-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SZ2sLlvK/9oZWgqq8aDCh4BqVGAvIkW+9zw0B/2dAz4oaHJoWGv9wr741xIT/+qA 7En1j9OOeNMBFrQTPOEGPg== 0000004611-97-000007.txt : 19970328 0000004611-97-000007.hdr.sgml : 19970328 ACCESSION NUMBER: 0000004611-97-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BILTRITE INC CENTRAL INDEX KEY: 0000004611 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 041701350 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04773 FILM NUMBER: 97565026 BUSINESS ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 BUSINESS PHONE: 6172376655 MAIL ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN BILTRITE RUBBER CO INC DATE OF NAME CHANGE: 19730621 10-K405 1 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 - -------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 57 River Street, Wellesley Hills, Massachusetts 02181 - ------------------------------------------------------ ------------- (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 - -------------------------- ------------------------ 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. PART I ITEM 1. BUSINESS - ----------------- (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. 2 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 - ------------------------------------- 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 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 4 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. 5 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 - -------------------------- 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 Key Customers. For the year ended December 31, 1996, two - -------------- 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 - -------------------------- 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 - --------- 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. 7 ITEM 2. PROPERTIES - ------------------- At December 31, 1996, ABI and Congoleum operated a total of nine manufacturing plants, and ABI operated a jewelry product distribution warehouse, as follows:
Owned Industry Segment or For Which Location Square Feet Leased Properties Used - -------- ----------- ------ --------------- 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
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 - --------------------------- 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. 8 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 9 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- 10 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. 11 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:
Sales Price of Common Shares ---------------------------- 1996 1995 Quarter ---- ---- Ended High Low High Low --------- ---- --- ---- --- 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 Cash Dividends Per Common Share ------------------------------- Quarter Ended 1996 1995 ----- ---- ----- March 31 $ .10 $ .0625 June 30 .10 .0875 September 30 .10 .1000 December 31 .10 .1000 ----- ------- $ .40 $ .3500 ===== =======
12 ITEM 6. SELECTED FINANCIAL DATA - ----------------------------------
Year Ended December 31, ----------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (In thousands, except per share data) 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
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 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.
Pro forma 1996 1995 1994 1994 ---- ---- ---- ---- (In millions) 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 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 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 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 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 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 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 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 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 ________________ 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 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 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 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
American Biltrite Inc. and Subsidiaries Consolidated Balance Sheets (Notes 1 and 4) (In thousands of dollars)
December 31 1996 1995 ----------------------- 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 =======================
28
December 31 1996 1995 ----------------------- 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 =======================
[FN] See accompanying notes. 29 American Biltrite Inc. and Subsidiaries Consolidated Statements of Earnings (Notes 1 and 4) (In thousands of dollars, except per share data)
Year ended December 31 1996 1995 1994 ------------------------------------- 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 =====================================
[FN] See accompanying notes. 30 American Biltrite Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (In thousands of dollars)
Foreign Currency Minimum Common Retained Translation Pension Treasury Stock Earnings Adjustment Liability Stock ------------------------------------------------------ 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 ======================================================
[FN] See accompanying notes. 31 American Biltrite Inc. and Subsidiaries Consolidated Statements of Cash Flows (Notes 1 and 4) (In thousands of dollars)
Year ended December 31 1996 1995 1994 ---------------------------------- 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 ==================================
[FN] See accompanying notes. 32 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 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 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 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 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:
1996 1995 ---------------------- (In thousands) 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 ======================
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:
December 31 1996 1995 ---------------------- (In thousands) 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 ======================
Depreciation expense amounted to $12,151,000, $11,274,000 and $2,715,000 in 1996, 1995 and 1994, respectively. 37 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 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):
Year ended December 31 1994 ------------ Revenue $409,300 ============ Net earnings $ 12,950 ============ Earnings per common share: Primary $ 3.41 ============ Fully diluted $ 3.40 ============
39 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:
1996 1995 --------------------- (In thousands) 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 =====================
40 American Biltrite Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 6. Financing Arrangements Long-term debt consists of the following:
1996 1995 ----------------------- (In thousands) 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 =======================
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 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 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):
1997 $ 1,156 1998 1,156 1999 4,156 2000 3,000 2001 90,750
43 American Biltrite Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 7. Other Liabilities Other liabilities consist of the following:
1996 1995 ----------------------- (In thousands) 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 ======================
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:
1996 1995 1994 ----------------------------- (In thousands) 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 ==============================
44 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:
Plans Whose Plans Whose Assets Exceed Accumulate Accumulated Benefits Benefits Exceed Assets ---------------------------- (In thousands) 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) =========================
45 American Biltrite Inc. and Subsidiaries Notes to consolidated Financial Statements December 31, 1996 8. Pension Plans (continued)
Plans Whose Plans Whose Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets ----------------------------- (In thousands) 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) =============================
Key assumptions used in developing the actuarial present value of the Company's benefit obligations are as follows:
December 31 1996 1995 ------------------------ Weighted-average discount rate 7% 7% Rate of increase in future compensation levels 5%-5.5% 5%-5.5%
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 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):
1996 1995 ---------------------- 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 ======================
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):
1996 1995 ----------------------- 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) ======================
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 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):
1997 $2,854 1998 1,421 1999 770 2000 317 2001 231 -------- Total future minimum lease payments $5,593 ========
48 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 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:
1996 1995 ----------------------- (In thousands) 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 =======================
Credit carryforwards consist primarily of alternative minimum tax credits and foreign tax credits. 50 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:
Year ended December 31 1996 1995 1994 ----------------------------------- (In thousands) Domestic $20,037 $17,330 $5,461 Foreign 1,937 1,390 2,253 ------------------------------------ $21,974 $18,720 $7,714 ====================================
Significant components of the provision for income taxes are as follows:
Year ended December 31 1996 1995 1994 ------------------------------------ (In thousands) 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 ====================================
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 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:
Year ended December 31 1996 1995 1994 ---------------------------------- 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% ==================================
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 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 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.
1996 1995 1994 -------------------------------------------------------------------------- Weighted- Weighted- Weighted- Average Average Average Share Exercise Price Shares Exercise Price Shares Exercise Price -------------------------------------------------------------------------- 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
Number Number Weighted-Average Option Outstanding at Exercisable at Remaining Grant Date 12/31/96 12/31/96 Contractual Life Exercisable - ---------------------------------------------------------------------------------------- May 1991 53,600 53,600 4.3 years $ 7.00 August 1993 289,040 173,424 6.7 years 16.88
54 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:
1996 1995 ------------------------------------------ Weighted- Weighted- Average Average Exercise Exercise Shares Price Shares Price ------------------------------------------ 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
55 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):
1996 1995 -------------------- (In thousands) 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
56 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 - --------------------------------
1996 1995 1994 -------------------------------------- (In thousands) 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 ======================================
57 American Biltrite Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 13. Industry Segments (continued)
1996 1995 1994 ------------------------------------- (In thousands) 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 =====================================
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 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):
Net Sales and Sales to Other Unaffiliated Operating Identifiable Depreciation Capital Income Customer Profit Assets Expense Expenditures --------------------------------------------------------------------------------- 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 =================================================================================
59 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)
First Second Third Fourth Quarter Quarter Quarter Quarter ------------------------------------------- (In thousands of dollars, except per share amounts) 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
60 American Biltrite Inc. and Subsidiaries Schedule II - Valuation and Qualifying Accounts Year ended December 31, 1996, 1995 and 1994 (Dollars in thousands)
- -------------------------------------------------------------------------------------------------------- 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| - -------------------------------------------------------------------------------------------------------- 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 ==============================================================================
[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 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 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 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 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 ________________ 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 EX-3.1 2 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. EX-10.14 3 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 EX-10.(15) 4 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 EX-10.(16) 5 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 EX-10.(17) 6 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 EX-10.(18) 7 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 EX-10.(19) 8 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 EX-10.(20) 9 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 EX-10.(21) 10 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. EX-11 11 FORM 10-K AMERICAN BILTRITE INC. AND SUBSIDIARIES December 31, 1996 EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended December 31 1996 1995 1994 ---- ---- ---- (Amounts in thousands, except per share data) 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 ===== ===== ======
EX-21 12 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 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 EX-23.1 13 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 EX-23.2 14 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 EX-27 15
5 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 33,658 17,500 34,849 0 81,058 175,725 111,884 0 324,966 89,007 105,565 0 0 19,469 42,292 324,966 417,961 422,190 284,305 284,305 105,164 0 10,747 21,974 8,871 6,299 0 0 0 6,299 1.69 1.68
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