
2. No holder of Preferred Stock shall as such
holder have any preemptive rights in or
preemptive rights to subscribe to or purchase
any shares of the class of stock or any other
securities which may at any time be issued by
the Corporation except to the extent such
rights shall be specifically provided for in
the resolution or resolutions providing for the
issuance thereof adopted by the Board of
Directors.
B. COMMON STOCK
1. The holders of the Common Stock shall be
entitled to receive dividends when, as and if
declared by the Board of Directors out of
assets legally available therefor.
2. No holder of Common Stock shall as such holder
have any preemptive right in or preemptive
right to subscribe to or purchase any shares of
the class of stock or any other securities
which may at any time be issued by the
Corporation.
3. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation,
whether voluntary or involuntary, all assets
and funds of the Corporation remaining after
the satisfaction in full of the prior rights of
creditors, including, but not limited to,
holders of the Corporation's indebtedness and
the aggregate liquidation preference of any
Preferred Stock then outstanding, shall be
divided and distributed among the holders of
the Common Stock ratably (together with any
shares of capital stock of the Corporation
which are not entitled to any preference in
liquidation).
C. VOTING RIGHTS
Except as otherwise specifically required by law,
this Certificate of Incorporation or as specifically
provided in any resolution of the Board of Directors
providing for the issuance of any particular series
of Preferred Stock, the exclusive voting power of
the Corporation shall be vested in the Common Stock
of the Corporation. Except as otherwise provided in
this Certificate of Incorporation, each share of
Common Stock shall entitle the holder thereof to one
vote at all meetings of the stockholders of the
Corporation.
FIFTH: The business and affairs of the
Corporation shall be managed by or under the direction of
a Board of Directors consisting of not less than three
nor more than fifteen directors, the exact number of
directors to be determined from time to time by
resolution adopted by affirmative vote of a majority of
the entire Board of Directors.
A. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible,
of one-third of the total number of directors
constituting the entire Board of Directors. At the
1990 annual meeting of stockholders, Class I
directors shall be elected for a one-year term,
Class II directors for a two-year term and Class III
directors for a three-year term. At each succeeding
annual meeting of stockholders beginning in 1991,
successors to the class of directors whose term
expires at that annual meeting shall be elected for
a three-year term. If the number of directors is
changed, any increase or decrease shall be
apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as
possible, and any additional director of any class
elected to fill a vacancy resulting form an increase
in such class shall hold office for a term that
shall coincide with the remaining term of that
class, but in no case will a decrease in the number
of directors shorten the term of any incumbent
director. A director shall hold office until the
annual meeting for the year in which his term
expires and until his successor shall be elected and
shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal
from office. Any vacancy on the Board of Directors
that results from an increase in the number of
directors may be filled by a majority of the Board
of directors then in office, provided that a quorum
is present, and any other vacancy occurring in the
Board of Directors may be filled by a majority of
the directors then in office, even if less than a
quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting
from an increase in the number of directors shall
have the same remaining term as that of his
predecessor. Each of the directors of the
Corporation may be removed from office at any time,
but only for cause and only by the affirmative vote
of the holders of not less than eighty percent (80%)
of the outstanding stock of the Corporation then
entitled to vote for the election of such director.
Notwithstanding the foregoing, whenever the holders
of any one or more classes or series of preferred
stock issued by the Corporation shall have the
right, voting separately by class or series, to
elect directors at an annual or special meeting of
stockholders, the election, term of office, filling
of vacancies and other features of such
directorships shall be governed by the terms of this
Certificate of Incorporation or the resolution or
resolutions adopted by the Board of Directors
pursuant to Article FOURTH applicable thereto, and
such directors so elected shall not be divided into
classes pursuant to this Article FIFTH unless
expressly provided by such terms.
B. Except to the extent prohibited by law, the Board of
Directors shall have the right (which, to the extent
exercised, shall be exclusive) to establish the
rights, powers, duties, rules and procedures that
from time to time shall govern the Board of
Directors and each of its members, including without
limitation the vote required for any action by the
Board of Directors, and that from time to time shall
affect the directors' power to manage the business
and affairs of the Corporation; and no By-Law
adopted by stockholders shall operate retroactively
to impair or impede the implementation of any action
authorized in accordance with the foregoing.
C. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the
Board of Directors is expressly authorized and
empowered:
1. To make, alter, amend, and repeal the By-Laws,
subject, however, to the power of the
stockholders to alter and repeal the By-Laws
made by the Board of Directors.
2. To determine, from time to time, whether and to
what extent and at what times and places and
under what conditions and regulations the
accounts and books and papers of the
Corporation, or any of them, shall be open to
the inspection of the stockholders; and no
stockholder shall have any rights to inspect
any account, book or document of the
Corporation, except as and to the extent
expressly provided by law with reference to the
right of stockholders to examine the original
or duplicate stock ledger, or otherwise
expressly provided by law, or except as
expressly authorized by resolution of the Board
of Directors.
3. To authorize and issue obligations of the
Corporation, secured or unsecured, to include
therein such provisions as to redeemability,
convertibility or otherwise, as they may
determine, and to authorize the mortgaging or
pledging, as security therefor, of any property
of the Corporation, real or personal, including
after-acquired property.
D. In addition to the powers and authority hereinbefore
or by statute expressly conferred upon it, the Board
of Directors may exercise all such powers and do all
such acts and things as may be exercised or done by
the Corporation subject, nevertheless, to the
provisions of the laws of the State of Delaware,
this Certificate of Incorporation and any By-Laws
adopted by the stockholders.
SIXTH: Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or
any class of them, and/or between this Corporation and
its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may,
on the application in a summary way of this Corporation
or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for
this Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code, or on the application of
trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in
number representing three-fourths in value of the
creditors or class of creditors, and/or of the
stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to
which the application has been made be binding on all the
creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this
Corporation, as the case may be, and also on this
Corporation.
SEVENTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or
hereafter prescribed by applicable law and all rights
conferred upon officers, directors and stockholders
herein are granted subject to this reservation.
EIGHTH:
A. No director of the Corporation shall be held
personally liable to the Corporation or its
stockholders for monetary damages of any kind for
breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty
of loyalty to the Corporation or its stockholders,
(2) for acts or omissions not in good faith or which
involved intentional misconduct or a knowing
violation of law, (3) under Section 174 of the GCL,
or (4) for any transaction from which the director
derived an improper personal benefit. If the GCL is
amended after the date this Certificate of
Incorporation became effective under the GCL to
authorize corporate action further eliminating or
limiting the personal liability of directors, then
the liability of a director of the Corporation shall
be eliminated or limited to the fullest extent
permitted by the GCL, as so amended from time to
time. No amendment or repeal of this Section A of
Article EIGHTH by the stockholders of the
Corporation shall apply to or have any effect on the
liability or alleged liability of any director of
the Corporation for or with respect to any acts or
omissions occurring prior to such amendment or
repeal. The provisions of this Section A of Article
EIGHTH shall not be deemed to limit or preclude
indemnification of a director by the Corporation for
any liability of a director which has not been
eliminated by the provisions of this Section A of
Article EIGHTH.
B. Every person who was or is a party or is threatened
to be made a party to or is involved in any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that such
person, or such person's testator or intestate, is
or was a director or an officer of the Corporation
or by reason of the fact that such person is or was
serving at the request of the Corporation or for its
benefit any other corporation, partnership, joint
venture, trust, employee benefit plan or other
enterprise, in any capacity shall be indemnified and
held harmless by the Corporation to the fullest
extent legally permissible under the GCL in the
manner prescribed therein, from time to time,
against all expenses (including attorneys fees)
judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in
connection therewith. Similar indemnification may
be provided by the Corporation to an agent or
employee of the Corporation who was or is a party or
is threatened to be made a party to or is involved
in any such threatened, pending or completed action,
suit or proceeding by reason of the fact that such
person is or was an employee or agent of the
Corporation or is or was serving at the request of
the Corporation or for its benefit any other
corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, in any
capacity. No amendment or repeal of this Section B
of Article EIGHTH by the stockholders of the
Corporation shall apply to or have any effect on any
right to indemnification provided hereunder with
respect to any acts or omissions occurring prior to
such amendment or repeal.
C. The Corporation may maintain insurance, at its
expense, to protect itself and any director,
officer, employee or agent of the Corporation or
another corporation, partnership, joint venture,
trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation
would have the power to indemnify such person
against such expense, liability or loss under the
GCL. The Corporation may also create a trust fund,
grant a security interest and use other means
(including, but not limited to, letters of credit,
surety bonds and other similar arrangements), as
well as enter into contracts providing
indemnification to the full extent authorized or
permitted by law and including as part thereof
provisions with respect to any or all of the
foregoing, to ensure the payment of such amounts as
may become necessary to effect indemnification as
provided therein, or elsewhere.
NINTH: No contract or transaction between the
Corporation and one or more of its directors or officers,
or between the Corporation and any other corporation,
partnership, association or other organization in which
one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the
director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely
because his or their votes are counted for such purposes,
if:
A. the material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or
committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority
of the disinterested directors, even though the
votes of the disinterested directors be less than a
quorum; or
B. the material facts as to his relationship or
interest and as to the contract or transaction are
known to the stockholders entitled to vote thereon,
and the contract or transaction is specifically
approved in good faith by vote of the stockholders;
or
C. the contract or transaction is fair as to the
Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a
committee thereof or the stockholders. Common or
interested directors may be counted in determining
the presence of a quorum at a meeting of the Board
of Directors or of a committee which authorizes the
contract or transaction.
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made
and entered into as of this 20th day of December, 1996 by
and between American Biltrite Inc., a Delaware
corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the
"Corporation"), and Michael J. Glazerman, Trustee of the
Marcus Family 1990 Insurance Trust u/t/d March 1, 1990
(the "Trust").
William M. Marcus, an individual residing in
the Commonwealth of Massachusetts (the "Employee"), is
employed by the Corporation as its Executive Vice
President.
The Employee desires that his family be
provided life insurance protection under a policy of life
insurance insuring the life of Cynthia S. Marcus, the
Employee's wife (the "Insured"). Such policy is
described in Exhibit A attached hereto and by this
reference is made a part hereof (the "Policy"). The
Policy has been issued by Massachusetts Mutual Life
Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as
such, possesses all incidents of ownership in and to the
Policy, including without limitation the right to
designate the Policy beneficiary.
The Corporation is willing to pay a portion of
the premiums due on the Policy as an additional
employment benefit for the Employee, on the terms and
conditions hereinafter set forth.
The Corporation desires to have the Policy
collaterally assigned to it by the Trust in order to
secure the repayment of the amounts which it will pay
toward the premiums on the Policy.
In consideration of the premises and of the
mutual promises contained herein, the parties hereto
agree as follows:
1. PURCHASE OF POLICY. The Trust has
purchased the Policy from the Insurer with
a Selected Face Amount (as such term is
defined in the Policy) of $5,100,000. The
parties hereto agree that they will take
all necessary action to cause the Insurer
to issue the Policy and will take any
further action which may be necessary to
cause the Policy to conform to the
provisions of this Agreement. The parties
hereto agree that the Policy shall be
subject to the terms and conditions of
this Agreement and of the related
collateral assignment filed with the
Insurer relating to the Policy.
2. OWNERSHIP OF POLICY. The Trust shall be
the sole and absolute owner of the Policy
and shall have and may exercise all
ownership rights granted to the owner
thereof by the terms of the Policy,
including without limitation the right to
designate the Policy beneficiary and the
right to elect and change both the
Selected Face Amount and the investment
options of the Policy, except as may
otherwise be provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is
30 days prior to the due date of each
Policy premium, the Corporation shall
notify the Employee and the Trust of the
exact amount due from the Trust to the
Corporation hereunder toward payment of
the Planned Annual Premium (as such term
is defined in the Policy), which shall be
an amount equal to the annual cost of
current life insurance protection on the
life of the Insured, measured by the lower
of the P.S. 58 rate, set forth in Revenue
Ruling 55-747 (or the corresponding
applicable provision of any future Revenue
Ruling), or the Insurer's current
published premium rate for annually
renewable term insurance for standard
risks. The Trust shall pay such required
contribution to the Corporation prior to
the premium due date. If the Trust fails
to make such timely payment, the
Corporation, in its sole discretion, may
elect to make such portion of the premium
payment, which payment shall be recovered
by the Corporation as provided herein.
b. On or before the due date of
each Policy premium, or within the grace
period provided therein, the Corporation
shall pay the full amount of the Planned
Annual Premium to the Insurer, and shall,
upon request, promptly furnish the
Employee evidence of timely payment of
such premium. Except with the consent of
the Trust, the Corporation shall not pay
less than the Planned Annual Premium, but
it may, in its discretion, at any time and
from time to time, subject to acceptance
of such amount by the Insurer, pay more
than the Planned Annual Premium or make
other premium payments on the Policy. The
Corporation shall annually furnish the
Employee a statement of the amount of
income reportable by the Employee for
federal and state income tax purposes as a
result of the insurance protection
provided to the Policy beneficiary.
4. COLLATERAL ASSIGNMENT. To secure
repayment to the Corporation of the amount
of the premiums on the Policy paid by it
hereunder, the Trust has contemporaneously
herewith assigned the Policy to the
Corporation as collateral, under a form
acceptable to the Insurer for such
assignments. The collateral assignment of
the Policy to the Corporation hereunder
shall not be terminated, altered or
amended by the Trust without the express
written consent of the Corporation. The
parties hereto agree to take all action
necessary to cause such collateral
assignment to conform to the provisions of
this Agreement.
5. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided
herein, the Trust shall not sell, assign,
transfer, borrow against or withdraw from
the cash surrender value of the Policy,
surrender or cancel the Policy, change the
beneficiary designation provision thereof
or increase or decrease the Selected Face
Amount without, in any such case, the
express written consent of the
Corporation.
b. Notwithstanding any provision
hereof to the contrary, the Trust shall
have the sole authority to direct the
manner in which the Separate Account (as
such term is defined in the Policy)
established pursuant to the terms of the
Policy shall be allocated among the
various investment options from time to
time available under the Policy and to
change such allocation from time to time,
as provided for in the Policy; provided,
however, that at least 50% of the annual
premium paid must at all times be
allocated to one or more of the following:
the Guaranteed Principal Account (as such
term is defined in the Policy); a short-
term government bond fund; or a money
market account.
c. The Corporation shall have the
right to borrow that portion of the loan
value of the Policy equal in amount to the
total amount of the premiums advanced by
the Corporation on behalf of the Trust
hereunder, reduced by any then outstanding
indebtedness secured by the Policy which
was incurred by the Corporation, including
any interest due on such indebtedness (the
"net premiums"). Interest on such Policy
loan shall be the responsibility of the
Corporation as such interest becomes due.
The Trust shall have the right to borrow
that portion of the loan value of the
Policy equal in amount to the net premiums
for the sole purpose of paying such amount
to the Corporation under Section 8(a) of
this Agreement if it is terminated during
the lifetime of the Insured. In the event
of any such borrowing, the loan proceeds
shall be paid by the Insurer directly to
the Corporation, and such payment shall
discharge completely all obligations owing
from the Trust to the Corporation under
this Agreement with respect to the Policy.
Interest on any such Policy loan shall be
the responsibility of the Trust as such
interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Insured,
the Corporation and the Trust shall
cooperate to take whatever action is
necessary to collect the death benefit
provided under the Policy. When such
benefit has been collected and paid as
provided herein, this Agreement shall
thereupon terminate.
b. Upon the death of the Insured,
the Corporation shall have the unqualified
right to receive a portion of such death
benefit equal to the net premiums paid by
it. The balance of the death benefit
provided under the Policy, if any, shall
be paid directly to the Policy beneficiary
in the manner and in the amount or amounts
provided in the beneficiary designation
provision of the Policy. In no event
shall the amount payable to the
Corporation hereunder exceed the Policy
proceeds payable as a result of the
maturity of the Policy as a death claim.
No amount shall be paid from such death
benefit to the Policy beneficiary until
the full amount due the Corporation
hereunder has been paid.
c. Notwithstanding any provision
hereof to the contrary, in the event that,
for any reason whatsoever, no death
benefit is payable under the Policy upon
the death of the Insured and in lieu
thereof the Insurer refunds all or any
part of the premiums paid for the Policy,
the Corporation shall have the unqualified
right to such premiums in an amount not to
exceed the net premiums paid by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF THE INSURED.
a. This Agreement shall terminate
during the lifetime of the Insured,
without notice, upon the occurrence of any
of the following events: (a) total
cessation of the Corporation's business;
(b) liquidation or dissolution of the
Corporation; or (c) termination of the
Employee's employment by the Corporation
for Cause (as defined below). For the
purposes of this Section 7(a), "Cause"
shall mean (i) conviction of the Employee
for any felony or for fraud or
embezzlement; (ii) the Employee's willful
and continued refusal to substantially
perform reasonably assigned duties with
the Corporation (other than any such
refusal resulting from incapacity due to
physical or mental illness or disability)
after a written demand for substantial
performance is delivered to the Employee
identifying the manner in which the
Corporation believes that the Employee has
willfully and continuously refused to
substantially perform his duties; or (iii)
other willful misconduct by the Employee
which is materially injurious to the
Corporation. For the purposes of this
Section 7(a), no act or failure to act
shall be considered "willful" unless done
or omitted to be done not in good faith
and without reasonable belief that such
action or omission was in the best
interest of the Corporation.
b. The Corporation may terminate
this Agreement at any time after the date
which is 14 years after the Issue Date (as
such term is defined in the Policy) by
written notice to the Trust. Such
termination shall be effective as of the
date of such notice.
c. In addition, the Trust may
terminate this Agreement, during the
Insured's lifetime and while no premium
under the Policy is overdue, by written
notice to the Corporation. Such
termination shall be effective as of the
date of such notice.
8. DISPOSITION OF THE POLICY ON TERMINATION
OF THIS AGREEMENT DURING THE LIFETIME OF
THE INSURED.
a. For 60 days after the date of
the termination of this Agreement during
the Insured's lifetime under Section 7 of
this Agreement, the Trust shall have the
option of obtaining the release of the
collateral assignment of the Policy to the
Corporation. To obtain such release, the
Trust shall repay to the Corporation an
amount equal to the total amount of the
net premiums paid by the Corporation.
Upon receipt of such amount, the
Corporation shall release the collateral
assignment of the Policy by the execution
and delivery of an appropriate instrument
of release.
b. If the Trust fails to exercise
such option within such 60-day period,
then, at the request of the Corporation,
the Trust shall execute any document or
documents required by the Insurer to
transfer all interests of the Trust in the
Policy, including without limitation the
Trust's right to designate the Policy
beneficiary, to the Corporation.
Alternatively, the Corporation may enforce
its right to be repaid the amount due it
hereunder from the cash surrender value of
the Policy under the collateral assignment
of the Policy; provided, however, that in
the event the cash surrender value of the
Policy exceeds the amount due the
Corporation hereunder, such excess shall
be paid to the Trust. Thereafter, neither
the Trust nor the Trust's successors,
assigns or beneficiaries shall have any
further interest in and to the Policy
under the terms thereof or under this
Agreement.
9. INSURER NOT A PARTY. The Insurer shall be
fully discharged from its obligations
under the Policy by payment of the Policy
death benefit to the beneficiary or
beneficiaries named in the Policy, subject
to the terms and conditions of the Policy.
In no event shall the Insurer be
considered a party to this Agreement or
any modification or amendment hereof. No
provision of this Agreement nor of any
modification or amendment hereof shall in
any way be construed as enlarging,
changing, varying or in any other way
affecting the obligations of the Insurer
as expressly provided in the Policy,
except insofar as the provisions hereof
are made a part of the Policy by the
collateral assignment executed by the
Trust and filed with the Insurer in
connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF
BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
a. The Corporation is hereby
designated as the named fiduciary under
this Agreement. The named fiduciary shall
have authority to control and manage the
operation and administration of this
Agreement, and it shall be responsible for
establishing and carrying out a funding
policy and method consistent with the
objectives of this Agreement. The
Corporation may allocate to others certain
aspects of the management and operational
responsibilities of this Agreement,
including by the employment of advisors
and the delegation of any ministerial
duties to qualified individuals.
b. (1) Claim.
A person who believes that he or she is
being denied a benefit to which he or she
is entitled under this Agreement
(hereinafter referred to as a "Claimant")
may file a written request for such
benefit with the Corporation, setting
forth his or her claim. The request must
be addressed to the President of the
Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply
will be forthcoming within 90 days and
shall, in fact, deliver such reply within
such 90-day period. Upon written notice
prior to the expiration of the 90-day
reply period, the Corporation may,
however, extend the reply period for an
additional 90 days for reasonable cause.
If the claim is denied in whole or in
part, the Corporation shall adopt a
written opinion, using language calculated
to be understood by the Claimant, setting
forth: (A) the specific reason or reasons
for such denial; (B) the specific
reference to pertinent provisions of this
Agreement on which such denial is based;
(C) a description of any additional
material or information necessary for the
Claimant to perfect his or her claim and
an explanation why such material or such
information is necessary; (D) appropriate
information as to the steps to be taken if
the Claimant wishes to submit the claim
for review; and (E) the time limits for
requesting a review under subsection (3)
and for review under subsection (4) of
this section 10(b). If a notice of denial
is not received within the reply period,
the claim shall be deemed denied and the
Claimant shall be permitted to request
review, as set forth below.
(3) Request for Review.
With 60 days after the receipt by the
Claimant of the written opinion described
above (or, in the case of a deemed denial,
within 60 days after the end of the reply
period), the Claimant may request in
writing that the Secretary of the
Corporation (the "Secretary") review the
determination of the Corporation. Such
request must be addressed to the
Secretary, at the Corporation's then
principal place of business. The Claimant
or his or her duly authorized
representative may, but need not, review
the pertinent documents and submit issues
and comments in writing for consideration
by the Secretary. If the Claimant does
not request a review by the Secretary of
the Corporation's determination within
such 60-day period, he shall be barred and
estopped from challenging the
Corporation's determination, except as may
be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's
receipt of a request for review, he or she
will review the Corporation's
determination. After considering all
materials presented by the Claimant, the
Secretary will render a written opinion,
using language calculated to be understood
by the Claimant, setting forth the
specific reasons for the decision and
containing specific references to the
pertinent provisions of this Agreement on
which the decision is based. If special
circumstances require that the 60-day time
period be extended, the Secretary will so
notify the Claimant and will render the
written opinion as soon as possible, but
no later than 120 days after receipt of
the request for review. If the written
opinion on review is not rendered within
the 60-day period (or the 120-day period,
if an extension is granted), the claim
shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be
payable, the Corporation will promptly
issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures
set forth in this Section 10.b, nothing
shall prevent any person from pursuing any
other legal or equitable remedy otherwise
available, including without limitation
legal action in federal court.
11. AMENDMENT. This Agreement may not be
amended, altered or modified, except by a
written instrument signed by the parties
hereto or their respective successors or
assigns, and may not be otherwise
terminated except as provided herein.
12. BINDING EFFECT; NO THIRD-PARTY
BENEFICIARY.
This Agreement shall be binding upon
and inure to the benefit of the
Corporation and its successors and assigns
and the Trust and its respective
successors, assigns and beneficiaries.
This Agreement shall not confer any rights
or remedies upon any person other than the
parties hereto and their respective
successors and assigns, except that the
Employee is a third-party beneficiary of
this Agreement to the extent necessary to
effectuate the intents and purposes of
this Agreement.
13. NOTICE. Any notice, consent or demand
required or permitted to be given under
the provisions of this Agreement shall be
in writing, and shall be signed by the
party giving or making the same. Any such
notice, consent or demand mailed to a
party hereto shall be sent by United
States certified mail, postage prepaid, or
sent by a nationally recognized overnight
delivery service, charges prepaid, in each
case addressed to such party's last known
address as shown on the records of the
Corporation. The date of such mailing
shall be deemed the date of notice,
consent or demand.
14. GOVERNING LAW. This Agreement, and the
rights of the parties hereunder, shall be
governed by and construed in accordance
with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement, in duplicate, as of the day and
year first above written.
MARCUS FAMILY 1990
INSURANCE TRUST u/t/d
MARCH 1, 1990
By /s/ Michael J. Glazerman
---------------------------
Name: Michael J. Glazerman
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ Gilbert K. Gailius
---------------------- -------------------------
Secretary Name: Gilbert K. Gailius
Title: Vice President
EXHIBIT A
---------
The following life insurance policy is subject to the
attached Split-Dollar Agreement:
Insurer: Massachusetts Mutual Life Insurance Company
Insured: Cynthia S. Marcus
Policy Number: 0025310
Selected Face Amount of Insurance: $5,100,000
Date of Issue: December 16, 1996
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made
and entered into as of this 20th day of December, 1996 by
and between American Biltrite Inc., a Delaware
corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the
"Corporation"), and the Marcus Family 1990 Insurance
Trust (the "Trust").
William M. Marcus, an individual residing in
the Commonwealth of Massachusetts (the "Employee"), is
employed by the Corporation as an Executive Vice
President.
The Employee desires that his family be
provided life insurance protection under a policy of
survivorship life insurance insuring the Employee's life
and the life of Cynthia S. Marcus, the Employee's wife
(each, an "Insured" and together, the "Insureds"). Such
policy is described in Exhibit A attached hereto and by
this reference made a part hereof (the "Policy"). The
Policy has been issued by John Hancock Variable Life
Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as
such, possesses all incidents of ownership in and to the
Policy, including without limitation the right to
designate the Policy beneficiary.
The Corporation is willing to pay a portion of
the premiums due on the Policy as an additional
employment benefit for the Employee, on the terms and
conditions hereinafter set forth.
The Corporation desires to have the Policy
collaterally assigned to it by the Trust in order to
secure the repayment of the amounts which it will pay
toward the premiums on the Policy.
In consideration of the premises and of the
mutual promises contained herein, the parties hereto
agree as follows:
1. PURCHASE OF POLICY. The Trust has
purchased the Policy from the Insurer with
a Total Sum Insured at Issue (as such term
is defined in the Policy) of $1,250,000.
The parties hereto agree that they will
take all necessary action to cause the
Insurer to issue the Policy and will take
any further action which may be necessary
to cause the Policy to conform to the
provisions of this Agreement. The parties
hereto agree that the Policy shall be
subject to the terms and conditions of
this Agreement and of the related
collateral assignment filed with the
Insurer relating to the Policy.
2. OWNERSHIP OF POLICY. The Trust shall be
the sole and absolute owner of the Policy
and shall have and may exercise all
ownership rights granted to the owner
thereof by the terms of the Policy,
including without limitation the right to
designate the Policy beneficiary and the
right to elect and change both the Total
Sum Insured at Issue and the investment
options of the Policy, except as may
otherwise be provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is
30 days prior to the due date of each
Policy premium, the Corporation shall
notify the Employee and the Trust of the
exact amount due from the Trust to the
Corporation hereunder toward payment of
the Planned Premium (as such term is
defined in the Policy). While both
Insureds are alive, such amount shall be
equal to the annual cost of current life
insurance protection on the joint lives of
the Insureds, measured by the lower of the
P.S. 38 rate or the Insurer's current
published premium rate for annually
renewable term insurance for standard
risks. After the death of the first
Insured to die, such amount shall be equal
to the annual cost of current life
insurance protection on the life of the
surviving Insured, measured by the lower
of the P.S. 58 rate, set forth in Revenue
Ruling 55-747 (or the corresponding
applicable provision of any future Revenue
Ruling), or the Insurer's current
published premium rate for annually
renewable term insurance for standard
risks. The Trust shall pay such required
contribution to the Corporation prior to
the premium due date. If the Trust fails
to make such timely payment, the
Corporation, in its sole discretion, may
elect to make such portion of the premium
payment, which payment shall be recovered
by the Corporation as provided herein.
b. On or before the due date of
each Policy premium, or within the grace
period provided therein, the Corporation
shall pay the full amount of the Planned
Premium to the Insurer and shall, upon
request, promptly furnish the Employee
evidence of timely payment of such
premium. Except with the consent of the
Trust, the Corporation shall not pay less
than the Planned Premium, but it may, in
its discretion, at any time and from time
to time, subject to acceptance of such
amount by the Insurer, pay more than the
Planned Premium or make other premium
payments on the Policy. The Corporation
shall annually furnish the Employee a
statement of the amount of income
reportable by the Employee for federal and
state income tax purposes as a result of
the insurance protection provided to the
Policy beneficiary.
4. COLLATERAL ASSIGNMENT. To secure
repayment to the Corporation of the amount
of the premiums on the Policy paid by it
hereunder, the Trust has contemporaneously
herewith assigned the Policy to the
Corporation as collateral, under a form
acceptable to the Insurer for such
assignments. The collateral assignment of
the Policy to the Corporation hereunder
shall not be terminated, altered or
amended by the Trust without the express
written consent of the Corporation. The
parties hereto agree to take all action
necessary to cause such collateral
assignment to conform to the provisions of
this Agreement.
5. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided
herein, the Trust shall not sell, assign,
transfer, borrow against or withdraw from
the cash surrender value of the Policy,
surrender or cancel the Policy, change the
beneficiary designation provision thereof
or increase or decrease the Total Sum
Insured at Issue without, in any such
case, the express written consent of the
Corporation.
b. Notwithstanding any provision
hereof to the contrary, the Trust shall
have the sole authority to direct the
manner in which amounts in and among the
Subaccounts (as such term is defined in
the Policy) established pursuant to the
terms of the Policy shall be allocated
among the various investment options from
time to time available under the Policy
and to change such allocation from time to
time, as provided for in the Policy;
provided, however, that at least 50% of
the annual premium paid must at all times
be allocated to one or more of the
following: a Fixed Account (as such term
is defined in the Policy); a short-term
government bond fund; or a money market
account.
c. The Corporation shall have the
right to borrow that portion of the loan
value of the Policy equal in amount to the
total amount of the premiums advanced by
the Corporation on behalf of the Trust
hereunder, reduced by any then outstanding
indebtedness secured by the Policy which
was incurred by the Corporation, including
any interest due on such indebtedness (the
"net premiums"). Interest on such Policy
loan shall be the responsibility of the
Corporation as such interest becomes due.
The Trust shall have the right to borrow
that portion of the loan value of the
Policy equal in amount to the net premiums
for the sole purpose of paying such amount
to the Corporation under Section 8(a) of
this Agreement if it is terminated during
the lifetime of either of the Insureds.
In the event of any such borrowing, the
loan proceeds shall be paid by the Insurer
directly to the Corporation, and such
payment shall discharge completely all
obligations owing from the Trust to the
Corporation under this Agreement with
respect to the Policy. Interest on any
such Policy loan shall be the
responsibility of the Trust as such
interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the last
surviving Insured, the Corporation and the
Trust shall cooperate to take whatever
action is necessary to collect the death
benefit provided under the Policy. When
such benefit has been collected and paid
as provided herein, this Agreement shall
thereupon terminate.
b. Upon the death of the last
surviving Insured, the Corporation shall
have the unqualified right to receive a
portion of such death benefit equal to the
net premiums paid by it. The balance of
the death benefit provided under the
Policy, if any, shall be paid directly to
the Policy beneficiary in the manner and
in the amount or amounts provided in the
beneficiary designation provision of the
Policy. In no event shall the amount
payable to the Corporation hereunder
exceed the Policy proceeds payable as a
result of the maturity of the Policy as a
death claim. No amount shall be paid from
such death benefit to the Policy
beneficiary until the full amount due the
Corporation hereunder has been paid.
c. Notwithstanding any provision
hereof to the contrary, in the event that,
for any reason whatsoever, no death
benefit is payable under the Policy upon
the death of the last surviving Insured
and in lieu thereof the Insurer refunds
all or any part of the premiums paid for
the Policy, the Corporation shall have the
unqualified right to such premiums in an
amount not to exceed the net premiums paid
by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF EITHER OF THE INSUREDS.
a. This Agreement shall terminate
during the lifetime of either of the
Insureds, without notice, upon the
occurrence of any of the following events:
(a) total cessation of the Corporation's
business; (b) liquidation or dissolution
of the Corporation; or (c) termination of
the Employee's employment by the
Corporation for Cause (as defined below).
For the purposes of this Section 7(a),
"Cause" shall mean (i) conviction of the
Employee for any felony or for fraud or
embezzlement; (ii) the Employee's willful
and continued refusal to substantially
perform reasonably assigned duties with
the Corporation (other than any such
refusal resulting from incapacity due to
physical or mental illness or disability)
after a written demand for substantial
performance is delivered to the Employee
identifying the manner in which the
Corporation believes that the Employee has
willfully and continuously refused to
substantially perform his duties; or (iii)
other willful misconduct by the Employee
which is materially injurious to the
Corporation. For the purposes of this
Section 7(a), no act or failure to act
shall be considered "willful" unless done
or omitted to be done not in good faith
and without reasonable belief that such
action or omission was in the best
interest of the Corporation.
b. The Corporation may terminate
this Agreement at any time after the date
which is 14 years after the Date of Issue
(as such term is defined in the Policy) by
written notice to the Trust. Such
termination shall be effective as of the
date of such notice.
c. In addition, the Trust may
terminate this Agreement during the
lifetime of either of the Insureds and
while no premium under the Policy is
overdue by written notice to the
Corporation. Such termination shall be
effective as of the date of such notice.
8. DISPOSITION OF THE POLICY ON TERMINATION
OF THIS AGREEMENT DURING THE LIFETIME OF
EITHER OF THE INSURED.
a. For 60 days after the date of
the termination of this Agreement during
the lifetime of either of the Insureds
under Section 7 of this Agreement, the
Trust shall have the option of obtaining
the release of the collateral assignment
of the Policy to the Corporation. To
obtain such release, the Trust shall repay
to the Corporation an amount equal to the
total amount of the net premiums paid by
the Corporation. Upon receipt of such
amount, the Corporation shall release the
collateral assignment of the Policy by the
execution and delivery of an appropriate
instrument of release.
b. If the Trust fails to exercise
such option within such 60-day period,
then, at the request of the Corporation,
the Trust shall execute any document or
documents required by the Insurer to
transfer all interests of the Trust in the
Policy, including without limitation the
Trust's right to designate the Policy
beneficiary, to the Corporation.
Alternatively, the Corporation may enforce
its right to be repaid the amount due it
hereunder from the cash surrender value of
the Policy under the collateral assignment
of the Policy; provided, however, that in
the event the cash surrender value of the
Policy exceeds the amount due the
Corporation hereunder, such excess shall
be paid to the Trust. Thereafter, neither
the Trust nor the Trust's successors,
assigns or beneficiaries shall have any
further interest in and to the Policy
under the terms thereof or under this
Agreement.
9. INSURER NOT A PARTY. The Insurer shall be
fully discharged from its obligations
under the Policy by payment of the Policy
death benefit to the beneficiary or
beneficiaries named in the Policy, subject
to the terms and conditions of the Policy.
In no event shall the Insurer be
considered a party to this Agreement or
any modification or amendment hereof. No
provision of this Agreement nor of any
modification or amendment hereof shall in
any way be construed as enlarging,
changing, varying or in any other way
affecting the obligations of the Insurer
as expressly provided in the Policy,
except insofar as the provisions hereof
are made a part of the Policy by the
collateral assignment executed by the
Trust and filed with the Insurer in
connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF
BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
a. The Corporation is hereby
designated as the named fiduciary under
this Agreement. The named fiduciary shall
have authority to control and manage the
operation and administration of this
Agreement, and it shall be responsible for
establishing and carrying out a funding
policy and method consistent with the
objectives of this Agreement. The
Corporation may allocate to others certain
aspects of the management and operational
responsibilities of this Agreement,
including by the employment of advisors
and the delegation of any ministerial
duties to qualified individuals.
b. (1) Claim.
A person who believes that he or she is
being denied a benefit to which he or she
is entitled under this Agreement
(hereinafter referred to as a "Claimant")
may file a written request for such
benefit with the Corporation, setting
forth his or her claim. The request must
be addressed to the President of the
Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply
will be forthcoming within 90 days and
shall, in fact, deliver such reply within
such 90-day period. Upon written notice
prior to the expiration of the 90-day
reply period, the Corporation may,
however, extend the reply period for an
additional 90 days for reasonable cause.
If the claim is denied in whole or in
part, the Corporation shall adopt a
written opinion, using language calculated
to be understood by the Claimant, setting
forth: (A) the specific reason or reasons
for such denial; (B) the specific
reference to pertinent provisions of this
Agreement on which such denial is based;
(C) a description of any additional
material or information necessary for the
Claimant to perfect his or her claim and
an explanation why such material or such
information is necessary; (D) appropriate
information as to the steps to be taken if
the Claimant wishes to submit the claim
for review; and (E) the time limits for
requesting a review under subsection (3)
and for review under subsection (4) of
this section 10(b). If a notice of denial
is not received within the reply period,
the claim shall be deemed denied and the
Claimant shall be permitted to request
review, as set forth below.
(3) Request for Review.
With 60 days after the receipt by the
Claimant of the written opinion described
above (or, in the case of a deemed denial,
within 60 days after the end of the reply
period), the Claimant may request in
writing that the Secretary of the
Corporation (the "Secretary") review the
determination of the Corporation. Such
request must be addressed to the
Secretary, at the Corporation's then
principal place of business. The Claimant
or his or her duly authorized
representative may, but need not, review
the pertinent documents and submit issues
and comments in writing for consideration
by the Secretary. If the Claimant does
not request a review by the Secretary of
the Corporation's determination within
such 60-day period, he shall be barred and
estopped from challenging the
Corporation's determination, except as may
be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's
receipt of a request for review, he or she
will review the Corporation's
determination. After considering all
materials presented by the Claimant, the
Secretary will render a written opinion,
using language calculated to be understood
by the Claimant, setting forth the
specific reasons for the decision and
containing specific references to the
pertinent provisions of this Agreement on
which the decision is based. If special
circumstances require that the 60-day time
period be extended, the Secretary will so
notify the Claimant and will render the
written opinion as soon as possible, but
no later than 120 days after receipt of
the request for review. If the written
opinion on review is not rendered within
the 60-day period (or the 120-day period,
if an extension is granted), the claim
shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be
payable, the Corporation will promptly
issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures
set forth in this Section 10(b), nothing
shall prevent any person from pursuing any
other legal or equitable remedy otherwise
available, including without limitation
legal action in federal court.
11. AMENDMENT. This Agreement may not be
amended, altered or modified, except by a
written instrument signed by the parties
hereto or their respective successors or
assigns, and may not be otherwise
terminated except as provided herein.
12. BINDING EFFECT; NO THIRD-PARTY
BENEFICIARY.
This Agreement shall be binding upon
and inure to the benefit of the
Corporation and its successors and assigns
and the Trust and its respective
successors, assigns and beneficiaries.
This Agreement shall not confer any rights
or remedies upon any person other than the
parties hereto and their respective
successors and assigns, except that the
Employee is a third-party beneficiary of
this Agreement to the extent necessary to
effectuate the intents and purposes of
this Agreement.
13. NOTICE. Any notice, consent or demand
required or permitted to be given under
the provisions of this Agreement shall be
in writing, and shall be signed by the
party giving or making the same. Any such
notice, consent or demand mailed to a
party hereto shall be sent by United
States certified mail, postage prepaid, or
sent by a nationally recognized overnight
delivery service, charges prepaid, in each
case addressed to such party's last known
address as shown on the records of the
Corporation. The date of such mailing
shall be deemed the date of notice,
consent or demand.
14. GOVERNING LAW. This Agreement, and the
rights of the parties hereunder, shall be
governed by and construed in accordance
with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement, in duplicate, as of the day and
year first above written.
MARCUS FAMILY 1990
INSURANCE TRUST
By /s/ Michael J. Glazerman
---------------------------
Name: Michael J. Glazerman
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ Gilbert K. Gailius
----------------------- ---------------------------
Secretary Name: Gilbert K. Gailius
Title: Vice President
EXHIBIT A
The following life insurance policy is subject to
the attached Split-Dollar Agreement:
Insurer: John Hancock Variable Life Insurance Company
Insureds: William M. & Cynthia S. Marcus
Policy Number: 20010120
Total Sum Insured at Issue: $1,250,000
Date of Issue: October 10, 1996
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made
and entered into as of this 20th day of December, 1996 by
and between American Biltrite Inc., a Delaware
corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the
"Corporation"), and the Marcus Family 1996 Irrevocable
Insurance Trust Dated October 28, 1996 (the "Trust").
Richard G. Marcus, an individual residing in
the Commonwealth of Massachusetts (the "Employee"), is
employed by the Corporation as its President.
The Employee desires that his family be
provided life insurance protection under a survivorship
life insurance policy insuring the Employee's life and
the life of Beth A. Marcus, the Employee's wife (each, an
"Insured" and together, the "Insureds"). Such policy is
described in Exhibit A attached hereto and by this
reference is made a part hereof (the "Policy"). The
Policy has being issued by John Hancock Variable Life
Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as
such, possesses all incidents of ownership in and to the
Policy, including without limitation the right to
designate the Policy beneficiary.
The Corporation is willing to pay a portion of
the premiums due on the Policy as an additional
employment benefit for the Employee, on the terms and
conditions hereinafter set forth.
The Corporation desires to have the Policy
collaterally assigned to it by the Trust in order to
secure the repayment of the amounts which it will pay
toward the premiums on the Policy.
In consideration of the premises and of the
mutual promises contained herein, the parties hereto
agree as follows:
1. PURCHASE OF POLICY. The Trust has
purchased the Policy from the Insurer with
a Total Sum Insured at Issue (as such term
is defined in the Policy) of $2,500,000.
The parties hereto agree that they will
take all necessary action to cause the
Insurer to issue the Policy and will take
any further action which may be necessary
to cause the Policy to conform to the
provisions of this Agreement. The parties
hereto agree that the Policy shall be
subject to the terms and conditions of
this Agreement and of the related
collateral assignment filed with the
Insurer relating to the Policy.
2. OWNERSHIP OF POLICY. The Trust shall be
the sole and absolute owner of the Policy
and shall have and may exercise all
ownership rights granted to the owner
thereof by the terms of the Policy,
including without limitation the right to
designate the Policy beneficiary and the
right to elect and change both the Total
Sum Insured at Issue and the investment
options of the Policy, except as may
otherwise be provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is
30 days prior to the due date of each
Policy premium, the Corporation shall
notify the Employee and the Trust of the
exact amount due from the Trust to the
Corporation hereunder toward payment of
the Planned Premium (as such term is
defined in the Policy). While both
Insureds are alive, such amount shall be
equal to the annual cost of current joint
life insurance protection on the joint
lives of the Insureds, measured by the
lower of the P.S. 38 rate or the Insurer's
current published premium rate for
annually renewable term insurance for
standard risks. After the death of the
first Insured to die, such amount shall be
equal to the annual cost of current life
insurance protection on the life of the
surviving Insured, measured by the lower
of the P.S. 58 rate, set forth in Revenue
Ruling 55-747 (or the corresponding
applicable provision of any future Revenue
Ruling), or the Insurer's current
published premium rate for annually
renewable term insurance for standard
risks. The Trust shall pay such required
contribution to the Corporation prior to
the premium due date. If the Trust fails
to make such timely payment, the
Corporation, in its sole discretion, may
elect to make such portion of the premium
payment, which payment shall be recovered
by the Corporation as provided herein.
b. On or before the due date of
each Policy premium, or within the grace
period provided therein, the Corporation
shall pay the full amount of the Planned
Premium to the Insurer and shall, upon
request, promptly furnish the Employee
evidence of timely payment of such
premium. Except with the consent of the
Trust, the Corporation shall not pay less
than the Planned Premium, but it may, in
its discretion, at any time and from time
to time, subject to acceptance of such
amount by the Insurer, pay more than the
Planned Premium or make other premium
payments on the Policy. The Corporation
shall annually furnish the Employee a
statement of the amount of income
reportable by the Employee for federal and
state income tax purposes as a result of
the insurance protection provided to the
Policy beneficiary.
4. COLLATERAL ASSIGNMENT. To secure
repayment to the Corporation of the amount
of the premiums on the Policy paid by it
hereunder, the Trust has contemporaneously
herewith assigned the Policy to the
Corporation as collateral, under a form
acceptable to the Insurer for such
assignments. The collateral assignment of
the Policy to the Corporation hereunder
shall not be terminated, altered or
amended by the Trust without the express
written consent of the Corporation. The
parties hereto agree to take all action
necessary to cause such collateral
assignment to conform to the provisions of
this Agreement.
5. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided
herein, the Trust shall not sell, assign,
transfer, borrow against or withdraw from
the cash surrender value of the Policy,
surrender or cancel the Policy, change the
beneficiary designation provision thereof
or increase or decrease the Total Sum
Insured at Issue without, in any such
case, the express written consent of the
Corporation.
b. Notwithstanding any provision
hereof to the contrary, the Trust shall
have the sole authority to direct the
manner in which amounts in and among the
Subaccounts (as such term is defined in
the Policy) established pursuant to the
terms of the Policy shall be allocated
among the various investment options from
time to time available under the Policy
and to change such allocation from time to
time, as provided for in the Policy;
provided, however, that at least 50% of
the annual premium paid must at all times
be allocated to one or more of the
following: a Fixed Account (as such term
is defined in the Policy); a short-term
government bond fund; or a money market
account.
c. The Corporation shall have the
right to borrow that portion of the loan
value of the Policy equal in amount to the
total amount of the premiums advanced by
the Corporation on behalf of the Trust
hereunder, reduced by any then outstanding
indebtedness secured by the Policy which
was incurred by the Corporation, including
any interest due on such indebtedness (the
"net premiums"). Interest on such Policy
loan shall be the responsibility of the
Corporation as such interest becomes due.
The Trust shall have the right to borrow
that portion of the loan value of the
Policy equal in amount to the net premiums
for the sole purpose of paying such amount
to the Corporation under Section 8(a) of
this Agreement if it is terminated during
the lifetime of either of the Insureds.
In the event of any such borrowing, the
loan proceeds shall be paid by the Insurer
directly to the Corporation, and such
payment shall discharge completely all
obligations owing from the Trust to the
Corporation under this Agreement with
respect to the Policy. Interest on any
such Policy loan shall be the
responsibility of the Trust as such
interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the last
surviving Insured, the Corporation and the
Trust shall cooperate to take whatever
action is necessary to collect the death
benefit provided under the Policy. When
such benefit has been collected and paid
as provided herein, this Agreement shall
thereupon terminate.
b. Upon the death of the last
surviving Insured, the Corporation shall
have the unqualified right to receive a
portion of such death benefit equal to the
net premiums paid by it. The balance of
the death benefit provided under the
Policy, if any, shall be paid directly to
the Policy beneficiary in the manner and
in the amount or amounts provided in the
beneficiary designation provision of the
Policy. In no event shall the amount
payable to the Corporation hereunder
exceed the Policy proceeds payable as a
result of the maturity of the Policy as a
death claim. No amount shall be paid from
such death benefit to the Policy
beneficiary until the full amount due the
Corporation hereunder has been paid.
c. Notwithstanding any provision
hereof to the contrary, in the event that,
for any reason whatsoever, no death
benefit is payable under the Policy upon
the death of the last surviving Insured
and in lieu thereof the Insurer refunds
all or any part of the premiums paid for
the Policy, the Corporation shall have the
unqualified right to such premiums in an
amount not to exceed the net premiums paid
by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF EITHER OF THE INSUREDS.
a. This Agreement shall terminate
during the lifetime of either of the
Insureds, without notice, upon the
occurrence of any of the following events:
(a) total cessation of the Corporation's
business; (b) liquidation or dissolution
of the Corporation; or (c) termination of
the Employee's employment by the
Corporation for Cause (as defined below).
For the purposes of this Section 7(a),
"Cause" shall mean (i) conviction of the
Employee for any felony or for fraud or
embezzlement; (ii) the Employee's willful
and continued refusal to substantially
perform reasonably assigned duties with
the Corporation (other than any such
refusal resulting from incapacity due to
physical or mental illness or disability)
after a written demand for substantial
performance is delivered to the Employee
identifying the manner in which the
Corporation believes that the Employee has
willfully and continuously refused to
substantially perform his duties; or (iii)
other willful misconduct by the Employee
which is materially injurious to the
Corporation. For the purposes of this
Section 7(a), no act or failure to act
shall be considered "willful" unless done
or omitted to be done not in good faith
and without reasonable belief that such
action or omission was in the best
interests of the Corporation.
b. The Corporation may terminate
this Agreement at any time after the date
which is 16 years after the Date of Issue
(as such term is defined in the Policy) by
written notice to the Trust. Such
termination shall be effective as of the
date of such notice.
c. In addition, the Trust may
terminate this Agreement during the
lifetime of either of the Insureds and
while no premium under the Policy is
overdue by written notice to the
Corporation. Such termination shall be
effective as of the date of such notice.
8. DISPOSITION OF THE POLICY ON TERMINATION
OF THIS AGREEMENT DURING THE LIFETIME OF
EITHER OF THE INSUREDS.
a. For 60 days after the date of
the termination of this Agreement during
the lifetime of either of the Insureds
under Section 7 of this Agreement, the
Trust shall have the option of obtaining
the release of the collateral assignment
of the Policy to the Corporation. To
obtain such release, the Trust shall repay
to the Corporation an amount equal to the
total amount of the net premiums paid by
the Corporation. Upon receipt of such
amount, the Corporation shall release the
collateral assignment of the Policy by the
execution and delivery of an appropriate
instrument of release.
b. If the Trust fails to exercise
such option within such 60-day period,
then, at the request of the Corporation,
the Trust shall execute any document or
documents required by the Insurer to
transfer all interests of the Trust in the
Policy, including without limitation the
Trust's right to designate the Policy
beneficiary, to the Corporation.
Alternatively, the Corporation may enforce
its right to be repaid the amount due it
hereunder from the cash surrender value of
the Policy under the collateral assignment
of the Policy; provided, however, that in
the event the cash surrender value of the
Policy exceeds the amount due the
Corporation hereunder, such excess shall
be paid to the Trust. Thereafter, neither
the Trust nor the Trust's successors,
assigns or beneficiaries shall have any
further interest in and to the Policy
under the terms thereof or under this
Agreement.
9. INSURER NOT A PARTY. The Insurer shall be
fully discharged from its obligations
under the Policy by payment of the Policy
death benefit to the beneficiary or
beneficiaries named in the Policy, subject
to the terms and conditions of the Policy.
In no event shall the Insurer be
considered a party to this Agreement or
any modification or amendment hereof. No
provision of this Agreement nor of any
modification or amendment hereof shall in
any way be construed as enlarging,
changing, varying or in any other way
affecting the obligations of the Insurer
as expressly provided in the Policy,
except insofar as the provisions hereof
are made a part of the Policy by the
collateral assignment executed by the
Trust and filed with the Insurer in
connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF
BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
a. The Corporation is hereby
designated as the named fiduciary under
this Agreement. The named fiduciary shall
have authority to control and manage the
operation and administration of this
Agreement, and it shall be responsible for
establishing and carrying out a funding
policy and method consistent with the
objectives of this Agreement. The
Corporation may allocate to others certain
aspects of the management and operational
responsibilities of this Agreement,
including by the employment of advisors
and the delegation of any ministerial
duties to qualified individuals.
b. (1) Claim.
A person who believes that he or she is
being denied a benefit to which he or she
is entitled under this Agreement
(hereinafter referred to as a "Claimant")
may file a written request for such
benefit with the Corporation, setting
forth his or her claim. The request must
be addressed to the President of the
Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply
will be forthcoming within 90 days and
shall, in fact, deliver such reply within
such 90-day period. Upon written notice
prior to the expiration of the 90-day
reply period, the Corporation may,
however, extend the reply period for an
additional 90 days for reasonable cause.
If the claim is denied in whole or in
part, the Corporation shall adopt a
written opinion, using language calculated
to be understood by the Claimant, setting
forth: (A) the specific reason or reasons
for such denial; (B) the specific
reference to pertinent provisions of this
Agreement on which such denial is based;
(C) a description of any additional
material or information necessary for the
Claimant to perfect his or her claim and
an explanation why such material or such
information is necessary; (D) appropriate
information as to the steps to be taken if
the Claimant wishes to submit the claim
for review; and (E) the time limits for
requesting a review under subsection (3)
and for review under subsection (4) of
this section 10(b). If a notice of denial
is not received within the reply period,
the claim shall be deemed denied and the
Claimant shall be permitted to request
review, as set forth below.
(3) Request for Review.
With 60 days after the receipt by the
Claimant of the written opinion described
above (or, in the case of a deemed denial,
within 60 days after the end of the reply
period), the Claimant may request in
writing that the Secretary of the
Corporation (the "Secretary") review the
determination of the Corporation. Such
request must be addressed to the
Secretary, at the Corporation's then
principal place of business. The Claimant
or his or her duly authorized
representative may, but need not, review
the pertinent documents and submit issues
and comments in writing for consideration
by the Secretary. If the Claimant does
not request a review by the Secretary of
the Corporation's determination within
such 60-day period, he shall be barred and
estopped from challenging the
Corporation's determination, except as may
be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's
receipt of a request for review, he or she
will review the Corporation's
determination. After considering all
materials presented by the Claimant, the
Secretary will render a written opinion,
using language calculated to be understood
by the Claimant, setting forth the
specific reasons for the decision and
containing specific references to the
pertinent provisions of this Agreement on
which the decision is based. If special
circumstances require that the 60-day time
period be extended, the Secretary will so
notify the Claimant and will render the
written opinion as soon as possible, but
no later than 120 days after receipt of
the request for review. If the written
opinion on review is not rendered within
the 60-day period (or the 120-day period,
if an extension is granted), the claim
shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be
payable, the Corporation will promptly
issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures
set forth in this Section 10(b), nothing
shall prevent any person from pursuing any
other legal or equitable remedy otherwise
available, including without limitation
legal action in federal court.
11. AMENDMENT. This Agreement may not be
amended, altered or modified, except by a
written instrument signed by the parties
hereto or their respective successors or
assigns, and may not be otherwise
terminated except as provided herein.
12. BINDING EFFECT; NO THIRD-PARTY
BENEFICIARY.
This Agreement shall be binding upon
and inure to the benefit of the
Corporation and its successors and assigns
and the Trust and its respective
successors, assigns and beneficiaries.
This Agreement shall not confer any rights
or remedies upon any person other than the
parties hereto and their respective
successors and assigns, except that the
Employee is a third-party beneficiary of
this Agreement to the extent necessary to
effectuate the intents and purposes of
this Agreement.
13. NOTICE. Any notice, consent or demand
required or permitted to be given under
the provisions of this Agreement shall be
in writing, and shall be signed by the
party giving or making the same. Any such
notice, consent or demand mailed to a
party hereto shall be sent by United
States certified mail, postage prepaid, or
sent by a nationally recognized overnight
delivery service, charges prepaid, in each
case addressed to such party's last known
address as shown on the records of the
Corporation. The date of such mailing
shall be deemed the date of notice,
consent or demand.
14. GOVERNING LAW. This Agreement, and the
rights of the parties hereunder, shall be
governed by and construed in accordance
with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement, in duplicate, as of the day and
year first above written.
MARCUS FAMILY 1996
IRREVOCABLE INSURANCE TRUST
DATED OCTOBER 28, 1996
By /s/ David P. Gerstenblatt
--------------------------
Name: David P. Gerstenblatt
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ William M. Marcus
---------------------- ---------------------------
Secretary Name: William M. Marcus
Title: Executive
Vice President
EXHIBIT A
The following life insurance policy is subject to
the attached Split-Dollar Agreement:
Insurer: John Hancock Variable Life Insurance Company
Insureds: Richard G. & Beth A. Marcus
Policy Number: 20010583
Total Sum Insured at Issue: $2,500,000
Date of Issue: October 10, 1996
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made
and entered into as of this 20th day of December, 1996 by
and between American Biltrite Inc., a Delaware corpora-
tion with principal offices and a principal place of
business in the Commonwealth of Massachusetts (the "Cor-
poration"), and The Richard G. Marcus Irrevocable Insur-
ance Trust of 1990 Dated June 1, 1990 (the "Trust").
Richard G. Marcus, an individual residing in
the Commonwealth of Massachusetts (the "Employee"), is
employed by the Corporation as its President.
The Employee desires that his family be provid-
ed life insurance protection under a policy of life
insurance insuring the Employee's life, described in
Exhibit A attached hereto and by this reference made a
part hereof (the "Policy"), which has been issued by John
Hancock Variable Life Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as
such, possesses all incidents of ownership in and to the
Policy, including without limitation the right to desig-
nate the Policy beneficiary.
The Corporation is willing to pay a portion of
the premiums due on the Policy as an additional employ-
ment benefit for the Employee, on the terms and condi-
tions hereinafter set forth.
The Corporation desires to have the Policy
collaterally assigned to it by the Trust in order to
secure the repayment of the amounts which it will pay
toward the premiums on the Policy.
In consideration of the premises and of the
mutual promises contained herein, the parties hereto
agree as follows:
1. PURCHASE OF POLICY. The Trust has pur-
chased the Policy from the Insurer with a
Total Sum Insured at Issue (as such term
is defined in the Policy) of $2,590,000.
The parties hereto agree that they will
take all necessary action to cause the
Insurer to issue the Policy and will take
any further action which may be necessary
to cause the Policy to conform to the
provisions of this Agreement. The parties
hereto agree that the Policy shall be
subject to the terms and conditions of
this Agreement and of the related collat-
eral assignment filed with the Insurer
relating to the Policy.
2. OWNERSHIP OF POLICY. The Trust shall be
the sole and absolute owner of the Policy
and shall have and may exercise all owner-
ship rights granted to the owner thereof
by the terms of the Policy, including
without limitation the right to designate
the Policy beneficiary and the right to
elect and change both the Total Sum In-
sured at Issue and the investment options
of the Policy, except as may otherwise be
provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is
30 days prior to the due date of each
Policy premium, the Corporation shall
notify the Employee and the Trust of the
exact amount due from the Trust to the
Corporation hereunder toward payment of
the Planned Premium (as such term is de-
fined in the Policy), which shall be an
amount equal to the annual cost of current
life insurance protection on the life of
the Employee, measured by the lower of the
P.S. 58 rate, set forth in Revenue Ruling
55-747 (or the corresponding applicable
provision of any future Revenue Ruling),
or the Insurer's current published premium
rate for annually renewable term insurance
for standard risks. The Trust shall pay
such required contribution to the Corpora-
tion prior to the premium due date. If
the Trust fails to make such timely pay-
ment, the Corporation, in its sole discre-
tion, may elect to make such portion of
the premium payment, which payment shall
be recovered by the Corporation as provid-
ed herein.
b. On or before the due date of
each Policy premium, or within the grace
period provided therein, the Corporation
shall pay the full amount of the Planned
Premium to the Insurer and shall, upon
request, promptly furnish the Employee
evidence of timely payment of such premi-
um. Except with the consent of the Trust,
the Corporation shall not pay less than
the Planned Premium, but it may, in its
discretion, at any time and from time to
time, subject to acceptance of such amount
by the Insurer, pay more than the Planned
Premium or make other premium payments on
the Policy. The Corporation shall annual-
ly furnish the Employee a statement of the
amount of income reportable by the Employ-
ee for federal and state income tax pur-
poses as a result of the insurance protec-
tion provided to the Policy beneficiary.
4. COLLATERAL ASSIGNMENT. To secure repay-
ment to the Corporation of the amount of
the premiums on the Policy paid by it
hereunder, the Trust has contemporaneously
herewith assigned the Policy to the Corpo-
ration as collateral, under a form accept-
able to the Insurer for such assignments.
The collateral assignment of the Policy to
the Corporation hereunder shall not be
terminated, altered or amended by the
Trust without the express written consent
of the Corporation. The parties hereto
agree to take all action necessary to
cause such collateral assignment to con-
form to the provisions of this Agreement.
5. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided
herein, the Trust shall not sell, assign,
transfer, borrow against or withdraw from
the cash surrender value of the Policy,
surrender or cancel the Policy, change the
beneficiary designation provision thereof
or increase or decrease the Total Sum
Insured at Issue without, in any such
case, the express written consent of the
Corporation.
b. Notwithstanding any provision
hereof to the contrary, the Trust shall
have the sole authority to direct the
manner in which amounts in and among the
Subaccounts (as such term is defined in
the Policy) established pursuant to the
terms of the Policy shall be allocated
among the various investment options from
time to time available under the Policy
and to change such allocation from time to
time, as provided for in the Policy; pro-
vided, however, that at least 50% of the
annual premium paid must at all times be
allocated to one or more of the following:
a Fixed Account (as such term is defined
in the Policy); a short-term government
bond fund; or a money market account.
c. The Corporation shall have the
right to borrow that portion of the loan
value of the Policy equal in amount to the
total amount of the premiums advanced by
the Corporation on behalf of the Trust
hereunder, reduced by any then outstanding
indebtedness secured by the Policy which
was incurred by the Corporation, including
any interest due on such indebtedness (the
"net premiums"). Interest on such Policy
loan shall be the responsibility of the
Corporation as such interest becomes due.
The Trust shall have the right to borrow
that portion of the loan value of the
Policy equal in amount to the net premiums
for the sole purpose of paying such amount
to the Corporation under Section 8(a) of
this Agreement if it is terminated during
the lifetime of the Employee. In the
event of any such borrowing, the loan
proceeds shall be paid by the Insurer
directly to the Corporation, and such
payment shall discharge completely all
obligations owing from the Trust to the
Corporation under this Agreement with
respect to the Policy. Interest on any
such Policy loan shall be the responsibil-
ity of the Trust as such interest becomes
due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Employee,
the Corporation and the Trust shall coop-
erate to take whatever action is necessary
to collect the death benefit provided
under the Policy. When such benefit has
been collected and paid as provided here-
in, this Agreement shall thereupon termi-
nate.
b. Upon the death of the Employee,
the Corporation shall have the unqualified
right to receive a portion of such death
benefit equal to the net premiums paid by
it. The balance of the death benefit
provided under the Policy, if any, shall
be paid directly to the Policy beneficiary
in the manner and in the amount or amounts
provided in the beneficiary designation
provision of the Policy. In no event
shall the amount payable to the Corpora-
tion hereunder exceed the Policy proceeds
payable as a result of the maturity of the
Policy as a death claim. No amount shall
be paid from such death benefit to the
Policy beneficiary until the full amount
due the Corporation hereunder has been
paid.
c. Notwithstanding any provision
hereof to the contrary, in the event that,
for any reason whatsoever, no death bene-
fit is payable under the Policy upon the
death of the Employee and in lieu thereof
the Insurer refunds all or any part of the
premiums paid for the Policy, the Corpora-
tion shall have the unqualified right to
such premiums in an amount not to exceed
the net premiums paid by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF THE EMPLOYEE.
a. This Agreement shall terminate
during the lifetime of the Employee, with-
out notice, upon the occurrence of any of
the following events: (a) total cessation
of the Corporation's business; (b) liqui-
dation or dissolution of the Corporation;
or (c) termination of the Employee's em-
ployment by the Corporation for Cause (as
defined below). For the purposes of this
Section 7(a), "Cause" shall mean (i) con-
viction of the Employee for any felony or
for fraud or embezzlement; (ii) the
Employee's willful and continued refusal
to substantially perform reasonably as-
signed duties with the Corporation (other
than any such refusal resulting from inca-
pacity due to physical or mental illness
or disability) after a written demand for
substantial performance is delivered to
the Employee identifying the manner in
which the Corporation believes that the
Employee has willfully and continuously
refused to substantially perform his du-
ties; or (iii) other willful misconduct by
the Employee which is materially injurious
to the Corporation. For the purposes of
this Section 7(a), no act or failure to
act shall be considered "willful" unless
done or omitted to be done not in good
faith and without reasonable belief that
such action or omission was in the best
interests of the Corporation.
b. The Corporation may terminate
this Agreement at any time after the date
which is 16 years after the Date of Issue
(as such term is defined in the Policy) by
written notice to the Trust. Such termi-
nation shall be effective as of the date
of such notice.
c. In addition, the Trust may ter-
minate this Agreement during the lifetime
of the Employee and while no premium under
the Policy is overdue by written notice to
the Corporation. Such termination shall
be effective as of the date of such no-
tice.
8. DISPOSITION OF THE POLICY ON TERMINATION
OF THIS AGREEMENT DURING THE LIFETIME OF
THE EMPLOYEE.
a. For 60 days after the date of
the termination of this Agreement during
the lifetime of the Employee under Section
7 of this Agreement, the Trust shall have
the option of obtaining the release of the
collateral assignment of the Policy to the
Corporation. To obtain such release, the
Trust shall repay to the Corporation an
amount equal to the total amount of the
net premiums paid by the Corporation.
Upon receipt of such amount, the Corpora-
tion shall release the collateral assign-
ment of the Policy by the execution and
delivery of an appropriate instrument of
release.
b. If the Trust fails to exercise
such option within such 60-day period,
then, at the request of the Corporation,
the Trust shall execute any document or
documents required by the Insurer to
transfer all interests of the Trust in the
Policy, including without limitation the
Trust's right to designate the Policy
beneficiary, to the Corporation. Alterna-
tively, the Corporation may enforce its
right to be repaid the amount due it here-
under from the cash surrender value of the
Policy under the collateral assignment of
the Policy; provided, however, that in the
event the cash surrender value of the
Policy exceeds the amount due the Corpora-
tion hereunder, such excess shall be paid
to the Trust. Thereafter, neither the
Trust nor the Trust's successors, assigns
or beneficiaries shall have any further
interest in and to the Policy under the
terms thereof or under this Agreement.
9. INSURER NOT A PARTY. The Insurer shall be
fully discharged from its obligations
under the Policy by payment of the Policy
death benefit to the beneficiary or bene-
ficiaries named in the Policy, subject to
the terms and conditions of the Policy.
In no event shall the Insurer be consid-
ered a party to this Agreement or any
modification or amendment hereof. No
provision of this Agreement nor of any
modification or amendment hereof shall in
any way be construed as enlarging, chang-
ing, varying or in any other way affecting
the obligations of the Insurer as express-
ly provided in the Policy, except insofar
as the provisions hereof are made a part
of the Policy by the collateral assignment
executed by the Trust and filed with the
Insurer in connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF BENE-
FITS, CLAIMS PROCEDURE AND ADMINISTRATION.
a. The Corporation is hereby desig-
nated as the named fiduciary under this
Agreement. The named fiduciary shall have
authority to control and manage the opera-
tion and administration of this Agreement,
and it shall be responsible for establish-
ing and carrying out a funding policy and
method consistent with the objectives of
this Agreement. The Corporation may allo-
cate to others certain aspects of the
management and operational responsibili-
ties of this Agreement, including by the
employment of advisors and the delegation
of any ministerial duties to qualified
individuals.
b. (1) Claim.
A person who believes that he or she is
being denied a benefit to which he or she
is entitled under this Agreement (herein-
after referred to as a "Claimant") may
file a written request for such benefit
with the Corporation, setting forth his or
her claim. The request must be addressed
to the President of the Corporation at its
then principal place of business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply
will be forthcoming within 90 days and
shall, in fact, deliver such reply within
such 90-day period. Upon written notice
prior to the expiration of the 90-day
reply period, the Corporation may, howev-
er, extend the reply period for an addi-
tional 90 days for reasonable cause. If
the claim is denied in whole or in part,
the Corporation shall adopt a written
opinion, using language calculated to be
understood by the Claimant, setting forth:
(A) the specific reason or reasons for
such denial; (B) the specific reference to
pertinent provisions of this Agreement on
which such denial is based; (C) a descrip-
tion of any additional material or infor-
mation necessary for the Claimant to per-
fect his or her claim and an explanation
why such material or such information is
necessary; (D) appropriate information as
to the steps to be taken if the Claimant
wishes to submit the claim for review; and
(E) the time limits for requesting a re-
view under subsection (3) and for review
under subsection (4) of this section
10(b). If a notice of denial is not re-
ceived within the reply period, the claim
shall be deemed denied and the Claimant
shall be permitted to request review, as
set forth below.
(3) Request for Review.
With 60 days after the receipt by the
Claimant of the written opinion described
above (or, in the case of a deemed denial,
within 60 days after the end of the reply
period), the Claimant may request in writ-
ing that the Secretary of the Corporation
(the "Secretary") review the determination
of the Corporation. Such request must be
addressed to the Secretary, at the
Corporation's then principal place of
business. The Claimant or his or her duly
authorized representative may, but need
not, review the pertinent documents and
submit issues and comments in writing for
consideration by the Secretary. If the
Claimant does not request a review by the
Secretary of the Corporation's determina-
tion within such 60-day period, he shall
be barred and estopped from challenging
the Corporation's determination, except as
may be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's re-
ceipt of a request for review, he or she
will review the Corporation's determina-
tion. After considering all materials
presented by the Claimant, the Secretary
will render a written opinion, using lan-
guage calculated to be understood by the
Claimant, setting forth the specific rea-
sons for the decision and containing spe-
cific references to the pertinent provi-
sions of this Agreement on which the deci-
sion is based. If special circumstances
require that the 60-day time period be
extended, the Secretary will so notify the
Claimant and will render the written opin-
ion as soon as possible, but no later than
120 days after receipt of the request for
review. If the written opinion on review
is not rendered within the 60-day period
(or the 120-day period, if an extension is
granted), the claim shall be deemed denied
on review.
(5) Payment of Claim.
If and when a claim is determined to be
payable, the Corporation will promptly
issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures
set forth in this Section 10(b), nothing
shall prevent any person from pursuing any
other legal or equitable remedy otherwise
available, including without limitation
legal action in federal court.
11. AMENDMENT. This Agreement may not be
amended, altered or modified, except by a
written instrument signed by the parties
hereto or their respective successors or
assigns, and may not be otherwise termi-
nated except as provided herein.
12. BINDING EFFECT; NO THIRD-PARTY
BENEFICIARY.
This Agreement shall be binding upon
and inure to the benefit of the Corpora-
tion and its successors and assigns and
the Trust and its respective successors,
assigns and beneficiaries. This Agreement
shall not confer any rights or remedies
upon any person other than the parties
hereto and their respective successors and
assigns, except that the Employee is a
third-party beneficiary of this Agreement
to the extent necessary to effectuate the
intents and purposes of this Agreement.
13. NOTICE. Any notice, consent or demand
required or permitted to be given under
the provisions of this Agreement shall be
in writing, and shall be signed by the
party giving or making the same. Any such
notice, consent or demand mailed to a
party hereto shall be sent by United
States certified mail, postage prepaid, or
sent by a nationally recognized overnight
delivery service, charges prepaid, in each
case addressed to such party's last known
address as shown on the records of the
Corporation. The date of such mailing
shall be deemed the date of notice, con-
sent or demand.
14. GOVERNING LAW. This Agreement, and the
rights of the parties hereunder, shall be
governed by and construed in accordance
with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement, in duplicate, as of the day and
year first above written.
THE RICHARD G. MARCUS
IRREVOCABLE INSURANCE TRUST
OF 1990 DATED JUNE 1, 1990
By /s/ David P. Gerstenblatt
----------------------------
Name: David P. Gerstenblatt
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ William M. Marcus
---------------------- -----------------------
Secretary Name: William M. Marcus
Title: Executive
Vice President
EXHIBIT A
The following life insurance policy is subject to
the attached Split-Dollar Agreement:
Insurer: John Hancock Variable Life Insurance Company
Insured: Richard G. Marcus
Policy Number: 50053001
Total Sum Insured at Issue: $2,590,000
Date of Issue: October 10, 1996
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made and entered into
as of this 20th day of December, 1996 by and between American Biltrite
Inc., a Delaware corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the "Corporation"), and
the Roger S. Marcus Irrevocable Insurance Trust Dated Nov. 29, 1996,
Richard G. Marcus, Trustee (the "Trust").
Roger S. Marcus, an individual residing in the Commonwealth of
Pennsylvania (the "Employee"), is employed by the Corporation as its Chief
Executive Officer.
The Employee desires that his family be provided life insurance
protection under a policy of life insurance insuring the Employee's life,
described in Exhibit A attached hereto and by this reference made a part
hereof (the "Policy"), which has been issued by Massachusetts Mutual Life
Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy, including without limitation
the right to designate the Policy beneficiary.
The Corporation is willing to pay a portion of the premiums due
on the Policy as an additional employment benefit for the Employee, on the
terms and conditions hereinafter set forth.
The Corporation desires to have the Policy collaterally assigned
to it by the Trust in order to secure the repayment of the amounts which it
will pay toward the premiums on the Policy.
In consideration of the premises and of the mutual promises
contained herein, the parties hereto agree as follows:
1. PURCHASE OF POLICY. The Trust has pur chased the Policy from
the Insurer with a Selected Face Amount (as such term is de-
fined in the Policy) of $3,400,000. The parties hereto agree
that they will take all necessary action to cause the
Insurer to issue the Policy and will take any further
action which may be necessary to cause the Policy to conform
to the provisions of this Agreement. The parties hereto
agree that the Policy shall be subject to the terms and
conditions of this Agreement and of the related collateral
assignment filed with the Insurer relating to the Policy.
2. OWNERSHIP OF POLICY. The Trust shall be the sole and
absolute owner of the Policy and shall have and may exercise
all ownership rights granted to the owner thereof by the
terms of the Policy, including without limitation the right
to designate the Policy beneficiary and the right to elect
and change both the Selected Face Amount and the investment
options of the Policy, except as may otherwise be provided
herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is 30 days prior to
the due date of each Policy premium, the Corporation shall
notify the Employee and the Trust of the exact amount due
from the Trust to the Corporation hereunder toward payment
of the Planned Annual Premium (as such term is defined in
the Policy), which shall be an amount equal to the annual
cost of current life insurance protection on the life of the
Employee, measured by the lower of the P.S. 58 rate, set
forth in Revenue Ruling 55-747 (or the corresponding
applicable provision of any future Revenue Ruling), or the
Insurer's current published premium rate for annually
renewable term insurance for standard risks. The Trust shall
pay such required contribution to the Corporation prior to
the premium due date. If the Trust fails to make such timely
payment, the Corporation, in its sole discretion, may elect
to make such portion of the premium payment, which payment
shall be recovered by the Corporation as provided herein.
b. On or before the due date of each Policy premium, or
within the grace period provided therein, the Corporation
shall pay the full amount of the Planned Annual Premium to
the Insurer and shall, upon request, promptly furnish the
Employee evidence of timely payment of such premium. Except
with the consent of the Trust, the Corporation shall not pay
less than the Planned Annual Premium, but it may, in its
discretion, at any time and from time to time, subject to
acceptance of such amount by the Insurer, pay more than the
Planned Annual Premium or make other premium payments on the
Policy. The Corporation shall annually furnish the Em-
ployee a statement of the amount of income reportable by the
Employee for federal and state income tax purposes as a
result of the insurance protection provided to the Policy
beneficiary.
4. COLLATERAL ASSIGNMENT. To secure repayment to the
Corporation of the amount of the premiums on the Policy paid
by it hereunder, the Trust has contemporaneously herewith
assigned the Policy to the Corporation as collateral, under
a form acceptable to the Insurer for such assignments. The
collateral assignment of the Policy to the Corporation
hereunder shall not be terminated, altered or amended by the
Trust without the express written consent of the
Corporation. The parties hereto agree to take all action
necessary to cause such collateral assignment to conform to
the provisions of this Agreement.
5. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided herein, the Trust shall
not sell, assign, transfer, borrow against or withdraw from
the cash surrender value of the Policy, surrender or cancel
the Policy, change the beneficiary designation provision
thereof or increase or decrease the Selected Face Amount
without, in any such case, the express written consent of
the Corporation.
b. Notwithstanding any provision hereof to the
contrary, the Trust shall have the sole authority to direct
the manner in which the Separate Account (as such term is
defined in the Policy) established pursuant to the terms of
the Policy shall be allocated among the various investment
options from time to time available under the Policy and to
change such allocation from time to time, as provided for in
the Policy; provided, however, that at least 50% of the
annual premium paid must at all times be allocated to one or
more of the following: the Guaranteed Principal Account (as
such term is defined in the Policy); a short-term government
bond fund; or a money market account.
c. The Corporation shall have the right to borrow that
portion of the loan value of the Policy equal in amount to
the total amount of the premiums advanced by the Corporation
on behalf of the Trust hereunder, reduced by any then
outstanding indebtedness secured by the Policy which was
incurred by the Corporation, including any interest due on
such indebtedness (the "net premiums"). Interest on such
Policy loan shall be the responsibility of the Corporation
as such interest becomes due. The Trust shall have the right
to borrow that portion of the loan value of the Policy equal
in amount to the net premiums for the sole purpose of paying
such amount to the Corporation under Section 8(a) of this
Agreement if it is terminated during the lifetime of the
Employee. In the event of any such borrowing, the loan
proceeds shall be paid by the Insurer directly to the
Corporation, and such payment shall discharge completely all
obligations owing from the Trust to the Corporation under
this Agreement with respect to the Policy. Interest on any
such Policy loan shall be the responsibility of the Trust as
such interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Employee, the Corporation and
the Trust shall cooperate to take whatever action is
necessary to collect the death benefit provided under the
Policy. When such benefit has been collected and paid as
provided herein, this Agreement shall thereupon terminate.
b. Upon the death of the Employee, the Corporation
shall have the unqualified right to receive a portion of
such death benefit equal to the net premiums paid by it. The
balance of the death benefit provided under the Policy, if
any, shall be paid directly to the Policy beneficiary in the
manner and in the amount or amounts provided in the
beneficiary designation provision of the Policy. In no event
shall the amount payable to the Corporation hereunder exceed
the Policy proceeds payable as a result of the maturity of
the Policy as a death claim. No amount shall be paid from
such death benefit to the Policy beneficiary until the full
amount due the Corporation hereunder has been paid.
c. Notwithstanding any provision hereof to the
contrary, in the event that, for any reason whatsoever, no
death benefit is payable under the Policy upon the death of
the Employee and in lieu thereof the Insurer refunds all or
any part of the premiums paid for the Policy, the Corpora-
tion shall have the unqualified right to such premiums in an
amount not to exceed the net premiums paid by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF THE EMPLOYEE.
a. This Agreement shall terminate during the lifetime
of the Insured, without notice, upon the occurrence of any
of the following events: (a) total cessation of the
Corporation's business; (b) liquidation or dissolution of
the Corporation; or (c) termination of the Employee's
employment by the Corporation for Cause (as defined below).
For the purposes of this Section 7(a), "Cause" shall mean
(i) conviction of the Employee for any felony or for fraud
or embezzlement; (ii) the Employee's willful and continued
refusal to substantially perform reasonably assigned duties
with the Corporation (other than any such refusal resulting
from incapacity due to physical or mental illness or
disability) after a written demand for substantial
performance is delivered to the Employee identifying the
manner in which the Corporation believes that the Employee
has willfully and continuously refused to substantially
perform his duties; or (iii) other willful misconduct by the
Employee which is materially injurious to the Corporation.
For the purposes of this Section 7(a), no act or failure to
act shall be considered "willful" unless done or omitted to
be done not in good faith and without reasonable belief that
such action or omission was in the best interest of the
Corporation.
b. The Corporation may terminate this Agreement at any
time after the date which is 15 years after the Issue Date
(as such term is defined in the Policy) by written notice to
the Trust. Such termination shall be effective as of the
date of such notice.
c. In addition, the Trust may terminate this Agreement
during the lifetime of the Employee and while no premium
under the Policy is overdue by written notice to the
Corporation. Such termination shall be effective as of the
date of such notice.
8. DISPOSITION OF THE POLICY ON TERMINATION OF THIS
AGREEMENT DURING THE LIFETIME OF THE EMPLOYEE.
a. For 60 days after the date of the termination of
this Agreement during the lifetime of the Employee under
Section 7 of this Agreement, the Trust shall have the option
of obtaining the release of the collateral assignment of the
Policy to the Corporation. To obtain such release, the Trust
shall repay to the Corporation an amount equal to the total
amount of the net premiums paid by the Corporation. Upon
receipt of such amount, the Corporation shall release the
collateral assignment of the Policy by the execution and
delivery of an appropriate instrument of release.
b. If the Trust fails to exercise such option within
such 60-day period, then, at the request of the Corporation,
the Trust shall execute any document or documents required
by the Insurer to transfer all interests of the Trust in the
Policy, including without limitation the Trust's right to
designate the Policy beneficiary, to the Corporation.
Alternatively, the Corporation may enforce its right to be
repaid the amount due it hereunder from the cash surrender
value of the Policy under the collateral assignment of the
Policy; provided, however, that in the event the cash
surrender value of the Policy exceeds the amount due the
Corporation hereunder, such excess shall be paid to the
Trust. Thereafter, neither the Trust nor the Trust's
successors, assigns or beneficiaries shall have any further
interest in and to the Policy under the terms thereof or
under this Agreement.
9. INSURER NOT A PARTY. The Insurer shall be fully discharged
from its obligations under the Policy by payment of the
Policy death benefit to the beneficiary or beneficiaries
named in the Policy, subject to the terms and conditions of
the Policy. In no event shall the Insurer be considered a
party to this Agreement or any modification or amendment
hereof. No provision of this Agreement nor of any
modification or amendment hereof shall in any way be
construed as enlarging, changing, varying or in any other
way affecting the obligations of the Insurer as expressly
provided in the Policy, except insofar as the provisions
hereof are made a part of the Policy by the collateral
assignment executed by the Trust and filed with the Insurer
in connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS
PROCEDURE AND ADMINISTRATION.
a. The Corporation is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall
have authority to control and manage the operation and
administration of this Agreement, and it shall be
responsible for establishing and carrying out a funding
policy and method consistent with the objectives of this
Agreement. The Corporation may allocate to others certain
aspects of the management and operational responsibilities
of this Agreement, including by the employment of advisors
and the delegation of any ministerial duties to qualified
individuals.
b. (1) Claim.
A person who believes that he or she is being denied a
benefit to which he or she is entitled under this Agreement
(hereinafter referred to as a "Claimant") may file a written
request for such benefit with the Corporation, setting forth
his or her claim. The request must be addressed to the
President of the Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation shall advise the
Claimant that a reply will be forthcoming within 90 days and
shall, in fact, deliver such reply within such 90-day
period. Upon written notice prior to the expiration of the
90-day reply period, the Corporation may, however, extend
the reply period for an additional 90 days for reasonable
cause. If the claim is denied in whole or in part, the
Corporation shall adopt a written opinion, using language
calculated to be understood by the Claimant, setting forth:
(A) the specific reason or reasons for such denial; (B) the
specific reference to pertinent provisions of this Agreement
on which such denial is based; (C) a description of any
additional material or information necessary for the
Claimant to perfect his or her claim and an explanation why
such material or such information is necessary; (D)
appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and (E) the
time limits for requesting a review under subsection (3) and
for review under subsection (4) of this section 10(b). If a
notice of denial is not received within the reply period,
the claim shall be deemed denied and the Claimant shall be
permitted to request review, as set forth below.
(3) Request for Review.
With 60 days after the receipt by the Claimant of the
written opinion described above (or, in the case of a deemed
denial, within 60 days after the end of the reply period),
the Claimant may request in writing that the Secretary of
the Corporation (the "Secretary") review the determination
of the Corporation. Such request must be addressed to the
Secretary, at the Corporation's then principal place of
business. The Claimant or his or her duly authorized
representative may, but need not, review the pertinent
documents and submit issues and comments in writing for
consideration by the Secretary. If the Claimant does not
request a review by the Secretary of the Corporation's
determination within such 60-day period, he shall be barred
and estopped from challenging the Corporation's
determination, except as may be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's receipt of a request
for review, he or she will review the Corporation's
determination. After considering all materials presented by
the Claimant, the Secretary will render a written opinion,
using language calculated to be understood by the Claimant,
setting forth the specific reasons for the decision and
containing specific references to the pertinent provisions
of this Agreement on which the decision is based. If special
circumstances require that the 60-day time period be
extended, the Secretary will so notify the Claimant and will
render the written opinion as soon as possible, but no later
than 120 days after receipt of the request for review. If
the written opinion on review is not rendered within the
60-day period (or the 120-day period, if an extension is
granted), the claim shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be payable, the
Corporation will promptly issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures set forth in this
Section 10(b), nothing shall prevent any person from
pursuing any other legal or equitable remedy otherwise
available, including without limitation legal action in
federal court.
11. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the
parties hereto or their respective successors or assigns,
and may not be otherwise terminated except as provided
herein.
12. BINDING EFFECT; NO THIRD-PARTY BENEFICIARY.
This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns
and the Trust and its respective successors, assigns and
beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the parties hereto and
their respective successors and assigns, except that the
Employee is a third-party beneficiary of this Agreement to
the extent necessary to effectuate the intents and purposes
of this Agreement.
13. NOTICE. Any notice, consent or demand required or permitted
to be given under the provisions of this Agreement shall be
in writing, and shall be signed by the party giving or
making the same. Any such notice, consent or demand mailed
to a party hereto shall be sent by United States certified
mail, postage prepaid, or sent by a nationally recognized
overnight delivery service, charges prepaid, in each case
addressed to such party's last known address as shown on the
records of the Corporation. The date of such mailing shall
be deemed the date of notice, consent or demand.
14. GOVERNING LAW. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in duplicate, as of the day and year first above written.
ROGER S. MARCUS
IRREVOCABLE INSURANCE TRUST
DATED NOV. 29, 1996
By /s/ Richard G. Marcus
----------------------------
Name: Richard G. Marcus
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ William M. Marcus
- ----------------------- ----------------------------
Secretary Name: William M. Marcus
Title: Executive
Vice President
EXHIBIT A
---------
The following life insurance policy is subject to the attached
Split-Dollar Agreement:
Insurer: Massachusetts Mutual Life Insurance Company
Insured: Roger S. Marcus
Policy Number: 0025308
Selected Face Amount of Insurance: $3,400,000
Date of Issue: December 16, 1996
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made and entered into
as of this 20th day of December, 1996 by and between American Biltrite
Inc., a Delaware corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the "Corporation"), and
the Roger S. Marcus Irrevocable Insurance Trust Dated Nov. 29, 1996 (the
"Trust").
Roger S. Marcus, an individual residing in the Commonwealth of
Pennsylvania (the "Employee"), is employed by the Corporation as its Chief
Executive Officer.
The Employee desires that his family be provided life insurance
protection under a policy of life insurance insuring the Employee's life,
described in Exhibit A attached hereto and by this reference made a part
hereof (the "Policy"), which has been issued by John Hancock Variable Life
Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy, including without limitation
the right to designate the Policy beneficiary.
The Corporation is willing to pay a portion of the premiums due
on the Policy as an additional employment benefit for the Employee, on the
terms and conditions hereinafter set forth.
The Corporation desires to have the Policy collaterally assigned
to it by the Trust in order to secure the repayment of the amounts which it
will pay toward the premiums on the Policy.
In consideration of the premises and of the mutual promises
contained herein, the parties hereto agree as follows:
1. PURCHASE OF POLICY. The Trust has purchased the Policy
from the Insurer with a Total Sum Insured at Issue (as such
term is defined in the Policy) of $2,495,000. The parties
hereto agree that they will take all necessary action to
cause the Insurer to issue the Policy and will take any
further action which may be necessary to cause the Policy to
conform to the provisions of this Agreement. The parties
hereto agree that the Policy shall be subject to the terms
and conditions of this Agreement and of the related collat-
eral assignment filed with the Insurer relating to the
Policy.
2. OWNERSHIP OF POLICY. The Trust shall be the sole and
absolute owner of the Policy and shall have and may exercise
all ownership rights granted to the owner thereof by the
terms of the Policy, including without limitation the right
to designate the Policy beneficiary and the right to elect
and change both the Total Sum Insured at Issue and the
investment options of the Policy, except as may otherwise be
provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is 30 days prior to
the due date of each Policy premium, the Corporation shall
notify the Employee and the Trust of the exact amount due
from the Trust to the Corporation hereunder toward payment
of the Planned Premium (as such term is defined in the
Policy), which shall be an amount equal to the annual cost
of current life insurance protection on the life of the
Employee, measured by the lower of the P.S. 58 rate, set
forth in Revenue Ruling 55-747 (or the corresponding
applicable provision of any future Revenue Ruling), or the
Insurer's current published premium rate for annually
renewable term insurance for standard risks. The Trust shall
pay such required contribution to the Corporation prior to
the premium due date. If the Trust fails to make such timely
payment, the Corporation, in its sole discretion, may elect
to make such portion of the premium payment, which payment
shall be recovered by the Corporation as provided herein.
b. On or before the due date of each Policy premium, or
within the grace period provided therein, the Corporation
shall pay the full amount of the Planned Premium to the
Insurer, and shall, upon request, promptly furnish the
Employee evidence of timely payment of such premium. Except
with the consent of the Trust, the Corporation shall not pay
less than the Planned Premium, but it may, in its
discretion, at any time and from time to time, subject to
acceptance of such amount by the Insurer, pay more than the
Planned Premium or make other premium payments on the
Policy. The Corporation shall annually furnish the Employee
a statement of the amount of income reportable by the
Employee for federal and state income tax purposes as a
result of the insurance protection provided to the Policy
beneficiary.
4. COLLATERAL ASSIGNMENT. To secure repayment to the
Corporation of the amount of the premiums on the Policy paid
by it hereunder, the Trust has contemporaneously herewith
assigned the Policy to the Corporation as collateral, under
a form acceptable to the Insurer for such assignments. The
collateral assignment of the Policy to the Corporation
hereunder shall not be terminated, altered or amended by the
Trust without the express written consent of the
Corporation. The parties hereto agree to take all action
necessary to cause such collateral assignment to conform to
the provisions of this Agreement.
5. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided herein, the Trust shall
not sell, assign, transfer, borrow against or withdraw from
the cash surrender value of the Policy, surrender or cancel
the Policy, change the beneficiary designation provision
thereof or increase or decrease the Total Sum Insured at
Issue without, in any such case, the express written consent
of the Corporation.
b. Notwithstanding any provision hereof to the
contrary, the Trust shall have the sole authority to direct
the manner in which the amounts in and among the Subaccounts
(as such term is defined in the Policy) established pursuant
to the terms of the Policy shall be allocated among the
various investment options from time to time available under
the Policy and to change such allocation from time to time,
as provided for in the Policy; provided, however, that at
least 50% of the annual premium paid must at all times be
allocated to one or more of the following: a Fixed Account
(as such term is defined in the Policy); a short-term
government bond fund; or a money market account.
c. The Corporation shall have the right to borrow that
portion of the loan value of the Policy equal in amount to
the total amount of the premiums advanced by the Corporation
on behalf of the Trust hereunder, reduced by any then
outstanding indebtedness secured by the Policy which was
incurred by the Corporation, including any interest due on
such indebtedness (the "net premiums"). Interest on such
Policy loan shall be the responsibility of the Corporation
as such interest becomes due. The Trust shall have the right
to borrow that portion of the loan value of the Policy equal
in amount to the net premiums for the sole purpose of paying
such amount to the Corporation under Section 8(a) of this
Agreement if it is terminated during the lifetime of the
Employee. In the event of any such borrowing, the loan
proceeds shall be paid by the Insurer directly to the
Corporation, and such payment shall discharge completely all
obligations owing from the Trust to the Corporation under
this Agreement with respect to the Policy. Interest on any
such Policy loan shall be the responsibility of the Trust as
such interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Employee, the Corporation and
the Trust shall cooperate to take whatever action is
necessary to collect the death benefit provided under the
Policy. When such benefit has been collected and paid as
provided herein, this Agreement shall thereupon terminate.
b. Upon the death of the Employee, the Corporation
shall have the unqualified right to receive a portion of
such death benefit equal to the net premiums paid by it. The
balance of the death benefit provided under the Policy, if
any, shall be paid directly to the Policy beneficiary in the
manner and in the amount or amounts provided in the
beneficiary designation provision of the Policy. In no event
shall the amount payable to the Corporation hereunder exceed
the Policy proceeds payable as a result of the maturity of
the Policy as a death claim. No amount shall be paid from
such death benefit to the Policy beneficiary until the full
amount due the Corporation hereunder has been paid.
c. Notwithstanding any provision hereof to the
contrary, in the event that, for any reason whatsoever, no
death benefit is payable under the Policy upon the death of
the Employee and in lieu thereof the Insurer refunds all or
any part of the premiums paid for the Policy, the Corpora-
tion shall have the unqualified right to such premiums in an
amount not to exceed the net premiums paid by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF THE EMPLOYEE.
a. This Agreement shall terminate, while the Employee
is alive, without notice, upon the occurrence of any of the
following events: (a) total cessation of the Corporation's
business; (b) liquidation or dissolution of the Corporation;
or (c) termination of the Employee's employment by the
Corporation for Cause (as defined below). For the purposes
of this Section 7(a), "Cause" shall mean (i) conviction of
the Employee for any felony or for fraud or embezzlement;
(ii) the Employee's willful and continued refusal to
substantially perform reasonably assigned duties with the
Corporation (other than any such refusal resulting from
incapacity due to physical or mental illness or disability)
after a written demand for substantial performance is
delivered to the Employee identifying the manner in which
the Corporation believes that the Employee has willfully and
continuously refused to substantially perform his duties; or
(iii) other willful misconduct by the Employee which is
materially injurious to the Corporation. For the purposes of
this Section 7(a), no act or failure to act shall be
considered "willful" unless done or omitted to be done not
in good faith and without reasonable belief that such action
or omission was in the best interests of the Corporation.
b. The Corporation may terminate this Agreement at any
time after the date which is 15 years after the Date of
Issue (as such term is defined in the Policy) by written
notice to the Trust. Such termination shall be effective as
of the date of such notice.
c. In addition, the Trust may terminate this Agreement,
during the Employee's lifetime and while no premium under
the Policy is overdue, by written notice to the Corporation.
Such termination shall be effective as of the date of such
notice.
8. DISPOSITION OF THE POLICY ON TERMINATION OF THIS
AGREEMENT DURING THE LIFETIME OF THE EMPLOYEE.
a. For 60 days after the date of the termination of
this Agreement during the Employee's lifetime under Section
7 of this Agreement, the Trust shall have the option of
obtaining the release of the collateral assignment of the
Policy to the Corporation. To obtain such release, the Trust
shall repay to the Corporation an amount equal to the total
amount of the net premiums paid by the Corporation. Upon
receipt of such amount, the Corporation shall release the
collateral assignment of the Policy by the execution and
delivery of an appropriate instrument of release.
b. If the Trust fails to exercise such option within
such 60-day period, then, at the request of the Corporation,
the Trust shall execute any document or documents required
by the Insurer to transfer all interests of the Trust in the
Policy, including without limitation the Trust's right to
designate the Policy beneficiary, to the Corporation.
Alternatively, the Corporation may enforce its right to be
repaid the amount due it hereunder from the cash surrender
value of the Policy under the collateral assignment of the
Policy; provided, however, that in the event the cash
surrender value of the Policy exceeds the amount due the
Corporation hereunder, such excess shall be paid to the
Trust. Thereafter, neither the Trust nor the Trust's
successors, assigns or beneficiaries shall have any further
interest in and to the Policy under the terms thereof or
under this Agreement.
9. INSURER NOT A PARTY. The Insurer shall be fully discharged
from its obligations under the Policy by payment of the
Policy death benefit to the beneficiary or beneficiaries
named in the Policy, subject to the terms and conditions of
the Policy. In no event shall the Insurer be considered a
party to this Agreement or any modification or amendment
hereof. No provision of this Agreement nor of any
modification or amendment hereof shall in any way be
construed as enlarging, changing, varying or in any other
way affecting the obligations of the Insurer as expressly
provided in the Policy, except insofar as the provisions
hereof are made a part of the Policy by the collateral
assignment executed by the Trust and filed with the Insurer
in connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS
PROCEDURE AND ADMINISTRATION.
a. The Corporation is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall
have authority to control and manage the operation and
administration of this Agreement, and it shall be
responsible for establishing and carrying out a funding
policy and method consistent with the objectives of this
Agreement. The Corporation may allocate to others certain
aspects of the management and operational responsibilities
of this Agreement, including by the employment of advisors
and the delegation of any ministerial duties to qualified
individuals.
b. (1) Claim.
A person who believes that he or she is being denied a
benefit to which he or she is entitled under this Agreement
(hereinafter referred to as a "Claimant") may file a written
request for such benefit with the Corporation, setting forth
his or her claim. The request must be addressed to the
President of the Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation shall advise the
Claimant that a reply will be forthcoming within 90 days and
shall, in fact, deliver such reply within such 90-day
period. Upon written notice prior to the expiration of the
90-day reply period, the Corporation may, however, extend
the reply period for an additional 90 days for reasonable
cause. If the claim is denied in whole or in part, the
Corporation shall adopt a written opinion, using language
calculated to be understood by the Claimant, setting forth:
(A) the specific reason or reasons for such denial; (B) the
specific reference to pertinent provisions of this Agreement
on which such denial is based; (C) a description of any
additional material or information necessary for the
Claimant to perfect his or her claim and an explanation why
such material or such information is necessary; (D)
appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and (E) the
time limits for requesting a review under subsection (3) and
for review under subsection (4) of this section 10(b). If a
notice of denial is not received within the reply period,
the claim shall be deemed denied and the Claimant shall be
permitted to request review, as set forth below.
(3) Request for Review.
With 60 days after the receipt by the Claimant of the
written opinion described above (or, in the case of a deemed
denial, within 60 days after the end of the reply period),
the Claimant may request in writing that the Secretary of
the Corporation (the "Secretary") review the determination
of the Corporation. Such request must be addressed to the
Secretary, at the Corporation's then principal place of
business. The Claimant or his or her duly authorized
representative may, but need not, review the pertinent
documents and submit issues and comments in writing for
consideration by the Secretary. If the Claimant does not
request a review by the Secretary of the Corporation's
determination within such 60-day period, he shall be barred
and estopped from challenging the Corporation's
determination, except as may be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's receipt of a request
for review, he or she will review the Corporation's
determination. After considering all materials presented by
the Claimant, the Secretary will render a written opinion,
using language calculated to be understood by the Claimant,
setting forth the specific reasons for the decision and
containing specific references to the pertinent provisions
of this Agreement on which the decision is based. If special
circumstances require that the 60-day time period be
extended, the Secretary will so notify the Claimant and will
render the written opinion as soon as possible, but no later
than 120 days after receipt of the request for review. If
the written opinion on review is not rendered within the
60-day period (or the 120-day period, if an extension is
granted), the claim shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be payable, the
Corporation will promptly issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures set forth in this
Section 10(b), nothing shall prevent any person from
pursuing any other legal or equitable remedy otherwise
available, including without limitation legal action in
federal court.
11. AMENDMENT. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the
parties hereto or their respective successors or assigns,
and may not be otherwise terminated except as provided
herein.
12. BINDING EFFECT; NO THIRD-PARTY BENEFICIARY.
This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns
and the Trust and its respective successors, assigns and
beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the parties hereto and
their respective successors and assigns, except that the
Employee is a third-party beneficiary of this Agreement to
the extent necessary to effectuate the intents and purposes
of this Agreement.
13. NOTICE. Any notice, consent or demand required or permitted
to be given under the provisions of this Agreement shall be
in writing, and shall be signed by the party giving or
making the same. Any such notice, consent or demand mailed
to a party hereto shall be sent by United States certified
mail, postage prepaid, or sent by a nationally recognized
overnight delivery service, charges prepaid, in each case
addressed to such party's last known address as shown on the
records of the Corporation. The date of such mailing shall
be deemed the date of notice, consent or demand.
14. GOVERNING LAW. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in duplicate, as of the day and year first above written.
ROGER S. MARCUS IRREVOCABLE
INSURANCE TRUST DATED
NOV. 29, 1996
By /s/ Richard G. Marcus
---------------------------
Name: Richard G. Marcus
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ William M. Marcus
- ---------------------- ----------------------------
Secretary Name: William M. Marcus
Title: Executive
Vice President
EXHIBIT A
---------
The following life insurance policy is subject to the attached
Split-Dollar Agreement:
Insurer: John Hancock Variable Life Insurance Company
Insured: Roger S. Marcus
Policy Number: 50061001
Face Amount of Insurance: $2,495,000
Date of Issue: October 10, 1996
SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made
and entered into as of this 9th day of January, 1997 by
and between American Biltrite Inc., a Delaware
corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the
"Corporation"), and Joseph D. Burns, an individual
residing in the State of New Jersey (the "Employee").
The Employee is employed by the Corporation as
a Vice President and General Manager.
The Employee desires that his family be
provided life insurance protection under a policy of life
insurance insuring the Employee's life, described in
Exhibit A attached hereto and by this reference made a
part hereof (the "Policy"). The Policy has been issued
by Massachusetts Mutual Life Insurance Company (the
"Insurer").
The Employee is the owner of the Policy and, as
such, possesses all incidents of ownership in and to the
Policy, including without limitation the right to
designate the Policy beneficiary.
The Corporation is willing to pay a portion of
the premiums due on the Policy as an additional
employment benefit for the Employee, on the terms and
conditions hereinafter set forth.
The Corporation desires to have the Policy
collaterally assigned to it by the Employee in order to
secure the repayment of the amounts which it will pay
toward the premiums on the Policy.
In consideration of the premises and of the
mutual promises contained herein, the parties hereto
agree as follows:
1. THE POLICY. The Policy has a Selected
Face Amount (as such term is defined in
the Policy) of $320,000. The parties
hereto agree that they will take any
action which may be necessary to cause the
Policy to conform to the provisions of
this Agreement. The parties hereto agree
that the Policy shall be subject to the
terms and conditions of this Agreement and
of the related collateral assignment filed
with the Insurer relating to the Policy.
2. OWNERSHIP OF POLICY. The Employee is the
sole and absolute owner of the Policy.
The Employee shall have and may exercise
all ownership rights granted to the owner
of the Policy by its terms, including
without limitation the right to designate
the Policy beneficiary and the right to
elect and change both the Selected Face
Amount and the investment options of the
Policy, except as may otherwise be
provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is
30 days prior to the due date of each
Policy premium, the Corporation shall
notify the Employee of the exact amount
due from the Employee to the Corporation
hereunder toward payment of the Planned
Annual Premium (as such term is defined in
the policy), which shall be an amount
equal to the annual cost of current life
insurance protection on the life of the
Employee, measured by the lower of the
P.S. 58 rate, set forth in Revenue Ruling
55-747 (or the corresponding applicable
provision of any future Revenue Ruling),
or the Insurer's current published premium
rate for annually renewable term insurance
for standard risks. The Employee shall
pay such required contribution to the
Corporation prior to the premium due date.
If the Employee fails to make such timely
payment, the Corporation, in its sole
discretion, may elect to make such portion
of the premium payment, which payment
shall be recovered by the Corporation as
provided herein.
b. On or before the due date of each
Policy premium, or within the grace period
provided therein, the Corporation shall
pay the full amount of the Planned Annual
Premium to the Insurer and shall, upon
request, promptly furnish the Employee
evidence of timely payment of such
premium. Except with the consent of the
Employee, the Corporation shall not pay
less than the Planned Annual Premium, but
it may, in its discretion, at any time and
from time to time, subject to acceptance
of such amount by the Insurer, pay more
than the Planned Annual Premium or make
other premium payments on the Policy. The
Corporation shall annually furnish the
Employee a statement of the amount of
income reportable by the Employee for
federal and state income tax purposes as a
result of the insurance protection
provided to the Policy beneficiary.
4. COLLATERAL ASSIGNMENT. To secure
repayment to the Corporation of the amount
of the premiums on the Policy paid by it
hereunder, the Employee has
contemporaneously herewith assigned the
Policy to the Corporation as collateral,
under a form acceptable to the Insurer for
such assignments. The collateral
assignment of the Policy to the
Corporation hereunder shall not be
terminated, altered or amended by the
Employee without the express written
consent of the Corporation. The parties
hereto agree to take all action necessary
to cause such collateral assignment to
conform to the provisions of this
Agreement.
5. LIMITATIONS ON EMPLOYEE'S RIGHTS IN
POLICY.
a. Except as otherwise provided
herein, the Employee shall not sell,
assign, transfer, borrow against or
withdraw from the cash surrender value of
the Policy, surrender or cancel the
Policy, change the beneficiary designation
provision thereof or increase or decrease
the Selected Face Amount without, in any
such case, the express written consent of
the Corporation.
b. Notwithstanding any provision
hereof to the contrary, the Employee shall
have the sole authority to direct the
manner in which the Separate Account (as
such term is defined in the Policy)
established pursuant to the terms of the
Policy shall be allocated among the
various investment options from time to
time available under the Policy and to
change such allocation from time to time,
as provided for in the Policy; provided,
however, that at least 50% of the annual
premium paid must at all times be
allocated to one or more of the following:
the Guaranteed Principal Account (as such
term is defined in the Policy); a short-
term government bond fund; or a money
market account.
c. The Corporation shall have the
right to borrow that portion of the loan
value of the Policy equal in amount to the
total amount of the premiums advanced by
the Corporation on behalf of the Employee
hereunder, reduced by any then outstanding
indebtedness secured by the Policy which
was incurred by the Corporation, including
any interest due on such indebtedness (the
"net premiums"). Interest on such Policy
loan shall be the responsibility of the
Corporation as such interest becomes due.
The Employee shall have the right to
borrow that portion of the loan value of
the Policy equal in amount to the net
premiums for the sole purpose of paying
such amount to the Corporation under
Section 8.a. of this Agreement if it is
terminated during the lifetime of the
Employee. In the event of any such
borrowing, the loan proceeds shall be paid
by the Insurer directly to the
Corporation, and such payment shall
discharge completely all obligations owing
from the Employee to the Corporation under
this Agreement with respect to the Policy.
Interest on any such Policy loan shall be
the responsibility of the Employee as such
interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Employee,
the Corporation and the Policy beneficiary
shall cooperate to take whatever action is
necessary to collect the death benefit
provided under the Policy. When such
benefit has been collected and paid as
provided herein, this Agreement shall
thereupon terminate.
b. Upon the death of the Employee,
the Corporation shall have the unqualified
right to receive a portion of such death
benefit equal to the net premiums paid by
it. The balance of the death benefit
provided under the Policy, if any, shall
be paid directly to the Policy beneficiary
in the manner and in the amount or amounts
provided in the beneficiary designation
provision of the Policy. In no event
shall the amount payable to the
Corporation hereunder exceed the Policy
proceeds payable as a result of the
maturity of the Policy as a death claim.
No amount shall be paid from such death
benefit to the Policy beneficiary until
the full amount due the Corporation
hereunder has been paid.
c. Notwithstanding any provision
hereof to the contrary, in the event that,
for any reason whatsoever, no death
benefit is payable under the Policy upon
the death of the Employee and in lieu
thereof the Insurer refunds all or any
part of the premiums paid for the Policy,
the Corporation shall have the unqualified
right to such premiums in an amount not to
exceed the net premiums paid by it.
7. TERMINATION OF THIS AGREEMENT DURING
THE LIFETIME OF THE EMPLOYEE.
a. This Agreement shall terminate
during the lifetime of the Employee,
without notice, upon the occurrence of any
of the following events: (a) total
cessation of the Corporation's business;
(b) liquidation or dissolution of the
Corporation; or (c) termination of the
Employee's employment by the Corporation
for Cause (as defined below). For the
purposes of this Section 7.a., "Cause"
shall mean: (i) conviction of the
Employee for any felony or for fraud or
embezzlement; (ii) the Employee's willful
and continued refusal to substantially
perform reasonably assigned duties with
the Corporation (other than any such
refusal resulting from incapacity due to
physical or mental illness or disability)
after a written demand for substantial
performance is delivered to the Employee
identifying the manner in which the
Corporation believes that the Employee has
willfully and continuously refused to
substantially perform his duties; or (iii)
other willful misconduct by the Employee
which is materially injurious to the
Corporation. For the purposes of this
Section 7.a., no act or failure to act
shall be considered "willful" unless done
or omitted to be done not in good faith
and without reasonable belief that such
action or omission was in the best
interest of the Corporation.
b. The Corporation may terminate
this Agreement at any time after the date
which is 16 years after the Issue Date (as
such term is defined in the Policy) by
written notice to the Employee. Such
termination shall be effective as of the
date of such notice.
c. In addition, the Employee may
terminate this Agreement during the
lifetime of the Employee and while no
premium under the Policy is overdue, by
written notice to the Corporation. Such
termination shall be effective as of the
date of such notice.
8. DISPOSITION OF THE POLICY ON TERMINATION
OF THIS AGREEMENT DURING THE LIFETIME OF
THE EMPLOYEE.
a. For 60 days after the date of
the termination of this Agreement during
the lifetime of the Employee under Section
7 of this Agreement, the Employee shall
have the option of obtaining the release
of the collateral assignment of the Policy
to the Corporation. To obtain such
release, the Employee shall repay to the
Corporation an amount equal to the total
amount of the net premiums paid by the
Corporation. Upon receipt of such amount,
the Corporation shall release the
collateral assignment of the Policy by the
execution and delivery of an appropriate
instrument of release.
b. If the Employee fails to
exercise such option within such 60-day
period, then, at the request of the
Corporation, the Employee shall execute
any document or documents required by the
Insurer to transfer all interests of the
Employee in the Policy, including without
limitation the Employee's right to
designate the Policy beneficiary, to the
Corporation. Alternatively, the
Corporation may enforce its right to be
repaid the amount due it hereunder from
the cash surrender value of the Policy
under the collateral assignment of the
Policy; provided, however, that in the
event the cash surrender value of the
Policy exceeds the amount due the
Corporation hereunder, such excess shall
be paid to the Employee. Thereafter,
neither the Employee nor the Employee's
successors, assigns or beneficiaries shall
have any further interest in and to the
Policy under the terms thereof or under
this Agreement.
9. INSURER NOT A PARTY. The Insurer shall be
fully discharged from its obligations
under the Policy by payment of the Policy
death benefit to the beneficiary or
beneficiaries named in the Policy, subject
to the terms and conditions of the Policy.
In no event shall the Insurer be
considered a party to this Agreement or
any modification or amendment hereof. No
provision of this Agreement nor of any
modification or amendment hereof shall in
any way be construed as enlarging,
changing, varying or in any other way
affecting the obligations of the Insurer
as expressly provided in the Policy,
except insofar as the provisions hereof
are made a part of the Policy by the
collateral assignment executed by the
Employee and filed with the Insurer in
connection herewith.
10. NAMED FIDUCIARY, DETERMINATION OF
BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
a. The Corporation is hereby
designated as the named fiduciary under
this Agreement. The named fiduciary shall
have authority to control and manage the
operation and administration of this
Agreement, and it shall be responsible for
establishing and carrying out a funding
policy and method consistent with the
objectives of this Agreement. The
Corporation may allocate to others certain
aspects of the management and operational
responsibilities of this Agreement,
including by the employment of advisors
and the delegation of any ministerial
duties to qualified individuals.
b. (1) Claim.
A person who believes that he or she is
being denied a benefit to which he or she
is entitled under this Agreement
(hereinafter referred to as a "Claimant")
may file a written request for such
benefit with the Corporation, setting
forth his or her claim. The request must
be addressed to the President of the
Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply
will be forthcoming within 90 days and
shall, in fact, deliver such reply within
such 90-day period. Upon written notice
prior to the expiration of the 90-day
reply period, the Corporation may,
however, extend the reply period for an
additional 90 days for reasonable cause.
If the claim is denied in whole or in
part, the Corporation shall adopt a
written opinion, using language calculated
to be understood by the Claimant, setting
forth: (A) the specific reason or reasons
for such denial; (B) the specific
reference to pertinent provisions of this
Agreement on which such denial is based;
(C) a description of any additional
material or information necessary for the
Claimant to perfect his or her claim and
an explanation why such material or such
information is necessary; (D) appropriate
information as to the steps to be taken if
the Claimant wishes to submit the claim
for review; and (E) the time limits for
requesting a review under subsection (3)
and for review under subsection (4) of
this Section 10.b. If a notice of denial
is not received within the reply period,
the claim shall be deemed denied and the
Claimant shall be permitted to request
review, as set forth below.
(3) Request for Review.
Within 60 days after the receipt by the
Claimant of the written opinion described
above (or, in the case of a deemed denial,
within 60 days after the end of the reply
period), the Claimant may request in
writing that the Secretary of the
Corporation (the "Secretary") review the
determination of the Corporation. Such
request must be addressed to the
Secretary, at the Corporation's then
principal place of business. The Claimant
or his or her duly authorized
representative may, but need not, review
the pertinent documents and submit issues
and comments in writing for consideration
by the Secretary. If the Claimant does
not request a review by the Secretary of
the Corporation's determination within
such 60-day period, he shall be barred and
estopped from challenging the
Corporation's determination, except as may
be otherwise provided herein.
(4) Review of Decision.
Within 60 days after the Secretary's
receipt of a request for review, he or she
will review the Corporation's
determination. After considering all
materials presented by the Claimant, the
Secretary will render a written opinion,
using language calculated to be understood
by the Claimant, setting forth the
specific reasons for the decision and
containing specific references to the
pertinent provisions of this Agreement on
which the decision is based. If special
circumstances require that the 60-day time
period be extended, the Secretary will so
notify the Claimant and will render the
written opinion as soon as possible, but
no later than 120 days after receipt of
the request for review. If the written
opinion on review is not rendered within
the 60-day period (or the 120-day period,
if an extension is granted), the claim
shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be
payable, the Corporation will promptly
issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures
set forth in this Section 10.b., nothing
shall prevent any person from pursuing any
other legal or equitable remedy otherwise
available, including without limitation
legal action in federal court.
11. AMENDMENT. This Agreement may not be
amended, altered or modified, except by a
written instrument signed by the parties
hereto or their respective successors or
assigns, and may not be otherwise
terminated except as provided herein.
12. BINDING EFFECT; NO THIRD-PARTY
BENEFICIARY.
This Agreement shall be binding upon
and inure to the benefit of the
Corporation and its successors and assigns
and the Employee and his respective
successors, assigns, heirs, executors,
administrators and beneficiaries. This
Agreement shall not confer any rights or
remedies upon any person other than the
parties hereto and their respective
successors and assigns.
13. NOTICE. Any notice, consent or demand
required or permitted to be given under
the provisions of this Agreement shall be
in writing and shall be signed by the
party giving or making the same. Any such
notice, consent or demand mailed to a
party hereto shall be sent by United
States certified mail, postage prepaid, or
sent by a nationally recognized overnight
delivery service, charges prepaid, in each
case addressed to such party's last know
address as shown on the records of the
Corporation. The date of such mailing
shall be deemed the date of notice,
consent or demand.
14. GOVERNING LAW. This Agreement, and the
rights of the parties hereunder, shall be
governed by and construed in accordance
with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement, in duplicate, as of the day and
year first above written.
By /s/ Joseph D. Burns
----------------------
Joseph D. Burns
ATTEST: AMERICAN BILTRITE INC.
/s/ Henry W. Winkleman By /s/ William M. Marcus
---------------------- ------------------------
Secretary Name: William M. Marcus
Title: Executive
Vice President
EXHIBIT A
---------
The following life insurance policy is subject
to the attached Split-Dollar Agreement:
Insurer: Massachusetts Mutual Life Insurance Company
Insured: Joseph D. Burns
Policy Number: 0025309
Selected Face Amount of Insurance: $320,000
Issue Date: December 16, 1996
DESCRIPTION OF SUPPLEMENTAL RETIREMENT BENEFITS
FOR GILBERT K. GAILIUS
The Compensation Committee of the Board of Directors of
American Biltrite Inc. (the "Company") recently approved
supplemental retirement benefits (the "Supplemental
Benefits") for Gilbert K. Gailius, the Company's Chief
Financial Officer, which entitle Mr. Gailius to post-
retirement cash payments from the Company, payable on the
same basis as benefits payable under The Retirement Plan
for Salaried Employees of American Biltrite Inc. (the
"Pension Plan"). The Supplemental Benefits will equal
the difference between (a) the dollar amount of
retirement benefits to which Mr. Gailius would be
entitled under the Pension Plan absent any limit on
credited compensation imposed by the Internal Revenue
Code of 1986, as amended ("Required Maximum"), and (b)
the dollar amount of retirement benefits actually payable
to Mr. Gailius under the Pension Plan. The Supplemental
Benefits will be unfunded, and Mr. Gailius's rights with
respect thereto shall be those of an unsecured creditor
of the Company.
The Pension Plan is a defined benefit pension plan.
Remuneration under the Pension Plan is calculated as a
percentage of the highest average compensation over a
period of five consecutive years during the last ten
years of service with the Company, subject to any
Required Maximum. Retirement benefits under the Pension
Plan are payable on a monthly basis after retirement
based on the form of distribution elected by a
participant.
FORM 10-K
AMERICAN BILTRITE INC. AND SUBSIDIARIES
December 31, 1996
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
---- ---- ----
(Amounts in thousands, except per share data)
<S> <C> <C> <C>
Primary:
Average shares outstanding 3,645 3,619 3,560
Net effect of dilutive stock
options-based on the treasury
stock method using average
market price 84 172 209
----- ----- -----
Totals 3,729 3,791 3,769
===== ===== =====
Net income $ 6,299 $ 6,105 $ 12,261
===== ===== ======
Per share amount $ 1.69 $ 1.61 $ 3.25
===== ===== ======
Fully diluted:
Average shares outstanding 3,645 3,619 3,560
Net effect of dilutive stock
options-based on the treasury
stock method using period-end
market price, if greater than
average market price 107 176 219
----- ----- -----
Totals 3,752 3,795 3,779
===== ===== =====
Net income $ 6,299 $ 6,105 $ 12,261
===== ===== ======
Per share amount $ 1.68 $ 1.61 $ 3.24
===== ===== ======
</TABLE>
Exhibit No. 21
SUBSIDIARIES OF THE REGISTRANT
- ------------------------------
Effective as of March 20, 1997
Name Jurisdiction
---- ------------
American Biltrite (Canada) Ltd. Canada
200 Bank Street
Sherbrooke, Quebec JIH 4K3
also doing business in Canada
as Produits American Biltrite Ltee
American Biltrite Far East, Inc. Delaware
57 River Street
Wellesley Hills, Massachusetts 02181
American Biltrite Sales Corporation Virgin Islands
57 River Street
Wellesley Hills, Massachusetts 02181
Majestic Jewelry, Inc. Delaware
57 River Street
Wellesley Hills, Massachusetts 02181
Ocean State Jewelry, Inc. Rhode Island
57 River Street
Wellesley Hills, Massachusetts 02181
Aimpar, Inc. New York
57 River Street
Wellesley Hills, Massachusetts 02181
ABTRE, Inc. Tennessee
57 River Street
Wellesley Hills, Massachusetts 02181
Ideal Tape Co., Inc. Delaware
1400 Middlesex Street
Lowell, Massachusetts 01851
American Biltrite Intellectual Properties, Inc. Delaware
1013 Centre Road Suite 350
Wilmington, Delaware 19805
<PAGE>
K & M Trading (H.K.) Limited Hong Kong
1001 Hutchison House
10 Harcourt Road
Hong Kong
Congoleum Corporation Delaware
3705 Quakerbridge Road
Mercerville, New Jersey 08619
Exhibit 23(1)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-11879) pertaining to
the 1985 Stock Option Plan of American Biltrite Inc. and the
Registration Statement (Form S-8 No. 33-77318) pertaining to
the 1993 Stock Award and Incentive Plan of American Biltrite
Inc. of our report dated March 4, 1997, with respect to the
consolidated financial statements and schedule of American
Biltrite Inc. and subsidiaries included in the Annual Report
(Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
- ----------------------
Boston, Massachusetts
March 21, 1997
Exhibit 23(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
Registration Statement of American Biltrite Inc. on Form
S-8 (Registration No. 33-11879) of our report dated February
20, 1996 on our audits of the financial statements and
financial statement schedule of Congoleum Corporation as of
December 31, 1995 and 1994 and for the years ended December
31, 1995, 1994 and for the ten months ended December 31,
1993, which reports are included in this Report on Form
10-K.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 33,658
<SECURITIES> 17,500
<RECEIVABLES> 34,849
<ALLOWANCES> 0
<INVENTORY> 81,058
<CURRENT-ASSETS> 175,725
<PP&E> 111,884
<DEPRECIATION> 0
<TOTAL-ASSETS> 324,966
<CURRENT-LIABILITIES> 89,007
<BONDS> 105,565
0
0
<COMMON> 19,469
<OTHER-SE> 42,292
<TOTAL-LIABILITY-AND-EQUITY> 324,966
<SALES> 417,961
<TOTAL-REVENUES> 422,190
<CGS> 284,305
<TOTAL-COSTS> 284,305
<OTHER-EXPENSES> 105,164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,747
<INCOME-PRETAX> 21,974
<INCOME-TAX> 8,871
<INCOME-CONTINUING> 6,299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,299
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.68
</TABLE>
