BONTEX INC, DEF 14A, 1999-09-28

BONTEX INC
DEF 14A, 1999-09-28
CONVERTED PAPER & PAPERBOARD PRODS (NO CONTANERS/BOXES)

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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)
Charles W. J. Kostelni, 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(Registered Trademark)

1999

Notice of Annual Stockholders Meeting

and

Proxy Statement

Thursday, October 28, 1999
at 10:30 a.m. local time
Lexington, Virginia

<PAGE>

September 28, 1999

Dear Stockholder:

You are cordially invited to attend the Annual Stockholders Meeting to be held
at 10:30 a.m., Eastern Daylight-Saving Time, on Thursday, October 28, 1999, at
the Best Western Inn at Hunt Ridge, Lexington, Virginia. The accompanying Notice
of Annual Meeting and Proxy Statement contains 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 28, 1999

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 28, 1999 at 10:30 a.m., Eastern Daylight-Saving
Time, for the following purposes:

(1) To elect three Class C directors to serve until the annual
meeting of stockholders in 2002,

(2) To approve the proposed Key Employee Stock Option Plan, and

(3) The transaction of such other business as may properly come
before the meeting or any adjournments thereof.

Only stockholders of record at the close of business on September 10, 1999,
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

Charles W. J. Kostelni
Corporate Secretary

<PAGE>

BONTEX, INC.
A VIRGINIA CORPORATION
PROXY STATEMENT
1999 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 28, 1999, 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 28, 1999.

A copy of the Company's Annual Report to Stockholders, including
consolidated financial statements for the fiscal year ended June 30, 1999,
reported upon by KPMG 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 C
directors and FOR the adoption of the proposed Key Employee Stock Option Plan
(the "Proposed Plan").

VOTING SECURITIES

The close of business on September 10, 1999, 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. Approval of the
Proposed Plan requires the affirmative vote, at a meeting at which a quorum is
present, of a majority of the votes cast by the shares that are present in
person or by proxy and entitled to vote. 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 abilities. 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.

1
<PAGE>

As a matter of policy, proxies, ballots and voting tabulations that
identify individual stockholders are kept private by the Company. Such documents
are available for examination only by the inspectors of election and certain
personnel associated with processing proxy cards and tabulating votes. The vote
of any stockholder is not disclosed except as may be necessary to meet legal
requirements.

STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT

The following table sets forth as of August 27, 1999, certain information
regarding the only known beneficial holders of more than five percent of the
outstanding common stock of the Company and 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>

Shares Beneficially
Name of Beneficial Owner Owned Percent of Class
- ------------------------ ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>

First Union National Bank 843,082 (1) 50.04
303 Broad Street
Red Bank, New Jersey 07701

Mrs. Dolores Kostelni 696,207 (2) 41.32
Route 4, Box 251
Turtle Brooke Lane
Lexington, Virginia 24450

Mrs. Patricia S. Tischio 675,607 (3)(9) 40.10
901 Foxboro Drive
Norwalk, Connecticut 06851

Estate of Marie G. Surmonte 675,507 (4) 40.09
c/o First Union National Bank
303 Broad Street
Red Bank, New Jersey 07701

Hugo N. Surmonte Residuary Trust 95,400 (5) 5.66
c/o First Union National Bank
303 Broad Street
Red Bank, New Jersey 07701

William J. Binnie 3,244 (6) *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Michael J. Breton 1,900 *
Bontex S.A.
rue Slar
4801 Stembert, Belgium

<PAGE>

William B. D'Surney 850 *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

David A. Dugan 160 *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Charles W. J. Kostelni 31,134 (10) 1.85
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

James C. Kostelni 154,940 (7)(9) 9.20
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Jeffrey C. Kostelni 41,826 (8) 2.48
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Frank B. Mayorshi 600 *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Larry E. Morris 4,000 *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Joseph F. Raffetto 5,582 *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

Robert J. Weeks 8,121 *
Bontex, Inc.
One Bontex Drive
Buena Vista, Virginia 24416-1500

All Directors and 927,964 55.08
Executive Officers
as a Group (12 persons)
</TABLE>

<PAGE>

(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 20,700 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 57,590 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 shares 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, as to which Mrs. Tischio disclaims
beneficial ownership.
(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.
(6) Includes 726 shares held by Mr. Binnie's spouse as Trustee for their
sons.
(7) Includes 20,700 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. Includes 72,000 shares that are unissued but are
subject to stock options exercisable within 60 days from the date of
this Proxy Statement.
(8) Includes 1,000 shares owned by Mr. Jeffrey C. Kostelni's spouse.
Includes 20,000 shares that are unissued but are subject to stock
options exercisable within 60 days from the date of this Proxy
Statement.
(9) 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.
(10) Includes 20,000 shares that are unissued but are subject to stock
options exercisable within 60 days from the date of this Proxy
Statement.

* 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 1999 Annual Meeting of Stockholders. The terms of the
Class A and Class B directors will expire in 2000 and 2001, respectively.

There are three Class C directors, William J. Binnie, Charles W. J.
Kostelni and Frank B. Mayorshi. Messrs. Binnie and Mayorshi currently serve on
the Board and are standing for re-election.

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. Class C nominees will serve for a three-year
term until the 2002 Annual Meeting and until their successors are elected and
qualified.

<PAGE>

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.

Your Board of Directors recommends a vote FOR each of the nominees for
Class C Director.

NOMINEES
CLASS C DIRECTORS
(Serving Until 2002 Annual Meeting)

<TABLE>
<CAPTION>
Year in Which First
Name and Age Elected as Director Principal Occupation
- ------------ ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>

William J. Binnie 1977 Retired engineering consultant since 1996;
Age 74 prior thereto, President, W. J. Binnie &
Associates, Whispering Pines, North
Carolina. Mr. Binnie has a Bachelor of
Science Degree in Civil Engineering.

Charles W. J. Kostelni Senior Vice President (since 1999),
Age 35 General Manager (U.S. operations only)
(since 1998), Corporate Secretary (since
1997), Corporate Controller (since 1996)
of the Company and General Sales Manager
of Bontex S.A., a subsidiary of the
Company in Belgium (since 1999). Prior
thereto, Assistant Controller (1994 -
1996) of the Company and Assistant Vice
President, Union Bank of Switzerland, New
York (1991 - 1995). Mr. Kostelni has a
Bachelor of Science Degree in Accountancy
and is a Certified Public Accountant.

Frank B. Mayorshi 1993 Private investor since 1991; prior thereto
Age 63 Partner, KPMG LLP, Roanoke, Virginia.
Mr. Mayorshi has a Bachelor of Science
Degree in Business Administration.
</TABLE>
<TABLE>
<CAPTION>

DIRECTORS CONTINUING IN OFFICE
CLASS A DIRECTORS
(Serving Until 2000 Annual Meeting)

Year in Which First
Name and Age Elected as Director Principal Occupation
- ------------ ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>

James C. Kostelni 1965 Chairman of the Board, President, and
Age 64 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.

<PAGE>

Robert J. Weeks 1983 Private investor since 1993; prior thereto,
Age 65 Vice-President, Dun & Bradstreet Corp.,
Bethlehem, Pennsylvania. Mr. Weeks has
a Bachelor of Science Degree in Business
Administration.

Larry E. Morris 1993 Technical Sales Director (since 1998) of
Age 53 the Company; prior thereto, Technical
Director (1983-1998), Sales Director
(1993-1998).

William B. D'Surney 1995 Private investor since 1994; prior thereto,
Age 70 Senior Vice-President, Alexander &
Alexander, Richmond, Virginia. Mr.
D'Surney has a Bachelor of Science
Degree in Business Administration.
</TABLE>
<TABLE>
<CAPTION>

CLASS B DIRECTORS
(Serving Until 2001 Annual Meeting)

Year in Which First
Name and Age Elected as Director Principal Occupation
- ------------ ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>

Patricia S. Tischio 1995 Assistant Corporate Secretary (1994-1997)
Age 60 and Corporate Office Manager (since
1989) of the Company. Mrs. Tischio has a
Bachelor of Arts Degree in English.

Jeffrey C. Kostelni 1995 Senior Vice President (since 1999), Chief
Age 33 Financial Officer and Treasurer (since
1994) of the Company and General Sales
Manager of Bontex S.A., a subsidiary of
the Company in Belgium (1995 - 1999).
Mr. Kostelni has a Bachelor of Science
Degree in Accountancy and is a Certified
Public Accountant.

Joseph F. Raffetto 1984 Physician (retired).
Age 90
</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. Charles W. J. Kostelni and Mr. Jeffrey C. Kostelni are the sons of Mr.
James C. Kostelni. Mrs. Patricia S. Tischio is the sister-in-law of Mr. James C.
Kostelni and the aunt of Mr. Charles W. J. Kostelni and Mr. Jeffrey C. Kostelni.

<PAGE>

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors held five meetings during fiscal 1999. All
directors, with the exception of Larry E. Morris, attended at least 75% 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, Compliance 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 five standing committees: the
Executive Committee, the Audit Committee, the Compensation Committee, the
Compliance 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, 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 four times
during fiscal 1999.

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
1999.

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 1999.

The Compliance Committee of the Board of Directors, which consists of
Messrs. D'Surney (Chairman), Raffetto and Binnie, oversees the Company's
compliance with environmental and safety regulations. This Committee met three
times during fiscal 1999.

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 1999.

BONTEX KEY EMPLOYEE STOCK OPTION PLAN

PROPOSAL NO. 2

At its meeting on July 22, 1999, the Board of Directors adopted, subject to
stockholder approval, the Bontex Key Employee Stock Option Plan. The Proposed
Plan is applicable to not more than 103,000 shares of Company common stock.

The text of the Proposed Plan is attached to this Proxy Statement as
Appendix A. The description of the Proposed Plan set forth below is qualified in
its entirety by reference to Appendix A.

<PAGE>

The Proposed Plan will become effective upon approval by the stockholders.
The Proposed Plan is designed to assist in attracting, retaining and motivating
officers and other key employees of the Company upon whose judgment, initiative
and efforts the Company depends by providing such persons with the opportunity
to acquire an equity interest in the Company and thereby benefit from
appreciation in the value of Company common stock. Participants in the Proposed
Plan will have an incentive to use their best efforts and superior performances
to promote the best interests of the Company, for their own benefit and for the
benefit of all stockholders.

The Proposed Plan was also adopted by the Board of Directors in
consideration of a reduction of certain executives' salary and other
compensation in the amount of approximately $239,988 during fiscal 1999. If the
Proposed Plan is approved, Messrs. James C. Kostelni, Jeffrey C. Kostelni and
Charles W. J. Kostelni have each agreed to cancel a portion of their
unexercised options earlier granted to them in 1999 to prevent any dilutive
effect which could otherwise occur upon the exercise of grants under the
Proposed Plan.

In the case of James C. Kostelni, an option was granted on January 28, 1999
which entitled him to purchase, until January 22, 2007, up to 72,000 shares of
Company common stock, at a price of $4.50 per share. In the case of Jeffrey C.
Kostelni and Charles W. J. Kostelni, options were granted on January 28, 1999
which entitled each to purchase, until November 21, 2007, up to 20,000 shares of
Company common stock, at a price of $5.63 per share. If the Proposed Plan is
approved, James C. Kostelni has agreed to cancel 67,000 shares of his option,
leaving 5,000 shares available to be exercised. Jeffrey C. Kostelni and Charles
W. J. Kostelni have each agreed to cancel 18,000 shares of their options,
leaving 2,000 shares each available to be exercised. In total, 103,000 options
previously granted will be canceled if the Proposed Plan is approved.

If the Proposed Plan is approved, the outstanding options under the prior
grant of options, taking into account the cancellations discussed above, will be
as set forth below. The Compensation Committee has not at this time approved any
grants under the Proposed Plan.
<TABLE>
<CAPTION>

Number of Shares
Names and Position Dollar Value(1) Exercise Price(2) Underlying the Grant
- ------------------ --------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C> <C>

James C. Kostelni $10,000 $22,500 5,000
President and CEO

Executive Group $8,000 $22,520 4,000
</TABLE>

(1) Based on the closing price ($2.00 per share) of the Company's common
stock on the Nasdaq SmallCap Market on September 16, 1999.
(2) The exercise price of each option would be $4.50 per share for James
C. Kostelni, and $5.63 per share for Jeffrey C. Kostelni and Charles
W. J. Kostelni, who for purposes of this chart represent the Executive
Group.

Under the Proposed Plan, the Compensation Committee of the Board may grant
stock options ("Options") to officers and other full time salaried employees of
the Company or its affiliates who are selected by the Committee. The Options do
not meet the terms of Section 422A of the Internal Revenue Code and therefore
result in taxable income to the recipient at the time of exercise to the extent
of the difference between the exercise price and the fair market value of the
stock at the time of exercise. The Company will be entitled to a federal income
tax deduction upon the transfer of stock to an optionee pursuant to an exercise
of an Option, if certain federal income tax withholding requirements are met.
The amount of the deduction will equal the amount of compensation income
recognized by the optionee.

<PAGE>

The exercise price under each Option shall be established by the Committee,
but in no event will be less than the fair market value of Company common stock
at the time the Option is granted. The fair market value per share of Company
common stock will be determined by the Committee under the Proposed Plan by
reference to the closing sales price of the Company's common stock on the Nasdaq
SmallCap Market. As of September 9, 1999 (the last trading day preceding the
record date), the closing sales price of the Company's common stock on the
Nasdaq SmallCap Market was $1.75. The exercise period of each Option is
determined by the Committee at the time of the grant, but cannot be more than
ten years from the date of the grant.

The right to exercise an Option generally expires three months after
employment is terminated for a reason other than retirement or death. In the
event an optionee retires or dies while employed by the Company, Options may be
exercised within one year following the optionee's death or retirement, as the
case may be, but in no event later than the expiration date of the Option. In
the event of a change in control of the Company, the Committee under the
Proposed Plan is authorized to take such action as it, in its discretion, may
deem necessary or advisable and fair to optionees, including amending the terms,
conditions or duration of Options granted under the Proposed Plan. A change in
control under the Proposed Plan includes (i) any person obtaining direct or
indirect voting power of 20% of the Company's voting securities; (ii) a change
in the composition of the Board of Directors not approved by a vote of at least
75% of the incumbent directors; (iii) the sale of all or substantially all of
the assets of the Company; and (iv) the merger or consolidation of the Company
with another corporation or entity which results in less than 75% of the
outstanding voting securities of the surviving corporation being owned in the
aggregate by former stockholders of the Company. No change of control is deemed
to have occurred for purposes of the Proposed Plan by virtue of any transaction
(i) which results in the optionee, or a group of persons which includes the
optionee, acquiring, directly or indirectly, 20% or more of the combined voting
power of the Company's voting securities; or (ii) which results in the Company
or any affiliate of the Company or any profit sharing plan, employee stock
ownership plan or employee benefit plan of the Company or any of its affiliates
acquiring, directly or indirectly, 20% or more of the combined voting power of
the Company's securities; or (iii) which results in the heirs, successors or
assigns of Hugo N. Surmonte acquiring, directly or indirectly, 20% or more of
the combined voting securities.

The Committee may grant Options under the Proposed Plan to eligible
individuals on the basis of criteria that it feels are in the best interests of
the Company and its affiliates. Further, the Committee may impose such
restrictions, conditions, terms and timing upon the granting of Options as it
deems advisable for the Company.

The Board of Directors may amend or terminate the Proposed Plan but cannot,
without the approval of the stockholders: (i) increase the maximum number of
shares for which Options may be granted under the Proposed Plan; (ii) permit the
granting of Options at less than 100% of fair market value at the time of grant;
or (iii) change the class of employees eligible to receive Options.

If a quorum is established, approval of the Proposed Plan requires the
affirmative vote of the majority of the votes cast by the shares that are
present in person or by proxy and entitled to vote at the Annual Meeting. See
"Voting Securities" above.

Your Board of Directors recommends a vote FOR Proposal No. 2.

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, 1999, 1998 and 1997.

Long-Term
Annual Compensation Compensation
---------------------------------------- ----------------
Awards
----------------
Other Annual Securities All Other
Name and Principal Compensation Underlying Compensation
Position Year Salary ($) Bonus ($) ($)(2) Options (#) ($)(3)
- --------------------- ------- ------------ ---------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
James C. Kostelni 1999 250,000 - 6,858 72,000 6,810
Chairman of the 1998 242,795 44,664(1) 59,188 65,891
Board of Directors, 1997 221,180 48,110 101,397 58,316
President and Chief
Executive Officer

Michael J. Breton 1999 144,350 - 15,606 42,527
Corporate Director of 1998 148,417 10,781(1) 18,135 7,829
International 1997 158,821 - 18,912 7,910
Operations, Bontex,
S.A.

Jeffrey C. Kostelni 1999 109,167 - 3,471 20,000 3,170
Treasurer and Chief 1998 121,856 24,333(1) 3,446 3,843
Financial Officer 1997 98,964 8,537 2,646 1,494

Charles W. J. Kostelni 1999 100,417 - 1,539 20,000 2,548
Corporate Controller, 1998 108,625 23,099(1) 1,923 2,933
General Manager and 1997 88,083 15,208 - 1,039
Corporate Secretary

Larry E. Morris 1999 96,840 - - 3,631
Technical Sales 1998 105,280 13,576(1) 3,351 3,485
Director 1997 113,256 23,144 3,351 2,458

</TABLE>

(1) Performance-based bonuses awarded by the Compensation Committee and
paid in 1998 for 1997 performance.
(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.
(3) Amounts disclosed in this column for 1999 include: (i) payment by the
Company of premiums for whole life insurance on behalf of Mr. James
Kostelni in the amount of $6,810, (ii) Company contributions on behalf
of the named executive officers under the Bontex Inc. Retirement Plan
as follows: Mr. James Kostelni $0, Mr. Breton $0, Mr. Jeffrey Kostelni
$2,358, Mr. Charles Kostelni $1,829 and Mr. Morris $2,578, (iii)
Bontex S.A.'s contribution under the Bontex, S.A. Pension Plan on
behalf of Mr. Breton, $42,527. (The increase in Mr. Breton's pension
costs over prior years is due to a change in the pension plan policy
based on Mr. Breton's age. The change is a one time adjustment and is
being offset by a permanent salary reduction implemented in the fourth
quarter of fiscal year 1999, of which the full effect will be seen in
subsequent years. The cost of the pension plan for Mr. Breton in
fiscal year 2000 is expected to be similar to the amounts shown in
fiscal years 1998 and 1997), and (iv) Company contributions on behalf
of the named executive officers under the Bontex Inc. Executive
Benefit Deferred Compensation Agreement as follows: Mr. James Kostelni
$0, Mr. Breton $0, Mr. Jeffrey Kostelni $812, Mr. Charles Kostelni
$719 and Mr. Morris $1,053.

<PAGE>

Option Grants in Last Fiscal Year

Individual Grants
--------------------------------------------------------------------------------------------
% of Total Potential Realized
Number of Options Market Value at Assumed
Securities Granted to Exercise Price on Annual Rates of
Underlying Employees or Base Date of Stock Price
Options in Fiscal Price Grant Expiration Appreciation for
Granted (#) Year ($/Share) ($/Share) Date Option Term(1)
------------- ------------ -------------- --------------- ----------------------------------
5%($) 10%($)
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James C. Kostelni 72,000 64 4.50 1.875 Jan. 2007 199,440 289,440
Jeffrey C. Kostelni 20,000 18 5.63 1.875 Nov. 2007 58,200 88,400
Charles W. J. Kostelni 20,000 18 5.63 1.875 Nov. 2007 58,200 88,400
</TABLE>

(1) The hypothetical potential appreciation shown in these columns
reflects the required calculations at annual rates of 5% and 10% set
by the Securities Exchange Commission, and is not intended to
represent either historical appreciation or anticipated future
appreciation of the Company's Common Stock price.

Retirement Plans

Bontex, Inc. Retirement Income Plan

The Company has in effect a contributory 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>

$ 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.

<PAGE>

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 1999 and 1998 plan years was $160,000, 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, Jeffrey C. Kostelni, Charles W. J. Kostelni and Larry E. Morris will
have 41, 38, 34 and 28 years of credited service, respectively. Mr. Michael J.
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>

Years of Service
Final Average --------------------------------------------------------------------------------
Earnings 15 20 25 30 35
----------------- ------------- -------------- -------------- ------------ ------------
<S> <C> <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 $104,450 of the amount shown for Mr.
Breton in the Compensation Table qualifies as compensation under the Pension
Plan for 1999. 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, 1999. 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.

<PAGE>

Bontex, Inc. Executive Benefit Deferred Compensation Agreement

The Company adopted a tax deferred compensation benefit plan for certain
executives during fiscal year 1997. The plan allows the employee to defer up to
four percent of his compensation with a Company match of up to one percent of
compensation. The Company's contribution funds life insurance policies on each
executive, with the Company as owner and beneficiary.

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 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, 1997, 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. With Mr. Kostelni's consent, the
Company did not purchase the annuity contract as provided in the Agreement
during fiscal year 1999.

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.

<PAGE>

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 until 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 Mr. Kostelni.
Under the Agreement, Mr. Kostelni is to receive a minimum annual salary of
$222,000, 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 stockholders 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 also granted Mr. Kostelni a stock option to purchase 80,000
shares of the Company's common stock, at an exercise price of $4.50 per share,
which was the fair market value of the stock on the date of grant (January 22,
1997). The option was exercisable from the date of grant and had a minimum term
of ten years. On July 1, 1998, Mr. Kostelni voluntarily agreed to cancel the
unexercised option in order to expedite the Company's application to transfer
its common stock listing to The Nasdaq SmallCap Market. At the Annual Meeting
held on October 22, 1998 and adjourned to January 28, 1999, the stockholders
approved the issuance of a new option to Mr. Kostelni, exercisable effective
January 28, 1999, to purchase 72,000 shares of the Company's common stock, at an
exercise price of $4.50 per share. If the Proposed Plan set forth as Proposal 2
is approved, Mr. Kostelni has agreed to cancel 67,000 shares of the unexercised
option. As of September 20, 1999, Mr. Kostelni has not exercised his right to
purchase shares pursuant to the option. If the Proposed Plan is not approved,
the shares currently available pursuant to the January 1999 option will remain
unchanged, and Mr. Kostelni will continue to have 72,000 shares available to be
exercised. (See Proposal 2).

Related Party Litigation

In March 1998, a civil complaint was filed in the Superior Court of New
Jersey, Law Division, Essex County, by Patricia Surmonte Tischio, a director of
Bontex (the "Company") against the Company, James C. Kostelni, the President and
Chief Executive Officer of the Company, and Mr. Kostelni's spouse. Both Mrs.
Tischio and Mrs. Kostelni are daughters of the Company's founder and serve as
co-executors and co-trustees of, and are designated beneficiaries under, an
estate and certain trusts, which in the aggregate beneficially own approximately
43 percent of the Company's outstanding common stock. The case was transferred
to the United States District Court for the Western District of Virginia.

<PAGE>

On February 23, 1999, the United States District Court of the Western
District of Virginia granted the Motion for Judgment on the Pleadings filed by
the defendants with regard to the tortious interference with contractual
relations and conspiracy claims, dismissing those claims with prejudice. No
appeal was taken from the Court's ruling by Mrs. Tischio. The court declined to
enter declaratory judgment regarding plaintiff's alleged lifetime contract with
the Company. The court also found that the case presented a nonjusticiable issue
for the breach of contract, promissory estoppel and wrongful discharge in
violation of public policy claims and dismissed those claims without prejudice.

In the normal course of business, the Company is subject to proceedings,
lawsuits and other claims which are subject to many uncertainties, for which
their outcomes are not predictable with assurance. There are no legal
proceedings, lawsuits or other claims pending against or involving the Company,
which in the opinion of management, will have a material adverse impact upon the
consolidated results of operations or financial condition of the Company.

Related Party Transaction

On February 16, 1999, the Company entered into a five-year contract with
Maxcomm, Inc. ("Maxcomm"), a Virginia corporation, wholly owned by Mr. J. H.
Kostelni, the son of Mr. James C. Kostelni. Pursuant to the contract, Maxcomm
will continue to develop a marketing relationship with certain identified target
companies for the purpose of developing and refining products for global
distribution by Bontex in the footwear, luggage and allied industries. In
consideration, Bontex will pay Maxcomm a monthly commission calculated based on
6% of all collected net sales made by Bontex with respect to the distribution of
products to the identified target companies. Bontex additionally agreed to
reimburse Maxcomm $75,000 for the costs and expenses it incurred in its ongoing
marketing efforts on Bontex's behalf.

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.
The Compensation Committee consists of Robert J. Weeks, Chairman, Frank B.
Mayorshi and William J. Binnie, who are each independent directors of the
Company.

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
stockholders 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 available, 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.

Elements of the Fiscal 1999 Executive Compensation Program.

The Committee believes the interests of the stockholders will be best
served if the executive compensation program links a substantial component of
the cash compensation earned by executives to increases in stockholder value.
The current program therefore includes the following two principal components:
base salary and annual cash bonuses.

<PAGE>

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 1999, 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 1999 ranged from $77,413 to $2,680. Bonuses were not available
to executive officers under the plan in fiscal 1999 unless and until the
Company's net income after taxes exceeded $500,000. This $500,000 threshold was
subjectively established by the Committee based on the Company's prior bonus
arrangements.

The amount of the maximum cash bonus received by an executive under the
plan depends upon the extent to which the Company meets or exceeds the target
levels established for each of six operating goals - environment, safety,
production efficiency, customer service, product quality and 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 six operating goals as a percent of the 1999 bonus pool were weighted
as follows: environment 9%, safety 10%, production efficiency 45%, customer
service 8%, product quality 20% and overtime 8%. In fiscal 1999, the Company
did not meet the $500,000 net income threshold, and no bonus payments were made.

Chief Executive Officer (CEO) Compensation

The 1999 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 Mr. James C.
Kostelni's on-going efforts to develop the Company's specifications sales
business, 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.

Report Submitted by the Compensation Committee of the
Board of Directors of the Company.

Robert J. Weeks, Chairman
Frank B. Mayorshi
William J. Binnie

<PAGE>

STOCK PERFORMANCE

The following graph compares the yearly percentage change and the
cumulative total stockholder 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, 1994 and ending on
June 30, 1999. These comparisons assume the investment of $100 of the Company's
common stock and in each of the indices on June 30, 1994 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.)

Comparison of 5 Year Cumulative Total Return
of Company, Industry Index and Broad Market

1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>

BONTEX, INC. $ 100 $ 65.00 $ 72.52 $ 97.50 $ 57.50 $ 35.00
MG PAPER PRODUCTS INDEX 100 134.98 142.73 181.25 175.04 199.89
NASDAQ MARKET INDEX 100 117.28 147.64 177.85 235.75 330.37
</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.

<PAGE>

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 1999 and written representations from certain reporting persons that no
other reports are required, the Company believes that during fiscal 1999, one
report relating to one transaction was filed late by Mr. James C. Kostelni.

INDEPENDENT AUDITORS

The firm of KPMG LLP audited the Company's consolidated financial
statements as of and for the year ended June 30, 1999 and has been reappointed
by the Board of Directors as independent auditors for the year ended June 30,
2000. A representative of KPMG 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

In order to be considered for inclusion in the Company's proxy statement
for the 2000 Annual Meeting, stockholder proposals must be received by the
Corporate Secretary of Bontex, Inc., One Bontex Drive, Buena Vista, Virginia
24416-1500, no later than May 24, 2000. Stockholder proposals intended to be
presented at the 2000 Annual Meeting by means other than inclusion in the
Company's proxy statement must be received by the Corporate Secretary no later
than August 13, 2000.

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

Charles W. J. Kostelni
Corporate Secretary

September 28, 1999

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>

Appendix A

BONTEX, INC.
KEY EMPLOYEE STOCK OPTION PLAN

1. PURPOSE:
The purpose of this Plan is to promote the interests of Bontex, Inc. (the
"Corporation") and its stockholders by aiding in attracting, retaining and
motivating officers and other key employees of the Corporation and its
affiliates. The Plan is designed to accomplish these objectives by providing
such officers and key employees with an opportunity to acquire a proprietary
interest in the Corporation by means of options and thereby benefit from
appreciation in value of the shares of the Corporation's Common Stock. This
opportunity should provide additional incentives for such officers and key
employees to continue to use their best efforts and superior performances to
promote the best interests of the Corporation, for their own benefit and for the
benefit of the stockholders.
2. DEFINITIONS:
The following words and phrases as used herein shall have the meanings set
forth below:
2.1 "Board" shall mean the Board of Directors of the Corporation.
2.2 "Change in Control" shall mean a change in control of a nature that
would be required to be reported (assuming such event has not been "previously
reported") in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that,
notwithstanding the foregoing and without limitation, such a change in control
shall be deemed to have occurred at such time as (i) any person is or becomes
the "beneficial owner" (as defined in Rule 13d-3 or Rule 13d-5 under the
Exchange Act as in effect on the date hereof), directly or indirectly, of 20% or
more of the combined voting powers of the Corporation's voting securities; (ii)
the incumbent Board ceases for any reason to constitute at least the majority of
the Board, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Corporation's
stockholders, was approved by a vote of at least 75% of the directors comprising
the incumbent Board (either by a specific vote or by approval of the proxy
statement of the Corporation in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
clause (ii) considered as though such person were a member of the incumbent
Board; (iii) all or substantially all of the assets of the Corporation 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 Corporation,
control meaning the ownership of more than 75% of the combined voting power of
such entity's voting securities; or (iv) the Corporation is merged or
consolidated with another corporation or entity and as a result of such merger
or consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation or entity shall be owned in the

A-1

<PAGE>

aggregate by the former stockholders of the Corporation. Notwithstanding
anything in the foregoing to the contrary, no change in control shall be deemed
to have occurred for purposes of this Agreement by virtue of any transaction (i)
which results in the Optionee or a group of Persons which includes the Optionee,
acquiring, directly or indirectly, 20% or more of the combined voting power of
the Corporation's voting securities; or (ii) which results in the Corporation,
any affiliate of the Corporation or any profit-sharing plan, employee stock
ownership plan or employee benefit plan of the Corporation or any of its
affiliates (or any trustee of or fiduciary with respect to any such plan acting
in such capacity) acquiring, directly or indirectly, 20% or more of the combined
voting power of the Corporation's voting securities; or (iii) which results in
the heirs, successor or assigns of Hugo N. Surmonte acquiring, directly or
indirectly, 20% or more of the combined voting securities.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.4 "Committee" shall mean the Compensation Committee of the Board of
Directors, or such other committee of the Board as may be designated by the
Board from time to time, for the purpose of administering this Plan as
contemplated by Section 3 of this document. The composition of the Committee
shall meet the non-employee director requirements of Rule 16b-3 promulgated
pursuant to the Exchange Act. Should any member of the Committee cease to be a
non-employee director under Rule 16b-3(b)(3)(i) or any subsequent rule, he shall
immediately be deemed not to be a member of the Committee for all purposes of
this Plan.
2.5 "Common Stock" shall mean the common stock of the Corporation.
2.6 "Option" shall mean any stock option granted pursuant to this Plan.
2.7 "Optionee" shall mean any person who is the holder of an Option
granted under this Plan.
2.8 "Person" shall mean person within the meaning of Sections 3(a)(9)
and 13(d)(3) of the Exchange Act.
2.9 "Plan" shall mean this Bontex, Inc. Key Employee Stock Option Plan.
2.10 "Fair Market Value" shall mean the closing sales price of Common
stock on a nationally recognized stock exchange or, if not traded on such an
exchange, the NASDAQ SmallCap Market, on the date involved if that is a trading
day, or if not, the first trading day prior to such day. If said Common Stock is
not quoted on the NASDAQ SmallCap Market, then Fair Market Value shall mean the
average between the bid and asked price on the date involved if that is a
trading day, or if not, the first trading day prior to such day. If there is no
such average, the Committee shall determine Fair Market Value in good faith. In
determining such Fair Market Value, the Committee shall utilize all information
which it deems pertinent, including, but not limited to, actual sale or purchase
data, and may engage the services of an accounting firm to assist in the
determination. The Committee shall further determine Fair Market Value using
guidelines promulgated pursuant to the pertinent provisions of the Code.

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<PAGE>

3. ADMINISTRATION:
3.1 The Plan shall be administered by the Committee, which may make such
determinations and take such actions in connection with the Plan as it deems
necessary. Such determinations and actions shall be binding and conclusive for
all purposes and upon all persons.
3.2 The Committee may correct any defects, omissions or ambiguities, or
reconcile any inconsistencies, in the Plan, or in any document issued pursuant
to the Plan, in the manner and to the extent it shall deem reasonably desirable.
The Committee shall have full and sole authority to make all administrative,
interpretative and other determinations with respect to the Plan and all such
determinations shall be final and conclusive.
3.3 As provided in Section 6.1 hereof, the Committee shall have full and
sole authority to make all grants to be made hereunder.
3.4 Any other provision of the Plan to the contrary notwithstanding, the
Committee is authorized to take such action as it, in its discretion, may deem
necessary or advisable and fair and equitable with regard toOptionees in the
event of: a Change in Control of the Corporation; a tender, exchange or similar
offer for all or any part of the Common Stock made by an entity, person or group
(other than the Corporation, any affiliate of the Corporation or any savings,
pension or other benefit plan for the benefit of employees of the Corporation or
its affiliates); a merger of the Corporation into, a consolidation of the
Corporation with, or an acquisition of the Corporation by another corporation;
or a sale or transfer of all or substantially all of the Corporation's assets.
Such action, in the Committee's discretion, may include (but shall not be deemed
limited to): establishing, amending or waiving the forms, terms, conditions or
duration of Options granted hereunder or subject to grant hereunder, so as to
provide for earlier, later, extended or additional terms for exercise of the
whole, or any installment thereof (provided that, except as permitted by the
provisions of this Section and Section 9.1 hereof, in no event will any Option
be exercisable within the first six months of its respective term); alternate
forms of payment; or other modifications. The Committee may take any such
actions pursuant to this Section 3.4 by adopting rules or regulations of general
applicability to all Optionees, or to certain categories of Optionees; by
amending or waiving terms and conditions in stock option agreements; or by
taking action with respect to individual Optionees. The Committee may take any
such actions before or after the public announcement of any such Change in
Control, tender offer, exchange offer, merger, consolidation, acquisition or
sale or transfer of assets.
4. SHARES AVAILABLE:
4.1 Subject to the provisions of Sections 4.2 and 4.3 hereof, the
aggregate number of shares of Common Stock to be subject to Options under this
Plan shall not exceed 103,000 shares. Such shares shall be made available from
the authorized but unissued shares of Common Stock of the Corporation.

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<PAGE>

4.2 Shares subject to an Option, to the extent such shares are
surrendered or withheld to pay the exercise price of the Option, are no longer
available for issuance hereunder. Other shares subject to Options granted under
this Plan, which Options have been canceled or have expired or are unexercised
and no longer outstanding, shall thereupon become available for issuance
pursuant to other Options granted under the Plan. This Section 4.2 shall in all
cases be interpreted in a manner consistent with Rule 16b-3, as amended from
time to time.
4.3 The Committee may, at any time, make or provide for such adjustments
to the Plan, to the number and class of shares available thereunder or to any
outstanding Options as it shall deem appropriate to preventdilution or
enlargement of the rights of Optionees, including adjustments in the event of
changes in the outstanding Common Stock by reason of stock dividends, stock
splits, distributions to stockholders (other than cash dividends),
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, reorganizations, liquidations and the like. Such adjustments may
include, in the discretion of the Committee, adjustments to the aggregate number
and kind of shares which may be issued pursuant to Options under this Plan, and
the number, kind and price of shares subject to each Option then outstanding.
5. ELIGIBILITY:
5.1 Officers and other full-time, salaried employees of the Corporation
and its affiliates shall be eligible to receive Options under the Plan.
5.2 A director of the Corporation or any of its affiliates who is not
also a regular, full-time employee of the Corporation or its affiliates will not
be eligible for Options under the Plan.
5.3 An employee who has been granted an Option otherwise under the Plan
may be granted additional Options, if the Committee shall so determine.
6. GRANTS:
6.1 Subject to the express provisions of this Plan, the Committee shall
have sole authority to determine the individuals to whom Options shall be
granted, the time or times at which Options shall be granted, the number of
shares of Common Stock to be subject to each Option granted, the period of each
Option and the time or times at or during which an Option may be exercised in
whole or in part, and all such other terms and conditions of such Options
granted as the Committee deems appropriate.
6.2 Each Option granted to an Optionee under this Plan shall, if
required by the Committee, be evidenced by a written agreement to be duly
executed and delivered by or on behalf of the Corporation and the Optionee and
containing provisions not inconsistent with the Plan.

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<PAGE>

7. OPTION PRICE:
The exercise price under each Option shall be established by the Committee,
but in no event shall it be less than 100% of the Fair Market Value of the
Common Stock on the date the Option is granted.
8. TERM OF OPTIONS:
The term of each Option shall be fixed by the Committee, but, subject to
the power of the Committee, among other things, to accelerate or otherwise
adjust the terms for exercise of Options pursuant to Section 3.4 hereof in the
event of the occurrence of any of the events set forth therein, no Option shall
be exercisable later than ten years from the date of grant of the Option or
earlier than six months from the date of grant of the Option, except as
otherwise provided in Section 9.1.
9. EXERCISE OF OPTIONS:
9.1 Each Option granted under this Plan shall be exercisable in such
number of shares and, subject to the provisions of Section 8, at such time or
times, including periodic installments, as may be determined by the Committee at
the time of the grant. The six months from the date of the grant of the Option
restriction pursuant to Section 8 shall not be applicable to an Optionee in the
event that he dies prior to the expiration of such period. The right to acquire
shares pursuant to Options that are exercisable in installments shall be
cumulative so that when the right to acquire any shares has accrued such shares
or any part thereof may be acquired at any time thereafter until the expiration
or termination of the Option.
9.2 An Option may be exercised by giving written notice of exercise to
the Corporation specifying the number of shares to be purchased and by paying in
full in cash the exercise price. The proceeds received by the Corporation in
cash will be used for general corporate purposes.
9.3 If authorized by the Committee, the exercise price may also be paid
by (i) the delivery of shares of Common Stock with a Fair Market Value equal to
the exercise price, or (ii) a combination of cash and such Common Stock equal to
the exercise price.
9.4 Upon notification of the amount due and prior to, or concurrently
with, the delivery to the Optionee of a certificate representing any shares
purchased pursuant to the exercise of an Option, the Optionee shall promptly pay
to the Corporation any amount necessary to satisfy applicable federal, state or
local tax requirements.
9.5 An Optionee shall have none of the rights of a shareholder with
respect to the shares subject to any Option until such shares have been issued
and registered on the Corporation's transfer books upon exercise thereof.

A-5

<PAGE>

10. NON-TRANSFERABILITY:
No Option granted under this Plan shall be transferable other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code, and an Option may be exercised during
the lifetime of the Optionee only by him or by his guardian or legal
representative.
11. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH OR CANCELLATION:
11.1 In the event that the employment of an Optionee is terminated, for a
reason other than retirement or death, no Option held by such Optionee shall be
exercisable later than three months after such Optionee shall have ceased to be
an employee of the Corporation or one of its affiliates or, if earlier, later
than the expiration date of the Option. The employment relationship, however,
will be treated as continuing intact while the Optionee is on military or sick
leave if the period of such leave does not exceed ninety days, or, if longer, so
long as the Optionee's right to re-employment is guaranteed either by statute or
by contract.
11.2 In the event that an Optionee shall retire or die while employed by
the Corporation or one of its affiliates, Options held by such Optionee may be
exercised by the Optionee or by the person designated in the will of the
Optionee or by the proper legal representative of the Optionee within one year
following the Optionee's death or one year following retirement, but in no event
later than the expiration date of the Option.
11.3 Notwithstanding the express term of the grant or the foregoing
provisions of this Section 11, Options shall terminate upon the termination of
the employment of the Optionee if the Corporation determines that such
termination is for deliberate, willful or gross misconduct, and the Options
shall terminate (whether or not the employment of the Optionee is terminated) if
the Corporation determines that the Optionee has improperly disclosed
confidential information of the Corporation and the Optionee is so notified.
12. LISTING AND REGISTRATION OF SHARES:
Each Option shall be subject to the requirement that, if at any time the
Committee shall determine in its discretion that the listing, registration or
qualification of the shares subject to such Option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issuance or purchase of
shares thereunder, then such Option shall not be granted or exercised in whole
or in part unless suchlisting, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
13. EFFECTIVE DATE:
This Plan is subject to approval by the stockholders of the Corporation.
The Plan will become effective on the date so approved. The Committee may, in
its discretion, grant Options conditioned upon the stockholders' subsequent
approval of the Plan.

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<PAGE>

14. DURATION AND AMENDMENT:
14.1 There is no express limitation upon the duration of the Plan.
14.2 The Board may terminate or may amend the Plan at any time, provided,
however, that the Board may not, without approval of the stockholders of the
Corporation, (i) increase the maximum number of shares for which Options may be
granted under the Plan, (ii) permit the granting of Options at less than 100% of
Fair Market Value at time of grant, or (iii) change the class of employees
eligible to receive Options under the Plan. The transactions under this Plan are
intended to comply with Rule 16b-3 (or its successor), as amended from time to
time, promulgated pursuant to the Exchange Act, and the Corporation may, but
shall not be required to, submit any proposed Plan amendment to its stockholders
for their approval to assure continued compliance if such proposed amendment
would, with respect to any participant who is an officer, director or 10%
shareholder of the Corporation who is subject to Section 16 of the Exchange Act
("Control Person"), (i) materially increase the benefits accruing to
participants under the Plan, or (ii) materially increase the number of
securities which may be issued under the Plan (this shall not affect the
prohibition against increasing the maximum number of shares for which Options
may be granted under the Plan pursuant to the previous paragraph without
shareholder approval), or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
15. MISCELLANEOUS:
With respect to any participant who is a Control Person, transactions under
this Plan are intended to comply with Rule 16b-3 (or its successor), as amended
from time to time, promulgated pursuant to the Exchange Act. Therefore, to the
extent any provision of the Plan or action by a person administering the Plan
fails to so comply, it shall be deemed null and void ab initio to the extent
permitted by law and deemed advisable by the Committee.
As evidence of its adoption of this Plan, the Corporation has caused this
document to be executed on its behalf this ____ day of __________, 1999

BONTEX, INC.

By:
----------------------
Its:
------------------

A-7

<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 28, 1999

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 10, 1999, 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 Thursday, October 28, 1999 at 10:30 A.M., Eastern
Daylight Saving Time, and at any adjournments thereof.

The undersigned acknowledges receipt of the Proxy Statement dated September 28,
1999.

This proxy must be signed Date
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: Three Class C directors for a three year term: William J.
Binnie, Charles W. J. Kostelni and Frank B. Mayorshi

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. Approval of a proposed Key Employee Stock Option Plan as
described in the Proxy Statement dated September 28, 1999.

For Against Abstain
[ ] [ ] [ ]

3. In their discretion, upon other matters as may properly come before the
meeting.

This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposals 1 and 2. This proxy is revocable at any time prior to the
exercise hereof.

<PAGE>

Detach above card, sign, date and mail in postage paid envelope provided.

BONTEX, INC.

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