Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant (x)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
(x) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material pursuant to Section 240.14a-11(c) or Section
240.14a-12
Bontex, Inc.
(Name of Registrant as Specified in its Charter)
David A. Dugan, Corporate Secretary
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
N/A
Payment of Filing Fee (Check the appropriate box):
(x) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
( ) Fee paid previously with preliminary materials
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
(Bontex logo) BONTEX (registered trademark)
1997
Notice of Annual Stockholders Meeting
and
Proxy Statement
Tuesday, October 14, 1997
at 10:30 a.m. local time
Lexington, Virginia
<PAGE>
Dear Shareholder:
You are cordially invited to attend the Annual Shareholders Meeting to be
held at 10:30 A.M., Eastern Daylight-Saving Time, on Tuesday, October 14,
1997, 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.
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>
NOTICE OF ANNUAL STOCKHOLDERS MEETING
September 18, 1997
BONTEX, INC.
Notice is hereby given that the Annual Meeting of Stockholders of
Bontex, Inc. will be held at the Best Western Inn at Hunt Ridge, Willow
Springs Drive, Lexington, Virginia, on October 14, 1997, at 10:30 a.m.,
Eastern Daylight-Saving Time, for the following purposes:
1. To elect four Class A directors to serve until the annual meeting
of stockholders in 2000; and
2. 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 8,
1997, are entitled to vote at this meeting.
You are urged to fill in, date and sign the accompanying proxy and to
mail the same as promptly as possible. If you sign and return your proxy
without specifying your choices, it will be understood that you wish to have
your shares voted in accordance with the directors' recommendations. Should
you decide to attend the meeting and vote in person, you may withdraw your
proxy.
Your attention is directed to the Proxy Statement accompanying this
Notice for a more complete statement regarding the matters proposed to be
acted upon at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
David A. Dugan
Corporate Secretary
<PAGE>
BONTEX, INC.
A VIRGINIA CORPORATION
PROXY STATEMENT
1997 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 Bontex, Inc. (the "Company") of
proxies in the accompanying form to be used at the Annual Meeting of the
Stockholders of the Company to be held on October 14, 1997, at 10:30 a.m.,
Eastern Daylight-Saving Time, at the Best Western Inn at Hunt Ridge, Willow
Springs Drive, Lexington, Virginia 24450, and at any adjournments thereof.
The approximate date on which this Proxy Statement and the accompanying form
of proxy are first being sent or given to stockholders is September 22, 1997.
A copy of the Company's Annual Report to Stockholders, including
financial statements for the fiscal year ended June 30, 1997, 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 24416-1500. 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 A directors.
VOTING SECURITIES
The close of business on September 8, 1997, 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, 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.<PAGE>
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.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of August 29, 1997, 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 843,082 (1) 53.60
303 Broad Street
Red Bank, New Jersey 07701
Mrs. Dolores Kostelni 695,207 (2) 44.20
Route 4, Box 251
Turtle Brooke Lane
Lexington, Virginia 24450
Mrs. Patricia S. Tischio 675,607 (3) 42.96
901 Foxboro Drive
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
</TABLE>
(1) Includes 95,400 shares held as co-trustee for the Hugo N. Surmonte
Residuary Trust, 72,175 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 19,700 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 62,240 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 S. 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 S. 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.<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth as of August 29, 1997, 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 29, 1997 Percent of Class
<S> <C> <C>
William J. Binnie 3,899 (1) *
Michael J. Breton 1,900 *
William B. D'Surney 650 *
David A. Dugan 160 *
Charles W. J. Kostelni 15,175 *
James C. Kostelni 161,940(2)(5)(6) 9.80
Jeffrey C. Kostelni 21,826 (3) 1.40
Frank B. Mayorshi 600 *
Larry E. Morris 4,000 *
Joseph F. Raffetto 5,582 *
Patricia S. Tischio 675,607 (4)(5) 42.96
Robert J. Weeks 8,121 *
All Directors and
Executive Officers
as a Group (12 persons) 899,460 (6) 54.42
</TABLE>
(1) Includes 726 shares held by Mr. Binnie's spouse as Trustee for their
sons.
(2) Includes 19,700 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
First Union National Bank of 675,507 shares held by the Estate of Mrs.
Marie G. Surmonte.
(6) Includes 80,000 shares which Mr. James C. Kostelni has the right to
acquire through the exercise of stock options.
* Represents less than 1% of the outstanding shares of Company common
stock.
<PAGE>
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 A directors expires at the 1997 Annual Meeting of Stockholders. The
terms of the Class B and Class C directors will expire in 1998 and 1999,
respectively.
There are four Class A directors, James C. Kostelni, William B.
D'Surney, Larry E. Morris and Robert J. Weeks, 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 four nominees set forth
below. Each nominee has agreed to serve if elected. If any nominee shall
unexpectedly be unable to serve, the shares represented by all valid proxies
will be voted for the remaining nominees and such other person or persons as
may be designated by the Board. At this time, the Board knows of no reason
why any nominee might be unable to serve. Class A nominees will serve for a
three year term until 2000 Annual Meeting and until their successors are
elected and qualified.
The present principal occupation or employment and employment during
the past five years and all positions or offices, if any, held with the
Company are set forth opposite the name of each director and nominee. All
nominees are members of the present Board of Directors.
<TABLE>
<CAPTION>
NOMINEES
CLASS A DIRECTORS
(Serving Until 2000 Annual Meeting)
Year in Which First
Name and Age Elected as Director Principal Occupation
- ------------ ------------------- --------------------
<S> <C> <C>
James C. Kostelni 1965 Chairman of the Board, President,
Age 62 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 1993; prior
Age 63 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 1983)
Age 51 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.
<PAGE>
William B. D'Surney 1995 Private investor since 1994; prior
Age 68 thereto, Senior Vice-President,
Alexander & Alexander, Richmond,
Virginia. Mr. D'Surney has a
Bachelor of Science Degree in
Business Administration.
Year in Which First
Name and Age Elected as Director Principal Occupation
- ------------ ------------------- --------------------
DIRECTORS CONTINUING IN OFFICE
CLASS C DIRECTORS
(Serving Until 1999 Annual Meeting)
William J. Binnie 1977 Retired engineering consultant
Age 72 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 International
Age 57 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 1991; Partner
Age 61 KPMG Peat Marwick LLP, Roanoke,
Virginia. Mr. Mayorshi has a
Bachelor of Science Degree in
Business Administration.
CLASS B DIRECTORS
(Serving Until 1998 Annual Meeting)
Patricia S. Tischio 1995 Assistant Corporate Secretary (since
Age 58 1994) and Office Manager (since
1989) of the Company. Mrs. Tischio
has a Bachelor of Arts Degree in
English.
Jeffrey C. Kostelni 1995 Chief Financial Officer and
Age 31 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. Mr.
Kostelni has a Bachelor of Science
Degree in Accountancy and is a
Certified Public Accountant.
Joseph F. Raffetto 1984 Physician (retired).
Age 88
</TABLE>
<PAGE>
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 four meetings during fiscal 1997. All
directors attended 100% 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, Mayorshi and Binnie. The
committee is empowered to exercise all authority of the Board of Directors,
except with respect to matters reserved for the Board by Virginia law. This
committee met five times during the fiscal 1997.
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 1997.
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 1997.
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 1997.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding the individual
compensation earned by the Chief Executive Officer and the four other most
highly compensated executives for services in all capacities to the Company
and its subsidiaries for the fiscal years ended June 30, 1997, 1996 and 1995.
<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 1997 221,180 48,110 101,397 58,316
Chairman of the 1996 221,180 - 99,820 66,007
Board of 1995 213,733 - 97,834 60,411
Directors,
President and
Chief Executive
Officer
Michael J. Breton 1997 158,821 - 15,603 7,910
Corporate 1996 167,868 - 18,912 7,238
Director of 1995 173,309 10,000 18,433 7,023
International
Operations,
Bontex S.A.
Tarcisio Pasquali 1997 107,978 10,000 16,790 -
General Manager 1996 129,181 20,000 15,812 -
Bontex S.r.l. 1995 109,780 10,000 15,434 -
Harmonson H. Floyd, Jr. 1997 106,250 40,244 - -
Director of 1996 105,000 - - -
Manufacturing 1995 8,750 - - -
and Chief Engineer
Larry E. Morris 1997 113,256 23,144 3,351 2,019
Technical and 1996 100,740 - 3,351 2,070
Sales Director 1995 98,890 - 3,012 3,043
</TABLE>
(1) In 1997, performance-based bonuses awarded by the Compensation
Committee.
(2) Except as otherwise indicated in the table, the named executives did
not receive perquisites or other personal benefits in excess of the
lesser 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 1997 includes a $1,110 automobile allowance, a
$26,000 annual payment and $68,565 "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 $5,722.
<PAGE>
(3) Amounts disclosed in this column for 1997 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 $51,941,
transferred to Mr. Kostelni pursuant to the Supplemental Executive
Compensation Plan; (iii) Company contributions on behalf of the named
executive officers under the Bontex, Inc. Retirement Plan as follows:
Mr. Kostelni $0; Mr. Breton $0; Mr. Pasquali $0; Mr. Floyd $0; Mr.
Morris $2,019; and (iv) Bontex S.A.'s contribution under the Bontex
S.A. Pension Plan on behalf of Mr. Breton, $7,910.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realized Value (1)
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
--------------------------------------------------------------------------------
% of Total
Number of Options Market
Securities Granted to Exercise Price on
Underlying Employees or Base Date of
Options in Fiscal Price Grant Expiration
Name Granted (#) Year ($/Share) (2) ($/Share) Date 5% ($) 10% ($)
---- ----------- -------- ----------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
James C. Kostelni 80,000 100 $4.50 $4.50 1-22-07 $7.33 $11.67
</TABLE>
(1) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price. Additionally,
these values do not take into consideration the provisions of the
options providing for nontransferability or termination of the options
following termination of employment. The Company did not use an
alternative formula for a grant date valuation, as it is not aware of
any formula which will determine with reasonable accuracy a present
value based on future unknown or volatile factors.
(2) The exercise price of the options granted is equal to the closing
sales price of the Company's common stock on the Nasdaq National
Market on the date of grant. The options will expire ten years from
the date of grant.
<PAGE>
Retirement Plans
Bontex, 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 1997 and 1996 plan years was $160,000 and $150,000
respectively, 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, Morris and Floyd will have 41, 28 and 19 years of credited service,
respectively. Messrs. Breton and Pasquali do not participate in the Plan.
<PAGE>
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 $15,591 $ 20,789 $ 25,987 $ 31,184 $ 36,381
150,000 19,822 26,429 33,036 39,643 46,251
175,000 24,052 32,068 40,086 48,103 56,120
200,000 28,281 37,708 47,135 56,163 65,990
225,000 32,511 43,347 54,186 65,023 75,860
250,000 36,741 48,988 61,235 73,482 85,729
300,000 45,201 52,431 75,335 90,401 105,469
400,000 62,119 82,827 103,533 124,241 144,947
450,000 70,580 94,107 117,634 141,159 164,687
500,000 79,040 105,386 131,733 158,079 184,426
</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 $118,921 of the
amount shown for Mr. Breton in the Compensation Table qualifies as
compensation under the Pension Plan for 1997. 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, 1997. 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 Bontex,
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
<PAGE>
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 1997 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.
Employment Agreement
On January 22, 1997, 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
Executive Officer of the Company for a term expiring on May 15, 2005. This
Agreement supersedes in its entirety the Executive Compensation Agreement
dated June 29,1989, by and between the Company (as successor to Georgia
Bonded Fibers, Inc.) and the Employee. Under the Agreement, Mr. Kostelni is
to receive a minimum annual salary of $222,000, which shall be adjusted
<PAGE>
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.
The Agreement grants Mr. Kostelni stock options to purchase 80,000
shares of the Company's stock. The option price of $4.50 per share on all
outstanding options is equal to the fair market value of the stock at the
date of grant. Options are exercisable from the date of grant and have a
minimum term of 10 years. See Options Granted in Last Fiscal Year Table
above.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Bontex, 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.
<PAGE>
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 1997 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 Bonus 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 1997, the maximum
amount at 100 percent of target of the cash bonus available to each executive
under the plan was a percentage of the executive's fiscal year earnings, 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 1997 ranged from
$77,413 to $2,680. Bonuses were not available to executive officers under
the plan in fiscal 1997 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. This plan is
discretionary and subject to final approval by the Compensation Committee.
<PAGE>
The amount of the maximum cash bonus received by an executive under the
plan depends upon the extent to which the Company meets or exceeds the target
levels established for each of seven operating goals - environment, safety,
customer service, product quality, production efficiency, inventory turns and
overtime. These target levels are established each year by the Committee,
with the advice of management, based on the Company's past results,
anticipated improvements in efficiency and productivity, and current market
conditions. The target levels for the seven operating goals as a percent of
the 1997 bonus pool, were weighted as follows: environment 10%, safety 10%,
customer service 8%, product quality 27%, production efficiency 28%,
inventory turns 9% and overtime 8%. In fiscal 1997, the Company met the
$500,000 net income threshold and reached a percentage of the target levels
for the seven goals - environmental (100%), safety (120%), customer service
(50%), product quality (72%), production efficiency (55%), inventory turns
(0%) and overtime (0%). Bonuses aggregating $24,188 were paid from the bonus
pool to the Company's executive officers under the 1997 plan.
1996-97 Senior Management Incentive Plan
The purpose of the 1996-97 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 annual
bonus equal to a percentage of their 1997 current base salary if the
Company's net sales and operating profits for fiscal 1997 exceeded specified
amounts and executives obtained individual objectives. The level of bonus
payments available to executives under the plan was determined as follows:
10% of current base salary if the Company's net sales and operating profit
exceed $49,500,000 and $3,099,465, respectively, and 10% if executives reach
individual objectives. 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. This plan is discretionary and subject to
final approval by the Compensation Committee.
The Company's net sales and operating profits for fiscal year 1997
exceeded the specified amounts and 58 percent of individual objectives were
obtained. Accordingly, the Company paid bonuses aggregating $83,313 under
the plan.
Chief Executive Officer (CEO) Compensation
The 1997 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 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. For present and anticipated future
<PAGE>
performance, the Committee granted Mr. Kostelni, in 1997, stock options to
purchase 80,000 shares of the Company's stock. The option price is $4.50 per
share and the options have a term of 10 years.
Compensation Committee:
Robert J. Weeks, Chairman
Frank B. Mayorshi
William J. Binnie
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, 1992 and ending
on June 30, 1997. These comparisons assume the investment of $100 of the
Company's common stock and in each of the indices on June 30, 1992 and the
reinvestment of dividends.
Comparison Of 5-Year Cumulative Total Return
Among Bontex, 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
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
BONTEX, INC. $ 100 $ 72.00 $ 80.00 $ 52.00 $ 58.00 $ 78.00
MG PAPER PRODUCTS INDEX 100 96.69 103.84 140.16 148.21 188.20
NASDAQ MARKET INDEX 100 122.76 134.61 157.88 198.73 239.40
</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 Bontex, 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 1997 and written representations from certain
reporting persons that no other reports are required, the Company believes
that during fiscal 1997 one report relating to one transaction inadvertently
was filed late by Mr. Charles W.J. Kostelni.
<PAGE>
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP audited the Company's consolidated
financial statements as of and for the year ended June 30, 1997 and has been
reappointed by the Board of Directors as independent auditors for the year
ended June 30, 1998. 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.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's
1998 Annual Meeting must be received by the Corporate Secretary of Bontex,
Inc., One Bontex Drive, Buena Vista, Virginia 24416-1500, no later than May
25, 1998, in order to be considered for inclusion in the Company's Proxy
Statement relating to that meeting.
OTHER MATTERS
The Board knows of no matters which may properly come before the Annual
Meeting other than the matters referred to in this Proxy Statement. If,
however, any matters properly come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote such proxy in accordance
with their best judgment thereon.
BY THE ORDER OF THE BOARD OF DIRECTORS
David A. Dugan
Corporate Secretary
September 18, 1997
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 Corporate
Controller, Bontex, Inc., One Bontex Drive, Buena Vista, Virginia
24416-1500.
<PAGE>
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE
BONTEX, INC.
REVOCABLE PROXY
Proxy Solicited on Behalf of the Board of Directors of the Company for
Annual Meeting October 14, 1997
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 8, 1997, at the Annual Meeting
of Stockholders of Bontex, Inc. to be held at the Best Western Inn at Hunt
Ridge, Willow Springs Drive, Lexington, Virginia, on Tuesday, October 14,
1997 at 10:30 A.M., Eastern Daylight Saving Time, and at any adjournments
thereof.
The undersigned acknowledges receipt of the
Proxy Statement dated September 18, 1997.
This proxy must be signed Dated: , 1997
--------
exactly as name appears hereon.
------------------------------------
Stockholder sign above
Co-holder (if any) sign above
With- For All
For hold Except
1. ELECTION OF DIRECTORS [ ] [ ] [ ]
Nominees: Four Class A directors for a three year term, James C.
Kostelni, William B. D'Surney, Larry E. Morris and Robert J. Weeks.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
- ---------------------------------------------------------------------------
2. 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 Proposal 1. 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.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
<PAGE>
