SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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
AMERICAN FILTRONA CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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>
AMERICAN FILTRONA CORPORATION
3951 WESTERRE PARKWAY, SUITE 300
RICHMOND, VIRGINIA 23233
March 10, 1995
ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
We enclose our annual report for the fiscal year ended December 31, 1994.
We hope you will read this report as it summarizes major developments during the
year and contains much information on the products, markets, facilities, and
future of our Corporation.
We cordially invite you to attend the annual meeting of shareholders to be
held on Tuesday, April 25, 1995, at 2:00 p.m. in the Second Floor Conference
Room at NationsBank Center, 12th and Main Streets, Richmond, Virginia.
A formal notice of the meeting, together with a proxy statement and a proxy
form, is enclosed with this letter. Please read the notice and proxy statement
carefully.
The notice points out that you will be asked to elect a Board of Directors,
approve the designation of independent accountants, and approve the 1995 Stock
Incentive Plan. The list of proposed Directors is contained in the proxy
statement. In addition to the formal agenda, we expect to report on our
activities and to answer any questions you might have.
We would appreciate your voting, signing, dating and promptly returning the
enclosed proxy in the enclosed postage-paid envelope. By doing so, you will be
sure that your shares will be represented and voted at the meeting. If, as we
hope, you attend the meeting, you may revoke your proxy and vote in person.
Sincerely,
(signature)
ANNE B. GIBBS
Secretary
<PAGE>
AMERICAN FILTRONA CORPORATION
RICHMOND, VIRGINIA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of Common
Stock of American Filtrona Corporation will be held in the Second Floor
Conference Room at NationsBank Center, 12th and Main Streets, Richmond, Virginia
on April 25, 1995, at 2:00 p.m., for the following purposes:
1. To elect a Board of Directors to serve for the ensuing year;
2. To consider and act upon the designation by the Board of Directors of
Coopers & Lybrand L.L.P. as independent accountants for the fiscal year ending
December 31, 1995;
3. To consider and act upon a proposed 1995 Stock Incentive Plan as
described in the proxy statement and as set forth in Exhibit A hereto; and
4. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed March 3, 1995, at the close of business,
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting or at any adjournment thereof.
You are requested to fill in, sign, date and return the enclosed proxy
promptly, whether or not you expect to attend the meeting. A self-addressed,
stamped envelope is enclosed for your convenience.
If you are present at the meeting, you may vote in person even if you have
already sent in your proxy.
By Order of the Board of Directors,
ANNE B. GIBBS
Secretary
March 10, 1995
<PAGE>
AMERICAN FILTRONA CORPORATION
3951 WESTERRE PARKWAY, SUITE 300
RICHMOND, VIRGINIA 23233
March 10, 1995
PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board of Directors for
the Annual Meeting of Shareholders to be held on April 25, 1995. Any person
giving a proxy may revoke it at any time before it is voted. A proxy, when
executed and not so revoked, will be voted, and if it contains any specific
instructions, will be voted in accordance with such instructions.
On March 3, 1995, the date for determining shareholders entitled to vote at
the meeting, there were 3,737,942 outstanding shares of Common Stock. Each share
of Common Stock is entitled to one vote.
The cost of the solicitation of proxies will be borne by the Corporation.
In addition to the use of the mails, proxies may be solicited, personally or by
telephone, by regular employees of the Corporation.
ELECTION OF DIRECTORS
Proxies will be voted for the election of the persons named below as
Directors for the ensuing year unless otherwise instructed. If for any reason
any of the persons named below should become unavailable to be elected as a
Director, then the proxies will be voted for such substitute nominee as the
Board of Directors may designate. The Corporation has no reason to believe that
any of the nominees will be unavailable. All of the nominees currently are
members of the Board. The number of shares of the Corporation's Common Stock
owned by each of the nominees is shown in the next section.
The election of each nominee for Director requires the affirmative vote of
the holders of a plurality of the shares of the Corporation's Common Stock cast
in the election of Directors. Votes that are withheld and shares held in street
name that are not voted in the election of Directors will not be included in
determining the number of votes cast. Unless otherwise specified in the
accompanying form of proxy, it is intended that votes will be cast for the
election of all of the nominees as Directors.
<PAGE>
<TABLE>
POSITION WITH CORPORATION,
PRINCIPAL OCCUPATION
FOR LAST 5 YEARS,
DIRECTORSHIPS IN PUBLIC DIRECTOR
NAME AGE CORPORATIONS SINCE
<S> <C> <C> <C>
JOHN D. BARLOW, JR. 60 Vice President -- Finance of the 1982
(photo) Corporation.
RUDOLPH H. BUNZL (a) 72 Former Chairman of the Board of the 1954
(photo) Corporation (1987-1994), and prior thereto
Chairman and Chief Executive Officer.
MANUEL DEESE 53 Executive Vice President, Major Accounts 1986
(photo) Business Unit, of Trigon Blue Cross Blue
Shield, health care insurer, Richmond,
Virginia (since October, 1990), having
previously served as Senior Vice President
of that corporation. Director of Central
Fidelity Bank, Richmond, Virginia.
</TABLE>
<PAGE>
<TABLE>
POSITION WITH CORPORATION,
PRINCIPAL OCCUPATION
FOR LAST 5 YEARS,
DIRECTORSHIPS IN PUBLIC DIRECTOR
NAME AGE CORPORATIONS SINCE
<S> <C> <C> <C>
LEO C. DROZESKI, JR. 55 President (since January 1, 1995) and 1993
(photo) Chief Operating Officer of the Corporation
(since January 27, 1993), having
previously served as Executive Vice
President and Chief Operating Officer
(since January 27, 1993), Executive Vice
President (since 1992), and prior thereto
Vice President -- Plastic Products.
BENNETT L. KIGHT 54 Partner, Sutherland, Asbill & Brennan, law 1990
(photo) firm, Atlanta, Georgia.
JOHN L. MORGAN (a) 60 Chairman (since January 1, 1995) and Chief 1973
(photo) Executive Officer of the Corporation,
having previously served as President and
Chief Executive Officer. Director of
NationsBank of Virginia, N.A., Norfolk,
Virginia.
</TABLE>
<PAGE>
<TABLE>
POSITION WITH CORPORATION,
PRINCIPAL OCCUPATION
FOR LAST 5 YEARS,
DIRECTORSHIPS IN PUBLIC DIRECTOR
NAME AGE CORPORATIONS SINCE
<S> <C> <C> <C>
STANLEY F. PAULEY (a) 67 Chairman and Chief Executive Officer of 1976
(photo) Carpenter Company, manufacturer of comfort
cushioning products, Richmond, Virginia.
GILBERT M. ROSENTHAL (a) 69 Retired (since October 1993); formerly 1984
(photo) Chairman and Chief Executive Officer of
Standard Drug Company, retail drug chain,
Richmond, Virginia. Director of Jefferson
Bankshares Corporation, Charlottesville,
Virginia.
WALLACE STETTINIUS (a) 62 Retired (since February 8, 1995); formerly 1978
(photo) Chairman of Cadmus Communications
Corporation, printer, Richmond, Virginia
(since October 1, 1992), having previously
served as Chairman and Chief Executive
Officer of that corporation. Director of
Cadmus Communications Corporation and
Chesapeake Corporation, Richmond,
Virginia.
</TABLE>
<PAGE>
<TABLE>
POSITION WITH CORPORATION,
PRINCIPAL OCCUPATION
FOR LAST 5 YEARS,
DIRECTORSHIPS IN PUBLIC DIRECTOR
NAME AGE CORPORATIONS SINCE
<S> <C> <C> <C>
BERNARD C. WAMPLER 63 Chairman (since December 1993) and Chief 1990
(photo) Executive Officer of Pulaski Furniture
Corporation, manufacturer of furniture,
Pulaski, Virginia, having previously
served as President and Chief Executive
Officer of that corporation. Director of
Pulaski Furniture Corporation and
NationsBank of Virginia, N.A., Norfolk,
Virginia.
HARRY H. WARNER 59 Financial Consultant. Director of 1988
(photo) Chesapeake Corporation, Richmond,
Virginia; and Pulaski Furniture
Corporation, Pulaski, Virginia.
</TABLE>
(a) Member of Executive Committee
Seven meetings of the Corporation's Board of Directors and five meetings of
its Executive Committee were held during 1994. The Corporation also has standing
Audit, Executive Compensation and Nominating Committees of the Board of
Directors. Three meetings of the Audit Committee, two meetings of the Executive
Compensation Committee and three meetings of the Nominating Committee were held
during 1994. Each of the nominees who was a Director attended at least 75% of
the aggregate of the total number of meetings held by the Board of Directors and
committees of the Board on which he served during 1994.
During 1994, in addition to its formal meetings, the Audit Committee
maintained informal contact with the auditors and management throughout the
year. Messrs. Kight, Rosenthal, Stettinius and Wampler served on the Audit
Committee during 1994. The Audit Committee reviews the Corporation's internal
audit and financial reporting functions and the scope and results of the audit
performed by the Corporation's independent accountants and matters relating
thereto and reports thereon to the Board of Directors.
<PAGE>
Messrs. Bunzl, Deese, Pauley and Warner served on the Executive
Compensation Committee during 1994. The Executive Compensation Committee
determines compensation of the Corporation's key executives and administers all
stock option and executive compensation plans of the Corporation.
Messrs. Pauley, Rosenthal and Wampler served on the Nominating Committee
during 1994. The Nominating Committee reviews the qualifications of, and
recommends candidates for, election as Directors.
The by-laws provide that a shareholder of the Corporation entitled to vote
for the election of Directors may nominate persons for election to the Board by
mailing written notice to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of shareholders, 60
days prior to such meeting, and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of Directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. Such shareholder's notice shall include (i) the
name and address of the shareholder and of each person to be nominated, (ii) a
representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate each person specified, (iii) a description
of all understandings between the shareholder and each nominee and any other
person (naming such person) pursuant to which the nomination is to be made by
the shareholder, (iv) such other information regarding each nominee as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated by the
Board of Directors and (v) the consent of each nominee to serve as a Director of
the Corporation if so elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
<PAGE>
STOCK OWNERSHIP
By reason of the positions of Rudolph H. Bunzl, Bennett L. Kight and
Wallace Stettinius with the Corporation, their beneficial ownership of Common
Stock, and the family and trust relationships described below, Rudolph H. Bunzl,
Frances B. Bunzl (Rudolph H. Bunzl's sister-in-law), Bennett L. Kight, Wallace
Stettinius and the various trusts and other entities described below may be
deemed to be "parents" of the Corporation as defined by the rules and
regulations of the Securities and Exchange Commission. Pursuant to the rules and
regulations of the Securities Exchange Act of 1934 (the "34 Act"), Messrs.
Bunzl, Kight and Stettinius and Mrs. Frances B. Bunzl also may be deemed to be
members of a "group" (as that term is used in Section 13(d)(3) of the 34 Act)
with respect to all securities of the Corporation owned by each of them. Each of
the foregoing persons expressly disavows the existence of any such group by
virtue of the relationships described below and, to the extent any such groups
may be deemed to exist, expressly disclaims membership in any such group and
beneficial ownership of all shares deemed to be beneficially owned as a result
thereof. The following table lists any person (including any "group" as that
term is used in Section 13(d)(3) of the 34 Act) who, to the knowledge of the
Corporation, was the beneficial owner, as of January 31, 1995, of more than five
percent of the outstanding shares of the Corporation's Common Stock. The number
of shares shown for each of the foregoing persons under column (3) below exclude
shares which may be deemed to be beneficially owned under the rules and
regulations of the 34 Act as a result of a group being deemed to exist.
<PAGE>
<TABLE>
(2) NAME AND (3) AMOUNT AND
(1) TITLE ADDRESS OF NATURE OF (4) PERCENT
OF BENEFICIAL BENEFICIAL OF
STOCK OWNERS OWNERSHIPS CLASS
<S> <C> <C> <C>
Common Stock Rudolph H. Bunzl 334,594 shares (a) 9.0
5540 Falmouth Street, Suite 305
Richmond, Virginia 23230
Frances B. Bunzl 996,164 shares (b) 26.7
3649 Peachtree Rd., Apt. 105
Atlanta, Georgia 30319
Bennett L. Kight 1,589,704 shares (c) 42.5
c/o Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Wallace Stettinius 515,540 shares (d) 13.8
P. O. Box 27367
Richmond, Virginia 23261
Quest Advisory Co. 269,400 shares (e) 7.2
Quest Advisory Corp.
1414 Avenue of the Americas
New York, New York 10019
David L. Babson & Company, Inc. 311,800 shares (f) 8.3
One Memorial Drive
Cambridge, Massachusetts 02142
</TABLE>
(a) Includes 254,189 shares held in a revocable trust of which Rudolph H.
Bunzl is the sole trustee, sole beneficiary and has sole voting and investment
power, and 80,405 shares as to which Rudolph H. Bunzl has shared voting and
investment power. Of the shares in the latter category, 80,000 are held in
certain trusts for the benefit of Rudolph H. Bunzl's wife and others, of which
Rudolph H. Bunzl's wife and Bennett L. Kight are trust committee members and the
remainder are held by Rudolph H. Bunzl's wife. Rudolph H. Bunzl disclaims
beneficial ownership of 80,405 of such shares.
(b) Frances B. Bunzl (the sister-in-law of Rudolph H. Bunzl) and Bennett L.
Kight are co-executors of the estate of Walter H. Bunzl. Frances B. Bunzl and
Bennett L. Kight share voting and investment power with respect to 429,298 of
such shares which are owned by the estate. In addition, Frances B. Bunzl has
shared voting and investment power with respect to 530,066 of such shares which
are held in certain trusts for the benefit of the children of Walter H. Bunzl,
of which Frances B. Bunzl and Bennett L. Kight are co-trustees. Frances B. Bunzl
and Bennett L. Kight also share voting and investment power with respect to
36,800 shares owned by a charitable foundation of which each is a director.
Frances B. Bunzl disclaims beneficial ownership of all shares held in such
trusts and the charitable foundation.
(c) Bennett L. Kight and Frances B. Bunzl are co-executors of the estate of
Walter H. Bunzl. Bennett L. Kight and Frances B. Bunzl share voting and
investment power with respect to 429,298 of such shares which are owned by the
estate. Bennett L. Kight disclaims beneficial ownership of all of such estate
shares. In addition, Bennett L. Kight has shared voting and investment power
with respect to 530,066 such shares, which are held in certain trusts for the
benefit of the children of Walter H.
<PAGE>
Bunzl, of which Frances B. Bunzl and Bennett L. Kight are co-trustees. Bennett
L. Kight also shares voting and investment power with respect to 80,000 shares
held in certain trusts for the benefit of Rudolph H. Bunzl's wife and others of
which Bennett L. Kight and Rudolph H. Bunzl's wife are trust committee members.
Bennett L. Kight disclaims beneficial ownership of all shares held in all such
trusts. Bennett L. Kight and Frances B. Bunzl also share voting and investment
power with respect to 36,800 shares owned by a charitable foundation of which
each is a director. Bennett L. Kight disclaims beneficial ownership of all
shares held in such charitable foundation. Bennett L. Kight also shares voting
and investment power with respect to 513,540 shares held in certain trusts for
the benefit of the children of Rudolph H. Bunzl, of which Bennett L. Kight and
Wallace Stettinius are co-trustees. Bennett L. Kight disclaims beneficial
ownership of all shares held in such trusts.
(d) Includes 2,000 shares as to which Wallace Stettinius has sole voting
and investment power and 513,540 shares as to which Wallace Stettinius has
shared voting and investment power. All of the shares in the latter category are
held in certain trusts for the benefit of the children of Rudolph H. Bunzl of
which Wallace Stettinius and Bennett L. Kight are co-trustees. Wallace
Stettinius disclaims beneficial ownership of all shares held in such trusts.
(e) The information contained herein with respect to Quest Advisory Corp.
and Quest Advisory Co., a general partnership, is based solely on a Schedule 13G
filed by such entities with the Securities and Exchange Commission, a copy of
which was received by the Corporation on February 27, 1995. Such filing further
stated that the acquisition of such shares was in the ordinary course of
business and not in connection with or as a participant in any transaction
having the purpose or effect of changing or influencing the control of the
Corporation.
(f) The information contained herein with respect to David L. Babson &
Company, Inc. is based solely on a Schedule 13G filed by such entity with the
Securities and Exchange Commission, a copy of which was received by the
Corporation on February 15, 1995. Such filing further stated that the
acquisition of such shares was in the ordinary course of business and not in
connection with or as a participant in any transaction having the purpose or
effect of changing or influencing the control of the Corporation.
The Board of Directors knows of no other person (including any "group") who
is the beneficial owner of more than five percent of the Corporation's Common
Stock.
<PAGE>
The following table provides information, as of January 31, 1995, as to the
shares of Common Stock owned by each Director, the Chief Executive Officer and
the four other most highly compensated officers of the Corporation and by all
Directors and officers of the Corporation as a group:
AMOUNT AND
NATURE
NAME OF PERSON OR OF BENEFICIAL PERCENT OF
NUMBER OF PERSONS OWNERSHIP (A) CLASS IF
IN GROUP (B) MORE THAN 1%
John D. Barlow, Jr. 32,842 shares(c)
Rudolph H. Bunzl 334,594 shares 9.0
Manuel Deese 400 shares
Leo C. Drozeski, Jr. 35,687 shares(c)
Bennett L. Kight 1,589,704 shares 42.5
John L. Morgan 88,273 shares(c) 2.4
Stanley F. Pauley 1,100 shares
Gilbert M. Rosenthal 1,000 shares
Wallace Stettinius 515,540 shares 13.8
Bernard C. Wampler 500 shares
Harry H. Warner 1,000 shares
Randall L. Hagan 30,088 shares(c)
Anthony M. Vincent 15,296 shares(c)
All Officers and Directors
as a Group (16) 2,060,276 shares(d) 55.1
(a) Includes 1,590,309 shares held by spouses, children and in certain
trust relationships, which may be deemed to be beneficially owned by the
nominees under the rules and regulations of the Securities and Exchange
Commission, but as to which the nominees and officers disclaim beneficial
ownership.
(b) Except in situations described in Note (a) above where beneficial
ownership is disclaimed, and except as set forth in the preceding table and the
notes thereto, the beneficial owner of each share shown in the table has sole
voting and investment power.
(c) Includes 12,400, 15,400, 35,600, 14,400 and 8,000 shares that may be
acquired by Messrs. Barlow, Drozeski, Morgan, Hagan and Vincent, respectively,
on or before March 31, 1995, under the Corporation's stock option plans.
(d) Includes the shares described in Note (c) above and 7,250 shares that
may be acquired by other officers on or before March 31, 1995, under the
Corporation's stock option plans.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table lists all compensation paid by the Corporation to the
Chief Executive Officer and the four other most highly compensated executive
officers of the Corporation for services rendered in fiscal years 1994, 1993 and
1992.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS ($)/1/
OPTIONS/ ALL OTHER
NAME AND SALARY BONUS SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
John L. Morgan 1994 250,000 110,000 0 0 10,500/2/
Chief Executive Officer 1993 235,000 95,000 12,000 53,000 15,786
and Chairman 1992 227,000 73,000 0 0 12,996
Leo C. Drozeski, Jr. 1994 154,000 80,000 0 0 10,500/3/
Chief Operating Officer 1993 140,000 65,000 8,000 26,500 13,059
and President 1992 131,000 48,000 0 0 10,780
Randall L. Hagan 1994 118,000 40,000 0 0 12,000/4/
Vice President -- Bonded 1993 113,300 35,000 2,500 26,500 11,864
Fiber Products 1992 108,500 35,000 0 0 13,755
John D. Barlow, Jr. 1994 141,000 19,000 0 0 10,500/5/
Vice President -- Finance 1993 136,000 17,000 2,000 26,500 10,430
1992 131,500 13,000 0 0 8,910
Anthony M. Vincent 1994 107,500 18,000 0 0 6,987/6/
Vice President7 1993 103,000 25,000 2,000 26,500 4,920
1992 99,000 20,000 0 0 3,720
</TABLE>
/1/ The amounts in this column represent the value of shares of Common Stock
received at the completion of the 1991-1993 Performance Cycle of the
Corporation's Performance Plan based on a per-share price of $26.50.
/2/ Includes contributions to the 401(k) Savings and Profit Sharing Plan
($9,375, $14,017 and $11,279) and ESOP ($1,125, $1,769 and $1,717) for 1994,
1993 and 1992, respectively.
/3/ Includes contributions to the 401(k) Savings and Profit Sharing Plan
($9,375, $11,649 and $9,422) and ESOP ($1,125, $1,410 and $1,358) for 1994, 1993
and 1992, respectively.
/4/ Includes contributions to the 401(k) Savings and Profit Sharing Plan
($10,875, $10,752 and $12,609) and ESOP ($1,125, $1,112 and $1,146) for 1994,
1993 and 1992, respectively.
/5/ Includes contributions to the 401(k) Savings and Profit Sharing Plan
($9,375, $9,313 and $7,796) and ESOP ($1,125, $1,117 and $1,114) for 1994, 1993
and 1992, respectively.
/6/ Includes contributions to the 401(k) Savings and Profit Sharing Plan
($5,862, $3,997 and $2,790) and ESOP ($1,125, $923 and $930) for 1994, 1993 and
1992, respectively.
/7/ In addition to compensation shown above, Anthony M. Vincent received
payments of $134,375 under separate agreements for continuing to serve as
president of Dollinger Corporation ("Dollinger") from the announcement of the
Corporation's intention to sell Dollinger through the actual closing date of the
sale, and for his efforts related to the sale process. Other key Dollinger
employees received aggregate payments of $180,333 for continuing their
employment through the closing date of the sale.
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Corporation granted no options or Stock Appreciation Rights ("SARs")
during fiscal year 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL-YEAR END
OPTION/SAR VALUES
The following table provides information on option/SAR exercises by the
Chief Executive Officer and the four other most highly compensated executive
officers of the Corporation and the value of each officer's unexercised options.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS/SARS AT IN-THE-MONEY OPTIONS
ON VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)/1/
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
John L. Morgan 0 0 31,200/16,800 173,550/29,700
Leo C. Drozeski, Jr. 0 0 14,200/ 8,200 67,613/10,800
Randall L. Hagan 0 0 13,200/ 3,800 68,513/10,800
John D. Barlow, Jr. 500 4,500 11,400/ 3,000 53,213/ 7,200
Anthony M. Vincent 5,300 60,300 6,800/ 3,400 4,000/10,800
</TABLE>
/1/ Value of unexercised options based on the December 31, 1994, closing price
of $27.00 per share.
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table provides information on all grants made pursuant to the
1988 Performance Shares Plan during 1994 by the Corporation to the Chief
Executive Officer and the other most highly compensated executive officers of
the Corporation.
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
<TABLE>
ESTIMATED FUTURE
PERFORMANCE PAYOUTS UNDER NON-STOCK
PERIOD PRICE-BASED PLANS
NUMBER UNTIL THRESHOLD TARGET MAXIMUM
NAME OF SHARES MATURATION # # #
<S> <C> <C> <C> <C> <C>
John L. Morgan 4,000/1/ 3 years 4,000 4,000 4,000
4,000/2/ 3 years 4,000 4,000 4,000
4,000/3/ 3 years 4,000 4,000 4,000
4,000/4/ 3 years 4,000 4,000 4,000
Leo C. Drozeski, Jr. 3,000/1/ 3 years 3,000 3,000 3,000
3,000/2/ 3 years 3,000 3,000 3,000
3,000/3/ 3 years 3,000 3,000 3,000
3,000/4/ 3 years 3,000 3,000 3,000
Randall L. Hagan 1,500/1/ 3 years 1,500 1,500 1,500
1,500/2/ 3 years 1,500 1,500 1,500
1,500/3/ 3 years 1,500 1,500 1,500
1,500/4/ 3 years 1,500 1,500 1,500
John D. Barlow, Jr. 1,000/1/ 3 years 1,000 1,000 1,000
1,000/2/ 3 years 1,000 1,000 1,000
1,000/3/ 3 years 1,000 1,000 1,000
1,000/4/ 3 years 1,000 1,000 1,000
</TABLE>
/1/ Shares of Common Stock to be awarded upon continued employment with the
Corporation throughout the Performance Period.
/2/ Shares of Common Stock to be awarded upon achievement of certain corporate
earnings per share goals by the end of the Performance Period.
/3/ Shares of Common Stock to be awarded upon achievement of an established
return on shareholders' equity by the end of the Performance Period.
/4/ Shares of Common Stock to be awarded at the end of the Performance Period
based on individual performance at discretion of the Executive Compensation
Committee.
<PAGE>
RETIREMENT BENEFITS
The following table illustrates annual retirement benefits payable under
the Retirement Plan and the supplemental benefit plan, as amended in 1993 (the
"Supplemental Plan"), to participants based on Final Average Earnings and years
of credited service, assuming normal retirement at age 65.
PENSION PLAN TABLE
ANNUAL RETIREMENT BENEFITS PAYABLE FOR CREDITED SERVICE OF
FINAL AVERAGE
EARNINGS 5 YEARS 10 YEARS 15 YEARS 20 OR MORE YEARS
$100,000 $ 6,250 $12,500 $18,750 $ 25,000
150,000 9,375 18,750 28,125 37,500
200,000 12,500 25,000 37,500 50,000
250,000 15,625 31,250 46,875 62,500
300,000 18,750 37,500 56,250 75,000
350,000 21,875 43,750 65,625 87,500
400,000 25,000 50,000 75,000 100,000
450,000 28,125 56,250 84,375 112,500
Under the Retirement Plan, "Final Average Earnings" is the highest annual
average compensation during any five consecutive calendar years within the
ten-year period prior to the date the participant's benefits are determined.
Annual retirement benefits at age 65 for all participants equal 25% of Final
Average Earnings. The benefits under the Retirement Plan may be reduced
depending upon the number of years of service with the Corporation or one of its
subsidiaries or divisions.
To the extent that benefits determined under the Retirement Plan's benefit
formula are reduced because of compensation limitations imposed by the Internal
Revenue Code, they will be paid under the Supplemental Plan.
Benefit amounts are stated as payments in the form of a life annuity with a
guarantee of 120 monthly payments and are in addition to Social Security
benefits. Other actuarially equivalent forms of benefit may be selected.
At December 31, 1994, Messrs. Morgan, Drozeski, Hagan, Barlow and Vincent
had 25, 22, 16, 14 and 15 years of credited service for purposes of calculating
retirement benefits, respectively, and $345,000, $219,000, $153,000, $158,400
and $150,000 Rates of Earnings, respectively.
The Supplemental Plan provides certain key management personnel with
additional supplemental retirement benefits. The Executive Compensation
Committee selects participants and determines the amount payable to each
participant under the Supplemental Plan. Benefits are paid at retirement and may
be payable at death or disability. A participant's benefit may be reduced
depending on the number of years of service with the Corporation or any of its
subsidiaries. Benefit amounts under the Supplemental Plan are stated as annual
payments in the form of a life annuity with a guarantee of 120 monthly payments.
Benefits are paid in the form of benefit selected by the participant under the
Retirement Plan. At December 31, 1994, Messrs. Morgan and Barlow were entitled
to annual benefits under the Supplemental Plan of $12,000 and $5,000,
respectively, at normal retirement age.
<PAGE>
REMUNERATION OF DIRECTORS
During the year ended December 31, 1994, each of the Directors except
Messrs. Barlow, Drozeski and Morgan was paid $750 for attendance at each Board
meeting, $500 for attendance at each meeting of a Committee of the Board of
which he was a member and $6,000 per year as a retainer. Such Directors' fees
may, at the Director's election, be deferred until retirement. Interest will
accrue thereon semi-annually at an interest rate equal to the 26-week U.S.
Treasury Bill rate in effect on January 1 and July 1 of each year. Each chairman
of a Committee of the Board received $2,000 per year as an additional retainer.
Rudolph H. Bunzl, a Director, retired from active employment with the
Corporation on July 31, 1987. The Corporation had an agreement with Mr. Bunzl
under which he received compensation of $2,000 per month in 1994 and Director's
fees. In exchange for such payments, Mr. Bunzl served as Chairman of the Board
of Directors, a member of its Executive and Executive Compensation Committees
and rendered consulting services to the Corporation on request. That agreement
ended on December 31, 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
One member of the Executive Compensation Committee, Mr. Bunzl, was the
Chairman of the Board of the Corporation until December 31, 1994 and was
formerly the Chief Executive Officer of the Corporation.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Corporation's executive compensation program, as administered by the
Executive Compensation Committee (the "Committee"), encompasses several
components: base salary, cash bonus and long-term, stock-based incentive awards.
The Committee determines base salaries based on a review of salaries paid
to executives of companies of comparable size and type and on the inflation
rate. The Committee attempts to set base salaries slightly below the middle of
the range of salaries paid by such companies. The companies considered do not
include all of the companies reflected in the Performance Graph on page 17. The
Committee also takes into account level of responsibility, time in position and
past performance in setting base salary.
The Committee approved a base salary for Mr. Morgan for 1994 that reflected
an increase of 6.4% above his 1993 base salary in response to inflation and to
bring his salary more in line with the Committee's general sense of competitive
salaries. In determining the cash bonuses for the Corporation's executives, the
Committee reviews the Corporation's financial results as well as each
individual's contribution to the Corporation's performance, especially his level
of responsibility and leadership efforts. The procedure is essentially
discretionary and subjective.
When establishing Mr. Morgan's cash bonus, the Committee considers his
total cash compensation (base salary and bonus) on a year to year basis. In
determining Mr. Morgan's 1994 cash bonus, the Committee also reviewed the
Corporation's performance for the year, as well as Mr. Morgan's individual
efforts in enhancing that performance, his consistently strong performance as
Chief Executive Officer and his leadership in the disposition of the industrial
filtration business of the Corporation. Mr. Morgan's cash bonus of $110,000 was
16% above his 1993 cash bonus and approximately in line with the Corporation's
increased income from continuing operations.
<PAGE>
The Corporation makes stock-based incentive awards pursuant to the 1988
Stock Option Plan (the "Option Plan") and the 1988 Performance Shares Plan (the
"Performance Plan") to its executives who have contributed, and are expected to
contribute, to the long-term financial performance of the Corporation. The
Option Plan provides for the grant of incentive stock options to purchase shares
of Common Stock at no less than the fair market value of the Common Stock on the
date of grant and non-qualified stock options to purchase shares of Common Stock
at no less than 85% of the fair market value of the Common Stock on the date of
grant. To date, all option grants under the Option Plan have been incentive
stock options. The Committee did not make any grants under the Option Plan in
1994.
Similarly, the Performance Plan provides that an executive may receive one
share of Common Stock for each Performance Share that vests after a
pre-determined performance cycle (i) upon continued employment with the
Corporation, (ii) upon satisfaction of certain pre-established performance
goals, including achievement of corporate earnings per share and return on
equity goals, and (iii) at the discretion of the Committee, based on individual
performance. Achievement of these goals inures to the benefit of the
shareholders, as well as the executives. On January 26, 1994, the executives
listed on page 13 were awarded 38,000 Performance Shares. Mr. Morgan received
16,000 of such Shares because of his critical long-term role in the
Corporation's development.
Because none of the Corporation's executive officers receives annual
compensation in excess of $1 million, the Corporation has not taken any position
with respect to the cap on tax deductibility of compensation in excess of that
amount established under the Omnibus Budget Reconciliation Act of 1993.
Executive Compensation Committee
Rudolph H. Bunzl
Manuel Deese
Stanley F. Pauley
Harry H. Warner (Chairman)
<PAGE>
PERFORMANCE GRAPH
(INSERT GRAPH HERE)
1990 1991 1992 1993 1994
AFC 100.00 71.19 96.45 114.64 115.82 125.69
S&P 500 INDEX 100.00 96.90 126.45 136.19 149.81 151.80
NASDAQ NON-FINANCIAL 100.00 88.03 141.72 154.90 177.59 170.28
STOCKS
<PAGE>
PROPOSAL TO APPROVE
THE CORPORATION'S 1995 STOCK INCENTIVE PLAN
GENERAL
It is proposed that the shareholders approve the American Filtrona
Corporation 1995 Stock Incentive Plan (the "1995 Plan"). The 1995 Plan, which is
set forth as Exhibit A to this Proxy Statement, was adopted subject to
shareholder approval by the Board of Directors on January 25, 1995.
The Corporation recognizes the importance of providing long-term incentives
to key employees and the key employees of its subsidiaries. For that reason, the
Corporation currently maintains the Option Plan and the Performance Plan. The
Option Plan and the Performance Plan were approved by shareholders on April 26,
1988.
No additional awards may be made under the Option Plan or the Performance
Plan after April 25, 1995. The 1995 Plan continues the material features of the
Option Plan and the Performance Plan within a single plan. The 1995 Plan will
offer selected key employees the opportunity to increase their ownership of
Common Stock through the award of stock options, the award of Performance Shares
or both.
The principal features of the 1995 Plan are summarized below. This summary
is not a complete description of the 1995 Plan and is subject in all respects to
the text of the 1995 Plan as set forth in Exhibit A hereto, which the
shareholders are urged to read carefully.
If the 1995 Plan is approved by the shareholders, no further options will
be granted under the Option Plan and no additional awards will be made under the
Performance Plan.
OPERATION
The 1995 Plan provides that the Committee may from time to time grant
options to purchase shares of the Corporation's Common Stock and award
Performance Shares to any employee of the Corporation or any subsidiary (as
defined) who, in the Committee's judgment, has contributed to its profits or
growth. No member of the Committee may participate in the 1995 Plan. A maximum
of 300,000 shares of Common Stock may be issued under the 1995 Plan. No more
than 60,000 of such 300,000 shares of Common Stock may be issued pursuant to the
award of Performance Shares under the 1995 Plan. The maximum number of shares
that may be issued under the 1995 Plan is subject to adjustment in the event of
stock dividends, stock splits and the like.
OPTIONS
Two types of options -- incentive stock options ("ISOs") and nonqualified
stock options -- may be granted under the 1995 Plan. The two types of options
differ primarily in the tax consequences relating to exercise and disposition of
shares acquired thereupon. See "Federal Income Tax Consequences" below.
A stock option entitles the optionee to purchase shares of Common Stock
from the Corporation at the option price. The option price will be fixed by the
Committee, but will not be less than the fair
<PAGE>
market value of the stock at the time the option is granted in the case of an
ISO nor less than 85% of the shares' date-of-grant fair market value in the case
of an option that is not an ISO. The closing price of the Common Stock on March
2, 1995, was $28.00 per share. The option price may be paid in cash or, with the
consent of the Committee, with shares of Common Stock or a combination of stock
and cash. Optionees may, with the Committee's consent, pay all or part of the
option price in installments upon such terms and conditions and at such interest
rate (not less than the rate necessary to prevent imputed interest or original
issue discount under the Internal Revenue Code) as the Committee may prescribe.
The Committee will be responsible for selecting optionees and determining
the amounts, times and forms of such requirements as the Committee may establish
consistent with the 1995 Plan. Grants must be made before January 24, 2005, and
all options will expire no later than ten years from the date of grant. No cash
consideration will be received by the Corporation for grants of options. Options
will not be transferable except by will or the laws of descent and distribution.
The Committee has not determined any requirements or conditions for option
grants under the 1995 Plan. However, no option that is an ISO may first become
exercisable in any calendar year for shares of Common Stock with a date-of-grant
fair market value that exceeds $100,000. In addition, no participant may be
granted options in any calendar year covering more than 30,000 shares of Common
Stock.
PERFORMANCE SHARES
Performance Shares also may be awarded under the 1995 Plan. A Performance
Share entitles a participant to receive one share of Common Stock upon the
satisfaction of the requirements of the 1995 Plan and his Performance Shares
award agreement.
Only officers of the Corporation will be eligible to receive Performance
Share awards under the 1995 Plan. The Committee will determine who will receive
an award of Performance Shares. The Committee has made no determination
regarding the individuals who will receive Performance Share awards under the
1995 Plan but expects to limit initial participation to executive officers,
including Messrs. Morgan, Drozeski, Hagan and Barlow.
In addition to selecting those who will receive awards of Performance
Shares, the Committee will determine the number of Performance Shares that will
be awarded. An award of Performance Shares under the 1995 Plan will be evidenced
by an agreement between the Corporation and the participant. The agreement will
specify the conditions, determined by the Committee consistent with the terms of
the 1995 Plan, that must be satisfied before the Performance Shares are vested
or nonforfeitable. The Committee currently expects the measuring period for the
various conditions to be three years. The conditions are expected to include,
for some portions of the award, stated objectives over the measuring period
based on the Corporation's earnings per share and return on equity. To the
extent that a participant's interest in the Performance Shares does not vest,
the Performance Shares will be forfeited and no Common Stock will be issuable
with respect thereto. Performance Shares that are forfeited will be available
for future awards under the 1995 Plan. No participant may be granted more than
20,000 Performance Shares in a calendar year.
<PAGE>
AMENDMENTS
The Board of Directors, without further action of the shareholders, may
amend the 1995 Plan as it deems proper or in the Corporation's best interest;
provided, however that approval of the shareholders is required if the amendment
(i) increases the aggregate number of shares that may be issued pursuant to the
1995 Plan, (ii) materially increases the benefits accruing to participants under
the 1995 Plan, or (iii) materially changes the class of employees eligible to
become participants. However, no amendment may adversely affect any award that
is outstanding at the time of the amendment unless the participant consents to
the change.
FEDERAL INCOME TAX CONSEQUENCES
The Corporation has been advised that, for federal income tax purposes, no
taxable income will be realized by any optionee when an option is granted under
the 1995 Plan. If an option is exercised, the federal income tax consequences
will depend upon whether the option is an ISO or a nonqualified option.
No taxable income will be realized by an optionee who exercises an ISO
unless and until he disposes of shares received upon exercise of the ISO.
However, the difference between the shares' fair market value on the date of
exercise and the option price is an adjustment to income that may result in
alternative minimum tax liability. If the optionee does not dispose of the
shares within two years from the date the ISO was granted and one year after the
shares were transferred to him (the "ISO holding period"), he will be taxed when
he does dispose of the shares at capital gains rates on the amount realized on a
sale or exchange less the option price. If he disposes of the shares before the
ISO holding period expires, he generally will be taxed at ordinary income rates
on the excess of the fair market value of the stock on the date of exercise over
the option price. Any additional gain will be characterized as long- or
short-term capital gain, depending on the length of the period the shares were
held. If an optionee sells or exchanges the shares for less than the fair market
value on the date of exercise, the amount recognized as ordinary income will be
limited to the amount realized on such sale or exchange less the option price.
The Corporation will not be entitled to any deduction with respect to the
grant or exercise of an ISO unless the optionee disposes of his shares before
the ISO holding period expires. In that event, the employer corporation (the
Corporation or a subsidiary) generally will be entitled to deduct an amount
equal to the amount of ordinary income recognizable by the optionee.
Upon the exercise of a nonqualified stock option, an optionee generally
will recognize as ordinary income the excess of the fair market value of the
shares on the date of exercise over the option price. If the optionee is subject
to the requirements of Section 16 of the '34 Act, however, his tax consequences
will be determined as of the earlier of (i) the date of exercise or (ii) the
date that is six months after the grant of the nonqualified stock option based
on the shares' value on that date. Such an optionee may elect, however, to have
his tax consequences determined as of the date of exercise. The employer
corporation (the Corporation or a subsidiary) generally will be entitled to a
deduction in the year the optionee recognizes income in an amount equal to the
income realized by the optionee. The amount
<PAGE>
taxable to an optionee as income will be added to the option price to determine
his tax basis for computing gain or loss on a subsequent sale or exchange of the
shares. Any such gain or loss will be long-or short-term capital gain, depending
on the length of the period the shares are held.
The award of Performance Shares is not a taxable event for federal income
tax purposes. When Common Stock is issued under a Performance Share award, the
participant will recognize, as ordinary income, the fair market value of the
Common Stock. The employer corporation (the Corporation or an affiliate of the
Corporation) generally will be entitled to a federal income tax deduction on
account of the issuance of Common Stock. The amount of the deduction will equal
the amount of ordinary income recognizable by the participant. The employer
corporation (the Corporation or an affiliate of the Corporation) may claim the
federal income tax deduction for its taxable year which includes the taxable
year of the participant in which the ordinary income is recognized.
ANTICIPATED AWARDS
Neither the number of individuals who will be selected to participate in
the 1995 Plan nor the type or size of awards that will be approved by the
Committee can be determined. The Corporation is also unable to determine the
number of individuals who would have participated in the 1995 Plan or the type
or size of awards that would have been made under the 1995 Plan had it been in
effect in 1994. The Corporation granted no options or SARs pursuant to the
Option Plan in 1994. Performance Shares granted in 1994 to the Chief Executive
Officer and the other most highly compensated executive officers of the
Corporation under the Performance Plan are reported in the table entitled
"Long-Term Incentive Plan Awards in Last Fiscal Year"on page 13. In 1995, the
Committee approved the following grants of Performance Shares (with a three year
performance cycle) under the Performance Plan (which was approved by
shareholders in 1988): Mr. Morgan, 5,000 shares; Mr. Drozeski, 3,000 shares; Mr.
Hagan, 1,000 shares; and Mr. Barlow, 1,000 shares. In addition, in 1995, the
Committee approved the following grants of stock options and SARs under the
Option Plan (which was approved by shareholders in 1988): Mr. Morgan, 15,000
shares; Mr. Drozeski, 12,000 shares; Mr. Hagan, 2,500 shares; Mr. Barlow, 2,500
shares; Mr. Vincent, 2,000 shares; and all non-executive officer employees,
39,750 shares. The exercise price for all such options is $26.8125.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the meeting and entitled to vote on this proposal is
required for its approval. Abstentions will have the same effect as a negative
vote for purposes of approving the 1995 Plan. Shares held in street name that
are not voted on the proposal to approve the 1995 Plan will not be included in
determining the number of shares entitled to vote on this proposal.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE 1995 PLAN. IT IS INTENDED THAT PROXIES WILL BE VOTED FOR
APPROVAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN IN THE PROXY.
<PAGE>
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
designated Coopers & Lybrand L.L.P., independent accountants, as auditors of the
financial statements for the fiscal year ending December 31, 1995, subject to
shareholder approval. Coopers & Lybrand L.L.P. previously served as auditors of
the Corporation and reported on its financial statements as of December 31,
1994, and for the year then ended.
Although shareholder approval of this action is not required under
applicable law, the Board believes it is in the best interests of the
shareholders to afford them a vote on this matter. Should this designation not
be so approved, the Board intends to reconsider its action in light of this
result. Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the meeting with the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE DESIGNATION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
ACCOUNTANTS TO AUDIT AND REPORT UPON THE FINANCIAL STATEMENTS OF THE CORPORATION
FOR THE YEAR 1995. IT IS INTENDED THAT PROXIES WILL BE VOTED FOR APPROVAL UNLESS
INSTRUCTIONS TO THE CONTRARY ARE GIVEN IN THE PROXY.
SHAREHOLDER PROPOSALS
Under the rules and regulations of the Securities and Exchange Commission,
any proposal that a shareholder intends to present at the next annual meeting
must be received by the Corporation at its principal office in Richmond,
Virginia on or before November 9, 1995, if the shareholder desires it to be
considered for inclusion in the Corporation's proxy statement and form of proxy
relating to that meeting.
The Corporation's by-laws provide that in addition to any other applicable
requirements, for business to be properly brought before the annual meeting by a
shareholder, the shareholder must give timely notice in writing to the Secretary
of the Corporation not later than 60 days prior to the meeting. As to each
matter, the notice should contain (i) a brief description of the matter and the
reasons for addressing it at the annual meeting, (ii) the name and record
address of (and class and number of shares beneficially owned by) the
shareholder proposing such business, and (iii) any material interest of the
shareholder in such business.
<PAGE>
OTHER MATTERS
The Corporation is not aware of any matters to be presented for action at
the meeting other than the election of Directors, approval of independent
accountants, and approval of the 1995 Plan. However, if any other matters
properly come before the meeting, or any adjournment thereof, the person or
persons voting the proxies will vote in accordance with their best judgment.
A copy of the Corporation's 1994 Annual Report on Form 10-K as required to
be filed with the Securities and Exchange Commission will be provided on written
request without charge to any shareholder whose proxy is being solicited by the
Board of Directors. The written request should be directed to the Secretary of
the Corporation, P. O. Box 31640, Richmond, Virginia 23294.
By Order of the Board of Directors,
ANNE B. GIBBS
Secretary
<PAGE>
EXHIBIT A
AMERICAN FILTRONA CORPORATION
1995 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
1.01. AFFILIATE means any Subsidiary or "parent corporation" (within the
meaning of Section 424 of the Code) of the Company.
1.02. AGREEMENT means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Option or Performance Shares granted to such Participant.
1.03. BOARD means the Board of Directors of the Company.
1.04. CODE means the Internal Revenue Code of 1986, and any amendments
thereto.
1.05. COMMITTEE means the Executive Compensation Committee of the Board. No
member of the Committee shall be eligible to participate in the Plan.
1.06. COMMON STOCK means the common stock of the Company.
1.07. COMPANY means American Filtrona Corporation.
1.08. FAIR MARKET VALUE means, on any given date, the closing price of a
share of Common Stock as reported by such source as the Committee may select. If
there is no closing price reported for the Common Stock on such day, then Fair
Market Value means the closing price on the most recent preceding day on which a
closing price is reported by such source as the Committee may select.
1.09. OPTION means a stock option which entitles the holder to purchase
from the Company a stated number of shares of Common Stock at the price set
forth in an Agreement.
1.10. PARTICIPANT means an employee of the Company or of a Subsidiary,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Committee to receive an Option
or Performance Shares.
1.11. PERFORMANCE SHARE means an award which, in accordance with and
subject to the terms of an Agreement, will entitle the Participant, or his
estate or beneficiary in the event of the Participant's death, to receive one
share of Common Stock.
1.12. PLAN means the American Filtrona Corporation 1995 Stock Incentive
Plan.
1.13. SUBSIDIARY means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations in the chain (other than the last corporation) owns stock
possessing at least 50 percent of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
<PAGE>
ARTICLE II
PURPOSES
This Plan is intended to assist the Company in recruiting and retaining key
employees with ability and initiative by enabling employees who contribute
significantly to the Company to participate in its future success and to
associate their interests with those of the Company. It is further intended that
Options granted under this Plan (unless otherwise designated by their terms)
shall constitute "incentive stock options" within the meaning of Section 422 of
the Code. No Option shall be invalid for failure to qualify as an incentive
stock option. The proceeds received by the Company from the sale of Common Stock
pursuant to this Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
This Plan shall be administered by the Committee. The Committee shall have
authority to grant Options and Performance Shares upon such terms (not
inconsistent with the provisions of this Plan) as the Committee may consider
appropriate. Such terms may include conditions (in addition to those contained
in this Plan) upon the exercisability of all or any part of an Option or on the
transferability or forfeitability of Performance Shares including, by way of
example and not limitation, requirements that the Participant complete a
specified period of employment with the Company or an Affiliate, that the
Company achieve a specified earnings per share objective, or that the Company
realize a stated return on equity. Notwithstanding any such conditions, the
Committee may, in its discretion, accelerate the time at which any Option may be
exercised. In addition, the Committee shall have complete authority to interpret
all provisions of the Plan; to prescribe the form of Agreements; to adopt,
amend, and rescind rules and regulations pertaining to the administration of
this Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. Any decision made, or action taken, by the Committee or in
connection with the administration of the Plan shall be final and conclusive. No
member of the Committee shall be liable for any act done in good faith with
respect to this Plan or any Agreement or Option or Performance Share award. All
expenses of administering this Plan shall be borne by the Company.
ARTICLE IV
ELIGIBILITY
4.01. GENERAL. Any employee of the Company or of any Affiliate (including
any corporation that becomes an Affiliate after the adoption of this Plan) who,
in the judgment of the Committee, has contributed or can be expected to
contribute to the profits or growth of the Company or an Affiliate may be
granted one or more Options. Any officer of the Company or any Affiliate
(including any corporation that becomes an Affiliate after the adoption of this
Plan) who, in the judgment of the Committee, has contributed or can be expected
to contribute to the profits or growth of the Company or an Affiliate may
receive one or more awards of Performance Shares, either in addition to or in
lieu of the grant of one or more Options. Directors of the Company who are
employees and are not members of the Committee are eligible to participate in
this Plan.
4.02. GRANTS. The Committee will designate employees to whom Options and
Performance Shares are to be granted and will specify the number of shares of
Common Stock subject to each grant; provided, however, that
<PAGE>
no Participant may be granted Options in any calendar year covering more than
30,000 shares of Common Stock and no Participant may be awarded more than 20,000
Performance Shares in any calendar year. All Options and Performance Shares
granted under this Plan shall be evidenced by Agreements which shall be subject
to applicable provisions of this Plan and to such other provisions as the
Committee may adopt. No Participant may be granted incentive stock options
(under all incentive stock option plans of the Company and Affiliates) which are
first exercisable in any calendar year for stock having an aggregate Fair Market
Value (determined as of the date an Option is granted) exceeding $100,000. The
preceding annual limitation shall not apply with respect to Options that are not
incentive stock options.
ARTICLE V
STOCK SUBJECT TO PLAN
Upon the exercise of any Option and the settlement of a Performance Share
award, the Company may deliver to the Participant shares of Common Stock from
its authorized but unissued Common Stock. The maximum aggregate number of shares
of Common Stock that may be issued pursuant to the exercise of Options and the
settlement of Performance Share awards under this Plan is 300,000, subject to
adjustment as provided in Article X. The maximum aggregate number of shares of
Common Stock that may be issued in settlement of Performance Share awards under
this Plan is 60,000, subject to adjustment as provided in Article X. The
Committee shall maintain records showing the cumulative totals of Common Stock
subject to Options and Performance Share awards outstanding under this Plan and
shares of Common Stock issued upon the exercise of Options and settlement of
Performance Share awards under this Plan. If an Option or Performance Share
award is terminated, in whole or in part, for any reason other than its exercise
or the issuance of Common Stock, the number of shares of Common Stock allocated
to the Option or Performance Share award or portion thereof may be reallocated
to other Options and Performance Share awards to be granted under this Plan.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased by the exercise of any
Option granted under this Plan shall be determined by the Committee on the date
the Option is granted but shall not be less than eighty-five percent of its Fair
Market Value on the date of grant in the case of an Option that is not an
incentive stock option nor less than its Fair Market Value on the date of grant
in the case of an Option that is an incentive stock option.
ARTICLE VII
EXERCISE OF OPTIONS
7.01. MAXIMUM OPTION PERIOD. No Option shall be exercisable after the
expiration of ten years from the date the Option was granted. The terms of any
Option may provide that it is exercisable for a period less than such maximum
period.
7.02. NONTRANSFERABILITY. Any Option granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution and,
during the lifetime of the Participant to whom the Option is granted, may be
exercised only by the Participant. No right or interest of a Participant in any
Option shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
<PAGE>
7.03. EMPLOYEE STATUS. For purposes of determining the applicability of
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Committee may decide in each case to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment.
ARTICLE VIII
METHOD OF EXERCISE
8.01. WHEN EXERCISED. Subject to the provisions of Articles VII and XI, an
Option may be exercised in whole at any time or in part from time to time at
such times and in compliance with such requirements as the Committee shall
determine. An Option granted under this Plan may be exercised with respect to
any number of whole shares less than the full number for which the Option could
be exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan with respect
to remaining shares subject to the Option.
8.02. PAYMENT. Unless otherwise provided by the Agreement or permitted by
the Committee, payment of the Option price shall be made in cash or such cash
equivalent as shall be acceptable to the Committee. If the Agreement provides or
the Committee permits, payment of all or part of the Option price may be made by
surrendering shares of Common Stock to the Company. If Common Stock is used to
pay all or part of the Option price, the sum of the cash and cash equivalent
paid and the Fair Market Value (determined as of the day preceding the date of
exercise) of the shares surrendered must not be less than the Option price of
the shares for which the Option is being exercised. If the Agreement provides or
the Committee permits, payment of all or part of the Option price may be made in
installments upon such terms and conditions as the Committee shall prescribe.
Any Participant who makes payments in installments shall pay interest on the
unpaid balance of the purchase price at a rate, to be determined by the
Committee, not less than the minimum rate necessary to prevent imputed interest
or original issue discount under the Code.
8.03. SHAREHOLDER RIGHTS. No Participant shall, as a result of receiving
any Option, have any rights as a shareholder until the date he exercises such
Option.
ARTICLE IX
PERFORMANCE SHARE AWARDS
9.01. AWARD. In accordance with the provisions of Article IV, the Committee
will designate individuals to whom an award of Performance Shares is to be made
and will specify the number of Performance Shares covered by the award.
9.02. VESTING. The Committee, on the date of the award, may prescribe that
the Participant's rights to receive Common Stock pursuant to a Performance Share
award shall be forfeitable or otherwise terminated for a period of time set
forth in the Agreement or upon the failure to satisfy such other conditions as
the Committee may prescribe consistent with the Plan. By way of example and not
limitation, the restrictions may provide that the shares will be forfeited if
the Participant separates from the service of the Company and its Affiliates
before the expiration of a stated term or if the Company does not attain stated
earnings per share or return on equity objectives.
<PAGE>
9.03. SHAREHOLDER RIGHTS. No Participant shall, as a result of receiving
any Performance Share award, have any rights as a shareholder until that Common
Stock is issuable under the terms of the Agreement. A Participant may not sell,
transfer, pledge, exchange, hypothecate, or otherwise dispose of Performance
Share awards or the right to receive Common Stock thereunder other than by will
or the laws of descent and distribution. The limitations set forth in the
preceding sentences shall not apply after Common Stock is issued pursuant to an
award of Performance Shares.
9.04. EMPLOYEE STATUS. In the event that the terms of any Performance Share
award provide that shares may be issued thereunder only after completion of a
specified period of employment, the Committee may decide in each case to what
extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options and Performance Share
awards may be granted under this Plan, the terms of outstanding Options and
Performance Share awards, and the per individual limitations on the number of
shares for which Options and Performance Share awards may be granted, shall be
adjusted as the Committee shall determine to be equitably required in the event
that (a) the Company (i) effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or (ii) engages in a transaction to
which Section 424 of the Code applies or (b) there occurs any other event which,
in the judgment of the Committee necessitates such action. Any determination
made under this Article X by the Committee shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the maximum
number of shares as to which Options and Performance Share awards may be
granted, the per individual limitations on the number of shares for which
Options and Performance Share awards may be granted or the terms of outstanding
Options or Performance Shares.
ARTICLE XI
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificate for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on the
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock for which an Option is exercised or a Performance Share
award is settled may bear such legends and statements as the Committee may deem
advisable to assure compliance with federal and state laws and regulations. No
Option shall be exercisable, no Common Stock shall be issued, no certificate for
shares will be delivered, and no payment shall be made under this Plan until the
Company has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters.
<PAGE>
ARTICLE XII
GENERAL PROVISIONS
12.01. EFFECT ON EMPLOYMENT. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.
12.02. UNFUNDED PLAN. This Plan, insofar as it provides for grants, shall
be unfunded, and the Company shall not be required to segregate any assets that
may at any time be represented by grants under the Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon contractual obligations that may be created pursuant to this Plan.
No such obligation of the Company shall be deemed to be secured by any pledge
of, or any encumbrance on, any property of the Company.
12.03. RULES OF CONSTRUCTION. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or any provision of law shall be construed
to refer to any amendment to or successor of such provision of law.
ARTICLE XIII
AMENDMENT
The Board may amend from time to time or terminate this Plan; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment materially increases the aggregate number of
shares that may be issued under the Plan, (ii) the amendment changes the class
of employees eligible to become Participants, or (iii) the amendment materially
increases the benefits that may be provided under the Plan. No amendment shall,
without a Participant's consent, adversely affect any rights of such Participant
under any Option or Performance Share award outstanding at the time such
amendment is made.
ARTICLE XIV
DURATION OF PLAN
No Option or Performance Share award may be granted under this Plan after
January 24, 2005. Options and Performance Shares granted before that date shall
remain valid in accordance with their terms.
ARTICLE XV
EFFECTIVE DATE OF PLAN
Options and Performance Shares may be granted under this Plan upon its
adoption by the Board, provided that no Option or Performance Share award will
be effective unless this Plan is approved by a majority of the votes entitled to
be cast by the Company's shareholders, voting either in person or by proxy, at a
duly held shareholders' meeting within twelve months of such adoption.
**********************************APPENDIX*************************************
PROXY
AMERICAN FILTRONA CORPORATION
ANNUAL MEETING OF SHAREHOLDERS--APRIL 25, 1995
The undersigned hereby appoints John L. Morgan and John D. Barlow, Jr.,
or either of them, with full power of substitution in each, proxies (and if the
undersigned is a proxy, substitute proxies) to vote all Common Stock of the
undersigned in American Filtrona Corporation at the Annual Meeting to be held on
April 25, 1995, and at any and all adjournments thereof, as specified below:
1. ELECTION OF DIRECTORS
John D. Barlow, Jr.; Rudolph H. Bunzl; Manuel Deese; Leo C. Drozeski,
Jr.; Bennett L. Kight; John L. Morgan; Stanley F. Pauley; Gilbert M.
Rosenthal; Wallace Stettinius; Bernard C. Wampler; and Harry H. Warner.
( ) FOR all nominees listed above (except as indicated to the contrary
below) listed above
( ) WITHHOLD AUTHORITY to vote for all nominees
(Instruction: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)
2. PROPOSAL TO APPROVE THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
AS INDEPENDENT ACCOUNTANTS OF THE CORPORATION.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. PROPOSAL TO APPROVE THE 1995 STOCK INCENTIVE PLAN.
( ) FOR ( ) AGAINST ( ) ABSTAIN
[Please sign and date on reverse side]
Dated:__________________________, 1995
--------------------------------------
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Please sign name exactly as it appears on stock certificate.
Only one of several joint owners need sign. Fiduciaries
should give full title.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
