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:
(x) Preliminary Proxy Statement
( ) 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-(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>
(Preliminary Copy)
1996
Notice of Annual Stockholders Meeting
and
Proxy Statement
Thursday, November 7, 1996
at 10:30 a.m. local time
Lexington, Virginia
<PAGE>
(Preliminary Copy)
Dear Shareholder:
You are cordially invited to attend the Annual Shareholders Meeting to be
held at 10:30 A.M., Eastern Standard Time, on Thursday, November 7, 1996, at
the Best Western Inn at Hunt Ridge, Lexington, Virginia. The accompanying
Notice of Annual Meeting and Proxy Statement contain detailed information as
to the formal business to be transacted at the meeting.
In addition to the other matters to be acted upon at the Annual Meeting, the
Board recommends that you support and vote for Proposal No. 3, to change the
state of incorporation of the Company from New Jersey to Virginia and thereby
adopt certain important changes to the Company's Certificate/Articles of
Incorporation. The proposal, if approved, should help to assure the
continued success of the Company. The proposed changes will be accomplished
by merging the Company into a wholly owned Virginia subsidiary. The only
purpose of the merger is to effectuate these proposed changes. The
reorganization will not result in any change in the business, management, net
worth, assets, or liabilities of the Company. Furthermore, the transaction
is generally intended to qualify as a tax-free reorganization, as described
in the attached Proxy Statement.
If Proposal No. 3 is approved, as part of the reorganization transaction, the
number of authorized shares of the Company's Common Stock will be increased
to 10,000,000, and a new class of up to 10,000,000 shares of Preferred Stock
will be created. This is intended to, among other things, help assure that
the Company has adequate shares available for general corporate needs,
including possible future stock splits.
The reorganization is described in more detail under Proposal No. 3 in the
attached Proxy Statement. The Board believes that the reorganization is
essential to the long-term success of the Company.
The Board urges you to vote "FOR" all proposals on the enclosed proxy card.
Regardless of whether you plan to attend the meeting, it is important that
your shares be voted. Accordingly, please complete, sign, and date the proxy
card attached and return it in the enclosed postage-paid envelope. Please
note, however, that if your shares are held of record by a broker, bank, or
other nominees and you wish to vote at the meeting, you must obtain from the
record holder a proxy issued in your name.
Thank you for your interest.
Sincerely,
James C. Kostelni
Chairman of the Board and
Chief Executive Officer
<PAGE>
(Preliminary Copy)
NOTICE OF ANNUAL STOCKHOLDERS MEETING
October 4, 1996
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 at Hunt
Ridge, Willow Springs Drive, Lexington, Virginia, on November 7, 1996, at
10:30 a.m. Eastern Standard Time, for the following purposes:
1. To elect three Class C directors to serve until the annual
meeting of stockholders in 1999;
2. The appointment of independent auditors of the Company for the
fiscal year 1997;
3. To vote upon a proposal to change the state of incorporation of
Georgia Bonded Fibers, Inc., to Virginia and to effect amended
and restated Articles of Incorporation modifying certain
provisions of the Certificate of Incorporation of the Company by
approving a Plan and Agreement of Merger dated as of August 19,
1996, and the related Articles of Merger (the "Reorganization
Agreement"), attached as Appendix A to the accompanying Proxy
Statement, providing for the merger of the Company into a
Virginia corporation, which is a wholly owned subsidiary of the
Company (the "Reorganization"); and
4. 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 September 25,
1996, are entitled to vote at this meeting.
If The Reorganization is approved, all of the previously outstanding
shares of Company Common Stock will be converted automatically to the same
number of shares of common stock of the Virginia corporation, and the Company
will be governed by Virginia law and the Bylaws and the Articles of
Incorporation of the Virginia corporation.
Holders of Company Common Stock shall have the right to dissent from
the vote on the Reorganization Agreement and to receive payment of the fair
value of shares of Company Common Stock held of record by such stockholders
upon compliance with the applicable provisions of Chapter 11 of the New
Jersey Business Corporation Act, the full text of which is included as
Appendix C to the Proxy Statement that is attached to this Notice of Annual
Meeting. For a summary of the dissenters' rights of Company stockholders,
see "Dissenters' Rights" in the Proxy Statement.
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>
(Preliminary Copy)
GEORGIA BONDED FIBERS, INC.
A NEW JERSEY CORPORATION
PROXY STATEMENT
1996 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 November 7, 1996, at
10:30 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
October 4, 1996.
A copy of the Company's Annual Report to Stockholders, including
financial statements for the fiscal year ended June 30, 1996, 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 C directors, FOR the appointment of KPMG Peat
Marwick LLP as independent auditors and FOR the approval of the
Reorganization of Georgia Bonded Fibers, Inc.
VOTING SECURITIES
The close of business on September 25, 1996, 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. For purposes of determining the votes cast with
respect to any other matter presented for consideration at the Annual
Meeting, including the vote of Company stockholders with respect to the
Reorganization described in Proposal No. 3, only those votes cast "for" or
"against" are included. 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.
As a matter of policy, proxies, ballots and voting tabulations that
identify individual shareholders are kept private by the Company. Such
documents are available for examination only by the inspectors of the
election and certain personnel associated with processing proxy cards and
tabulating the vote. The vote of any shareholder is not disclosed except as
may be necessary to meet legal requirements.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of August 30, 1996, 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>
First Union National Bank 843,178 (1) 53.61
303 Broad Street
Red Bank, New Jersey 07701
Mrs. Dolores Kostelni 684,007 (2) 43.49
Route 4, Box 251
Turtle Brooke Lane
Lexington, Virginia 24450
Mrs. Patricia M. Tischio 675,607 (3) 42.96
6 Stonecrop Road
Norwalk, Connecticut 06851
Estate of Marie G. Surmonte 675,507 (4) 42.95
c/o First Union National Bank
303 Broad Street
Red Bank, New Jersey 07701
Hugo N. Surmonte Residuary Trust 95,400 (5) 6.07
c/o First Union National Bank
303 Broad Street
Red Bank, New Jersey 07701
Kennedy Capital Management, Inc. 118,600 (6) 7.54
425 N. New Ballas Road, Suite 181
St. Louis, Missouri 63141-6821
</TABLE>
1 Includes 95,400 shares held as co-trustee for the Hugo N. Surmonte
Residuary Trust, 72,715 shares held as trustee of the Hugo N. Surmonte
Marital Trust, and 675,507 shares held as a co-executor of the Estate of
Marie G. Surmonte. The Bank has shared voting and dispositive power with
respect to these shares.
2 Includes 8,500 shares owned by Mrs. Kostelni with sole voting and
dispositive power and an aggregate of 675,507 shares of which Mrs.
Kostelni has shared voting and dispositive power as a co-executor of the
Estate of Marie G. Surmonte. Excludes 57,589 shares owned by Mrs.
Kostelni's spouse, Mr. James C. Kostelni, and 2,653 shares owned by Mrs.
Kostelni's adult son, James H. Kostelni.
3 Includes 100 shares owned by Mrs. Tischio with sole voting and dispositive
power, an aggregate of 675,507 of which Mrs. Tischio has shared voting and
dispositive power as a co-executor of the Estate of Marie G. Surmonte, and
excludes 2,750 shares owned by Mrs. Tischio's adult daughter.
4 Dolores Kostelni, Patricia M. Tischio and First Union National Bank are
co-executors of the Estate and have shared voting and dispositive power
with respect to these shares.
5 Dolores Kostelni and Patricia M. Tischio are beneficiaries of the Trust.
Mrs. Kostelni and Mrs. Tischio and the Bank have shared voting and
dispositive power with respect to these shares.
6 All shares owned by advisory clients over which Kennedy Capital
Management, Inc. has shared voting and dispositive power.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth as of August 30, 1996, 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
Owned as of
Name of Beneficial Owner August 30, 1996 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 66,089 (2)(5) 4.20
Jeffrey C. Kostelni 14,176 (3) *
Frank B. Mayorshi 400 *
Larry E. Morris 4,000 *
Joseph F. Raffetto 5,582 *
Patricia S. Tischio 675,607 (4)(5) 42.96
Robert J. Weeks 6,121 *
All Directors and
Executive Officers
as a Group (12 persons) 782,804 49.77
</TABLE>
1 Includes 726 shares held by Mr. Binnie's spouse as Trustee for their sons.
2 Includes 8,500 shares owned by Mr. James C. Kostelni's spouse, Dolores
Kostelni. Does not include 2,653 owned by Mr. James C. Kostelni's adult
son, James H. Kostelni, as to which Mr. James C. Kostelni disclaims
beneficial ownership, and 675,507 shares held in the Estate of Marie G.
Surmonte, of which Mr. James C. Kostelni's spouse, Dolores Kostelni, is a
co-executor with shared voting and dispositive power.
3 Includes 1,000 shares owned by Mr. Jeffrey C. Kostelni's spouse.
4 Includes 675,507 shares held in the Estate of Marie G. Surmonte, of which
Mrs. Patricia S. Tischio, Mrs. Dolores Kostelni and First Union National
Bank are co-executors and share voting and dispositive power. Does not
include 2,750 shares owned by Mrs. Tischio's adult daughter, as to which
Mrs. Tischio disclaims beneficial ownership.
5 Mr. James C. Kostelni's spouse, Dolores Kostelni, and Mrs. Patricia S.
Tischio are co-executors and share voting and dispositive power with
FirstUnion National Bank 675,507 shares held by the Estate of Mrs. Marie
G. Surmonte.
* 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 C directors expires at the 1996 Annual Meeting of Stockholders. The
terms of the Class A and Class B directors will expire in 1997 and 1998,
respectively.
There are three Class C directors, William J. Binnie, Michael J. Breton
and Frank B. Mayorshi, each of whom has been nominated for reelection by the
Board of Directors.
It is the intention of the persons named as proxies, unless instructed
otherwise, to vote for the election of each of the three 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 Class C nominees will serve for
a three year term until 1999 Annual Meeting and until their successors are
elected and qualified. The Reorganization Agreement discussed under Proposal
No. 3 provides that upon consummation of the Reorganization, the current
Board of Directors of the Company will comprise the Board of the surviving
Virginia corporation. Accordingly, if the Reorganization is approved, the
same individuals who comprise the Board of Directors of the Company will
serve, for the same terms, on the Board of Directors of the Virginia
corporation.
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
- - - ------------ ------------------- --------------------
NOMINEES
CLASS C DIRECTORS
(Serving Until 1999 Annual Meeting)
<S> <C> <C>
William J. Binnie 1977 Retired engineering
Age 71 consultant since 1996;
prior thereto, President,
W.J. Binnie & Associates,
Whispering Pines, North
Carolina. Mr. Binnie has a
Bachelor of Science Degree
in Civil Engineering.
Michael J. Breton 1990 Corporate Director of
Age 56 International Operations
of the Company (since
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
Age 60 1991; prior thereto,
Partner, KPMG Peat Marwick
LLP, Roanoke, Virginia.
Mr. Mayorshi has a
Bachelor of Science Degree
in Business
Administration.
DIRECTORS CONTINUING IN OFFICE
CLASS A DIRECTORS
(Serving Until 1997 Annual Meeting)
Year in Which First
Name and Age Elected as Director Principal Occupation
- - - ------------ ------------------- --------------------
James C. Kostelni 1965 Chairman of the Board,
Age 61 President, and Chief
Executive Officer of the
Company (since 1994),
President and Chief
Operating Officer (since
1971). Mr. Kostelni has a
Bachelor of Science Degree
in Business
Administration.
Robert J. Weeks 1983 Private investor since
Age 62 1993; prior thereto, Vice-
President, Dun &
Bradstreet Corp.,
Bethlehem, Pennsylvania.
Mr. Weeks has a Bachelor
of Science Degree in
Business Administration.
Larry E. Morris 1993 Technical Director (since
Age 50 1983) and Sales Director
(since 1993) of the
Company; prior thereto,
Manufacturing Director of
the Company (1983-1993).
Mr. Morris has a Bachelor
of Science Degree in
Chemical Engineering.
William B. D'Surney 1995 Private investor since
Age 67 1994, prior thereto,
Senior Vice-President,
Alexander & Alexander,
Richmond, Virginia. Mr.
D'Surney has a Bachelor of
Science Degree in Business
Administration.
CLASS B DIRECTORS
(Serving Until 1998 Annual Meeting)
Patricia S. Tischio 1995 Assistant Corporate
Age 57 Secretary (since 1994) and
Corporate Office
Manager(since 1989) of the
Company. Mrs. Tischio has
a Bachelor of Arts Degree
in English.
Jeffrey C. Kostelni 1995 Chief Financial Officer
Age 30 and Treasurer (since
1994), General Sales
Manager of Bontex S.A., a
subsidiary of the Company
(since 1995)and 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 and is a
Certified Public
Accountant.
Joseph F. Raffetto 1984 Physician (retired)
Age 87
</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. Jeffrey C. Kostelni is the son of Mr. James C. Kostelni.
Mrs. Patricia S. Tischio is the sister-in-law of Mr. James C. Kostelni and
the aunt of Mr. Jeffrey C. Kostelni.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during fiscal 1996. 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 1996.
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 1996.
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 four
times during fiscal 1996.
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 1996.
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, 1996, 1995 and 1994.
<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>
James C. Kostelni 1996 221,180 - 99,820 66,007
Chairman of the 1995 213,733 - 97,834 60,411
Board of 1994 188,180 52,440 98,337 49,702
Directors,
President and
Chief Executive
Officer
(effective
October 1994)
Michael J. Breton 1996 167,868 - 18,912 7,238
Corporate 1995 173,309 10,000 18,433 7,023
Director of 1994 143,223 - 16,420 432
International
Operations,
Bontex, S.A.
Tarcisio Pasquali 1996 129,181 20,000 15,812 -
General Manager 1995 109,780 10,000 15,434 -
Bontex, s.r.l. 1994 103,912 - 14,428 -
Harmonson H. Floyd, Jr. 1996 105,000 - - -
Director of 1995 8,750 - - -
Manufacturing 1994 - - - -
and Chief Engineer
Larry E. Morris 1996 100,740 - 3,351 2,070
Technical and 1995 98,890 - 3,012 3,043
Sales Director 1994 95,125 26,403 3,169 2,448
</TABLE>
(1) In 1996, for Mr. Pasquali, a $20,000 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 1996 includes automobile allowance $1,110, a $26,000 annual payment
and $66,999 "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 $6,379.
(3) Amounts disclosed in this column for 1996 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 $50,149,
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. Kostelni $9,479; Mr. Breton $0; Mr. Pasquali $0;
Mr. Floyd $0; Mr. Morris $2,070; and (iv) Bontex S.A.'s contribution
under the Bontex, S.A. Pension Plan on behalf of Mr. Breton, $7,238.
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 $35,556 $47,408 $59,260 $71,112 $71,112
150,000 43,056 57,408 71,760 86,112 86,112
175,000 43,056 57,408 71,760 86,112 86,112
200,000 43,056 57,408 71,760 86,112 86,112
225,000 43,056 57,408 71,760 86,112 86,112
250,000 43,056 57,408 71,760 86,112 86,112
300,000 43,056 57,408 71,760 86,112 86,112
400,000 43,056 57,408 71,760 86,112 86,112
450,000 43,056 57,408 71,760 86,112 86,112
500,000 43,056 57,408 71,760 86,112 86,112
</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 1996 and 1995 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
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 $17,904 $23,873 $29,841 $ 35,809 $41,777
150,000 22,762 30,349 37,936 45,523 53,111
175,000 27,619 36,825 46,032 55,238 64,444
200,000 32,476 43,301 54,126 64,493 75,778
225,000 37,333 49,777 62,223 74,667 87,112
250,000 42,191 56,254 70,318 84,381 98,445
300,000 51,905 69,208 86,509 103,810 121,113
400,000 71,333 95,112 118,890 142,669 166,446
450,000 81,049 108,065 135,082 162,097 189,114
500,000 90,764 121,017 151,272 181,526 211,781
</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 $127,968 of the
amount shown for Mr. Breton in the Compensation Table qualifies as
compensation under the Pension Plan for 1996. 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, 1996. 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 payment in the amount of $26,000. It
is intended that such cash payment 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
cash payment and the "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, 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,
received the benefit until her death on June 2, 1996. During fiscal year
1996, the Company paid $138,000 to Mrs. Surmonte. At June 30, 1996 the
Company reversed an unused accrued liability of $159,000 for this benefit.
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.
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 1996 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 1996, the maximum
amount at 100 percent of 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 100 percent of target
under the plan for fiscal 1996 ranged from $16,347 to $6,593. Bonuses were
not available to executive officers under the plan in fiscal 1996 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 certain operating goals. 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 Committee and senior
management did not issue goals for 1996 because they realized in the first 6
months of the year that the $500,000 net income threshold was not going to be
met. No bonuses were paid to the Company's executive officers under the plan
in fiscal 1996, because the net income threshold was not met.
1995-96 Senior Management Incentive Plan
The purpose of the 1995-96 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 is intended 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 1996 current base salary (up to
base salary of $200,000) if the Company's earnings for fiscal 1996 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 $1,650,000; 20% of current base salary if
the Company's pre-tax earnings reaches $2,000,000; 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 6% 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
1996 was $782,000, and net sales decreased 6.6%. No bonuses were paid under
the plan, because the Company did not reach its threshold pre-tax earnings.
The 1996-97 plan includes financial objectives and individual
performance goals.
Chief Executive Officer (CEO) Compensation
The 1996 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 restructuring the Company and reducing costs;
his 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
RELATED TRANSACTIONS
Pursuant to the Hugo N. Surmonte Deferred Compensation Plan, Marie G.
Surmonte, Mr. Surmonte's widow has since Mr. Surmonte's death, received
monthly payments in the amount of $12,500 in 1995 and 1996 until her death on
June 2, 1996. See discussion under "Retirement Compensation Arrangements --
Hugo N. Surmonte Deferred Compensation Agreement" above. The total amount of
the payments received by Mrs. Surmonte under the plan in fiscal 1996 was
$138,000.
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, 1991 and ending
on June 30, 1996. These comparisons assume the investment of $100 of the
Company's common stock and in each of the indices on June 30, 1991 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
(PERFORMANCE GRAPH APPEARS HERE.)
<TABLE>
<CAPTION>
Comparison Of 5 Year Cumulative Total Return
Of Company, Industry Index And Broad Market
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
GEORGIA BONDED FIBERS $100 $185.19 $133.33 $148.15 $ 96.30 107.41
MG PAPER PRODUCTS INDEX 100 110.13 106.49 114.36 154.36 163.22
NASDAQ MARKET INDEX 100 107.75 132.27 145.04 170.11 214.14
</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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1996 and written representations from certain
reporting persons that no other reports are required, the Company believes
that during fiscal 1996 one report relating to one transaction inadvertently
was filed late by each of Mrs. Patricia S. Tischio and Mr. Frank B. Mayorshi
and one report was filed to correct Mr. James C. Kostelni's earlier filed
initial statement of beneficial ownership.
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, 1996, and is being recommended to
stockholders for reappointment as auditors for the year ending June 30, 1997.
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 1997.
REINCORPORATION OF THE COMPANY IN VIRGINIA
PROPOSAL NO. 3
General
The Company's Board of Directors has approved a proposal whereby the
Company's state of incorporation would be changed from New Jersey to
Virginia. This change would be accomplished by merging the Company (referred
to in this caption as "New Jersey Bontex") into a Virginia corporation, now
named "Bontex Fibers, Inc." but whose name would be "Bontex, Inc." after the
reorganization (the Virginia corporation is referred to in this caption as
"Virginia Bontex"), which is a wholly owned subsidiary of New Jersey Bontex.
Upon completion of the reorganization, all of the previously outstanding
shares of New Jersey Bontex Common Stock will be converted automatically into
the same number of shares of Virginia Bontex Common Stock. The proposed
reorganization (the "Reorganization") will be accomplished pursuant to the
terms of a Plan and Agreement of Merger between Virginia Bontex and New
Jersey Bontex and the related Articles of Merger (collectively, the
"Reorganization Agreement") attached to this Proxy Statement as Appendix A
and Appendix B, respectively.
Virginia Bontex will be governed by Virginia law and new Articles of
Incorporation which will result in significant changes in the rights of
stockholders. These changes include: (i) changing the name of the Company
to Bontex, Inc.; (ii) increasing the number of authorized shares of Common
Stock; (iii) creating a new class of shares of Preferred Stock which will be
available for issuance by the Board of Directors from time to time;
(iv) providing that the number of directors may not be less than ten nor more
than fifteen, the precise number to be set out in the Bylaws; (v) providing
that any vacancy on the Board or newly created directorships shall be filled
by a majority of the remaining directors then in office, even if less than a
quorum; (vi) providing that directors may be removed only for cause and only
by holders of at least a majority of each class of the voting stock;
(vii) providing that the power to adopt, alter, amend or repeal the Bylaws is
vested in the Board to act by a vote of a majority of a quorum, including in
certain circumstances a majority of disinterested directors; and
(viii) increasing to 80% the stockholder vote required to amend or repeal, or
to adopt any provision inconsistent with certain provisions of the Articles
and to adopt, alter, amend or repeal certain provisions of the Bylaws. In
addition, Virginia Bontex's Articles of Incorporation will include provisions
regarding the limitation of liability and indemnification of directors and
officers that are not now included in New Jersey Bontex's Certificate of
Incorporation (the "New Jersey Bontex Certificate") or Bylaws. Reference is
made to the Articles of Incorporation of Virginia Bontex, as amended and
restated in accordance with the Reorganization Agreement (the "Virginia
Bontex Articles") annexed to this Proxy Statement as Attachment 1 to Appendix
A and to the discussion below under the caption "Differences in Corporate
Charters."
The Reorganization would not result in any change in the business,
management, assets, liabilities or net worth of the Company. New Jersey
Bontex's stock certificates will be deemed to represent the same number of
Virginia Bontex shares as were represented by New Jersey Bontex stock
certificates prior to the Reorganization. It will not be necessary for
stockholders to exchange their New Jersey Bontex stock certificates for
Virginia Bontex certificates, although stockholders may exchange their
certificates if they wish. Following the Reorganization, previously
outstanding New Jersey Bontex stock certificates will constitute "good
delivery" in connection with the sales through a broker or otherwise of
shares of Virginia Bontex. The Virginia Bontex stock will be traded in the
over-the-counter market and will be quoted on the Nasdaq Stock Market, as is
currently the New Jersey Bontex stock. The authorized capital of Virginia
Bontex will consist of 10,000,000 shares of Common Stock, $.10 par value, and
10,000,000 shares of Preferred Stock, no par value.
The Reorganization provided for in the Reorganization Agreement is
designed to qualify as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code. Accordingly, no gain or loss will be recognized by
New Jersey Bontex, Virginia Bontex, or the holders of New Jersey Bontex
Common Stock (except stockholders, if any, who receive cash pursuant to the
exercise of dissenters' rights) as a result of the consummation of the
Reorganization. Each holder's tax basis in the Virginia Bontex shares into
which his New Jersey Bontex shares are automatically converted will be the
same as his or her basis in the New Jersey Bontex shares. The holding period
for such Virginia Bontex shares will include the stockholder's holding period
for the corresponding New Jersey Bontex shares if they are held as a capital
asset at the time of the consummation of the Reorganization.
If approved by the stockholders, it is anticipated that the
Reorganization will be completed (the "Effective time") within ninety days
after stockholder approval. However, the Reorganization may be terminated
and abandoned at any time before the Effective Time, under any one or more of
the following circumstances: (i) by unanimous consent of the Board of
Directors of New Jersey Bontex; (ii) by the Board of Directors of either New
Jersey Bontex or Virginia Bontex if any action or proceeding before any court
or other governmental body or agency is instituted or threatened to retrain
or prohibit the Reorganization, and New Jersey or Virginia Bontex, as the
case may be, deems it inadvisable to proceed with the merger; (iii) by the
Board of Directors of GBF if 5% or more of the issued and outstanding stock
of GBF makes demand for the payment of the fair value of their shares
pursuant to the rights of dissenting stockholders (as described below).
However, upon such termination and abandonment, the certificate of amendment
of the Company will be amended to change the Company's name to Bontex, Inc.
Before voting on the Reorganization Agreement, stockholders are urged
to read carefully the following section of this Proxy Statement, which
describes the Reorganization and its purposes and effects, and the Appendices
hereto. Approval of the Reorganization requires the affirmative vote of two-
thirds of the votes cast by holders of Company Common Stock entitled to vote.
A failure to vote, either by not returning the enclosed proxy or checking the
abstain box thereon, will have the same effect as a vote against approval of
the Reorganization.
Appraisals Rights of Dissenting Stockholders
Under Chapter 11 of the New Jersey Business Corporation Act (the
"NJBCA"), holders of Georgia Bonded Fibers, Inc. Common Stock have the right
to dissent from the Reorganization and, if the Reorganization occurs, to
receive in cash the "fair value" of their shares of Company Common Stock
instead of the consideration provided for in the Reorganization Agreement.
The fair value will be determined as of the day before the Annual Meeting,
but will not include any appreciation or depreciation resulting from the
proposed Reorganization.
The following is a summary of the principal steps that a holder of
Company Common Stock must take to perfect dissenters' rights under Chapter 11
of the NJBCA. The summary does not purport to be complete and is qualified
in its entirety by reference to such Chapter, which is set forth in full in
Appendix C to this Proxy Statement. Failure to take any one of the steps
required of a stockholder may terminate such stockholder's dissenters' rights
under the NJBCA.
To exercise dissenters' rights, each dissenting stockholder must
satisfy both of the following requirements: (i) before the taking of the
vote or votes, if applicable, at the Annual Meeting, file with the Company a
written notice of dissent indicating an intent to demand payment (a "Notice
of Intent") for such stockholder's shares if the Reorganization is effected
and (ii) vote against the Reorganization or abstain from voting.
If the Reorganization is authorized at the Annual Meeting, Virginia
Bontex, as the surviving corporation, will give written notice (a
"Dissenters' Notice") of the effective date of the Reorganization (the
"Effective Time") to all holders of Company Common Stock who satisfy both of
the foregoing requirements. The Dissenters' Notice must be sent by Virginia
Bontex within ten days after the Effective Time. A stockholder receiving a
Dissenters' Notice must, within twenty days following the mailing of such
Dissenters' Notice, make written demand (the "Payment Demand") upon Virginia
Bontex, as the surviving corporation, for the payment of the fair value of
such stockholder's shares of Company Common Stock. A holder of Company
Common Stock must dissent with respect to all of the shares of Company Common
Stock held by such stockholder or with respect to none of such shares. Not
later than twenty days after making such Payment Demand, the stockholder must
submit the certificate or certificates representing such shares to Virginia
Bontex, as the surviving corporation, for notation thereon that such demand
has been made, whereupon such certificate or certificates shall be returned
to the stockholder. The Notice of Intent (unless filed at the Annual
Meeting), the Payment Demand and share certificates should be delivered to:
James C. Kostelni, President and Chief Executive Officer, Georgia Bonded
Fibers, Inc., One Bontex Drive, Buena Vista, Virginia 24416-0751.
After making the Payment Demand, a holder of Company Common Stock will
be entitled only to payment and will not be entitled to vote or exercise any
other stockholder right. A dissenting stockholder may not withdraw a Payment
Demand without the written consent of Virginia Bontex. Each communication
required to be given by Virginia Bontex relating to dissenters' rights will
inform holders of Company Common Stock of the dates prior to which action
must be taken by such stockholders in order to perfect rights as dissenting
stockholders. If the holders of Company Common Stock are entitled to vote
upon the Reorganization, a vote in favor of the Reorganization Agreement will
terminate a dissenter's rights, while a vote against the Reorganization or
abstention from voting will preserve such rights. However, merely voting
against the Reorganization or abstaining from voting will not satisfy the
requirements that the stockholder give written objection to the
Reorganization and make written demand on the Company for payment as
described above.
Within ten days after the expiration of the period in which holders of
Company Common Stock may submit Payment Demands, Virginia Bontex, as the
surviving corporation will mail to each dissenting stockholder (i) an
appropriate balance sheet, surplus statement and profit and loss statement of
the Company, as of and for a twelve-month period ended as of the latest
available date (which shall not be earlier than twelve months before the
mailing of such statements), and (ii) if Virginia Bontex, as the surviving
corporation, so elects, a written offer to pay each dissenting stockholder
for such stockholder's shares of Company Common Stock at a specified price
deemed by Virginia Bontex to be the fair value of such shares. If, not later
than thirty days after the end of the ten-day period during which
stockholders may make written demand for payment of the fair value of their
shares of Company Common Stock, such fair value is agreed upon between any
dissenting stockholder and Virginia Bontex, Virginia Bontex will make payment
for such stockholder's shares upon surrender of the certificate or
certificates representing such shares.
If the fair value of the shares of Company Common Stock is not agreed
upon within such thirty-day period, the dissenting stockholder may serve upon
Virginia Bontex a written demand that Virginia Bontex commence an action in
the New Jersey Superior Court for the determination of the fair value of such
shares. Such demand must be served not later than thirty days after the
expiration of such thirty-day period, and Virginia Bontex must commence the
requested action not later than thirty days after the receipt of such demand.
However, Virginia Bontex may elect to commence such action at any earlier
time. If Virginia Bontex fails to commence such a proceeding within the
allotted time, a dissenting stockholder may do so in the name of Virginia
Bontex not later than sixty days after the expiration of the time allotted
for Virginia Bontex to commence such action.
In any action to determine the fair value of shares of Company Common
Stock, all dissenting stockholders, except those who have come to an
agreement with Virginia Bontex as to the price to be paid for their shares,
will be parties to the action. The court may appoint an appraiser to receive
evidence and report to the court on the question of fair value, and such
appraiser will have the power and authority as is determined by the court.
The court will render a judgment against the corporation and in favor of each
stockholder who is a party to the action in the amount of the fair value of
such stockholder's shares of Company Common Stock, with an allowance for
interest at a rate set by the court from the date of the dissenting
stockholder's demand for payment to the day of payment. Such judgment shall
be payable upon surrender to Virginia Bontex of the certificate or
certificates representing the dissenting stockholder's shares.
The costs and expenses of any proceeding relating to the determination
of fair value, including reasonable compensation for and expenses of the
appraiser, if any, will be determined by the court and apportioned and
assessed as the court may find equitable. Fees and expenses of counsel and
of experts for the parties to the proceeding may be assessed as the court
deems equitable against Virginia Bontex, but only if the court finds that
Virginia Bontex's offer of payment was not made in good faith or if it fails
to make such an offer.
The right of any dissenting stockholder to be paid the fair value of
its shares of Company Common Stock will terminate if: (i) the dissenting
stockholder fails to present the certificate or certificates representing
such stockholder's shares for notation, unless a court having jurisdiction,
for good and sufficient cause shown, shall otherwise direct; (ii) the Payment
Demand is withdrawn by the dissenting stockholder with the written consent of
Virginia Bontex; (iii) Virginia Bontex and the dissenting stockholder do not
come to an agreement as to the fair value of the shares of the Company Common
Stock and no proceeding is commenced with the New Jersey Superior Court
within the time allotted; (iv) the New Jersey Superior Court determines that
the stockholder is not entitled to payment for such stockholder's shares;
(v) the Reorganization is abandoned or rescinded; or (vi) a court having
jurisdiction permanently enjoins or sets aside the Reorganization. In any
such case, the rights of the dissenting stockholder as a stockholder will be
reinstated as of the date of such stockholder's Payment Demand without
prejudice to any corporate action that has taken place in the interim. In
such event, the stockholder will be entitled to receive any intervening
preemptive rights and the payment of any intervening dividend or other
distribution or the fair value of any of the foregoing in cash.
REFERENCE IS MADE TO APPENDIX C ATTACHED HERETO FOR THE COMPLETE TEXT
OF THE PROVISIONS OF THE NJBCA RELATING TO THE RIGHTS OF DISSENTING
STOCKHOLDERS. THE STATEMENTS MADE IN THIS SUMMARY ARE QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO APPENDIX C. THE DISSENTERS' PROVISIONS OF THE NJBCA
ARE TECHNICAL IN NATURE AND COMPLEX. IT IS SUGGESTED THAT ANY STOCKHOLDER
WHO DESIRES TO AVAIL ITSELF OF ITS RIGHT TO DISSENT, CONSULT COUNSEL, BECAUSE
FAILURE TO STRICTLY COMPLY WITH THE NJBCA DISSENTERS' STATUTE MAY DEFEAT A
DISSENTER'S RIGHTS.
Principal Reasons for Reincorporation
Although organized under the laws of New Jersey, the Company's only
U.S. plant and its executive offices are, and have for many years been,
located in Buena Vista, Virginia. Virginia is regarded as having a
comprehensive, modern and flexible corporate law which is periodically
revised to meet changing business needs. As a result, Virginia is the state
of incorporation of a number of large domestic corporations. In certain
respects, Virginia law may be regarded as more protective of management than
the laws of some other states, including New Jersey. Principal reasons for
the proposed reincorporation in Virginia are the provisions of Virginia law
which permit the limitation of liability of directors, officers and agents of
the Company and the Virginia Affiliated Transactions and Control Share
Acquisitions Statutes (collectively, the "Virginia Anti-Takeover Statutes")
which are designed to protect minority stockholders in transactions involving
the Company and a potentially dominant stockholder. Further, the Articles of
Incorporation of Virginia Bontex include provisions for a "supermajority
vote" in certain circumstances, a class of Preferred Stock issuable in series
without further approval by the stockholders and provisions for
indemnification of directors and officers of the Company.
While the Company could authorize Preferred Stock as a New Jersey
corporation, and many states in addition to Virginia have stockholder
protection statutes (although New Jersey's is not as extensive as
Virginia's), the Company believes that the aggregate effect of these various
provisions, together with the limitation of liability and indemnification of
directors and officers, is in the best interest of the Company's stockholders
and the Company and justifies reincorporation as a Virginia corporation.
Sudden and unsolicited attempts to takeover corporations have been
common in recent years. Such attempts typically involve a surprise, so-
called "hostile" tender offer to obtain a majority stock interest in the
target company, followed by a transaction such as a merger in which the
target company is absorbed into the acquiring entity without the consent of
the remaining minority stockholders on terms determined entirely by the
acquiring entity by virtue of its ability to approve the transaction without
the vote of the minority stockholders. While it is recognized that all
tender offers and takeover bids are not made with the intention of
eliminating minority stockholder interests and that the terms of the offer
indeed may be fair, the Board of Directors nevertheless believes that the
terms of a non-negotiated takeover often are less favorable to the
stockholders of the target corporation than those that are obtained in a
transaction negotiated by the target corporation's board of directors.
Further, since the acquiring entity may be in a position to dictate the terms
of the subsequent merger or business combination, the interest of the
remaining minority stockholders of the target corporation may be eliminated
on terms which are unacceptable to them, although in such instances
stockholders generally have statutory appraisal rights.
The Board of Directors believes that the changes which will result from
the proposed Reorganization will encourage companies interested in acquiring
the Company to negotiate with and obtain the approval of the Board of
Directors. In the event of a proposed acquisition of the Company, the Board
of Directors believes that the interest of the Company's stockholders will
best be served by a transaction which results from negotiations based on
careful consideration of the proposed terms. The opportunity to negotiate
the terms of an acquisition may, but will not necessarily, result in more
favorable terms than the terms of a non-negotiated takeover, and may enable
the Board of Directors to protect the interests of minority stockholders who
choose not to tender their shares by negotiating for them to receive stock or
other consideration acceptable to them in a subsequent business combination.
Moreover, a Board-approved transaction can be carefully planned and
undertaken at the optimum time, with due consideration given to such
essential matters as the recognition of gain or loss for tax purposes or the
postponement of tax recognition on a tax-free transaction. The Board of
Directors believes, that while there is not certainty as to the outcome of
any given negotiation, these steps designed to encourage negotiation of any
proposed acquisition of the Company are in the best interests of the Company
and its stockholders.
None of the changes resulting from the proposed Reorganization will
prevent a tender offer or takeover bid for all or part of the stock of the
Company. Rather, they are designed to discourage any attempt to obtain
control of Virginia Bontex in a transaction which has not been considered and
approved by the Board of Directors by making it more difficult for a person
or company to gain control of Virginia Bontex in a short time and to impose
its will on the remaining stockholders. Provisions in the Virginia Anti-
Takeover Statutes respecting the voting rights of parties acquiring blocks of
Company Stock and respecting the price to be paid in a business combination
with a person owning more than 10% of any class of Virginia Bontex's voting
stock are intended to protect minority stockholders. See "State Anti-
Takeover Statutes" below.
Despite the belief of the Board as to the benefits to stockholders and
the Company of the proposed Reorganization, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which
is not approved by the Board of Directors but which a majority of the
stockholders may deem to be in their best interests or in which stockholders
may receive a substantial premium for their shares over the then market
value. As a result of the effects of the proposed Reorganization,
stockholders who might wish to participate in a tender offer may not have an
opportunity to do so. The provisions of the Virginia Anti-Takeover Statutes
could also make it more difficult to obtain stockholder approval of
transactions with persons having a defined relationship with Virginia Bontex
even if it is approved by the Board of Directors and favored by a majority of
stockholders. See "State Anti-Takeover Statutes" below.
The Board of Directors has concluded that the potential benefits of the
proposed Reorganization outweigh the possible disadvantages. The Board
believes that it is in the best interests of the corporation and its
stockholders to encourage potential acquirors of the Company to negotiate
with the Board of Directors and to discourage takeovers by persons intending
to eliminate the remaining stockholder interest in a merger and that the
changes resulting from the Reorganization will encourage such negotiations
and discourage non-negotiated takeover attempts. The Company is not aware of
any present or proposed efforts to acquire control of the Company.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE
THE PROPOSED REORGANIZATION.
State Anti-Takeover Statutes
The Virginia Stock Corporation Act (the "Virginia Act") includes two
anti-takeover statutes, the Affiliated Transactions Statute and the Control
Share Acquisitions Statute, both of which would be applicable to Virginia
Bontex at the Effective Time of the Reorganization.
The Affiliated Transactions Statute restricts certain transactions
("affiliated transactions") between a Virginia corporation having more than
300 stockholders of record and a beneficial owner of more than 10% of any
class of voting stock (an "interested stockholder"). An "affiliated
transaction" is defined in the Virginia Act as any of the following
transactions with or proposed by an interested stockholder: a merger; a
share exchange; certain dispositions of assets or guaranties of indebtedness
other than in the ordinary course of business; certain significant securities
issuances; dissolution of the corporation; or reclassification of the
corporation's securities. Under the statute, an affiliated transaction
generally requires the approval of a majority of disinterested directors and
two-thirds of the voting shares of the corporation other than shares owned by
an interested stockholder during a three-year period commencing as of the
date the interested stockholder crosses the 10% threshold. This special
voting provision does not apply if a majority of disinterested directors
approved the acquisition of the more than 10% interest in advance. After the
expiration of the three-year moratorium, an interested stockholder may engage
in an affiliated transaction only if it is approved by a majority of
disinterested directors or by two-thirds of the outstanding shares held by
disinterested stockholders, or if the transaction complies with certain fair
price provisions. This special voting rule is in addition to, and not in
lieu of, other voting provisions contained in the Virginia Act and Virginia
Bontex's Articles.
The Control Share Acquisitions Statute provides that, with respect to
Virginia corporations having 300 or more stockholders of record, shares
acquired in a transaction that would cause the acquiring person's aggregate
share ownership to meet or exceed any of three thresholds (20%, 33-1/3% or
50%) have no voting rights unless such rights are granted by a majority vote
of the shares not owned by the acquiring person or any officer or employee-
director of the corporation. The statute sets out a procedure whereby the
acquiring person may call a special stockholder's meeting for the purpose of
considering whether voting rights should be conferred. Acquisitions pursuant
to a merger or share exchange to which the corporation is a party and
acquisitions pursuant to a tender or exchange offer arising out of an
agreement to which the corporation is a party are exempt from the statute.
While New Jersey has a statute comparable to the Virginia Affiliated
Transactions Statute described above, it does not have a statute comparable
to the Virginia Control Share Acquisitions Statute. The Company believes
that the combination of both of these statutes as part of the corporation law
of the state of its incorporation would be of benefit to the Company and its
stockholders. The Virginia Anti-Takeover Statutes, unlike similar statutes
in many other states, have the advantage of having withstood specific
challenge in federal court by potential hostile acquirers. Further, having
shown willingness to legislate in the area, it is not unreasonable to expect
Virginia to continue to consider revisions to the regulatory scheme within
the state's authority.
Differences in Corporate Charters
Virginia Bontex's Articles will differ from New Jersey Bontex's
Certificate in certain material respects. Certain of these differences are
intended to encourage any person interested in acquiring Virginia Bontex to
first obtain approval of its Board of Directors and to discourage takeovers
by persons intending to eliminate the remaining stockholders' interests in
the organization. The Board of Directors believes that, in such a situation,
its ability effectively to represent the interests of stockholders will
thereby be enhanced. It should be recognized, however, that a change in
control of Virginia Bontex which is opposed by the Board of Directors could
be made more difficult by the foregoing provisions.
Except for the provisions of New Jersey Bontex's Certificate
establishing staggered terms for Company directors, New Jersey Bontex's
Certificate currently contains no provisions specifically intended for the
purposes described above. However, with the exception of the limitation of
liability and indemnification of directors and officers (the provisions for
which under the NJBCA generally are more restrictive than those of the
Virginia Act), each of the provisions described below could be adopted by the
Company, without reincorporation in Virginia, by amendment of the New Jersey
Bontex Certificate. It should be noted that approval of the Reorganization
by the stockholders will automatically result in the adoption of all of the
provisions of the Virginia Bontex Articles described below.
Increase in Authorized Common Stock. The Charter of New Jersey Bontex
-----------------------------------
authorizes the issuance of up to 3,000,000 shares of Common Stock, par value
$.10 a share. No shares of Preferred Stock are authorized.
The Virginia Bontex Articles authorize the issuance of up to 20,000,000
shares of capital stock, consisting of 10,000,000 shares of Common Stock, par
value $.10 per share, and up to 10,000,000 shares of Preferred Stock, no par
value per share ("Virginia Bontex Preferred Stock"). Virginia Bontex
Preferred Stock is issuable in series, each having such rights and
preferences as the Virginia Bontex Board may, by adoption of an amendment to
the Virginia Bontex Articles, fix and determine.
On the Record Date, the Company had 1,572,824 shares of Common Stock
issued and outstanding and, if the Reorganization is approved, those shares
automatically would, at the Effective Time of the Reorganization, convert to
the same number of shares of Virginia Bontex Common Stock, and any shares of
Virginia Bontex issued and outstanding immediately prior to the Effective
Time will be cancelled. The availability of a greater number of shares of
Common Stock issuable by Virginia Bontex will give the Company the
flexibility to raise equity through the sale of additional shares, if the
need should arise, or to issue shares in connection with possible stock
dividends, employee compensation plans, acquisitions and other general
corporate purposes. As is currently the case with New Jersey Bontex Common
Stock, the holders of the Virginia Bontex Common Stock have no preemptive
rights, and the increased number of shares would be issuable at any time and
from time to time by the Board of Directors, without further authorization of
the stockholders, except to the extent otherwise required by law or the rules
and regulations of the Nasdaq Stock Market. The Company presently has no
plans, agreements, contracts, arrangements or understandings with respect to
the issuance of any additional shares of Common Stock. See "Other Article
-------------
and Bylaw Provisions; Stockholder's Rights Plan" below.
- - - -----------------------------------------------
The additional shares of Common Stock provided for in Virginia Bontex's
Articles will have no immediate effect upon the rights of existing security
holders, whose shares of New Jersey Bontex will, assuming consummation of the
Reorganization, automatically convert to the same number of shares of
Virginia Bontex Common Stock. However, the additional Virginia Bontex Common
Stock, if and when issued, may affect the proportionate interest of each
stockholder in Virginia Bontex.
Shares of authorized Common Stock could be used by the Company in a
manner which would discourage or make more difficult an attempt to acquire
control of the Company. For example, the shares could be privately placed
with purchasers who might support the Board of Directors in opposing a
hostile takeover bid. The provision for a greater number of shares of Common
Stock in Virginia Bontex's Articles is not in response to any effort of which
the Company is aware to obtain control of the Company by accumulating shares
of Common Stock or otherwise.
Creation of New Class of Preferred Stock. The Virginia Bontex
----------------------------------------
Articles, which will be the Articles of Incorporation of the surviving
company after the Reorganization, authorize a class consisting of 10,000,000
shares of Preferred Stock, which may be issued in one or more series varying
as to, among other things, dividend provisions, voting rights, redemption
provisions, liquidation provisions, sinking fund provisions and conversion
provisions. If authorized, the Preferred Stock will be available for
possible future financings of, or acquisitions by, the Company and for
general corporate purposes without any legal requirement of further
stockholder authorization for the issuance thereof.
The Preferred Stock will rank prior or superior to the Common Stock
with respect to the payment of dividends and/or payment upon liquidation,
dissolution or winding up of the Company. Cash dividends on the outstanding
shares of Common Stock, when declared, will be paid after dividends have been
paid or set apart for payment on the Preferred Stock.
The Board of Directors may issue shares of Preferred Stock that could,
depending on the terms of such series, make more difficult or discourage an
attempt to obtain control of the Company through a merger, tender offer,
proxy contest, or other means. The existence of the authorized Preferred
Stock could have the effect of discouraging unsolicited takeover attempts.
The issuance of new shares could also be used to dilute the stock ownership
of a person or entity seeking to obtain control of the Company. Such shares
could be privately placed with purchasers who might cooperate with the Board
of Directors in opposing such attempt by a third party to gain control of the
Company. In addition, the Board of Directors could authorize holders of a
series of Preferred Stock to vote either separately or as a class or with the
holders of the Common Stock, on any merger, sale, or exchange of assets by
the Company or any other extraordinary corporate transactions.
The Company has no present plans concerning the issuance of any
Preferred Stock after the Reorganization. See "Other Article and Bylaw
-----------------------
Provisions; Stockholder's Rights Plan."
- - - -------------------------------------
Number of Directors. Article IV of New Jersey Bontex's current Bylaws,
-------------------
which will be the Bylaws of Virginia Bontex at the Effective Time,
establishes that the number of directors constituting the Board of Directors
of New Jersey Bontex is ten. New Jersey Bontex's Charter divides the
directors into three classes, each serving for three years, with one class
being elected annually. Article 3 of Virginia Bontex's Articles also
provides for classification of directors. In addition, the Virginia Bontex
Articles fix a variable range for the number of directors and provide that
the precise number of directors (within the variable range) will be
designated in the Bylaws.
This provision, together with the provisions hereafter discussed
regarding the filling of vacancies on the Board, restrictions on removal of
incumbent directors and amendment of the Bylaws, may make it more difficult
for a majority stockholder to obtain representation quickly by enlarging the
Board and filling the directorships with his own nominees. Together with the
provision requiring cause to remove a director as discussed below, the
foregoing provision is designed to assure continuity and stability in the
Board's leadership and policies in the currently volatile economic and
competitive atmosphere and in the event of a hostile tender offer. The Board
has had no problems with such continuity in the past and it wishes to ensure
that this will continue.
If the proposed Reorganization is approved, the directors of New Jersey
Bontex will be the directors of the surviving corporation.
Removal of Directors; Filling Newly-Created Directorships and
-------------------------------------------------------------
Vacancies. The provision of the Virginia Bontex Articles classifying the
- - - ---------
Board of Directors also provides that directors can be removed only for cause
and only by the affirmative vote of a majority of each class of the voting
stock of Virginia Bontex then outstanding. This same rule applies under New
Jersey law for New Jersey Bontex, except that the removal of a director for
cause requires only a majority of the votes cast by the stockholders entitled
to vote for the election of directors. Virginia Bontex's Articles further
provide that any vacancy on the Board occurring during the course of the
year, including vacancies created by an increase in the number of directors,
shall be filled by a majority vote of the remaining directors, whether or not
a quorum. At present, stockholders of New Jersey Bontex also have the right,
under certain circumstances, to fill vacancies on the New Jersey Bontex
Board.
These provisions are intended to prevent a significant stockholder,
particularly a takeover bidder, from destabilizing the classified Board by
removing directors and replacing them with its own nominees and thus could
have the effect of protecting the incumbent Board. At the same time, removal
of directors only for cause and only by an affirmative vote of each class of
voting stock outstanding may encourage bidders to negotiate with the Board of
Directors prior to launching a takeover bid. These provisions help insure
that the Board, if confronted by a surprise proposal from a third party that
has recently acquired a block of stock, will have sufficient time to review
the proposal and appropriate alternatives and to seek a solution that would
benefit all the stockholders.
Increased Vote for Amendments to Bylaws. Article 3 of Virginia
---------------------------------------
Bontex's Articles provides that the Board of Directors may adopt, alter,
amend or repeal any Bylaw by a majority vote of a quorum of the directors.
If, as of the date of such action, however, any person is directly or
indirectly a beneficial owner of 5% or more of Virginia Bontex's outstanding
voting shares (excluding any person who is a beneficial owner of 5% or more
of the Company's outstanding voting shares on December 1, 1996), such
majority must include a majority of the directors who are not affiliated with
the 5% stockholder and were directors immediately prior to the time such 5%
stockholder became a 5% stockholder. Article 3 further provides that
stockholders of Virginia Bontex may, by the affirmative vote of at least 80%
of each class of the voting stock of Virginia Bontex, adopt new Bylaws or
alter, amend or repeal Bylaws adopted by either the stockholders or the Board
and prescribe that any Bylaw made by them shall not be altered, amended or
repealed by the Board.
Currently, the power to adopt, alter, amend or repeal Bylaws of New
Jersey Bontex is vested in the Board or the stockholders by a majority vote.
The supermajority vote requirement set out in Virginia Bontex's Articles is
intended to prevent a stockholder that controls less than the required
percentage of Virginia Bontex stock from directly or indirectly effecting
changes in the Bylaws, including changes designed to facilitate a business
combination or the exercise of control of Virginia Bontex. This provision
may make it more difficult for significant stockholders to amend Virginia
Bontex's Bylaws. In addition, Virginia Bontex's Articles provide that the
affirmative vote of the holders of at least 80% of each class of voting stock
is required to amend or repeal, or to adopt any Article or Bylaw inconsistent
with, Article 3.
Other Article and Bylaw Provisions; Stockholder's Rights Plan.
-------------------------------------------------------------
Virginia Bontex's Articles and Bylaws do not currently contain any other
conventional anti-takeover provisions, and the Company has no current plans
to submit further proposals with a possible "anti-takeover" effect to
stockholders. The Board of Directors currently is considering the possible
adoption of a stockholder's rights plan involving the granting of rights to
stockholders of the Company to acquire additional shares of stock at a
discount upon the happening of certain events. If the Reorganization is
approved by the stockholders, any rights plan that may thereafter be adopted
by the Board of Directors could involve the granting of rights to acquire
shares of Virginia Bontex Preferred Stock or Common Stock.
Limitation of Liability and Indemnification of Directors and Officers.
---------------------------------------------------------------------
Virginia Bontex Article 4 (i) to the fullest extent permitted by the Virginia
Stock Corporation Act, eliminates the personal liability of Virginia Bontex's
directors and officers to the Corporation or its stockholders for monetary
damages for breach of their fiduciary duties, and (ii) expands and clarifies
the rights of certain individuals, including Virginia Bontex's directors and
officers, to indemnification by Virginia Bontex in the event of personal
liability or expenses incurred by them as a result of certain litigation
which might be brought against them in the future.
In recent years, there has been a significant increase in the number
and amount of claims brought against directors and officers of corporations.
At the same time, the general availability of adequate directors' and
officers' liability insurance coverage has been reduced and the cost of
available insurance has escalated dramatically with higher deductibles, lower
limits of liability and the exclusion of specific risks. As a result, some
corporations have experienced significant difficulties in attracting and
retaining qualified directors and officers. Although the Company has not
directly experienced this problem, the Board of Directors believes that the
Company should take every possible step to be able to attract the best
possible directors and officers. The Company presently plans to continue
directors' and officers' liability insurance coverage whether or not the
Reorganization is approved. The Company is not aware of any actual or
threatened litigation or proceeding that might result in a claim for
indemnification or the application of the liability limit. Moreover, the
provisions are not in response to any threat of resignation or refusal to
serve by any Board member or officer.
Limitation of Liability
Section 13.1-692.1 of the Virginia Act limits the amount of monetary
damages which may be assessed against a director or officer of a Virginia
corporation in a direct or derivative action brought by stockholders to the
lesser of: (i) the amount specified in the Articles or a stockholder-adopted
Bylaw as a limitation on the liability of the director or officer; or
(ii) the greater of (a) $100,000 or (b) the amount of cash compensation
received by the director or officer from the corporation during the twelve
months immediately preceding the act or omission giving rise to liability.
This statutory limit on damages does not apply in the event of willful
misconduct or a knowing violation of the criminal law or of any federal or
state securities law. The statute does not distinguish between liabilities
based upon the fiduciary duties of care and loyalty and does not change or
eliminate a director's or officer's duty of care to the corporation.
Virginia Bontex's Article 4 reduces the personal liability of a
director or officer of Virginia Bontex in a direct or derivative suit to
zero, except in cases in which a director or officer engaged in willful
misconduct or a knowing violation of the criminal law or of any federal or
state securities law. Virginia Bontex Article 4 would not preclude suits for
equitable relief, although there can be no assurance that such relief would,
as a practical matter, provide an adequate remedy for breach of directors'
and officers' fiduciary duties. Virginia Bontex Article 4 also would leave
unaffected the rights of third-party plaintiffs, such as creditors, to
institute suits to recover damages against the Company or its directors or
officers.
New Jersey Bontex's Charter does not contain a provision limiting the
liability of a director or officer, except a provision which states that any
person who becomes a director of the Company is relieved from any liability
that may otherwise exist from contracting with the Company for the benefit of
himself or any firm or corporation in which he may be in any way interested.
This provision, which was adopted in 1967, does not reflect current statutory
procedures in the NJBCA established for director conflicts of interest, and
does not address obligations imposed by a director's duty of loyalty.
Indemnification
Under the NJBCA, New Jersey Bontex has the power to indemnify any
person who is a director, officer, employee or agent of the Company or was or
is a director, officer, trustee, employee or agent of any other enterprise,
serving as such at the request of the Company, or the legal representative of
any such director, officer, trustee, employee or agent (collectively, the
"corporate agent") against its expenses (i.e., reasonable costs,
----
disbursements and counsel fees) and liabilities (i.e., amounts paid or
----
incurred in satisfaction of settlements, judgments, fines and penalties) in
connection with any proceeding involving the corporate agent by reason of its
being or having been such a corporate agent, other than a proceeding by or in
the right of the Company, if (i) such corporate agent acted in good faith and
in the manner it reasonably believed to be in or not opposed to the best
interest of the Company; and (ii) with respect to any criminal proceeding,
the corporate agent had no reasonable cause to believe its conduct was
unlawful. New Jersey Bontex further has the power by statute to indemnify a
corporate agent against its expenses (i.e., reasonable costs, disbursements
----
and counsel fees) in connection with any proceeding by or in the right of the
Company which involves the corporate agent by reason of its being or having
been such corporate agent, if it acted in good faith and in a manner it
reasonably believed to be in or not opposed to the best interests of the
Company. However, no indemnification may be provided in such proceeding in
respect of any claim, issue or matter as to which such corporate agent shall
have been adjudged to be liable to the corporation, unless and only to the
extent that the New Jersey Superior Court or the court in which the
proceeding was brought determines upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, the
corporate agent is fairly and reasonably entitled to indemnity for such
expenses as the New Jersey Superior Court or such other court deems proper.
The NJBCA mandates indemnification for expenses to the extent that a
corporate agent has been successful on the merits or otherwise in any
proceeding referred to above or in defense of any claim, issue or matter
therein. The Company is permitted to advance payments to a corporate agent
for expenses incurred prior to final disposition of the proceeding, provided
that the corporate agent submits a suitable undertaking to the Company.
These indemnification provisions are in addition to any provisions for
indemnification contained in the Company's Charter or Bylaws; provided that
no indemnification can be made to or on behalf of a corporate agent if a
judgment or other final adjudication adverse to the corporate agent
establishes that its act or omissions (i) were in breach of its duty of
loyalty to the Company or the stockholders; (ii) were not in good faith or
involved a knowing violation of law; or (iii) resulted in receipt by the
corporate agent of an improper personal benefit.
The Bylaws of New Jersey Bontex provides that any present or future
director or officer, or the executor, administrator or other legal
representative of such director or officer, shall be indemnified by the
Company against reasonable costs, expenses (exclusive of any amount paid to
the Company in settlement) and counsel fees paid or incurred in connection
with any action to which any such director or officer or his or her executor,
administrator or other legal representative may be made a party by reason of
his or her being or having been such a director or officer, provided that:
(i) said action must be prosecuted against such director or officer or
against his or her executor, administrator or other legal representative to
final determination, and it shall not be finally adjudicated in said action
suit that he or she had been derelict in the performance of his or her duties
as a director or officer, or (ii) said action is settled or otherwise
terminated as against such officer or his or her executor, administrator or
other legal representative without a final determination on the merits, and
it shall be determined that such director or officer had not in any
substantial way been derelict in the performance of his or her duties as
charged in such action, such determination to be made by a majority of the
members of the Board of Directors who are not parties to such action, though
less than a quorum, or by any one or more disinterested persons to whom the
question may be referred by the Board of Directors.
New Jersey Bontex's Certificate provides that any person made a party
to any action by reason of the fact that he or she is or was a director or
officer of the Company, or any corporation of which he or she served as such
at the request of the Company, shall be indemnified by the Company for all
reasonable expenses, including attorneys' fees, incurred in connection with
the defense of such action, or in connection with any appeal therein, except
in direct relation to matters as to which it shall be adjudged in such action
that such officer or director is liable for negligence or misconduct in the
performance of its duty. These indemnification provisions are generally more
limited than the indemnification permitted by Virginia law and the Virginia
Bontex Articles.
Section 13.1-704 of the Virginia Act permits a Virginia corporation to
indemnify its directors and officers except for liability arising out of
their willful misconduct or knowing violation of the criminal law.
Consistent with Section 13.1-704, paragraph (a) of Article 5 of Virginia
Bontex Articles requires indemnification of any director or officer who is a
party to any proceeding instituted against him by third parties or by or on
behalf of Virginia Bontex itself by reason of the fact that he is or was a
director or officer of Virginia Bontex, or served as a director, officer,
employee or agent of another corporation or other entity at the request of
Virginia Bontex, against any liabilities incurred by him in connection with
such proceeding, unless his or her acts or omissions constitute willful
misconduct or a knowing violation of the criminal law. This provision
requires Virginia Bontex to provide indemnification for liability arising out
of gross negligence.
The determination of whether indemnification is permissible is made
(i) by a majority vote of a quorum consisting of disinterested directors of
Virginia Bontex; or (ii) if such quorum is not available, or in the event the
composition of a majority of the Virginia Bontex Board changes after an
alleged act or omission giving rise to a claim for indemnification has
occurred, by special legal counsel agreed upon by the Board and the proposed
indemnitee. If the Board and the proposed indemnitee cannot agree upon such
special legal counsel, the Board and the proposed indemnitee must select a
nominee, and the nominees must select such special legal counsel.
Virginia Bontex Article 5 could require Virginia Bontex to advance
expenses reasonably incurred by a director or officer in a proceeding upon
receipt of an undertaking, which need not be a secured undertaking, from him
or her to repay the amounts advanced if it is ultimately determined that he
or she is not entitled to indemnification.
Paragraph (b) of Virginia Bontex Article 5 authorizes Virginia Bontex
to provide indemnification and make advances and reimbursement for expenses
to other persons, including directors and officers of its subsidiaries and
employees and agents of Virginia Bontex and its subsidiaries, to the same
extent that it is required to indemnify directors and officers of Virginia
Bontex. Virginia Bontex may also contract in advance to provide such
indemnification, but has no present plans to do so. Whether stockholders
would be estopped from a claim that any such contract, or any contract
permitted by paragraph (a) with regard to indemnity of directors or officers,
is invalid or unenforceable due to the approval of Virginia Bontex Article 5
would depend upon the facts and circumstances relating to such claim.
Paragraph (c) of Virginia Bontex Article 5 authorizes Virginia Bontex
to purchase and maintain insurance to indemnify it against all or part of the
liability assumed by it in accordance with Virginia Bontex Article 5.
Virginia Bontex further is authorized to purchase insurance for any director,
officer, employee or agent of another corporation or other entity who is
serving at the request of Virginia Bontex, whether or not Virginia Bontex
would have the power to indemnify him or her against such liability under
Virginia Bontex Article 5.
Paragraph (e) of Virginia Bontex Article 5 states that the provisions
of Article 5 shall be applicable to proceedings commenced after its adoption
even though some or all of the underlying conduct or events relating to a
proceeding may have occurred before such adoption. No amendment,
modification or repeal of Article 5 will have any effect on the rights
provided under Article 5 to any person with respect to any claim or liability
arising from conduct or events occurring before the adoption of such
amendment, modification or repeal. Virginia Bontex Article 5 may only be
amended by the favorable vote of both the Board of Directors and stockholders
of Virginia Bontex.
Stockholders should be aware that the concepts of limited liability and
indemnification are interrelated. While the provisions of the Virginia Act
limit the liability of directors and officers in suits by stockholders, to
the extent that directors and officers are liable, Virginia Bontex may be
required to indemnify them. Moreover, directors and officers may be entitled
to indemnification in the event it is determined that the proposed limitation
of liability provision is inapplicable or invalid. If stockholders approve
the Reorganization, the circumstances under which the Company is required to
indemnify a director or officer will be broadened. The combined effect of
the limitation on liability and the broadening of the indemnification rights
of directors and officers may be to reduce the likelihood that stockholders
will bring lawsuits in the event of conduct by directors and officers
involving gross negligence, including conduct related to a change in control
of Virginia Bontex, and thus may be seen as contrary to the purposes behind
the creation and judicial recognition of derivative suits. In addition, as a
result of adoption of the Reorganization, the Company and its stockholders
may lose the opportunity to obtain monetary damages payable either directly
by directors and officers of Virginia Bontex or out of the proceeds of
directors' and officers' liability insurance. The approval of the
Reorganization could also increase, as a result of Virginia Bontex Article 5,
the costs to the Company in the future in the event that claims for
indemnification were to be asserted. Any such increased costs may be
satisfied directly from Virginia Bontex's funds and therefore may affect the
stockholders' investments.
All directors and officers of the Company have an interest in and could
benefit from the provisions of Virginia Bontex Articles 4 and 5 at the
potential expense of the Company's stockholders. The Company believes that
the foregoing risks are outweighed by the positive effect that the provisions
will have, namely, the enhancement of the Company's ability to attract and
retain qualified directors and officers, and that the provisions ultimately
will inure to the benefit of the Company and its stockholders.
Insofar as indemnification for liability arising under federal
securities laws may be permitted to directors, officers and other persons
pursuant to Virginia Bontex Article 5, the Company understands that it is the
position of the Securities and Exchange Commission that such indemnification
is void as against public policy and unenforceable.
Certain Differences in Corporation Law
In addition to the matters described above, Virginia law differs in
many respects from New Jersey law. Certain differences which could
materially affect the rights of stockholders are discussed below. The
following summary does not reflect any rules of the Nasdaq Stock Market that
may affect New Jersey Bontex in connection with the matters discussed. This
summary does not purport to be a complete discussion of, and is qualified in
its entirety by reference to, the governing law and the certificate of
incorporation and bylaws of each corporation.
Stockholders Meetings. The New Jersey Bontex Bylaws provide that
---------------------
special meetings of stockholders may be called at any time by the Board of
Directors, or a majority thereof, or by the Chairman of the Board or by the
President. Further, the Chairman of the Board or the President must call
such meetings whenever so requested in writing by the stockholders of record
who own at least 45% of the shares of the capital stock of New Jersey Bontex
entitled to vote at such meeting. Notice of the meeting must specify the
object or objects thereof, and no other business than that specified in such
notice may be considered at any such meeting, except upon unanimous consent
of all stockholders entitled to notice thereof. Any questions submitted to
the stockholders generally may be decided by a majority of the votes cast at
a meeting at which a quorum is present, with the exception that the election
of directors is decided by a plurality of the votes cast. The quorum
requirement may be increased or decreased (with no limit), and the voting
requirement may be increased, in the Certificate of Incorporation.
Under the Virginia Act, Virginia Bontex may hold a special meeting on
call of the Chairman of the Board of Directors, the President, the Board of
Directors or the person or persons authorized to do so in the Articles or
Bylaws. Virginia Bontex's Articles do not contain any provision with respect
to the calling of special meetings. Virginia Bontex's Bylaws will be the New
Jersey Bontex Bylaws and will contain the Bylaw provisions referenced above.
A quorum for a meeting of stockholders of Virginia Bontex generally is a
majority of the outstanding shares of Virginia Bontex entitled to vote. If a
quorum is present, a majority of the shares represented at the meeting is
required for action by the stockholders, unless the vote of the greater
number or voting by classes is required under the Virginia Act or Virginia
Bontex's Articles, and except that in the election of directors those
receiving the greatest number of votes will be deemed elected even though not
receiving a majority. The Virginia Act provides that this quorum requirement
may be increased or decreased (but not to less than one-third of the shares
eligible to vote), and that this voting requirement may be increased, in the
Articles of Incorporation.
Stockholder Inspection Rights; Stockholder List. Under the NJBCA, upon
-----------------------------------------------
written request of any stockholder, New Jersey Bontex must mail to the
stockholder its balance sheet as of the end of the preceding fiscal year and
its profit and loss and surplus statement for such fiscal year. Any person
who has been a stockholder of record of New Jersey Bontex for at least six
months immediately preceding his demand, or any person holding, or authorized
in writing by the holders of, at least 5% of the outstanding shares of any
class or series, upon at least five days' written demand, shall have the
right for any proper purpose to examine in person or by agent or attorney,
during usual business hours, its minutes of proceedings of its stockholders
and record of stockholders and to make extracts therefrom, at the places
where such documents are kept. The list of stockholders also must be
produced for inspection of any stockholder at the time and during a
stockholders' meeting.
The Virginia Act permits any Virginia Bontex stockholder, upon written
demand submitted at least five business days in advance, to inspect and copy
certain listed materials, including the Articles of Incorporation and the
Bylaws and certain Board resolutions and minutes of stockholders' meetings.
The Virginia Act further permits a Virginia Bontex stockholder who has held
his shares for six months or more or who owns 5% or more of the outstanding
stock of Virginia Bontex to, upon five business days' prior written demand
made in good faith and for a proper purpose, inspect and copy the accounting
records, excerpts from minutes of meetings of the Board of Directors and its
committees, the minutes of any stockholders' meeting and the list
stockholders. In addition, Virginia Bontex is required to prepare a
stockholders' list with respect to any stockholders' meeting and to make such
list available at Virginia Bontex's principal office to any stockholder for a
period of ten days prior to the meeting and during such meeting and any
adjournment thereof.
Required Stockholder Vote for Certain Actions. New Jersey Bontex's
---------------------------------------------
Charter contains no special provisions relating to merger or consolidation of
the Company. New Jersey law generally provides that any plan of merger or
plan of consolidation must be approved by the affirmative vote of two-thirds
of the votes cast by the holders of shares entitled to vote thereon of each
New Jersey corporation party to such plan. The vote of the stockholders of a
surviving corporation is generally not required unless (i) the merger effects
an amendment to the certificate of incorporation of such corporation that
would require a vote of stockholders; (ii) the merger effects a change in the
number, designations, rights, preferences and limitations of the shares held
by the stockholders; (iii) the number of voting shares outstanding after the
merger, plus the number of shares issuable upon conversion of any other
securities or on exercise of rights and warrants issued pursuant to the
merger, exceeds by more than 40% the total number of voting shares of the
surviving corporation outstanding immediately before the merger; or (iv) the
number of shares that entitle their holders to participate without limitation
in distributions outstanding after the merger, plus the number of such shares
issuable on conversion of any other securities or on exercise of rights and
warrants issued pursuant to the merger, exceeds by more than 40% the total
number of such shares of the surviving corporation outstanding immediately
before the merger.
The Virginia Act generally provides that mergers, share exchanges and a
corporation's sale of all or substantially all of its assets other than in
the usual or regular course of business must be approved by the Board of
Directors and by more than two-thirds of all votes entitled to be cast by
each voting group entitled to vote on the plan of merger, share exchange or
sale of assets, unless the corporation's Board of Directors requires a
greater vote or the corporation's articles of incorporation provide for a
greater or lesser vote. Virginia Bontex's Articles do not contain any
special provisions with respect to increasing or decreasing a vote required
on a merger or other reorganization. With respect to a merger, no vote of
the stockholders of the surviving corporation is required if: (i) the
articles of incorporation of the surviving corporation will not differ
significantly after the merger; (ii) the corporation's stockholders will hold
the same number of shares, with identical designations, preferences,
limitations and relative rights after the merger; (iii) the number of voting
shares outstanding after the merger plus the number of voting shares issuable
as a result of the merger (including shares issuable upon conversion of
securities or exercise of rights or warrants issued in the merger) will not
exceed by more than 20% the total number of voting shares of the surviving
corporation outstanding before the merger; and (iv) the number of shares
entitling their holders to unlimited participation in distributions
outstanding after the merger, plus the number of participating shares
issuable as a result of such merger (including shares issuable upon
conversion of securities or exercise of rights or warrants issued in the
merger), will not exceed by more than 20% the total number of shares
outstanding before the merger.
Dissenters' Rights. Under New Jersey law, no dissenters' rights exist
------------------
with respect to any class or series of shares that is listed on national
securities exchange or is held of record by 1,000 holders or more
stockholders, or, generally, in any transaction in connection with which the
stockholders of the corporation will receive only (a) cash, (b) securities
that, upon consummation of the transaction, will be listed on a national
securities exchange or be held by record by not less than a 1,000 holders, or
(c) cash and such securities.
Under Virginia law, holders of shares listed on a national securities
exchange or on Nasdaq or held of record by at least 2,000 stockholders do not
have dissenters' rights of appraisal in a merger, consolidation, exchange or
sale of substantially all of the corporation's assets, unless, among other
things, (i) in the case of a plan of merger or share exchange, the holders of
that class or series of shares are required to accept anything other than
(a) cash, (b) shares, or shares and cash in lieu of fractional shares, of
(x) the surviving or acquiring corporation, or (y) any other corporation
which, on the record date fixed for the transaction, were either listed
subject to notice of issuance on a national securities exchange or held of
record by at least 2,000 stockholders, or (c) a combination of cash and
shares as set forth in (a) and (b) above; or (ii) the transaction to be voted
on is an "affiliated transaction" (see "State Anti-Takeover Statutes" above)
and is not approved by a majority of disinterested directors as required by
the Virginia Act.
As described under "Dissenters' Rights" above, holders of New Jersey
Bontex Common Stock are entitled to assert dissenters' rights with respect to
the Reorganization.
Voluntary Dissolution. Under the NJBCA, New Jersey Bontex may be
---------------------
dissolved upon the consent of all of its stockholders entitled to vote
thereon or, alternatively, if the New Jersey Bontex Board recommends that New
Jersey Bontex be dissolved and directs that the question be submitted to a
vote at a meeting of stockholders. New Jersey Bontex may be dissolved upon
the affirmative vote of two-thirds of the votes cast by the stockholders
entitled to vote thereon. If the dissolution is proposed by, on behalf of,
or pursuant to any agreement, arrangement or understanding with an interested
stockholder, the New Jersey Shareholders Protection Act will apply.
Virginia Bontex may be dissolved if its Board of Directors proposes
dissolution and more than two-thirds of the shares of Virginia Bontex
entitled to vote thereon approves. The Board of Directors may require a
greater vote to approve a dissolution and may condition its submission of the
proposal for dissolution on any basis. The requirements of the Virginia
Affiliated Transactions Statute will apply if the dissolution is proposed by
or on behalf of an interested stockholder.
See "State Anti-Takeover Statutes" above.
The affirmative vote of more than two-thirds of the votes cast by
holders of the Company's Common Stock entitled to vote thereon is required to
approve the Reorganization.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
---
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's
1997 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 June 6, 1997, 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
October 4, 1996
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.
Appendix A
PLAN AND AGREEMENT OF MERGER
OF
GEORGIA BONDED FIBERS, INC.
a New Jersey Corporation,
INTO
BONDED FIBERS, INC.,
a Virginia Corporation
Effective Time of Merger: 11:59 p.m. on __________, 1996
THIS PLAN AND AGREEMENT OF MERGER (hereinafter called "this
Agreement"), dated as of the 19th day of August, 1996, by and between Georgia
Bonded Fibers, Inc., a New Jersey corporation (hereinafter sometimes referred
to as the "Disappearing Company" or "GBF"), and Bonded Fibers, Inc., a
Virginia corporation (hereinafter sometimes referred to as the "Continuing
Company" or "Bonded Fibers") (said companies being hereinafter sometimes
collectively referred to as the "Constituent Companies"), made pursuant to
Section 14A:10-1 of the New Jersey Business Corporation Act, as amended, and
Section 13.1-716 of the Virginia Stock Corporation Act, as amended.
W I T N E S S E T H :
WHEREAS, the Boards of Directors of the Constituent Companies deem it
advisable, for the general welfare and advantage of the Constituent Companies
and their shareholders and in the interest of economy and efficiency of
operation of the Constituent Companies, that the Constituent Companies merge
into a single corporation pursuant to this Agreement, and the Constituent
Companies respectively desire to merge pursuant to this Agreement and
pursuant to the applicable provisions of the laws of the State of New Jersey
and the Commonwealth of Virginia.
WHEREAS, the Boards of Directors of the Constituent Companies desire
that the merger constitute a tax-free merger or consolidation of the
Constituent Companies pursuant to Section 368(a) of the Internal Revenue Code
of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree, in accordance with the
applicable provisions of the laws of the United States, the Commonwealth of
Virginia and the State of New Jersey that the Constituent Companies shall be
merged into a single corporation, and the terms and conditions of the merger
hereby agreed upon (hereinafter called the "merger") which the parties
covenant to observe, keep, and perform in carrying the same into effect are
and shall be as hereinafter set forth:
ARTICLE I
Effective Time of the Merger
The effective date of the merger shall be at 11:59 p.m.,
______________, 199__ (the "Effective Time"). At the Effective Time, the
Disappearing Company shall be merged with and into the Continuing Company,
and the separate corporate existence of the Disappearing Company shall
thereupon cease.
ARTICLE II
Articles of Incorporation and Bylaws
The Articles of Incorporation of Bonded Fibers shall, at the Effective
Time, be amended and restated as set forth in Attachment 1 attached hereto
and incorporated herein by this reference ("Restated Articles") and the
Restated Articles shall be the Articles of Incorporation of the Continuing
Company without change or amendment, until the same shall be altered or
amended in accordance with the provisions thereof and applicable law. The
Bylaws of GBF in effect at the Effective Time of the merger, shall continue
to be the Bylaws of the Continuing Company without change or amendment, until
further amended in accordance with the provisions thereof and applicable law.
ARTICLE III
Directors
The directors of GBF in office, immediately prior to the Effective
Time, shall, after the Effective Time, be the directors of the Continuing
Company until the next annual meeting or until such time as their successors
have been elected and shall have qualified.
ARTICLE IV
Officers of the Surviving Company
At the Effective Time, the officers of GBF in office immediately prior
to the Effective Time, shall, after the Effective Time, be the officers of
the Continuing Company, to serve their remaining terms or until such time as
their successors have been elected and shall have qualified.
ARTICLE V
Effect of the Merger
At the Effective Time, the Continuing Company shall succeed to, without
other transfer, and shall possess and enjoy, all of the rights, privileges,
immunities, powers and franchises, both of a public and private nature, and
be subject to all of the restrictions, disabilities, and duties, of each of
the Constituent Companies, and all of the rights, privileges, immunities,
powers, and franchises of each of the Constituent Companies, and all
property, real, personal and mixed, and all debts due to either of said
Constituent Companies on whatever account, shall be vested in the Continuing
Company; and all property, rights, privileges, immunities, powers and
franchises, and all and every other interest shall be thereafter effectually
the property of the Continuing Company as they were of the respective Consti-
tuent Companies, and the title to any real estate vested by deed or otherwise
in either of said Constituent Companies shall not revert nor be in any way
impaired by reason of the merger; provided, however, that all of the rights
of creditors and all liens upon any property of either of the said Constitu-
ent Companies shall be preserved unimpaired, limited in lien to the property
affected by such liens at the Effective Time, and all debts, liabilities, and
duties of said Constituent Companies, respectively, shall thenceforth be
attached to the Continuing Company and may be enforced against it to the same
extent as if said debts, liabilities and duties had been incurred or
contracted by the Continuing Company.
ARTICLE VI
Stock Ownership
At the Effective Time, by virtue of the merger and without any action
on the part of the holders thereof, all of the shares of stock of Bonded
Fibers issued and outstanding immediately prior to the merger shall be
cancelled. At the Effective Time, by virtue of the merger and without any
action on the part of the holders thereof, all of the shares of stock of GBF
issued and outstanding immediately prior to the merger shall become the
issued and outstanding stock of the Continuing Company, without any change.
ARTICLE VII
Termination and General Provisions
11.1 Termination and Abandonment. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned at
any time before the Effective Time, whether before or after adoption or
approval of this Agreement by the Constituent Companies, under any one or
more of the following circumstances:
A. By the unanimous consent of the Board of Directors of GBF
and Bonded Fibers; or
B. By the Board of Directors of either of the Constituent
Companies if any action or proceeding before any court or other governmental
body or agency shall have been instituted or threatened to restrain or
prohibit the merger, and such Constituent Company deems it inadvisable to
proceed with the merger; or
C. By the Board of Directors of GBF if five percent (5%) or
more of the issued and outstanding stock of GBF makes demand for the payment
of the fair value of their shares pursuant to the rights of dissenting
shareholders under Chapter 11 of the New Jersey Business Corporation Act.
Upon any such termination and abandonment, neither party shall have any
liability or obligation to the other. However, upon such termination and
abandonment, the directors and shareholders of GBF agree that the Certificate
of Incorporation of GBF shall nonetheless be amended to change GBF's name to
"Bontex, Inc."
11.2 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
11.3 Additional Documentation. From time to time, as and when
required by the Continuing Corporation or its successors and assigns, there
shall be executed and delivered on behalf of GBF such deeds and other
instruments, and there shall be taken or caused to be taken by it such
further and other actions, as shall be appropriate or necessary in order to
vest or perfect in or to confirm of record or otherwise in the Continuing
Corporation, the title to and possession of all the property, interests,
assets, rights, privileges, immunities, powers, franchises and authorities of
GBF and otherwise to carry out the purposes of the merger, and the officers
and directors of the Continuing Corporation are fully authorized in the name
and on behalf of GBF or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
11.4 Qualification in New Jersey. At the Effective Time, the
Continuing Corporation shall do the following, as mandated by Section 14A:10-
7(1)(c) of the New Jersey Business Corporation Act:
A. Qualify to transact business as a foreign corporation in
the State of New Jersey; and
B. Agree that it may be served with process in New Jersey in
any proceeding for the enforcement of any obligation of GBF or Bonded Fibers,
previously amenable to suit in New Jersey, and in any proceeding for the
enforcement of the rights of a dissenting shareholder of GBF against the
Continuing Corporation; and
C. Agree to the irrevocable appointment of the Secretary of
State of New Jersey as its agent to accept service of process in any such
proceeding, which process shall be mailed by the Secretary of State to the
Continuing Corporation at its business address; and
D. Subject to the provisions hereof, agree to promptly pay to
the dissenting shareholders of GBF the amount, if any, to which they shall be
entitled under the provisions of the New Jersey Business Corporation Act with
respect to the rights of dissenting shareholders.
IN WITNESS WHEREOF, this Agreement has been signed by an authorized
officer of each of the Constituent Companies, all as of the day and year
first above written.
GEORGIA BONDED FIBERS, INC.
By____________________________
Its_________________________
BONDED FIBERS, INC.
By____________________________
Its_________________________
<PAGE>
Attachment 1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
-----------------------------------------------
OF
--
BONDED FIBERS, INC.
-------------------
Pursuant to Section 13.1-716C(1) of the Code of Virginia, as amended,
the Amended and Restated Articles of Incorporation of Bonded Fibers, Inc.
(the "Corporation") are set forth below:
(a) The name of the Corporation is Bonded Fibers, Inc.
(b) The text of the amended and restated Articles of Incorporation is
as follows:
1. The name of the Corporation is Bontex, Inc.
2. (a) The aggregate number of shares which the Corporation is
authorized to issue is as follows:
<TABLE>
<CAPTION>
Class Number of Shares Par Value
----- ---------------- ---------
<S> <C> <C>
Common 10,000,000 $.10
Preferred 10,000,000 No par value
</TABLE>
(b) The Board of Directors of the Corporation (the "Board of
Directors") may, by amending these Articles of Incorporation (the "Articles")
by filing Articles of Amendment with the Virginia State Corporation
Commission, fix in whole or in part the preferences, limitations and rights,
within the limits set by law, of (i) any class of shares, before the issuance
of any shares of that class, or (ii) one or more series within a class,
before the issuance of any shares within that series.
(c) The preferred stock (including any shares of preferred
stock restored to the status of authorized but unissued preferred stock
undesignated as to series pursuant to this Article 2(c)) may be divided into
one or more series and issued from time to time with such preferences,
privileges, limitations, and relative rights as shall be fixed and determined
by the Board of Directors. Without limiting the generality of the foregoing,
the Board of Directors is expressly authorized to the fullest extent
permitted from time to time by law to fix:
(i) the distinctive serial designations and the division
of shares of preferred stock into one or more series and the number of shares
of a particular series, which may be increased or decreased (but not below
the number of shares thereof then outstanding);
(ii) the rate or amount (or the method of determining the
rate or amount) and times at which, the form in which, and the preferences
and conditions under which, dividends shall be payable on shares of a
particular series, the status of such dividends as cumulative, partially
cumulative, or noncumulative, the date or dates from which dividends, if
cumulative, shall accumulate, and the status of such series as participating
or nonparticipating with shares of other classes or series;
(iii) the price or prices at which, the consideration for
which, the period or periods within which and the terms and conditions, if
any, upon which the shares of a particular series may be redeemed, in whole
or in part, at the option of the Corporation or otherwise;
(iv) the amount or amounts and rights and preferences, if
any, to which the Holders (as defined in Article 3 below) of shares of a
particular series are entitled or shall have upon any involuntary or
voluntary liquidation, dissolution or winding up of the Corporation;
(v) the rights and preferences over or otherwise in
relation to any other class or series (including other series of preferred
stock), as to the right to receive dividends and/or the right to receive
payments out of the net assets of the Corporation upon any involuntary or
voluntary liquidation, dissolution or winding up of the Corporation;
(vi) the right, if any, of the Holders of a particular
series, the Corporation or another person to convert or cause conversion of
shares of such series into shares of other classes or series or into other
securities, cash, indebtedness or other property, or to exchange or cause
exchange of such shares for shares of other classes or series or other
securities, cash, indebtedness or other property, and the terms and
conditions, if any, including the price or prices or the rate or rates of
conversion and exchange, and the terms and conditions or adjustments, if any,
at which such conversion or exchange may be made or caused;
(vii) the obligation, if any, of the Corporation to redeem,
purchase or otherwise acquire, in whole or in part, shares of a particular
series for a sinking fund or otherwise, the terms and conditions thereof, if
any, including the price or prices and the nature of the consideration
payable for such shares so redeemed, purchased or otherwise acquired;
(viii) the voting rights, if any, including special,
conditional or limited voting rights, of the shares of a particular series in
addition to those required by law, including the number of votes per share
and any requirement for the approval by the Holders of shares of all series
of preferred stock, or of the shares of one or more series thereof, or of
both, in an amount greater than a majority, up to such amount as is in
accordance with applicable law or these Articles, as a condition to specified
corporate action or amendments to the Articles; and
(ix) any other preferences, limitations and relative
rights which may be so determined by resolution or resolutions of the Board
of Directors.
Shares of preferred stock shall rank prior or superior to the
common stock in respect of the right to receive dividends and/or the right to
receive payments out of the net assets of the Corporation upon any
involuntary or voluntary liquidation, dissolution or winding up of the
Corporation. All shares of preferred stock redeemed, purchased or otherwise
acquired by the Corporation (including shares surrendered for conversion or
exchange) shall be cancelled and thereupon restored to the status of
authorized but unissued shares of preferred stock undesignated as to series.
(d) The Holders of common stock, to the exclusion of any other
class of stock of the Corporation, have sole and full power to vote for the
election of directors and for all other purposes without limitation except
only (i) as otherwise expressly provided in the serial designation of any
series of preferred stock, (ii) as otherwise expressly provided in these
Articles and (iii) as otherwise expressly provided by the then existing laws
of the Commonwealth of Virginia. The Holders of common stock will have one
vote for each share of common stock held by them. The outstanding shares of
common stock, upon dissolution, liquidation or winding up of the Corporation,
entitle their Holders to share, pro rata, based on the number of shares
owned, in the Corporation's assets remaining after payment or provisions for
payment of all debts and liabilities of the Corporation, and after provisions
for the outstanding shares of any class of stock or other security having
senior liquidation rights to the common stock.
(e) No Holder of shares of stock of any class of the
Corporation will have any preemptive or preferential right of subscription to
any shares of any class of stock of the Corporation, whether now or hereafter
authorized, or to any obligations of the Corporation convertible into stock
of the Corporation, issued or sold, nor any right of subscription to any
thereof.
3. (a) Subject to the rights of Holders of any series of preferred
stock to elect directors under specified circumstances:
(i) The number of directors of the Corporation, not less
than ten nor more than fifteen, shall be set by the Bylaws; provided that, in
the absence of a provision in the Bylaws fixing the number of directors, the
number of directors shall be fifteen. The directors shall be divided into
three classes as nearly equal in number as possible, with the term of office
of directors of the first class to expire at the first annual meeting of the
shareholders after their election, that of the second class to expire at the
second annual meeting after their election, and that of the third class to
expire at the third annual meeting after their election. At each annual
meeting after such classification, the number of directors equal to the
number of the class whose term expires at the time of such meeting shall be
elected to hold office until the third succeeding annual meeting of
shareholders and until their respective successors are elected and shall
qualify. In the event of any increase or decrease in the number of directors
fixed by the Bylaws, all classes of directors shall be increased or decreased
as equally as may be possible.
(ii) Newly-created directorships resulting from an
increase in the authorized number of directors or any vacancies in the Board
of Directors resulting from death, resignation, retirement, disqualification,
removal from office, or other cause shall be filled by the affirmative vote
of a majority of the directors then in office, whether or not a quorum. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director. A director may be removed from
office only for cause and only by the affirmative vote of the Holders of a
majority of each class of the voting stock of the Corporation then
outstanding at a meeting called for that purpose.
(b) The power to adopt, alter, amend or repeal Bylaws is vested
in the Board of Directors, which may take such action by the vote of a
majority of the directors present and voting at a meeting at which a quorum
is present, provided that if, as of the date such action shall occur, there
is an Interested Shareholder (other than an Interested Shareholder qualifying
as such on December 1, 1996), such majority must include a majority of the
Continuing Directors. The Bylaws may contain any provision respecting the
affairs, business, governance or other matters relating to the Corporation
not inconsistent with the express provisions of these Articles.
Shareholders, by the affirmative vote of the Holders of not less than 80
percent of each class of the voting stock of the Corporation then
outstanding, may (i) adopt new Bylaws, or (ii) alter, amend or repeal Bylaws
adopted by either the shareholders or the Board, and (iii) prescribe that any
Bylaw made by them shall not be altered, amended or repealed by the Board
(provided that if the shareholders do not so prescribe, any Bylaw made by
them may be altered, amended or repealed by the Board).
(c) The affirmative vote of the Holders of not less than
80 percent of each class of the voting stock of the Corporation then
outstanding shall be required to amend or repeal this Article 3 or adopt any
provision of the Articles or Bylaws inconsistent with this Article 3.
(d) For purposes of this Article 3:
(i) "Person" means any individual, firm, corporation or
other entity.
(ii) "Interested Shareholder" means (A) any Person (other
than the Corporation, a Subsidiary, or any profit-sharing, employee stock
ownership or employee benefit plan of the Corporation or a Subsidiary, or any
trustee of or fiduciary with respect to any such plan acting in such
capacity) that is the direct or indirect beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934 (the "'34
Act") as in effect on June 30, 1996) of five percent or more of the
outstanding capital stock of the Corporation entitled to vote for the
election of directors, and (B) any Affiliate or Associate of any such Person.
(iii) "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and Regulations
under the '34 Act as in effect on June 30, 1996.
(iv) "Subsidiary" means any business entity, fifty percent
or more of which is directly or indirectly owned by the Corporation.
(v) "Continuing Director" means any member of the Board
of Directors who is neither an Interested Shareholder nor affiliated with an
Interested Shareholder and who was a member of the Board of Directors
immediately prior to the time that the Interested Shareholder became an
Interested Shareholder.
(vi) "Holders" means the holders of all classes and series
of the capital stock of the Corporation, except as otherwise specifically
provided herein.
4. To the full extent that the laws of the Commonwealth of Virginia,
as they now or may hereafter exist, permit the limitation or elimination of
the liability of directors or officers, no director or officer of the
Corporation shall be liable to the Corporation or its shareholders for any
monetary damages.
5. (a) The Corporation shall indemnify a director or officer of
the Corporation who is or was a party to any proceeding, including a
proceeding by or in the right of the Corporation, by reason of the fact that
he is or was such a director or officer or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other profit or non-profit enterprise against all liabilities and expenses
incurred in the proceeding, except such liabilities and expenses as are
incurred because of his willful misconduct or knowing violation of the
criminal law. Unless a determination has been made that indemnification is
not permissible, the Corporation shall make advances and reimbursement for
expenses incurred by a director or officer in a proceeding upon receipt of an
undertaking from him to repay the same if it is ultimately determined that he
is not entitled to indemnification. Such undertaking shall be an unlimited
unsecured general obligation of the director or officer and shall be accepted
without reference to his ability to make repayment. The Board of Directors
is hereby empowered to contract in advance to indemnify and advance the
expenses of any director or officer. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or
---- ----------
its equivalent shall not, by itself, create a presumption that the director
or officer did not meet the standard of conduct entitling him to indemnity
hereunder.
(b) The Board of Directors is hereby empowered to cause the
Corporation to indemnify and make advances and reimbursement for expenses (or
contract in advance for the same) incurred by any person not specified in
paragraph (a) of this Article 5 who was or is a party to any proceeding, by
reason of the fact that he is or was an employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other profit or non-profit
enterprise, to the same extent as if such person were specified as one to
whom indemnification is granted in paragraph (a) of this Article.
(c) The Corporation may purchase and maintain insurance to
indemnify it against the whole or any portion of the liability assumed by it
in accordance with this Article and may also procure insurance, in such
amounts as the Board of Directors may determine, on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against any liability asserted
against or incurred by such person in any such capacity or arising from his
status as such, whether or not the Corporation would have power to indemnify
him against such liability under the provisions of this Article.
(d) Except as hereinafter provided, all determinations as to
the permissibility of indemnification and advances and reimbursement for
expenses (including contracts with respect thereto) shall be made by a
majority vote of a quorum consisting of directors not at the time parties to
the proceeding. In the event such a quorum cannot be obtained to make any
determination as to the permissibility of indemnification and advances and
reimbursement for expenses with respect to any claim for indemnification
(including contracts with respect thereto), or in the event there has been a
change in the composition of a majority of the Board of Directors after the
date of the alleged act with respect to which indemnification is claimed,
such determination shall be made by special legal counsel agreed upon by the
Board of Directors and the proposed indemnitee. If the Board of Directors
and the proposed indemnitee are unable to agree upon such special legal
counsel, the Board of Directors and the proposed indemnitee each shall select
a nominee, and the nominees shall select such special legal counsel.
(e) The provisions of this Article shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article shall
diminish the rights provided hereby or diminish the right to indemnification
with respect to any claim, issue or matter in any then pending or subsequent
proceeding that is based in any material respect on any alleged action or
failure to act prior to such amendment, modification or repeal.
(f) Except to the extent inconsistent with this Article, terms
used herein shall have the same meanings assigned them in the Indemnification
Article of the Virginia Stock Corporation Act, as now in effect or hereafter
amended or replaced. Without limitation, it is expressly understood that
reference herein to directors, officers, employees or agents shall include
former directors, officers, employees and agents and their respective heirs,
executors and administrators.
<PAGE>
Appendix B
ARTICLES OF MERGER
OF
GEORGIA BONDED FIBERS, INC.,
a New Jersey Corporation
INTO
BONDED FIBERS, INC.,
a Virginia Corporation
The undersigned corporations, hereby execute the following Articles of
Merger:
ONE
Plan of Merger
(a) Names, States of Incorporation and Authority. Pursuant to a Plan
and Agreement of Merger dated 19th day of August, 1996 (hereinafter sometimes
referred to as "the Plan"), Georgia Bonded Fibers, Inc., a New Jersey
corporation (hereinafter referred to as "GBF") shall be merged with and into
Bonded Fibers, Inc., a Virginia corporation (hereinafter referred to as
"Bontex" or the "Surviving Corporation") (said corporations being hereinafter
sometimes collectively referred to as the "Constituent Corporations"). In
accordance with the Plan, the Surviving Corporation will adopt restated
Articles of Incorporation, and will change its name to Bontex, Inc. The
proposed merger is permitted by the laws of the State of New Jersey, and GBF
has complied with such laws in effecting this merger.
(b) Terms and Conditions of Merger. The terms and conditions of the
------------------------------
proposed merger are set forth in the Plan, a copy of which is attached hereto
as Exhibit A.
TWO
Adoption of Plan of Merger
(1) Adoption by GBF. The Board of Directors of GBF approved the Plan
---------------
on August 19, 1996, and recommended the same to the shareholders. The
shareholders of GBF approved the Plan by the following vote at a meeting held
on November 7, 1996:
Class Outstanding FOR AGAINST
----- ----------- --- -------
Common ___________ _____ _____
(2) Adoption by Bontex. The Board of Directors of Bontex approved
------------------
the Plan by unanimous written consent effective as of August 19, 1996, and
recommend the same to the shareholders. The shareholders of Bontex
unanimously approved the Plan by unanimous written consent effective as of
August 19, 1996.
THREE
Effective Time
The Articles of Merger shall become effective at 11:59 p.m. on
______________, 1996.
FOUR
Relocation of Situs
The merger merely constitutes a relocation of the situs of GBF from the
State of New Jersey to the Commonwealth of Virginia, and a change in the
identity, form and/or place of organization of GBF and Bontex pursuant to
Section 368(a)(1)(F) of the Internal Revenue Code.
IN WITNESS WHEREOF, each of the Constituent Corporations have caused
these Articles of Merger to be executed in its name by its President and
Secretary, this ____ day of _________, 1996.
ATTEST: GEORGIA BONDED FIBERS, INC.
By:_______________________ By:___________________________
Its Secretary Its President
ATTEST: BONDED FIBERS, INC.
By:_______________________ By:___________________________
Its Secretary Its President
<PAGE>
Appendix C
NEW JERSEY BUSINESS CORPORATION ACT
CHAPTER 11
RIGHTS OF DISSENTING SHAREHOLDERS
14A:11-1. Right of shareholders to dissent
(1) Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions
(a) Any plan of merger or consolidation to which the
corporation is a party, provided that, unless the certificate of
incorporation otherwise provides
(i) a shareholder shall not have the right to dissent
from any plan of merger or consolidation with respect to shares
(A) of a class or series which is listed on a
national securities exchange or is held of record by not
less than 1,000 holders on the record date fixed to
determine the shareholders entitled to vote upon the plan
of merger or consolidation; or
(B) for which, pursuant to the plan of merger or
consolidation, he will receive (x) cash, (y) shares,
obligations or other securities which, upon consummation of
the merger or consolidation, will either be listed on a
national securities exchange or held of record by not less
than 1,000 holders, or (z) cash and such securities;
(ii) a shareholder of a surviving corporation shall not
have the right to dissent from a plan of merger, if the merger
did not require for its approval the vote of such shareholders as
provided in section 14A:10-5.1 or in subsection 14A:10-3(4),
14A:10-7(2) or 14A:10-7(4); or
(b) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation not in the usual or
regular course of business as conducted by such corporation, other than
a transfer pursuant to subsection (4) of N.J.S. 14A:10-11, provided
that, unless the certificate of incorporation otherwise provides, the
shareholder shall not have the right to dissent.
(i) with respect to shares of a class or series which, at
the record date fixed to determine the shareholders entitled to
vote upon such transaction, is listed on a national securities
exchange or is held of record by not less than 1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution
of the corporation which provides for distribution of
substantially all of its net assets to shareholders in accordance
with their respective interests within one year after the date of
such transaction, where such transaction is wholly for
(A) cash; or
(B) shares, obligations or other securities which,
upon consummation of the plan of dissolution will either be
listed on a national securities exchange or held of record
by not less than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court having
jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares
owned beneficially by him and with respect to which a right of dissent
exists. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner with respect to which
the right of dissent exists.
(4) A corporation may provide in its certificate of incorporation
that holders of all its shares, or of a particular class or series thereof,
shall have the right to dissent from specified corporate actions in addition
to those enumerated in subsection 14A:11-1(1), in which case the exercise of
such right of dissent shall be governed by the provisions of this Chapter.
14A:11-2. Notice of dissent; demand for payment; endorsement of
certificates
(1) Whenever a vote is to be taken, either at a meeting of
shareholders or upon written consents in lieu of a meeting pursuant to
section 14A:5-6, upon a proposed corporate action from which a shareholder
may dissent under section 14A:11-1, any shareholder electing to dissent from
such action shall file with the corporation before the taking of the vote of
the shareholders on such corporate action, or within the time specified in
paragraph 14A:5-6(2)(b) or 14A:5-6(2)(c), as the case may be, if no meeting
of shareholders is to be held, a written notice of such dissent stating that
he intends to demand payment for his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action
takes effect, the corporation, or, in the case of a merger or consolidation,
the surviving or new corporation, shall give written notice of the effective
date of such corporate action, by certified mail to each shareholder who
filed written notice of dissent pursuant to subsection 14A:11-2(1), except
any who voted for or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder
to whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the
surviving or new corporation, for the payment of the fair value of his
shares.
(4) Whenever a corporation is to be merged pursuant to section
14A:10-5.1 or subsection 14A:10-7(4) and shareholder approval is not required
under subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the
right to dissent pursuant to section 14A:11-1 may, not later than 20 days
after a copy or summary of the plan of such merger and the statement required
by subsection 14A:10-5.1(2) is mailed to such shareholder, make written
demand on the corporation or on the surviving corporation, for the payment of
the fair value of his shares.
(5) Whenever all the shares, or all the shares of a class or series,
are to be acquired by another corporation pursuant to section 14A:10-9, a
shareholder of the corporation whose shares are to be acquired may, not later
than 20 days after the mailing of notice by the acquiring corporation
pursuant to paragraph 14A:10-9(3)(b), make written demand on the acquiring
corporation for the payment of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares
pursuant to this section, the shareholder shall submit the certificate or
certificates representing his shares to the corporation upon which such
demand has been made for notation thereon that such demand has been made,
whereupon such certificate or certificates shall be returned to him. If
shares represented by a certificate on which notation has been made shall be
transferred, each new certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of such
shares, and a transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making a demand for payment of the fair value thereof.
(7) Every notice or other communication required to be given or made
by a corporation to any shareholder pursuant to this Chapter shall inform
such shareholder of all dates prior to which action must be taken by such
shareholder in order to perfect his rights as a dissenting shareholder under
this Chapter.
14A:11-3. "Dissenting shareholder" defined; date for determination of fair
value
(1) A shareholder who has made demand for the payment of his shares
in the manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-
2(5) is hereafter in this Chapter referred to as a "dissenting shareholder."
(2) Upon making such demand, the dissenting shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the
fair value of his shares and any other rights of a dissenting shareholder
under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of
shareholders at which the proposed action was approved or as of the day
prior to the day specified by the corporation for the tabulation of
consents to such action if no meeting of shareholders was held; or
(b) In the case of a merger pursuant to section 14A:10-5.1 or
subsection 14A:10-7(4) in which shareholder approval is not required,
as of the day prior to the day on which the board of directors approved
the plan of merger; or
(c) In the case of an acquisition of all the shares or all the
shares of a class or series by another corporation pursuant to section
14A:10-9, as of the day prior to the day on which the board of
directors of the acquiring corporation authorized the acquisition, or,
if a shareholder vote was taken pursuant to section 14A:10-12, as of
the day provided in paragraph 14A:11-3(3)(a).
In all cases, "fair value" shall exclude any appreciation or
depreciation resulting from the proposed action.
14A:11-4. Termination of right of shareholder to be paid the fair value of
his shares
(1) The right of a dissenting shareholder to be paid the fair value
of his shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as
provided by subsection 14A:11-2(6), unless a court having jurisdiction,
for good and sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written
consent of the corporation;
(c) the fair value of the shares is not agreed upon as provided
in this Chapter and no action for the determination of fair value by
the Superior Court is commenced within the time provided in this
Chapter;
(d) the Superior Court determines that the shareholder is not
entitled to payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
(f) a court having jurisdiction permanently enjoins or sets
aside the corporate action.
(2) In any case provided for in subsection 14A:11-4(1), the rights of
the dissenting shareholder as a shareholder shall be reinstated as of the
date of the making of a demand for payment pursuant to subsections 14A:11-
2(3), 14A:11-2(4) or 14A:11-2(5) without prejudice to any corporate action
which has taken place during the interim period. In such event, he shall be
entitled to any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution, or, if any such rights have
expired or any such dividend or distribution other than in cash has been
completed, in lieu thereof, at the election of the board, the fair value
thereof in cash as of the time of such expiration or completion.
14A:11-5. Rights of dissenting shareholder
(1) A dissenting shareholder may not withdraw his demand for payment
of the fair value of his shares without the written consent of the
corporation.
(2) The enforcement by a dissenting shareholder of his right to
receive payment for his shares shall exclude the enforcement by such
dissenting shareholder of any other right to which he might otherwise be
entitled by virtue of share ownership, except as provided in subsection
14A:11-4(2) and except that this subsection shall not exclude the right of
such dissenting shareholder to bring or maintain an appropriate action to
obtain relief on the ground that such corporate action will be or is ultra
vires, unlawful or fraudulent as to such dissenting shareholder.
14A:11-6. Determination of fair value by agreement
(1) Not later than 10 days after the expiration of the period within
which shareholders may make written demand to be paid the fair value of their
shares, the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) shall mail to each
dissenting shareholder the balance sheet and the surplus statement of the
corporation whose shares he holds, as of the latest available date which
shall not be earlier than 12 months prior to the making of such offer and a
profit and loss statement or statements for not less than a 12-month period
ended on the date of such balance sheet or, if the corporation was not in
existence for such 12-month period, for the portion thereof during which it
was in existence. The corporation may accompany such mailing with a written
offer to pay each dissenting shareholder for his shares at a specified price
deemed by such corporation to be the fair value thereof. Such offer shall be
made at the same price per share to all dissenting shareholders of the same
class, or, if divided into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day
period limited by subsection 14A:11-6(1), the fair value of the shares is
agreed upon between any dissenting shareholder and the corporation, payment
therefor shall be made upon surrender of the certificate or certificates
representing such shares.
14A:11-7. Procedure on failure to agree upon fair value; commencement of
action to determine fair value
(1) If the fair value of the shares is not agreed upon within the 30-
day period limited by subsection 14A:11-6(2), the dissenting shareholder may
serve upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair
value of the shares. Such demand shall be served not later than 30 days
after the expiration of the 30-day period so limited and such action shall be
commenced by the corporation not later than 30 days after receipt by the
corporation of such demand, but nothing herein shall prevent the corporation
from commencing such action at any earlier time.
(2) If a corporation fails to commence the action as provided in
subsection 14A:11-7(1), a dissenting shareholder may do so in the name of the
corporation, not later than 60 days after the expiration of the time limited
by subsection 14A:11-7(1) in which the corporation may commence such an
action.
14A:11-8. Action to determine fair value; jurisdiction of court;
appointment of appraiser
In any action to determine the fair value of shares pursuant to this
Chapter:
(a) The Superior Court shall have jurisdiction and may proceed
in the action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except
those who have agreed with the corporation upon the price to be paid
for their shares, shall be made parties thereto as an action against
their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to
receive evidence and report to the court on the question of fair value,
who shall have such power and authority as shall be specified in the
order of his appointment; and
(d) The court shall render judgment against the corporation and
in favor of each shareholder who is a party to the action for the
amount of the fair value of his shares.
14A:11-9. Judgment in action to determine fair value
(1) A judgment for the payment of the fair value of shares shall be
payable upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate
as the court finds to be equitable, from the date of the dissenting
shareholder's demand for payment under subsections 14A:11-2(3), 14A:11-2(4)
or 14A:11-2(5) to the day of payment. If the court finds that the refusal of
any dissenting shareholder to accept any offer of payment, made by the
corporation under section 14A:11-6, was arbitrary, vexatious or otherwise not
in good faith, no interest shall be allowed to him.
14A:11-10. Costs and expenses of action
The costs and expenses of bringing an action pursuant to section
14A:11-8 shall be determined by the court and shall be apportioned and
assessed as the court may find equitable upon the parties or any of them.
Such expenses shall include reasonable compensation for and reasonable
expenses of the appraiser, if any, but shall exclude the fees and expenses of
counsel for and experts employed by any party; but if the court finds that
the offer of payment made by the corporation under section 14A:11-6 was not
made in good faith, or if no such offer was made, the court in its discretion
may award to any dissenting shareholder who is a party to the action
reasonable fees and expenses of his counsel and of any experts employed by
the dissenting shareholder.
14A:11-11. Disposition of shares acquired by corporation
(1) The shares of a dissenting shareholder in a transaction described
in subsection 14A:11-1(1) shall become reacquired by the corporation which
issued them or by the surviving corporation, as the case may be, upon the
payment of the fair value of shares.
(2) (Deleted by amendment, P.L. 1995, c. 279.)
(3) In an acquisition of shares pursuant to section 14A:10-9 or
section 14A:10-13, the shares of a dissenting shareholder shall become the
property of the acquiring corporation upon the payment by the acquiring
corporation of the fair value of such shares. Such payment may be made, with
the consent of the acquiring corporation, by the corporation which issued the
shares, in which case the shares so paid for shall become reacquired by the
corporation which issued them and shall be cancelled.
<PAGE>
(Preliminary Copy)
PROXY
GEORGIA BONDED FIBERS, INC.
Proxy Solicited on Behalf of the Board of Directors of the Company for
Annual Meeting November 7, 1996
The undersigned hereby constitutes and appoints David A. Dugan and William B.
D'Surney, or either 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 September 26, 1996, at the Annual Meeting of Stockholders of
Georgia Bonded Fibers, Inc. to be held at the Best Western Inn at Hunt Ridge,
Willow Springs Drive, Lexington, Virginia, on Thursday, November 7, 1996 at
10:30 A.M., Eastern Standard Time, and at any adjournments thereof.
The undersigned acknowledges receipt of the Proxy Statement dated October 4,
1996.
This proxy must be signed Dated: , 1996
--------
exactly as name appears hereon.
--------------------------------------------
Signature(s) of Stockholder(s) above
Please indicate if you plan to attend the annual stockholders meeting.
Yes ____ No ____
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
1. ELECTION OF DIRECTORS
Nominees: Three Class C directors for a three year term, William J.
Binnie, Michael J. Breton and Frank B. Mayorshi.
(Mark only one)
[ ] VOTE FOR all nominees listed above, except vote withheld for following
nominees (if any)
-----------------------------------------------------
[ ] VOTE WITHHELD for all nominees
2. APPOINTMENT OF KPMG PEAT MARWICK LLP as independent auditors of the
Company for fiscal year 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. REORGANIZATION to change the state of incorporation of Georgia Bonded
Fibers, Inc. to Virginia and to effect amended and restated Articles of
Incorporation modifying certain provisions of the Certificate of
Incorporation of the Company by approving a Plan and Agreement of
Merger dated as of August 19, 1996, and the related Articles of Merger,
providing for the merger of the Company into a Virginia corporation,
which is a wholly owned subsidiary of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. 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, 2 and 3. This proxy is revocable at any time
prior to the exercise hereof.
When shares are held by joint tenants, both should sign. Executors,
administrators, trustees, etc. should give full title as such. If executed
on behalf of a corporation, please sign full corporate name by duly
authorized officer.
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