<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Georgia Bonded Fibers, Inc.
(Name of Registrant as Specified in its Charter)
David A. Dugan, Corporate Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rules
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Set forth the amount on which the filing fee is calculated and state how it
was determined.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
(Georgia Bontex logo appears here)
NOTICE OF ANNUAL STOCKHOLDERS MEETING
September 18, 1995
To The Stockholders of
GEORGIA BONDED FIBERS, INC.
Notice is hereby given that the Annual Meeting of Stockholders of Georgia
Bonded Fibers, Inc. will be held at the Best Western Inn, Willow Springs Drive,
Lexington, Virginia, on October 19, 1995, at 11:00 a.m., for the following
purposes:
1. To elect three Class B directors to serve until the annual meeting of
stockholders in 1998 and to elect one Class A director to serve until
the annual meeting of stockholders in 1997;
2. The appointment of independent auditors of the Company for the fiscal
year 1996; and
3. The transaction of such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on August 29, 1995,
are entitled to vote at this meeting.
You are urged to fill in, date and sign the accompanying proxy and to mail
the same as promptly as possible. If you sign and return your proxy without
specifying your choices, it will be understood that you wish to have your shares
voted in accordance with the directors' recommendations. Should you decide to
attend the meeting and vote in person, you may withdraw your proxy.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement regarding the matters proposed to be acted upon at
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
David A. Dugan
Corporate Secretary
<PAGE>
GEORGIA BONDED FIBERS, INC.
A NEW JERSEY CORPORATION
PROXY STATEMENT
1995 ANNUAL MEETING OF STOCKHOLDERS
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Georgia Bonded Fibers, Inc. (the
"Company") of proxies in the accompanying form to be used at the Annual Meeting
of the Stockholders of the Company to be held on October 19, 1995, at 11:00
a.m., Eastern Standard Time, at the Best Western Inn at Hunt Ridge, Willow
Springs Drive, Lexington, Virginia 24450, and at any adjournments thereof. The
approximate date on which this Proxy Statement and the accompanying form of
proxy are first being sent or given to stockholders is September 26, 1995.
A copy of the Company's Annual Report to Stockholders, including financial
statements for the fiscal year ended June 30, 1995, reported upon by KPMG Peat
Marwick LLP, is being mailed concurrently with this Proxy Statement, but should
not be considered proxy solicitation material.
Any person signing and mailing the enclosed form of proxy may revoke the
proxy at any time prior to the actual voting thereof by attending the Annual
Meeting and voting in person, by submitting a signed proxy bearing a later date,
or by giving prior written notice of revocation of the proxy to the Corporate
Secretary of the Company, One Bontex Drive, Buena Vista, Virginia 24416-0751.
All properly executed proxies delivered pursuant to this solicitation will be
voted at the Annual Meeting in the manner specified therein. If no specification
is made, the proxy will be voted FOR the election of all of the Class B
directors and one Class A director and FOR the appointment of KPMG Peat Marwick
LLP as independent auditors.
VOTING SECURITIES
The close of business on August 29, 1995, has been fixed as the record date
for the determination of stockholders of the Company entitled to notice of and
to vote at the Annual Meeting of Stockholders. There were 1,572,824 shares of
Company common stock outstanding as of the foregoing record date, and each such
share is entitled to one vote.
The holders of shares entitled to cast a majority of the votes at the
Annual Meeting constitute a quorum. If a share is represented for any purpose at
the Annual Meeting, it is deemed to be present for purposes of establishing a
quorum. Abstentions and broker non-votes (I.E., shares registered in the names
of brokers or other "street name" nominees for which proxies are voted for some
but not all matters) will be included in determining the number of shares
represented at the Annual Meeting. Directors will be elected by a plurality of
the votes cast in person or by proxy at the Annual Meeting. Votes that are
withheld and broker non-votes will not be included in determining the number of
votes cast.
The Company will appoint one or more inspectors of election to act at the
Annual Meeting and to make a written report thereof. Prior to the meeting, the
inspectors will sign an oath to perform their duties in an impartial manner and
according to the best of their ability. The inspectors will ascertain the number
of shares outstanding and the voting power of each, determine the shares
represented at the meeting and the validity of proxies and ballots, count all
votes and ballots, and perform certain other duties as required by law.
2
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of August 29, 1995, information with
respect to the only known beneficial owners of more than five percent of the
outstanding common stock of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
<S> <C> <C>
Mrs. Marie G. Surmonte 843,082 1 53.60
1913 Adrian Avenue
Spring Lake, New Jersey 07762
Estate of Hugo N. Surmonte 661,478 2 42.05
c/o First Fidelity Bank, N.A.
303 Broad Street
Red Bank, New Jersey 07701
Hugo N. Surmonte Residuary Trust 81,700 3 5.19
c/o First Fidelity Bank, N.A.
303 Broad Street
Red Bank, New Jersey 07701
First Fidelity Bank, N.A. 743,178 4 47.25
303 Broad Street
Red Bank, New Jersey 07701
Kennedy Capital Management, Inc. 93,600 5 5.95
425 N. New Ballas Road, Suite 181
St. Louis, Missouri 63141-6821
</TABLE>
1 Includes 99,904 shares owned by Mrs. Surmonte with sole voting and dispositive
power and an aggregate of 743,178 shares of which Mrs. Surmonte has shared
voting and dispositive power as a co-executor of the Estate of Hugo Surmonte
and as beneficiary and co-trustee of the Hugo N. Surmonte Residuary Trust, as
described below.
2 Marie G. Surmonte and First Fidelity Bank, N.A. are co-executors of the Estate
and have shared voting and dispositive power with respect to these shares.
3 Marie G. Surmonte is a beneficiary and, with First Fidelity Bank, N.A., is a
co-trustee of the Trust. Mrs. Surmonte and the Bank have shared voting and
dispositive power with respect to these shares.
4 Includes 81,700 shares held as co-trustee for the Hugo N. Surmonte Residuary
Trust and 661,478 shares held as co-executor of the Estate of Hugo N.
Surmonte. The Bank has shared voting and dispositive power with respect to
these shares.
5 All shares owned by advisory clients over which Kennedy Capital Management,
Inc. has shared voting and dispositive power.
3
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth as of August 29, 1995, certain information
regarding the beneficial ownership of the common stock of the Company by each
director and nominee, by each named executive officer and by all directors and
executive officers as a group. Unless otherwise noted in the footnotes to the
table, the named persons have sole voting and investment power with respect to
all outstanding shares of common stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF COMMON
STOCK SHARES BENEFICIALLY
OWNER AS OF
NAME OF BENEFICIAL OWNER AUGUST 29, 1995 PERCENT OF CLASS
<S> <C> <C>
William J. Binnie 3,244 1 *
Michael J. Breton 1,900 *
William B. D'Surney 350 *
David A. Dugan 160 *
Charles W. J. Kostelni 5,175 *
James C. Kostelni 46,644 2 2.97
Jeffrey C. Kostelni 7,476 3 *
Frank B. Mayorshi 200 *
Larry E. Morris 4,000 *
Joseph F. Raffetto 5,582 *
Patricia S. Tischio 2,750 4 *
Robert J. Weeks 5,121 *
All Directors and
Executive Officers
as a Group(12 persons) 82,602 5.25
</TABLE>
1 Includes 726 shares held by Mr. Binnie's spouse as Trustee for their sons.
2 Includes 8,499 shares owned by Mr. Kostelni's spouse. Also includes 2,653
owned by Mr. Kostelni's son, as to which Mr. Kostelni disclaims beneficial
ownership.
3 Includes 1,000 shares owned by Mr. Kostelni's spouse.
4 All shares owned by Mrs. Tischio's daughter.
* Represents less than 1% of the outstanding shares of Company common stock.
ELECTION OF DIRECTORS
PROPOSAL NO. 1
The Company's Board of Directors is divided into three classes (A, B and C)
with staggered three-year terms. The current term of office of the Class B
directors expires at this 1995 Annual Meeting of Stockholders. The terms of the
Class A and Class C directors will expire in 1997 and 1996, respectively.
There is one Class A director, William B. D'Surney, who has been nominated
for reelection by the Board of Directors. Mr. D'Surney has served as a director
of the Company since January 26, 1995, when he was elected by the Board of
Directors to fill the vacancy created by the retirement of Hugo N. Surmonte.
There are three Class B directors, Jeffrey C. Kostelni, Joseph F. Raffetto and
Patricia S. Tischio, each of whom has been nominated for reelection or election
by the Board of Directors. Ms. Tischio has served as a director of the Company
since April 27, 1995, when she was elected by the Board to fill the vacancy
created by the resignation of Robert J. Bregman.
It is the intention of the persons named as proxies, unless instructed
otherwise, to vote for the election of each of the four nominees set forth
below. Each nominee has agreed to serve if elected. If any nominee shall
unexpectedly be unable to serve, the shares represented by all valid proxies
will be voted for the remaining nominees and such other person or persons as may
be designated by the Board. At this time, the Board knows of no reason why any
nominee might be unable to serve. If elected, the Class A nominee will serve for
a two-year term until the 1997 Annual Meeting
4
<PAGE>
and the Class B nominees will serve for a three-year term until 1998 Annual
Meeting and until their successors are elected and qualified. The present
principal occupation or employment and employment during the past five years and
all positions or offices, if any, held with the Company are set forth opposite
the name of each director and nominee. All nominees are members of the present
Board of Directors.
<TABLE>
<CAPTION>
YEAR IN WHICH FIRST
NAME AND AGE ELECTED AS DIRECTOR PRINCIPAL OCCUPATION
<S> <C> <C>
</TABLE>
NOMINEES
CLASS A DIRECTORS
(SERVING UNTIL 1997 ANNUAL MEETING)
<TABLE>
<S> <C> <C>
William B. D'Surney 1995 Private investor since 1994, prior thereto, Senior
Age 66 Vice-President, Alexander & Alexander, Richmond,
Virginia. Mr. D'Surney has a Bachelor of Science
Degree in Business Administration.
</TABLE>
CLASS B DIRECTORS
(SERVING UNTIL 1998 ANNUAL MEETING)
<TABLE>
<S> <C> <C>
Patricia S. Tischio 1995 Assistant Secretary (since 1994) and Corporate Office
Age 56 Manager (since 1989) of the Company. Mrs. Tischio has
a Bachelor of Arts Degree in English.
Jeffrey C. Kostelni 1995 Chief Financial Officer and Treasurer (since 1994) and
Age 29 Assistant Controller (1993-94) of the Company; prior
thereto, Senior Auditor, Deloitte & Touche,
Washington, D.C. Mr. Kostelni has a Bachelor of
Science Degree in Accountancy, Cum Laude and is a
Certified Public Accountant.
Joseph F. Raffetto 1984 Physician (retired)
Age 86
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS A DIRECTORS
(SERVING UNTIL 1997 ANNUAL MEETING)
<TABLE>
<S> <C> <C>
James C. Kostelni 1965 Chairman of the Board, President, and Chief Executive
Age 60 Officer of the Company. Mr. Kostelni has a Bachelor of
Science Degree in Business Administration.
Robert J. Weeks 1983 Private investor since 1993; prior thereto, Vice-
Age 61 President, Dun & Bradstreet Corp., Bethlehem,
Pennsylvania. Mr. Weeks has a Bachelor of Science
Degree in Business Administration.
Larry E. Morris 1993 Technical Director (since 1983) and Sales Director
Age 49 (since 1993) of the Company; prior thereto,
Manufacturing Director of the Company (1983-93). Mr.
Morris has a Bachelor of Science Degree in Chemical
Engineering.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR IN WHICH FIRST
NAME AND AGE ELECTED AS DIRECTOR PRINCIPAL OCCUPATION
<S> <C> <C>
</TABLE>
CLASS C DIRECTORS
(SERVING UNTIL 1996 ANNUAL MEETING)
<TABLE>
<S> <C> <C>
William J. Binnie 1977 President, W.J. Binnie & Associates, Whispering Pines,
Age 70 North Carolina (engineering consulting firm). Mr.
Binnie has a Bachelor of Science Degree in Civil
Engineering.
Michael J. Breton 1990 Corporate Director of International Operations (since
Age 55 1993), and General Manager of Bontex S.A., a subsidiary
of the Company (since 1987); prior thereto, Director of
European Operations (1987-1993). Mr. Breton has a
Bachelor of Science Degree in Paper Technology.
Frank B. Mayorshi 1993 Private investor since 1991; prior thereto, Partner,
Age 59 KPMG Peat Marwick LLP, Roanoke, Virginia. Mr. Mayorshi
has a Bachelor of Science Degree in Business
Administration.
</TABLE>
No director or nominee is a director of any other company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934. Mr. James C. Kostelni is the son-in-law of Mrs. Marie G. Surmonte. Mr.
Jeffrey C. Kostelni is the son of Mr. James C. Kostelni and grandson of Mrs.
Surmonte. Mrs. Patricia S. Tischio is the daughter of Mrs. Marie G. Surmonte.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during fiscal 1995. All directors
attended 75% or more of the total number of meetings of the Board and the
committees of the Board on which they served.
A director's fee of $1,500 per meeting attended is paid to all non-employee
directors. In addition, non-employee directors who are members of the Executive,
Audit and/or Compensation Committees receive a fee of $500 per committee meeting
attended. All directors are reimbursed for their actual travel expenses for
attending Board and committee meetings.
The Board of Directors annually elects four standing committees: the
Executive Committee, the Audit Committee, the Compensation Committee and the
Nominating Committee.
The Executive Committee of the Board of Directors, which is composed of
Messrs. James C. Kostelni (Chairman), Weeks and Mayorshi, is empowered to
exercise all authority of the Board of Directors, except with respect to matters
reserved for the Board by New Jersey law. This committee met five times during
the fiscal 1995.
The Audit Committee of the Board of Directors, which consists of Messrs.
Mayorshi (Chairman), Binnie and Weeks, oversees the financial reporting process
and the Company's internal controls. This committee met four times during fiscal
1995.
The Compensation Committee of the Board of Directors, which consists of
Messrs. Weeks (Chairman), Binnie and Mayorshi, meets as necessary to consider
and make recommendations to the Board of Directors concerning compensation of
executive officers and employees of the Company. This committee met two times
during fiscal 1995.
The Nominating Committee of the Board of Directors, which consists of
Messrs. James C. Kostelni (Chairman), Mayorshi and Weeks, considers and
recommends to the Board, candidates for election as directors of the Company.
The Nominating Committee will not consider nominees recommended by stockholders.
This committee met one time during fiscal 1995.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding the individual
compensation earned by the Chief Executive Officer and the four other most
highly compensated executives for services in all capacities to the Company and
its subsidiaries for the fiscal years ended June 30, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) 1 COMPENSATION ($) 2 COMPENSATION ($) 3
<S> <C> <C> <C> <C> <C>
Hugo N. Surmonte, deceased, 1995 81,383 25,000 1,215 0
Chairman of the Board of 1994 250,532 0 4,455 0
Directors, Treasurer and 1993 250,532 0 2,228 0
Chief Executive Officer,
Retired (effective October
1994)
James C. Kostelni 1995 213,733 0 97,834 60,411
Chairman of the Board of 1994 188,180 52,440 98,337 49,702
Directors, President and 1993 180,180 0 2,283 33,256
Chief Executive Officer
(effective October 1994)
Michael J. Breton 1995 173,309 10,000 18,433 7,023
Corporate Director of 1994 143,223 0 16,420 432
International Operations, 1993 130,372 0 13,526 21,387
Bontex, S.A.
Larry E. Morris 1995 98,890 0 3,012 3,043
Technical and Sales 1994 95,125 26,403 3,169 2,448
Director 1993 88,820 0 792 2,261
Mark P. Belair 1995 91,899 0 1,749 752
Chief Engineer and 1994 92,067 25,661 1,992 1,300
Director of Manufacturing, 1993 78,033 0 498 1,163
Resigned (effective June
1995)
</TABLE>
1 In 1995, for Mr. Surmonte, $25,000 one time retirement bonus paid upon his
retirement; and for Mr. Breton, $10,000 special performance-based bonus
awarded by the Board of Directors.
2 Except as otherwise indicated in the table, the named executives did not
receive perquisites or other personal benefits in excess of the lessor of
$50,000 or 10% of the total of his salary and bonus reported in the table. All
amounts represent automobile allowances or long-term disability insurance
premium payments, except for Mr. Kostelni, which in 1995 includes automobile
allowance $3,370, a $26,000 bonus payment and $62,069 "gross-up" payment for
reimbursement of taxes received pursuant to the Supplemental Executive
Compensation Agreement (discussed below) and long-term disability insurance
premium payment in the amount of $6,395.
3 Amounts disclosed in this column for 1995 include: (i) payment by the Company
of premiums for whole life insurance on behalf of Mr. Kostelni in the amount
of $6,375; (ii) annuity having a value of $44,557, transferred to Mr. Kostelni
pursuant to the Supplemental Executive Compensation Plan; (iii) Company
contributions on behalf of the named executive officers under the Georgia
Bonded Fibers, Inc. Retirement Plan as follows: Mr. Surmonte $0; Mr. Kostelni
$9,479; Mr. Breton $0: Mr. Morris $3,043; and Mr. Belair $752; and (iv) Bontex
S.A.'s contribution under the Bontex, S.A. Pension Plan on behalf of Mr.
Benton in the amount of $7,023.
7
<PAGE>
RETIREMENT PLANS
GEORGIA BONDED FIBERS, INC. RETIREMENT INCOME PLAN
The Company has in effect a defined benefit retirement plan ("Plan").
Estimated annual benefits payable at normal retirement age 65 under the Plan to
persons in specified remuneration and years of service classifications are set
forth below. The following table contains no benefits attributable to
supplemental benefit plans as there are no such plans.
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE
EARNINGS 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 125,000 $35,677 $47,569 $59,461 $71,353 $71,353
150,000 43,177 57,569 71,961 86,353 86,353
175,000 43,177 57,569 71,961 86,353 86,353
200,000 43,177 57,569 71,961 86,353 86,353
225,000 43,177 57,569 71,961 86,353 86,353
250,000 43,177 57,569 71,961 86,353 86,353
300,000 43,177 57,569 71,961 86,353 86,353
400,000 43,177 57,569 71,961 86,353 86,353
450,000 43,177 57,569 71,961 86,353 86,353
500,000 43,177 57,569 71,961 86,353 86,353
</TABLE>
The benefits in the Table are computed as a straight-life annuity payable
annually and are derived from both employer and employee contributions. The
benefits are not subject to any deduction for Social Security or other offset
amounts.
The compensation covered by the Plan includes all amounts received for
personal services rendered in the course of employment for the Company to the
extent those amounts are includable in gross income except for distributions
from deferred compensation plans or other amounts that receive special tax
treatment. Compensation for purposes of the Plan may not exceed statutory
limits. The limit for the 1995 and 1994 plan years was $150,000, which may be
increased by the Internal Revenue Service in the future to reflect cost of
living increases. The benefit formula equals the sum of (A) 1.5% of Final
Average Earnings up to Social Security Covered Compensation, and (B) 2.0% of
Final Average Earnings in excess of Social Security Covered Compensation,
multiplied by credited years of service up to a maximum of 30 years.
Social Security Covered Compensation means the average of the taxable wage
bases for the 35 calendar years ending with the last day of the calendar year in
which a participant attains his Social Security retirement age. Final Average
Earnings is generally the average earnings for the five highest consecutive
years of compensation during the ten years immediately preceding retirement.
It is estimated that at age 65, for Plan purposes, Messrs. James C.
Kostelni and Morris will have 41 and 28 years of credited service, respectively.
Mr. Breton does not participate in the Plan.
BONTEX, S.A. PENSION PLAN
The Company's subsidiary, Bontex, S.A., maintains a pension plan ("Pension
Plan") for certain of its employees. Mr. Breton is the only Pension Plan
participant included in the Compensation Table. The Pension Plan generally
provides a monthly retirement benefit beginning at normal retirement age 65
until the participant's death based on years of service and the average of the
last five years' annual salary. Provisions are also made for monthly payments to
a surviving spouse and children. Estimated annual benefits payable upon
retirement under the Pension Plan to persons in
8
<PAGE>
specified remuneration and years of service classifications are set forth below.
No benefits from a supplemental benefit plan are included as no such plan
exists.
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE
EARNINGS 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 20,046 $ 26,729 $ 33,411 $ 40,093 $ 46,775
150,000 25,485 33,980 42,475 50,969 59,465
175,000 30,923 41,231 51,539 61,847 72,154
200,000 36,362 48,482 60,602 72,724 84,844
225,000 41,800 55,733 69,667 83,600 97,534
250,000 47,239 62,984 78,731 94,477 110,223
300,000 58,115 77,488 96,859 116,230 135,603
400,000 79,868 106,492 133,114 159,738 186,360
450,000 90,746 120,994 151,243 181,491 211,740
500,000 101,623 135,496 169,371 203,244 237,119
</TABLE>
It is estimated that at age 65 Mr. Breton will have 18 years of credited
service. Although compensation for Pension Plan purposes is the average of the
most recent five years' annual salary, only $133,409 of the amount shown for Mr.
Breton in the Compensation Table qualifies as compensation under the Pension
Plan for 1995 because the balance was paid from the United States and is not
included in the definition of compensation. The Pension Plan defines the benefit
in terms of Belgian francs, and the above amounts were calculated using the
exchange rate in effect on June 30, 1995. The benefits listed in the Pension
Plan table are computed as a straight-life annuity payable annually and are not
subject to any deduction for Social Security or other offset amounts.
RETIREMENT COMPENSATION AGREEMENTS
SUPPLEMENTAL EXECUTIVE COMPENSATION AGREEMENT
On May 26, 1994, the Company and Mr. James C. Kostelni (hereafter in this
section, Mr. Kostelni) entered into a Supplemental Executive Compensation
Agreement which is intended to supplement Mr. Kostelni's retirement benefits to
make up for any loss of benefits under the Georgia Bonded Fibers, Inc.
Retirement Income Plan resulting from the application of certain limitations
imposed by amendments to Section 401(a)(17) of the Internal Revenue Code of
1986, as amended, under the Revenue Reconciliation Act of 1993. Under the
Supplemental Executive Compensation Agreement, the Company has agreed, during
Mr. Kostelni's life, to purchase for Mr. Kostelni, upon execution of the
Agreement and thereafter on May 1 of each year through May 1, 2000, an annuity
contract which provides for the payment of at least $458.33 per month to Mr.
Kostelni, such payments to begin upon Mr. Kostelni's reaching age sixty-five and
to end upon Mr. Kostelni's death or the ten-year anniversary date of the first
annuity payment, whichever is later. In order to replace the survivorship
benefits which Mr. Kostelni's spouse, but for the tax changes, would receive
upon his death, the Company also has agreed to pay to Mr. Kostelni, upon
execution of the Agreement and thereafter on May 1 of each year through May 1,
2000, a cash bonus in the amount of $26,000. It is intended that such cash bonus
will be used by Mr. Kostelni to purchase life insurance which will then provide
the survivor benefit. Additionally, the Supplemental Executive Compensation
Agreement also provides that the Company shall, upon execution of the Agreement
and thereafter on May 1 of each year through May 1, 2000, make a cash "gross-up"
payment equal to the amount of any federal, state and local income taxes paid by
Mr. Kostelni on the benefits received under the Agreement. The value of the
annuity, the bonus and the cash "gross-up" payment for fiscal 1995 are included
in the Summary Compensation Table above.
Under the Supplemental Executive Compensation Agreement, the Company shall,
upon a change in control, (i) purchase and transfer to Mr. Kostelni all
remaining annuities to be purchased pursuant to the Agreement; (ii) pay to Mr.
Kostelni all bonus amounts still owing pursuant to the Agreement; and (iii) pay
to Mr. Kostelni the applicable "gross-up" payment computed in accordance with
the Agreement. If Mr. Kostelni dies during the term of the Supplemental
Executive Compensation Agreement, or if Mr. Kostelni's employment with the
Company is terminated, either voluntarily or pursuant to the terms of the
Executive Compensation Agreement (discussed below), the Agreement shall,
9
<PAGE>
terminate, and Mr. Kostelni shall be entitled to no further payments or benefits
under the Agreement, except those which have accrued as of the date of his death
or termination.
A change in control under the Supplemental Executive Compensation Agreement
shall be deemed to have occurred in the event that (i) any person or group
becomes a beneficial owner of 20% or more of the combined voting power of the
Company's voting securities; (ii) the members of the Company's Board of
Directors on the date of the Agreement cease for any reason to constitute at
least a majority of the Board; (iii) all or substantially all of the assets of
the Company are sold, transferred or conveyed by any means, including, but not
limited to, direct purchase or merger, if the transferee is not controlled by
the Company; or (iv) the Company is merged or consolidated with another entity
and as a result of such merger or consolidation less than 75% of the outstanding
voting securities of the surviving or resulting entity shall be owned in the
aggregate by the former stockholders of the Company. No change of control shall
be deemed to have occurred for purposes of the Agreement by virtue of the
acquisition, directly or indirectly, of 20% or more of the combined voting power
of the Company's voting securities by Mr. Kostelni or a group including Mr.
Kostelni, by a subsidiary or certain other affiliates of the Company, or by the
heirs, successors or assigns of Hugo N. Surmonte.
HUGO N. SURMONTE DEFERRED COMPENSATION AGREEMENT
On October 3, 1994, the Board of Directors adopted a deferred compensation
agreement, which supersedes the previous arrangement dated November 1, 1985,
with Hugo N. Surmonte, former Chairman of the Board of Directors. The deferred
compensation agreement requires the Company pay Mr. Surmonte $150,000 per year,
after his retirement from the Company, and during his lifetime and, if Mr.
Surmonte's death precedes his spouse's death, that such amount shall be paid to
his spouse for the remainder of her life. On October 5, 1994, Mr. Surmonte
retired from the Company. On October 10, 1994, Mr. Surmonte died, and per the
agreement his widow, Marie G. Surmonte, age 84, receives the benefit. During
fiscal year 1995, the Company paid $113,000 to Mr. Surmonte's widow and at June
30, 1995 the Company has recorded a liability of $297,000 for this obligation.
See "RELATED TRANSACTIONS" below.
EMPLOYMENT AGREEMENT
On June 29, 1989, the Company and Mr. James C. Kostelni (hereafter in this
section, Mr. Kostelni) entered into an Executive Compensation Agreement
providing for the employment of Mr. Kostelni as President and Chief Operating
Officer of the Company for a term beginning on July 1, 1989 and terminating on
May 15, 2000. Under the Agreement, Mr. Kostelni is to receive a minimum annual
salary of $145,200, which shall be adjusted annually by the Compensation
Committee of the Board of Directors, along with certain benefits, including such
bonuses as are approved by the Board of Directors, an automobile allowance and
all fringe benefits offered to Company employees.
The Agreement may be terminated by the Company only for cause, provided,
however, that the Company may not terminate the Agreement on (i) the sale by the
Company of substantially all of its assets to a single purchaser or to a group
of associated purchasers; (ii) the sale, exchange or other disposition, in one
transaction, of more than 50% of the outstanding shares of Company common stock;
(iii) a decision by the Company to terminate its business and liquidate its
assets; or (iv) the merger or consolidation of the Company in a transaction in
which the shareholders of the Company receive less than 50% of the outstanding
voting shares of the new or continuing corporation. Under the Agreement, "cause"
is deemed to include only Mr. Kostelni's (i) conviction of a felony; (ii)
material breach of the Agreement which remains uncured sixty days after notice
by the Company of such breach; or (iii) dishonesty directly related to the
performance of his duties.
The Agreement also may be terminated by the Company if Mr. Kostelni becomes
disabled for a period of more than twelve consecutive months, and shall be
terminated if Mr. Kostelni dies during the term of the Agreement. In the event
of termination of the Agreement as a result of Mr. Kostelni's death or
disability, the Company shall, within forty-five days after such termination,
pay to Mr. Kostelni or his estate, as the case may be, an amount equal to
six-months compensation or the balance due under the Agreement, whichever is
less. Additionally, in the event of Mr. Kostelni's death during the term of the
Agreement, the Company shall, within sixty days after the date of death, pay a
survivor's benefit of $5,000 to his widow or other survivor.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Georgia Bonded Fibers, Inc. is responsible
for recommending to the Board of Directors the compensation policies applicable
to all employees, including the Company's executive officers. The Company's
compensation policies are based on the fundamental premise that the achievements
of the Company result from the coordinated efforts of all employees working
toward common objectives.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company seeks to attract, motivate and retain the best possible
executive and other employee talent by providing competitive, performance-based
compensation programs that tie compensation to the Company's business objectives
and performance. The overall objective of this strategy is to align the
financial interests of the executive and other employees with those of the
shareholders by linking a substantial component of its executives' compensation
directly to Company performance.
The Committee recommends to the Board of Directors the compensation
policies that govern both the compensation opportunities, as well as the actual
amounts paid to Company officers. These policies are designed to provide
competitive levels of compensation that link incentive awards to the Company's
annual operating plan.
The Company's incentive bonus plans for executives and other employees are
designed to recognize individual and group performance. Target compensation
levels are intended to be competitive with those at other progressive companies.
During fiscal 1994, the Compensation Committee met with an outside
consultant to review the compensation of the Company's executive officers. Based
on both survey results and the review with the consultant, the Committee has
concluded that the total compensation paid to the Company's executives is market
competitive, but relatively low with respect to its peer companies.
ELEMENTS OF THE FISCAL 1995 EXECUTIVE COMPENSATION PROGRAM
The Committee believes the interests of the shareholders will be best
served if the executive compensation program links a substantial component of
the cash compensation earned by executives to increases in shareholder value.
The current program therefore includes the following two principal components:
base salary and annual cash bonuses.
BASE SALARY
Base salaries for all executive officers, including the Chief Executive
Officer, are established by reference to defined salary ranges which have been
assigned to each position based upon salary opportunities provided by the
Company's competitors. Increases to individual base salaries are awarded based
on the officer's responsibilities, an evaluation of past and current
performance, seniority and experience, the Company's overall operating results,
position in range, the overall level of salary adjustments among the Company's
peers and current and projected economic conditions. Base salary is also a
reflection of the value of the job in the Company's operations.
ANNUAL INCENTIVE PLAN
The Company's annual incentive bonus plan directly links the Company's
performance to executive officer compensation by providing for higher variable
pay when the Company's performance is above defined targets and denying
competitive variable pay when Company performance is below targets. The plan,
which is designed to reward the accomplishment of overall corporate objectives
and reflect the Company's priority of maximum earnings, establishes a bonus pool
from which Company employees, including executive officers, may receive an
annual cash bonus. In fiscal 1995, the maximum amount at target of the cash
bonus available to each executive under the plan was one-twelfth of the base
market midpoint salary range established for such executive's position, as
determined by the Committee based on information provided by the Company's
compensation consultants and the Committee's assessment of the executive's
position and responsibilities at the Company. Maximum executive bonuses
available at target under the plan for fiscal 1995 ranged from $16,347 to
$6,593. Bonuses were not available to executive officers under the plan in
fiscal
11
<PAGE>
1995 unless and until the Company's net income after taxes exceeded $500,000.
This $500,000 threshold was subjectively established by the Committee based on
the Company's prior bonus arrangements.
The amount of the maximum cash bonus received by an executive under the
plan depends upon the extent to which the Company meets or exceeds the target
levels established for each of six operating goals -- environment, safety,
production efficiency, customer service, product quality and inventory turns and
ISO 9000 registration. These target levels are established each year by the
Committee, with the advice of management, based on the Company's past results,
anticipated improvements in efficiency and productivity, and current market
conditions. The target levels for the six operating goals, as a percent of the
1995 bonus pool, were weighted as follows: environment 20%, safety 20%,
production efficiency 15%, customer service 15% and product quality 20% and ISO
9000 10%. In fiscal 1995, the Company did not meet the $500,000 net income
threshold and reached a percentage of the target levels for all of the six
operating goals -- environmental (95%), safety (92%), customer service (100%),
product quality operating goals (80%), production efficiency (90%) and ISO 9000
(80%). No bonuses were paid to the Company's executive officers under the plan
in fiscal 1995, because the net income threshold was not met.
1994-95 SENIOR MANAGEMENT INCENTIVE PLAN
The purpose of the 1994-95 Senior Management Incentive Plan was to provide
additional incentives to executive officers to realize goals and to maximize
shareholder value by having a significant percentage of total direct
compensation derived from incentive awards. This strategy serves to motivate
officers to maximize Company performance and to align officer and shareholder
interests more closely by linking incentive compensation directly to increases
in shareholder value.
Under this plan, executive officers were eligible to earn an additional
annual bonus equal to a percentage of their 1995 current base salary (up to base
salary of $200,000) if the Company's earnings for fiscal 1995 exceeded specified
amounts. The level of bonus payments available to executives under the plan was
determined as follows: 10% of current base salary if the Company's pre-tax
earnings reaches $1,250,000; 20% of current base salary if the Company's pre-tax
earnings reaches $1,780,000; and 30% of current base salary if the Company's
pre-tax earnings reaches $3,000,000. If the Company meets any of the foregoing
goals with respect to increases in pre-tax earnings, the plan provided that the
executive officers could double their bonuses thereunder if the Company's sales
increased by 5% or more over the prior year's sales. The percentages and targets
established under the plan were determined by the Committee, subject to approval
of the Board of Directors, based on current year financial results and projected
financial results for the new plan year. The Company's loss before taxes in
fiscal 1995 was $2,346,000, and net sales growth was 6.8%. No bonuses were paid
under the plan, because the Company did not reach its threshold pre-tax
earnings.
CHIEF EXECUTIVE OFFICER (CEO) COMPENSATION
The 1995 compensation paid to Mr. James C. Kostelni, the Company's Chief
Executive Officer, was recommended by the Compensation Committee based on its
review of independently produced CEO compensation surveys and consideration of
compensation paid by companies of similar size with global responsibilities in
comparable industries. The Compensation Committee recommended the CEO's
compensation to the Board of Directors after considering that Mr. James C.
Kostelni was elected by the Board of Directors to the position of Chairman of
the Board and CEO and accompanying responsibilities after the retirement of Mr.
Surmonte; that Mr. James C. Kostelni is making significant accomplishments in
developing the Company's specifications sales business which is a major portion
of the Company's sales growth; his progress in initiating future manufacturing
operations in the Asian market; overall past and present performance and
contributions to the Company, and the relationship of the CEO's compensation to
that of other key executives.
Compensation Committee:
Robert J. Weeks, Chairman
Frank B. Mayorshi
William J. Binnie
12
<PAGE>
RELATED TRANSACTIONS
Pursuant to the Hugo N. Surmonte Deferred Compensation Plan, Marie G.
Surmonte, age 84, Mr. Surmonte's widow and a beneficial owner of 53.6% of the
Company, has since Mr. Surmonte's death, received monthly payments in the amount
of $12,500 and will continue to receive such payments until her death. See
discussion under "Retirement Compensation Arrangements -- HUGO N. SURMONTE
DEFERRED COMPENSATION AGREEMENT above." The total amount of payments received by
Mrs. Surmonte under the Plan in fiscal 1995 was $112,500.
STOCK PERFORMANCE
The following graph compares the yearly percentage change and the
cumulative total shareholder returns on the Company's common stock with the
cumulative return on the NASDAQ Market Index and the MG Paper Products Peer
Group Index for the five-year period commencing on June 30, 1990 and ending on
June 30, 1995. These comparisons assume the investment of $100 of the Company's
common stock and in each of the indices on June 30, 1990 and the reinvestment of
dividends.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG GEORGIA BONDED FIBERS, INC.
NASDAQ MARKET INDEX AND MG PAPER PRODUCTS GROUP INDEX
(The Comparison Graph appears here. See the table below for plot points.)
Comparison Of 5 Year Cumulative Total Return
Of Company, Industry Index And Broad Market
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
GEORGIA BONDED FIBERS $100 $ 84.38 $156.25 $112.50 $125.00 $ 81.25
MG PAPER PRODUCTS INDEX 100 118.31 130.29 125.98 135.29 182.61
NASDAQ MARKET INDEX 100 94.22 101.52 124.62 136.66 160.27
</TABLE>
The peer group comprises the largest companies domestically traded on the
NASDAQ market which operate in the Company's industry, paper products. None of
these companies compete directly with Georgia Bonded Fibers, Inc. The returns of
each company have been weighted according to their respective stock market
capitalization for purposes of arriving at a peer group average.
13
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and any persons who own more than ten percent
of the Company's common stock, to file reports of ownership and changes in
ownership of Company common stock with the Securities and Exchange Commission.
Based on its review of the copies of such Forms furnished to it with respect to
fiscal 1995 and written representations from certain reporting persons that no
other reports are required, the Company believes that during fiscal 1995 one
report relating to one transaction inadvertently was filed late by William B.
D'Surney and one report, concerning an initial statement of beneficial
ownership, inadvertently was filed late by Harmonson H. Floyd.
APPOINTMENT OF AUDITORS
PROPOSAL NO. 2
The firm of KPMG Peat Marwick LLP audited the Company's financial
statements for the year ended June 30, 1995, and is being recommended to
stockholders for reappointment as auditors for the year ending June 30, 1996. A
representative of KPMG Peat Marwick LLP is expected to attend the meeting with
the opportunity to make a statement and/or respond to appropriate questions from
stockholders at the meeting.
The Board of Directors recommends a vote "FOR" the appointment of KPMG Peat
Marwick LLP as independent auditors for fiscal 1996.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1996
Annual Meeting must be received by the Corporate Secretary of Georgia Bonded
Fibers, Inc., One Bontex Drive, Buena Vista, Virginia 24416-0751, no later than
May 21, 1996, in order to be considered for inclusion in the Company's Proxy
Statement relating to that meeting.
OTHER MATTERS
The Board knows of no matters which may properly come before the Annual
Meeting other than the matters referred to in this Proxy Statement. If, however,
any matters properly come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote such proxy in accordance with their best
judgment thereon.
BY THE ORDER OF THE BOARD OF DIRECTORS
David A. Dugan
Corporate Secretary
SEPTEMBER 18, 1995
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, EXCLUDING EXHIBITS, IS AVAILABLE
WITHOUT CHARGE TO ANY STOCKHOLDER OF RECORD REQUESTING THE SAME. WRITTEN
REQUESTS SHOULD BE ADDRESSED TO THE ATTENTION OF THE CONTROLLER, GEORGIA BONDED
FIBERS, INC., ONE BONTEX DRIVE, BUENA VISTA, VIRGINIA 24416-0751
14
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APPENDIX
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
GEORGIA BONDED FIBERS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING OCTOBER 19, 1995
The undersigned hereby constitutes and appoints David A. Dugan and William J.
Binnie, and each of them, his true and lawful agents and proxies, with full
power of substitution in each, to represent the undersigned and to vote as
designated below, all the shares of Common Stock held of record by the
undersigned on August 29, 1995, at the Annual Meeting of Stockholders of Georgia
Bonded Fibers, Inc. to be held at the Best Western Inn, Lexington, Virginia, on
Thursday, October 19, 1995 at 11:00 A.M., and at any adjournments thereof.
<TABLE>
<S> <C>
THIS PROXY MUST BE SIGNED Dated: , 1995
EXACTLY AS NAME APPEARS HEREON.
Signature(s) of Stockholder(s) above
</TABLE>
1. ELECTION OF DIRECTORS
NOMINEES: THREE CLASS B DIRECTORS FOR A THREE YEAR TERM, PATRICIA S. TISCHIO,
JEFFREY C. KOSTELNI AND JOSEPH F. RAFFETTO, AND ONE CLASS A DIRECTOR FOR A
TWO YEAR TERM, WILLIAM B. D'SURNEY.
FOR [ ] VOTE WITHHELD [ ]
INSTRUCTIONS: To withhold your vote for any individual nominee, insert
the nominee's name on the line provided below.
2. APPOINTMENT OF KPMG PEAT MARWICK LLP as independent auditors of the Company
for fiscal year 1996.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon other matters as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. THIS PROXY IS REVOCABLE AT ANY TIME PRIOR TO THE EXERCISE
HEREOF.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT DATED SEPTEMBER 18,
1995.
When shares are held by joint tenants, both should sign. Executors,
administrators, trustees, etc. should give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer.
<PAGE>
(Arrow) Detach above card, sign, date and mail in postage paid
envelope provided. (Arrow)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
