SCHEDULE 14A
SCHEDULE 14A INFORMATION
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 ss.240.14a-11(C) or ss.240,14a-12
Wellco Enterprises, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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
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>
WELLCO ENTERPRISES, INC.
150 Westwood Circle
P.O. Box 188
Waynesville, North Carolina 28786
October 17, 1997
NOTICE OF ANNUAL MEETING
OF
STOCKHOLDERS
The annual meeting of stockholders of Wellco Enterprises, Inc. will be held in
the cafeteria of the Company's Waynesville, North Carolina, plant, located at
150 Westwood Circle, on Tuesday, November 18, 1997, at 3:00 P.M., EST, for the
purpose of taking action on the following items, as more particularly described
in the accompanying Proxy Statement:
1. The election of directors;
2. Approval of the 1997 Stock Option Plan for Key Employees;
3. Approval of the 1997 Stock Option Plan for Non-Employee
Directors; and
such other matters as may properly come before the meeting.
Only stockholders of record at the close of business on October 17, 1997, will
be entitled to vote at the meeting. This Notice and the accompanying Proxy
Statement are being mailed to stockholders on approximately October 24, 1997.
By Order of the Board of Directors
RICHARD A. WOOD, JR.
SECRETARY
YOUR VOTE IS IMPORTANT. EVEN IF YOU DO NOT PLAN TO
ATTEND THE MEETING, PLEASE RETURN YOUR SIGNED
PROXY!
Please complete and promptly return your Proxy in the postpaid envelope
provided. This will not prevent you from voting in person at the meeting. It
will, however, help to assure a quorum and avoid added proxy solicitation costs.
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<PAGE>
Wellco Enterprises, Inc.
150 Westwood Circle
P.O. Box 188
Waynesville, North Carolina 28786
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Wellco
Enterprises, Inc. (the "Company") for use at the 1997 Annual Stockholders
Meeting of the Company, to be held on November 18, 1997, and at any adjournment
thereof. The cost of solicitation will be borne by the Company. ChaseMellon
Shareholder Services, the transfer agent for the Company, has been retained to
assist in obtaining proxies, including proxies from brokerage houses and others
with respect to shares registered in their names but beneficially owned by
others, by such means as ChaseMellon deems appropriate, at a cost to the Company
presently estimated at $3,100. Such brokerage houses and others will be
reimbursed for their out-of-pocket expenses incurred. Proxies may also be
solicited by some directors, officers or employees of the Company, in person or
by mail, telephone or telefax, without extra compensation to them.
The shares represented by the proxies received will be voted at the meeting, or
any adjournment thereof. On matters coming before the meeting as to which a
choice has been specified by the stockholder by means of the ballot on the
proxy, the shares represented will be voted accordingly. If no choice is so
specified, the shares will be voted in favor of the matters set forth in the
foregoing notice of meeting. Management does not know of any other matters which
will be presented for action at the meeting, but the persons named in the
accompanying proxy intend to vote or act with respect to any other proposal
which may be presented for action, and matters incident to the conduct of the
meeting, according to their judgment in light of conditions then prevailing
except as to election of substitute nominees for director, as to which proxies
will be voted for nominees designated as hereinafter stated. Executed proxies
may be revoked by written revocation or later dated proxy delivered to the
Secretary prior to or at the meeting. Also, stockholders who are present at the
meeting may withdraw their proxies and vote in person if they so desire.
Stockholders of record at the close of business on October 17, 1997, will be
entitled to vote at the meeting. On that date, there were outstanding 1,160,646
shares of the Company's common stock. Each stockholder is entitled to one vote
for each share of stock on all matters to be presented at the meeting. A
plurality vote of the shares represented at the meeting, in person or by proxy,
is necessary for the election of each director. The affirmative vote of a
majority of the holders of the outstanding shares of common stock of the Company
is necessary for approval of the 1997 Stock Option Plan for Key Employees and
the 1997 Stock Option Plan for Non-Employee Directors in order to qualify stock
acquired under the Plan for certain favorable tax and securities law benefits to
the holders of such stock. Cumulative voting is not available at the meeting.
Mr. James T. Emerson, a Director of the Company, owns 49% of total shares
outstanding (564,636 shares as of September 30, 1997). For further information
concerning such matters see page 13 of this Proxy Statement.
Stockholders having questions concerning the matters to be considered at the
meeting are invited to telephone the Company at (704) 456-3545, extension 102.
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<PAGE>
BOARD OF DIRECTORS
The Company's Board of Directors consists of nine directors divided into three
classes with each class having three directors serving for a term of three
years.
Your Board of Directors unanimously recommends the reelection of Messrs. Horace
Auberry and Rolf Kaufman and the election of Claude S. Abernethy, Jr. as Class
III Directors. All of said nominees have consented in writing to serve if
elected.
The class, period of service as a director, age and principal occupation for at
least the past five years of each nominee for director and each person whose
term of office as a director will continue after the meeting are as follows:
NOMINEES FOR ELECTION:
Class III Directors for Term Expiring in 2000:
Horace Auberry has been a Director of the Company since 1964 and is 66 years of
age. He is Chairman, Board of Directors and Chief Executive Officer of the
Company (since October, 1996) and was Chairman of the Board of Directors from
1968 until October, 1996.
Rolf Kaufman has been a Director of the Company since 1962 and is 67 years of
age. He was President of the Company from 1968 until October 1996. Upon his
retirement from the position of President on September 30, 1996, Mr. Kaufman was
elected by the Board of Directors to the position of Vice Chairman, Board of
Directors. As Vice Chairman, Mr. Kaufman is retired from full time employment as
President, while still being significantly involved in several areas of the
Company's business affairs.
Claude S. Abernethy, Jr. previously served as a Director of the Company from
1976 until 1994 and is 70 years of age. He is Senior Vice President of
Interstate/Johnson Lane (a securities brokerage firm), and a Director of
Interstate/Johnson Lane, Inc., Ridgeview, Inc., and Air Transportation Holdings,
Inc.
DIRECTORS CONTINUING IN OFFICE:
Class I Director Whose Term Expires in 1998:
William D. Schubert has been a Director of the Company since 1990 and is 73
years of age. He is the Principal of Advanced Management Concepts (consultant to
the apparel and textile industry) since 1989 and is a Director (since 1991) of
Sunstates Corporation (formerly Acton Corporation). He was President and Chief
Executive Officer of Alba-Waldensian, Inc. (1973-1988).
William M. Cousins, Jr. has been a Director of the Company since 1990 and is 73
years of age. He is President (since 1974) of William M. Cousins, Jr., Inc.
(management consultants), a Director (since 1991) of Alba-Waldensian, Inc. (an
apparel manufacturing company) and a director of BioSepra, Inc.
J. Aaron Prevost has been a Director of the Company since 1973 and is 86 years
of age. He is a retired Senior Vice President of First Union National Bank of
North Carolina, Waynesville, N.C.
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A Final Judgement of Permanent Injunction was filed on July 23, 1996 in the U.
S. District Court for the Western District of North Carolina, under which Mr.
Prevost and an associate voluntarily consented to permanently restrain and
enjoin themselves from violating Section 10(b) of the Securities Exchange Act of
1934, as amended, and the rules promulgated thereunder. The Judgement was
entered after the filing of a Complaint by the Securities and Exchange
Commission alleging that in 1993 Mr. Prevost gave said associate certain
non-public information about the Company that was used by the associate to
purchase the Company's stock. The Judgement required Mr. Prevost to pay a
disgorgement amount of $3,387 plus prejudgement interest and a like amount in
civil penalty.
Class II Directors Whose Term Expires in 1999:
James T. Emerson has been a Director of the Company since January, 1996 and
previously served as a Director from 1988 until 1993, and is 75 years of age. He
was an industrial instrumentation engineer and consultant (retired 1983), and is
an investor. He is the uncle of Fred K. Webb, Jr., also a Director.
Fred K. Webb, Jr. has been a Director of the Company since January, 1996. He is
an Accounting Team Leader (since 1995) and Senior Staff Accountant (since 1989)
for United Guaranty Corporation (an insurance holding company) and is 37 years
of age. He is the nephew of James T. Emerson, also a Director.
David Lutz has been a director of the Company since January, 1996 and previously
served as a Director from 1984 until 1992. He is President and Chief Operating
Officer and Treasurer of the Company (since October 1996) and is 52 years of
age. He served as Executive Vice President and Treasurer of the Company from May
until October, 1996, as Secretary/Treasurer from 1986 until May 1996 and as
Controller from 1974 until 1986.
It is intended that shares represented by the accompanying Proxy will be voted
for election of the above nominees unless authority for such vote is withheld.
In the event that any nominees should become unable to serve or for good cause
will not serve, it is intended that such shares will be voted for substitute
nominees designated by the present Board of Directors of the Company.
APPROVAL OF 1997 STOCK OPTION PLAN FOR KEY EMPLOYEES
The Board of Directors of the Company has unanimously adopted upon the
recommendation of its Compensation Committee, subject to approval of
stockholders at this 1997 Annual Meeting, the 1997 Stock Option Plan for Key
Employees (the "Plan") providing for the granting of stock options to key
employees (including officers) of the Company and its present and future
subsidiaries. Under North Carolina corporation law, your Board of Directors
could issue such options without stockholder approval. However, the affirmative
vote of a majority of the holders of the outstanding shares of common stock of
the Company is necessary for approval of the Plan in order to qualify stock
acquired under the Plan for certain favorable tax and securities law benefits to
the holders of such stock. Your Board of Directors unanimously recommends that
the Company's stockholders approve the Plan by at least such majority vote.
The Plan is intended to provide additional incentive to key employees of the
Company by encouraging and enabling them to acquire a proprietary interest in
the Company through
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<PAGE>
investment of their own funds. Your management believes that this Plan will also
be of significant assistance in retaining and attracting additional qualified
management personnel in today's highly competitive labor market. For purposes of
the Plan, a key employee is one serving the Company in an executive,
administrative, or professional capacity as defined from time to time by law
under the Fair Labor Standards Act and regulations promulgated thereunder.
A summary of the Plan is set forth below and a complete text of the Plan is set
forth as Exhibit A to this Proxy Statement.
A maximum of 99,000 shares of common stock of the Company (to be adjusted by any
future capitalization changes by virtue of the "anti-dilution" provisions of the
Plan) may be optioned under the Plan. Shares purchased by exercised options may
be provided from either authorized but unissued shares or issued shares which
have been reacquired by the Company. The price at which shares may be optioned
cannot be less than 100% of the fair market value (as defined in the Plan) of
such shares on the date the option is granted (110% in the case of an eligible
employee owning more than 10% of the Company's outstanding stock, of which there
are presently none). The purchase price of shares purchased must be paid in full
in cash at the time of exercise of any option or, at the holder's election,
surrender of the Company's stock then owned by said holder.
Options may be granted under the Plan at any time until June 30, 2002, on which
date the Plan will terminate except as to options then outstanding. The term of
each option shall be for not more than ten years from the granting thereof,
reduced in certain events of termination of employment or death of the option
holder. Options may be exercised in whole or in part. Options are not
transferable except by Will or the laws of intestate succession.
The Plan is administered by the Compensation Committee of the Company's Board of
Directors, which comprises all Directors of the Company not otherwise associated
with the Company. Within the limitations of the Plan, the Committee determines
in its discretion those employees who will be granted options, the time or times
at which options shall be granted and the number of shares to be subject to each
option. The composition of that Committee is as described on Page 11 of this
Proxy Statement.
The Plan has been adopted with the intent of making grants thereunder qualify as
"incentive stock options" under current federal income tax laws. The Company
understands that employees receiving grants under the Plan would not realize
federally taxable income upon such grant or upon any exercise of such grant nor
is the Company entitled to any current income tax deduction as to such grant.
Further, if stock is held for at least one year after exercise of the grant and
more than two years after the date of the grant, any gain to such employee would
be federally taxable as capital gain at a tax bracket dependent upon the holding
period. If the employee is so taxable on such a disposition, the Company has no
deduction for federal income tax purposes in connection with its granting of
such options or issuance of stock upon exercise of options. If the employee does
not hold and disposes of the granted stock for lesser periods of time, the
employee would recognize ordinary income equal to the excess of the lesser of
the sale price or fair market value on date of exercise over the exercise price
of the option, with any additional gain taxable to the employee at capital gain
rates. The Company under such circumstances would be entitled to a deduction
equal to the amount taxable to the employee as ordinary income.
On July 2, 1997, the Company's Board of Directors approved the 1997 Stock Option
Plan for Key Employees as to 99,000 shares of the Company's stock and, upon
unanimous recommendation
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of its Compensation Committee, awarded 35,000 shares to Horace Auberry (Chairman
of the Board of Directors and Chief Executive Officer of the Company), 20,000
shares to David Lutz (President and Chief Operating Officer and Treasurer of the
Company) and 38,000 shares to nine other key employees of the Company and its
subsidiaries. These awards, which are at a price of $12.00 per share, are
contingent upon approval of the 1997 Key Employee Plan by the stockholders of
the Company at the 1997 Annual Stockholders Meeting. If the Plan is approved,
options for 6,000 shares will be available for any future grants which might be
awarded by the Compensation Committee pursuant to the Plan. The closing price of
the Company's common stock on October 1, 1997 as listed on the American Stock
Exchange was $17.50.
APPROVAL OF 1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors of the Company has unanimously adopted upon the
recommendation of its Compensation committee, subject to approval of
stockholders at this 1997 Annual Meeting, the 1997 Stock Option Plan for
Non-Employee Directors (the "Plan") providing for the granting of stock options
to non-employee Directors of the Company. Under North Carolina corporation law,
your Board of Directors could issue such options without stockholder approval.
However, the affirmative vote of a majority of the holders of the outstanding
shares of common stock of the Company is necessary for approval of the Plan in
order to qualify stock acquired under the Plan for certain favorable tax and
securities law benefits to the holders of such stock. Your Board of Directors
unanimously recommends that the Company's stockholders approve the Plan by at
least such majority vote.
The Plan is intended to provide additional incentive to non-employee Directors
of the Company by encouraging and enabling them to acquire a proprietary
interest in the Company through investment of their own funds. Your management
believes that this Plan will also be of significant assistance in retaining
existing non-employee Directors and attracting additional qualified individuals
to serve in that capacity as appropriate in the future. For purposes of the
Plan, only Directors who are not employees of the Company are eligible to
participate in this option program.
A summary of the Plan is set forth below and a complete text of the Plan is set
forth as Exhibit B to this Proxy Statement.
A maximum of 16,000 shares of common stock of the Company (to be adjusted by any
future capitalization changes by virtue of the "anti-dilution" provisions of the
Plan) may be optioned under the Plan. Shares purchased by exercised options may
be provided from either authorized but unissued shares or issued shares which
have been reacquired by the Company. The price at which shares may be optioned
cannot be less than 100% of the fair market value (as defined in the Plan) of
such shares on the date the option is granted. The purchase price of shares
purchased must be paid in full in cash at the time of exercise of any option or,
at the holder's election, surrender of the Company's stock then owned by said
holder.
Options may be granted under the Plan at any time until June 30, 2002, on which
date the Plan will terminate except as to options then outstanding. The term of
each option shall be for not more than ten years from the granting thereof,
reduced in the events of termination of service or death of the option holder.
Options may be exercised in whole or in part. Options are not transferable
except by Will or the laws of intestate succession.
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The Plan is administered by the Compensation Committee of the Company's Board of
Directors, which comprises all Directors of the Company not otherwise associated
with the Company. Within the limitations of the Plan, the Committee determines
in its discretion those Directors (present and future) who will be granted
options, the time or times at which options shall be granted and the number of
shares to be subject to each option. The composition of that Committee is as
described on Page 11 of this Proxy Statement.
The Company understands that Section 1234 of the Internal Revenue Code is
applicable to the income tax treatment of Directors with reference to options
received under the Plan.
On July 2, 1997, the Company's Board of Directors approved the 1997 Stock Option
Plan for Non- Employee Directors as to 16,000 shares of the Company's stock, and
upon unanimous recommendation of its Compensation Committee, awarded 2,000
shares to each then-serving Director ( with the exception of Director and
Chairman of the Compensation Committee Emerson, who declined to participate in
the program). These awards, which are at a price of $12.00 per share, are
contingent upon approval of the 1997 Non-Employee Director Plan by the
stockholders of the Company at the 1997 Annual Stockholders Meeting.
By resolution adopted on October 6, 1997, and upon a unanimous recommendation by
its Compensation Committee, the Board of Directors also awarded a stock option
grant of 2,000 shares to Claude S. Abernethy, Jr., a nominee for election to the
Board of Directors replacing Director Joseph Minio who did not stand for
reelection. This award is at a price of $17.50 per share, and is contingent upon
Mr. Abernethy's election as a Class III Director and approval of the Plan by
stockholders at the 1997 Meeting. If the Plan is approved, options for 2,000
shares will be available for grants which might be awarded to future
non-employee Directors. The closing price of the Company's common stock on
October 1, 1997 as listed on the American Stock Exchange was $17.50.
BOARD AND COMMITTEE MEETINGS
During the Company's last full fiscal year, there was one regular (the 1996
Annual) and two special meetings of the Board of Directors. In addition, the
Company has for a number of years followed the practice, permissible under North
Carolina corporation law, of approving corporate resolutions by unanimous
written consent without meeting. Two such resolutions were adopted by the Board
of Directors during the Company's last full fiscal year.
The Company has a standing Audit Committee of the Board of Directors. All
directors not otherwise associated with the Company as an officer, employee or
consultant are designated as members of the Audit Committee. Accordingly,
Directors Cousins, Emerson, Minio, Schubert, and Webb are presently the members
of such Committee with Director Prevost serving as Chairman. If Mr. Abernethy is
elected as a Class III director at the 1997 Annual Meeting, he will replace Mr.
Minio as a member of this Committee. The Audit Committee held two meetings
during the Company's last fiscal year, at which representatives of the Company's
independent auditors, Deloitte & Touche LLP were present. The Audit Committee
recommends to the Board the firm to be designated as the Company's auditors,
reviews and approves the scope of the annual audit and is responsible for
considering any differences of opinion or disputes between management and said
auditors which may arise and which are called to the Committee's attention.
The Board has a standing Compensation Committee, consisting of the same members
as the Audit
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Committee with Director Emerson serving as Chairman. The Compensation Committee
met once during the Company's last fiscal year to review and approve the
compensation of officers and related matters.
The Company has not established a standing Nominating Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee has ever served as an officer or
employee of the Company or had any relationship requiring disclosure by the
Company under any paragraph of Item 404 of Regulation S-K of the Securities and
Exchange Commission. No executive officer of the Company has ever served as a
director or member of the compensation committee of any other entity one of
whose executive officers has ever been a member to the Company's Compensation
Committee or Board of Directors.
COMPENSATION OF DIRECTORS
Directors' fees are $3,750 per year; $1,000 per meeting for each Board meeting
attended in person; $1,000 per meeting for each committee meeting attended in
person that is held apart from the day of a Board meeting; and $500 for each
committee and Board phone meeting. Directors who are full-time employees of the
Company do not receive any directors' fees. Travel expenses of directors
incurred traveling to and from meetings are reimbursed by the Company.
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as the Company's independent auditors
for the fiscal year ended June 28, 1997. Deloitte & Touche LLP and its
predecessor firm, Touche Ross & Co., have served in this capacity since the
Company's 1979-80 fiscal year. The Board of Directors has not selected
independent auditors for the fiscal year beginning June 29, 1997. The Board of
Directors has a policy of selecting and engaging independent auditors a few
months prior to the end of the Company's fiscal year. A representative of
Deloitte & Touche LLP has been requested and is expected to be present at the
stockholders meeting. Such representative will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's common stock to the Standard & Poor's 500 Stock Index and an index of
peer companies that produce nonathletic footwear. The Standard & Poor's 500
Stock Index is a broad equity market index published by Standard & Poor's. The
index of peer companies was constructed by the Company and includes the Company
and R. G. Barry; Brown Group, Inc.; Genesco, Inc.; Daniel Green Co.; Justin
Industries; McRae Industries; Penobscot Shoe; Rocky Shoes & Boots, Inc.; Stride
Rite Corp.; Timberland Co.; Weyco Group, Inc; and Wolverine World Wide. In
constructing the peer index, the return of each component company was weighted
according to its respective stock market capitalization. The graph assumes the
investment of $100 in the Company's common stock, the Standard and Poor's 500
Stock Index and the peer index at the end of the Company's 1992 fiscal year.
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<TABLE>
<CAPTION>
Total Stockholder Return (These are the numbers in the graph)
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
WELLCO ............. $100 $105 $129 $142 $197 $346
S & P 500 .......... 100 114 115 145 183 247
PEER GROUP ......... 100 118 119 98 110 184
</TABLE>
EXECUTIVE COMPENSATION
Compensation Summary
The following Summary Compensation Table shows certain information concerning
the compensation of each of the Company's highly compensated executive officers
whose total annual salary and bonus exceeded $100,000 during the last fiscal
year:
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SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
OTHER COMPENSA-
ANNUAL TION-STOCK ALL OTHER
NAME AND PRINCIPAL COMPEN- OPTION COMPEN-
POSITION: YEAR SALARY BONUS SATION(1) GRANTS(2) SATION(3)
<S> <C> <C> <C> <C> <C> <C>
Horace Auberry,
Chairman of the Board
and Chief Executive
Officer 1997 $150,000 $20,847 $195,661 $964
1996 104,104 35,658 5,833 22,500 964
1995 100,074 30,027 3,588 964
David Lutz, President,
Chief Operating Officer
and Treasurer 1997 $94,825 $12,508 $3,605
1996 77,402 21,395 15,000
1995 74,386 18,018
</TABLE>
(1) Of the 1997 amounts, $193,075 for Mr. Auberry represents the excess of
market price at the date of stock option exercise over the exercise
price. All other amounts represent reimbursement for income taxes.
(2) Number of the Company's shares of common stock underlying stock options
granted in 1996. (3) Life insurance premiums paid by the Company for benefit of
the named executive officer.
Stock Options
The following table shows, on an aggregated basis, for executive officers named
in the Summary Compensation Table, each exercise of stock options during the
1997 fiscal year and the fiscal year-end value of unexercised options.
<TABLE>
<CAPTION>
SHARES NUMBER OF VALUE OF
ACQUIRED UNEXERCISED UNEXERCISED
ON VALUE OPTION IN-THE-MONEY
NAME EXERCISE REALIZED (1) SHARES (2) OPTIONS (3)
<S> <C> <C> <C> <C>
Horace Auberry 22,500 $193,075
David Lutz 15,000 $120,000
</TABLE>
(1) Excess of market price at the date of stock option exercise over the
exercise price. (2) All fully exercisable. (3) Excess of the total market value
at June 27, 1997 of the shares over the total exercise price.
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Employment Contracts and Termination of Employment and Change-in-Control
Agreements
The Company does not have employment contracts with any executive officer. There
are no compensation plans or arrangements that will result from the resignation,
retirement or termination of any executive officer, or that will result from a
change-in-control of the Company or a change in any executive officer's
responsibilities following a change-in-control.
Long-Term Incentive Plans
The Company does not have any type of long-term incentive plans for any
executive officer or other employee.
Pension Plan
The Company's executive officers and all other salaried employees participate in
an Administrative Employee Pension Plan (the Plan). Benefits under the Plan are
based on years of service and average annual earnings. The following table
illustrates the amount of annual pension benefits based on the years of service
and average annual compensation levels shown:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
YEARS OF SERVICE
AVERAGE
ANNUAL
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
<S> <C> <C> <C> <C> <C>
$125,000 $15,700 $20,900 $26,200 $31,400 $36,600
$150,000 19,100 25,400 31,800 38,100 44,500
$175,000 22,400 29,900 37,400 44,900 52,400
$200,000 25,800 34,400 43,000 51,600 60,300
</TABLE>
The Plan provides benefits based on final average compensation, defined in the
Plan as the average of the consecutive five highest of the last ten years
compensation, and on years of service. Compensation under the Plan is
essentially equivalent to the aggregate amounts reported as annual salary and
bonus compensation in the Summary Compensation Table above. Total years of
service are limited to 35 and benefits are computed on a straight life annuity
basis. Mr. Auberry named in the Summary Compensation Table has more than the
maximum 35 years of service. Mr. Lutz would have more than 35 years of service
under the plan, assuming his employment to age 65.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the Committee) of the Board of Directors submits
recommendations to the Board of Directors as to the type and amount of
compensation for two executive officers of the Company (Mr. Auberry, Chairman,
Board of Directors and Chief Executive Officer and Mr. Lutz, President and Chief
Operating Officer and Treasurer). The Committee consists of all directors not
otherwise associated with the Company and, in the 1997 fiscal year, consisted of
six members.
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The Committee usually meets once during a year to consider and make
recommendations to the Board of Directors. In the 1997 fiscal year, the Board of
Directors did not modify or reject any action or recommendation of the
Compensation Committee.
The Committee does not use any compensation consultants in making its decisions
and recommendations, and does not relate compensation of the above named
executive officers to that of any other entity or industry grouping.
Each of the named executive officers receives an annual cash bonus which is
based on a specified percentage of consolidated net income, as defined. Each
executive officer's percentage has remained constant for the past several years.
This results in a significant amount of each executive officer's total cash
compensation being dependent on the Company's operations. No one of the above
named executive officers has a guaranteed or minimum amount of bonus. Although
not a frequent occurrence, the Committee from time to time may give
discretionary additional bonuses for extraordinary achievement.
All officers of the Company participate in fringe benefit plans (group health
insurance, group life insurance and long-term disability) to the same extent and
under the same terms as all other salaried employees of the Company. Mr. Auberry
and Mr. Lutz each receive perquisites whose value aggregates much less than 10%
of their total annual salary and bonus.
Submitted by the Compensation Committee of the Board of Directors
James T. Emerson Chairman
William M. Cousins, Jr. J. Aaron Prevost
William D. Schubert Joseph Minio Fred K. Webb, Jr.
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<PAGE>
SECURITY OWNERSHIP
The number of shares of common stock (the Company's only voting security)
beneficially owned or held under option by (a) all executive officers, directors
and nominees for director and (b) each person or entity owning more than 5% of
the outstanding shares of common stock (including persons or entities who may be
deemed a group for purposes of the federal securities laws), as known by
management of the Company, based upon information furnished to the Company by or
on behalf of such person or entity, as "beneficial ownership" is defined under
Rule 13d-3 under the Securities Exchange Act of 1934, is set forth in the
following table:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP ON SEPTEMBER 30, 1997
SOLE
VOTING SHARED
AND VOTING AND TOTAL PERCENT
DISPOSITIVE DISPOSITIVE BENEFICIAL OF
NAME POWER POWER (1) OWNERSHIP CLASS (3)
<S> <C> <C> <C> <C>
Officers and Directors:
Horace Auberry* (2) 51,050 1,500 52,550 4.46%
David Lutz (2) 15,000 4,500 19,500 1.66%
Directors :
James T. Emerson 564,636 564,636 47.94%
Rolf Kaufman* 48,720 6,600 55,320 4.70%
Claude S. Abernethy, Jr.* 7,000 7,000 0.59%
J. Aaron Prevost 3,500 3,500 0.30%
Fred K. Webb, Jr. 200 200 0.02%
Officers:
Sven E. Oberg 2,800 2,800 0.24%
Richard A. Wood, Jr. 3,600 3,600 0.31%
All Officers and Directors as a
Group (11) 60.22%
Owners of More Than 5% of
the Company's Common
Shares:
Dimensional Fund Advisors Inc.
1299 Ocean Ave., 11th Floor,
Santa Monica, CA (4) 59,400 5.04%
</TABLE>
* Nominee for election to the Board of Directors.
(1) Shares owned jointly with spouse and shares held by spouse and children
over whom the listed person may have substantial influence by reason of
the relationship are shown as shared voting and dispositive power.
(2) Employees of the Company participate in a September 6, 1990 plan
approved by the Board of Directors under which any employee-stockholder
has the option of redeeming shares beneficially owned as of said date
and shares subsequently issued under stock options outstanding at that
date. The redemption right occurs at the
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<PAGE>
employee's death or other separation from employment other than for
cause and the redemption price is the Company's net book value per
share, as defined in said plan, at the time of termination ($5.95 at
June 28, 1997). The total of shares owned by all officers subject to
this plan are: Auberry, 15,450; Kaufman, 55,320; Lutz, 4,500. The
15,000 shares of Mr. Lutz represent shares he beneficially owns from an
unexercised fully exercisable option to acquire these shares.
(3) Percent of total shares outstanding (1,160,646) and shares issuable
under options exercisable within 60 days (17,100).
(4) According to information contained in a Schedule 13G dated February 7,
1997 and information provided to the Company by Dimensional Fund
Advisors Inc. (Dimensional), a registered investment advisor, is deemed
to have beneficial ownership of 59,400 shares of the Company's common
stock as of June 30, 1997, all of which shares are held in portfolios
of DFA Investment Dimensions Group Inc. (Fund), a registered open-end
investment company, or in series of the DFA Investment Trust Company
(Trust), a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
DFA disclaims beneficial ownership of all such shares. Dimensional has
sole voting power with respect to 42,300 shares. Certain officers of
Dimensional also serve as officers of the Fund and the Trust and as
such officers have sole voting power with respect to 12,300 shares
owned by the Fund and 4,800 shares owned by the Trust. Dimensional has
sole dispositive power over all 59,400 shares.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of qualified stockholders intended to be presented at the Company's
1998 Annual Stockholders Meeting must be received by the Secretary at the
address stated herein no later than June 27, 1998, in order to be considered for
inclusion in the Company's Proxy Statement and Proxy for that meeting.
By Order of the Board of Directors
RICHARD A. WOOD, JR.
Secretary
Waynesville, North Carolina
October 17, 1997
A copy of the Company's 1997 Form 10-K (Annual Report filed with the Securities
and Exchange Commission) is available at no charge to any stockholder requesting
it. Requests should be made in writing and addressed to the Secretary, Wellco
Enterprises, P. O. Box 188, Waynesville, NC 28786.
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<PAGE>
EXHIBIT A
1997 STOCK OPTION PLAN FOR KEY EMPLOYEES
OF
WELLCO ENTERPRISES, INC.
This 1997 Stock Option Plan (hereinafter called the "Plan") for key employees of
Wellco Enterprises, Inc. and its subsidiaries, both present and future
(hereinafter called "Wellco"), is intended to provide additional incentive to
key employees of Wellco and to encourage and enable such key employees to
acquire a greater proprietary interest in Wellco.
1. STOCK SUBJECT TO THE PLAN.
Options granted under this Plan shall be options to purchase common stock of
Wellco. The maximum number of shares which may be optioned hereunder shall not
exceed an aggregate of 99,000 shares of the One Dollar ($1.00) par common stock
of Wellco (subject to future adjustments for any stock dividends or other
changes in capitalization referred to in Paragraph 11 below). Such shares may be
in whole or in part, as the Board of Directors of Wellco shall from time to time
determine, authorized but unissued shares of common stock or issued shares which
shall have been reacquired by Wellco. If any option granted under the Plan shall
expire or terminate without being fully exercised, the shares which were subject
to such option but as to which the option was not exercised may again be
optioned under the Plan.
2. ELIGIBILITY.
Options will be granted only to regularly employed and salaried key employees
(including officers) of Wellco who, in the judgment of the Compensation
Committee of Wellco's Board of Directors (hereinafter called the "Committee")
provided for in Paragraph 10 below, perform services of special importance to
the management, operation and development of the business of Wellco and/or its
subsidiaries and sub-subsidiaries. For purposes of this Plan, a key employee is
one serving Wellco in an executive, administrative or professional capacity as
defined from time to time by law under the Fair Labor Standards Act and
regulations promulgated thereunder. A Director of Wellco who is not also an
employee of Wellco will not be eligible to receive an option.
3. OPTION PRICE AND PAYMENT.
The purchase price of the shares of common stock covered by each option granted
pursuant to the Plan shall equal not less than 100% of the fair market value of
such shares of common stock on the date the option is granted, provided,
however, that in the case of an option granted to any person then owning
(personally or under applicable attribution rules under the Internal Revenue
Code) more than 10% of the voting power of all classes of Wellco's outstanding
stock, the purchase price per share of the stock subject to such option shall be
not less than 110% of the fair market value of said stock on the date of grant
of such option. Such fair market value may be taken by the Committee as the
closing market composite price on the American Stock Exchange or other
securities market in which there is trading in Wellco common stock on the
trading day preceding the date on which the option is granted, or if such stock
is not traded on that date, on the next preceding date on which said stock was
traded. The purchase price of the shares purchased shall be paid in full in cash
at the time of exercise of the option or, at the election of the holder of the
grant, by surrender of the Company's stock then owned by said holder. No holder
of an option shall be deemed to be the
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<PAGE>
holder of any shares subject to such option or shall have any of the rights of a
stockholder with respect to the shares subject to such option unless and until
certificates for such shares are issued to such holder upon the due exercise of
the option.
4. TERMS OF OPTIONS.
The term of each option shall be not more than ten years from the date of
granting thereof and shall be exercisable at such time and in such installments
during said ten-year period as may be specified in each particular option grant.
Options granted under the Plan to individual employees may contain such
additional particular provisions not inconsistent with the terms hereof as the
Committee may deem appropriate. Except as provided in Paragraphs 6 and 7 below,
no option may be exercised at any time unless the holder thereof is then an
employee of Wellco or its subsidiaries. The granting of an option pursuant to
the Plan shall take place only when a written option agreement shall have been
duly executed and delivered by Wellco and the employee to whom such option is to
be granted. Any recipient of stock shall be obligated to pay to and be deemed as
authorizing Wellco to withhold the amount of any recipient's state or federal
income tax obligation which might at any time be deemed to arise by virtue of
the granting or issuance of shares under the Plan.
5. NON-TRANSFERABILITY OF OPTIONS.
No option granted under this Plan shall be transferable otherwise than by Will
or the laws of intestate succession, and an option may be exercised only by the
employee during the employee's lifetime.
6. TERMINATION OF EMPLOYMENT.
Notwithstanding the provisions of Paragraph 4 above, if the employment of an
employee holding an option shall be terminated otherwise than by reason of
death, he may (unless a shorter period is provided for in his option agreement)
exercise the option at any time within three months after such termination (but
in no event after ten years from the date such option was granted) to the extent
of the number of shares that he was entitled to purchase under the option at the
time of such termination. Options granted under the Plan shall not be affected
by any change of employment so long as the holder continues to be an employee of
Wellco and/or its subsidiaries or sub- subsidiaries. The option agreements may
contain such provisions as the Committee shall approve with reference to the
effect of approved leaves of absence. Nothing contained in the Plan or in any
option granted pursuant to the Plan shall confer on any employee the right to
continue in the employ of Wellco, its subsidiaries or sub-subsidiaries or
interfere in any way with the right of any such entities to terminate his
employment at any time.
7. DEATH OF EMPLOYEE.
In the event of the death of an employee to whom an option has been granted
while he is employed by Wellco and/or its subsidiaries or sub-subsidiaries or
within three months after the termination of his employment, the option
theretofore granted to him may be exercised by a legatee or legatees of the
option under the employee's Will, or by the personal representative or
distributees of such deceased employee, at any time within a period of one year
after the death of such employee (but in no event after ten years from the date
such option was granted) to the extent of the number of shares that an employee
was entitled to purchase under his option at the date of his death.
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<PAGE>
8. ISSUANCE AND TRANSFER OF SHARES.
No shares of Wellco's common stock shall be issued under the Plan or
subsequently transferred unless and until all legal requirements applicable to
such issuance have been complied with to the satisfaction of the Committee and
Wellco's legal counsel. The Committee shall condition issuance of shares under
the Plan on the recipient's written undertaking to comply with such restrictions
on his subsequent disposition of said shares as the Committee and Wellco's legal
counsel shall deem necessary or advisable as the result of any applicable law,
regulation or official interpretation thereof and certificates representing such
shares may be legended to reflect any such restrictions. Each grant shall
expressly be conditioned upon the recipient's written undertaking that he is
receiving said shares for his own account and not with a view toward a
distribution thereof and will not sell the same except pursuant to an effective
registration under the Securities Act of 1933, as amended, or pursuant to an
applicable exemption from such registration and otherwise permissible under any
other applicable laws, regulations or rules of any governmental agency, all as
determined by Wellco's legal counsel.
9. ADMINISTRATION.
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have the authority and discretion to
determine the individuals to whom, and the time or times at which, options shall
be granted and the number of shares to be subject to each option. In making such
determinations, the Committee may take into account the nature of the services
rendered by the respective employees, their present and potential contributions
to Wellco's success, the anticipated number of years of effective service
remaining and such other factors as the Committee may deem relevant. Subject to
the express provisions of the Plan, the Committee shall also have the authority
and discretion to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective option agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee's determinations on all such matters shall be final and binding on
all persons.
10. THE COMMITTEE.
The Plan shall be administered by the Compensation Committee of Wellco's Board
of Directors as in existence and constituted from time to time, said
Compensation Committee being comprised of all Directors of the Company not
otherwise associated with Wellco. If for some reason the Compensation Committee
shall not exist, the Plan shall be administered by a Committee consisting of not
less than 3 members of the Board of Directors of Wellco. No member of the Board
of Directors who is at the time eligible to participate in the Plan shall be a
member of the Committee. The Committee, including its Chairman, shall be
appointed by the Board of Directors, which may from time to time appoint members
of the Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the Committee. The
Committee shall hold its meetings at such times and places as it may determine.
A majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. Any decisions or
determinations reduced to writing and signed by all of the members shall be
fully as effective as if it had been made by a majority vote at a meeting duly
called and held. The Committee may appoint a secretary, shall keep minutes of
its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable. No member of the Committee shall be liable
for any determination made in good faith with respect to the Plan or any option
granted under it.
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<PAGE>
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provisions of the Plan, each option agreement shall
contain such provisions as the Committee shall determine to be appropriate for
adjustment of the number and class of shares subject to such option, the option
prices and numbers of shares as to which the options shall be exercisable at any
time in the event of changes in the outstanding common stock of Wellco by reason
of stock dividends, split-ups, recapitalizations, combinations or exchanges of
shares, mergers, consolidations, separations, reorganizations, liquidations and
the like. In the event of any such change in the outstanding common stock of the
Corporation, the class and aggregate number of shares available under the Plan
and the maximum number of shares as to which options may be granted to any
individual shall be appropriately adjusted by the Committee, whose determination
shall be conclusive.
12. NON-FUNDING OF PLAN.
The Plan shall be unfunded. Neither Wellco nor any subsidiary or sub-subsidiary
shall be required to establish any special or separate fund or make any other
segregation of assets by virtue of the Plan or the issuance of grants or shares
hereunder.
13. AMENDMENT AND TERMINATION.
Unless the Plan shall theretofore have been terminated as hereinafter provided,
the Plan shall terminate on and no option shall be granted thereunder after June
30, 2002. The Board of Directors of Wellco may at any time prior to that date
terminate the Plan, or make such modifications of the Plan as it shall deem
advisable, including any modification in the composition of the Committee;
provided, however, that the Board of Directors may not, without the affirmative
vote of the holders of a majority of the outstanding shares of common stock of
Wellco, increase the maximum number of shares for which options may be granted
under the Plan either in the aggregate or to any individual employee (except as
provided in the foregoing Paragraph 11) or extend beyond June 30, 2002, the
period during which options may be granted or beyond ten years after date of
grant the period within which options may be exercised. No termination or
amendment of the Plan may, without the consent of the employee to whom any
option shall theretofore have been granted, adversely affect the rights of such
employee under such option.
14. EFFECTIVENESS OF THE PLAN.
Effectiveness of the Plan is contingent upon approval of the Plan at Wellco's
1997 Annual Stockholders Meeting by the affirmative vote in person or by proxy
of the holders of a majority of the outstanding shares of the common stock of
the Corporation entitled to vote at such meeting.
-18-
<PAGE>
EXHIBIT B
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
OF
WELLCO ENTERPRISES, INC.
This 1997 Stock Option Plan (hereinafter called the "Plan") for Non-Employee
Directors (both present and future) of Wellco Enterprises, Inc. (hereinafter
called "Wellco"), is intended to provide additional incentive to non-employee
Directors of Wellco and to encourage and enable such individuals to acquire a
greater proprietary interest in Wellco.
1. STOCK SUBJECT TO THE PLAN.
Options granted under this Plan shall be options to purchase common stock of
Wellco. The maximum number of shares which may be optioned hereunder shall not
exceed an aggregate of 16,000 shares of the One Dollar ($1.00) par common stock
of Wellco (subject to future adjustments for any stock dividends or other
changes in capitalization referred to in Paragraph 11 below). Such shares may be
in whole or in part, as the Board of Directors of Wellco shall from time to time
determine, authorized but unissued shares of common stock or issued shares which
shall have been reacquired by Wellco. If any option granted under the Plan shall
expire or terminate without being fully exercised, the shares which were subject
to such option but as to which the option was not exercised may again be
optioned under the Plan.
2. ELIGIBILITY.
Options will be granted only to present or future Non-Employee Directors of
Wellco.
3. OPTION PRICE AND PAYMENT.
The purchase price of the shares of common stock covered by each option granted
pursuant to the Plan shall equal not less than 100% of the fair market value of
such shares of common stock on the date the option is granted. Such fair market
value may be taken by the Committee as the closing market composite price on the
American Stock Exchange or other securities market in which there is trading in
Wellco common stock on the trading day preceding the date on which the option is
granted, or if such stock is not traded on that date, on the next preceding date
on which said stock was traded. The purchase price of the shares purchased shall
be paid in full in cash at the time of exercise of the option or, at the
election of the holder of the grant, by surrender of the Company's stock then
owned by said holder. No holder of an option shall be deemed to be the holder of
any shares subject to such option or shall have any of the rights of a
stockholder with respect to the shares subject to such option unless and until
certificates for such shares are issued to such holder upon the due exercise of
the option.
4. TERMS OF OPTIONS.
The term of each option shall be not more than ten years from the date of
granting thereof and shall be exercisable at such time and in such installments
during said ten-year period as may be specified in each particular option grant.
Options granted under the Plan to individual Directors may contain such
additional particular provisions not inconsistent with the terms hereof as the
Committee may deem appropriate. Except as provided in Paragraphs 6 and 7 below,
no option may be exercised
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<PAGE>
at any time unless the holder thereof is then a Director of Wellco. The granting
of an option pursuant to the Plan shall take place only when a written option
agreement shall have been duly executed and delivered by the Corporation and the
Director to whom such option is to be granted.
Any recipient of stock shall be obligated to pay to and be deemed as
authorizing Wellco to withhold from compensation otherwise due to such recipient
from Wellco the amount of any recipient's state or federal income tax obligation
which might at any time be deemed to arise by virtue of the granting or issuance
of shares under the Plan.
5. NON-TRANSFERABILITY OF OPTIONS.
No option granted under this Plan shall be transferable otherwise than by Will
or the laws of intestate succession, and an option may be exercised only by the
Director during the Director's lifetime.
6. TERMINATION OF SERVICE.
Notwithstanding the provisions of Paragraph 4 above, if the service of a
Director holding an option shall be terminated otherwise than by reason of death
(and including by way of resignation, removal or non-re-election), he may
(unless a shorter period is provided for in his option agreement) exercise the
option at any time within three months after such termination (but in no event
after ten years from the date such option was granted) to the extent of the
number of shares that he was entitled to purchase under the option at the time
of such termination.
7. DEATH OF DIRECTOR.
In the event of the death of a Director to whom an option has been granted or
within three months after the termination of his service as a Director, the
option theretofore granted to him may be exercised by a legatee or legatees of
the option under the Director's Will, or by the personal representative or
distributees of such deceased Director, at any time within a period of one year
after the death of such Director (but in no event after ten years from the date
such option was granted) to the extent of the number of shares that a Director
was entitled to purchase under his option at the date of his death.
8. ISSUANCE AND TRANSFER OF SHARES.
No shares of Wellco's common stock shall be issued under the Plan or
subsequently transferred unless and until all legal requirements applicable to
such issuance have been complied with to the satisfaction of the Committee and
Wellco's legal counsel. The Committee shall condition issuance of shares under
the Plan on the recipient's written undertaking to comply with such restrictions
on his subsequent disposition of said shares as the Committee and Wellco's legal
counsel shall deem necessary or advisable as the result of any applicable law,
regulation or official interpretation thereof and certificates representing such
shares may be legended to reflect any such restrictions. Each grant shall
expressly be conditioned upon the recipient's written undertaking that he is
receiving said shares for his own account and not with a view toward a
distribution thereof and will not sell the same except pursuant to an effective
registration under the Securities Act of 1933, as amended, or pursuant to an
applicable exemption from such registration and otherwise permissible under any
other applicable laws, regulations or rules of any governmental agency, all as
determined by Wellco's legal counsel.
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<PAGE>
9. ADMINISTRATION.
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have the authority and discretion to
determine the non-employee Directors to whom, and the time or times at which,
options shall be granted and the number of shares to be subject to each option.
Subject to the express provisions of the Plan, the Committee shall also have the
authority and discretion to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective option agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee's determinations on all such matters shall be final and binding on
all persons.
10. THE COMMITTEE.
The Plan shall be administered by the Compensation Committee of Wellco's Board
of Directors as in existence and constituted from time to time, said
Compensation Committee being comprised of all Directors of the Company not
otherwise associated with Wellco. If for some reason the Compensation Committee
shall not exist, the Plan shall be administered by a Committee consisting of not
less than 3 members of the Board of Directors of Wellco. The Committee,
including its Chairman, shall be appointed by the Board of Directors, which may
from time to time appoint members for the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall hold its meetings at such times and places
as it may determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members. Any
decisions or determinations reduced to writing and signed by all of the members
shall be fully as effective as if it had been made by a majority vote at a
meeting duly called and held. The Committee may appoint a secretary, shall keep
minutes of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable. No member of the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any option granted under it.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provisions of the Plan, each option agreement shall
contain such provisions as the Committee shall determine to be appropriate for
adjustment of the number and class of shares subject to such option, the option
prices and numbers of shares as to which the options shall be exercisable at any
time in the event of changes in the outstanding common stock of Wellco by reason
of stock dividends, split-ups, recapitalizations, combinations or exchanges of
shares, mergers, consolidations, separations, reorganizations, liquidations and
the like. In the event of any such change in the outstanding common stock of the
Corporation, the class and aggregate number of shares available under the Plan
and the maximum number of shares as to which options may be granted to any
individual shall be appropriately adjusted by the Committee, whose determination
shall be conclusive.
12. NON-FUNDING OF PLAN.
The Plan shall be unfunded. Neither Wellco nor any subsidiary or sub-subsidiary
shall be required to establish any special or separate fund or make any other
segregation of assets by virtue of the Plan or the issuance of grants or shares
hereunder.
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<PAGE>
13. AMENDMENT AND TERMINATION.
Unless the Plan shall theretofore have been terminated as hereinafter provided,
the Plan shall terminate on and no option shall be granted thereunder after June
30, 2002. The Board of Directors of Wellco may at any time prior to that date
terminate the Plan, or make such modifications of the Plan as it shall deem
advisable, including any modification in the composition of the Committee;
provided, however, that the Board of Directors may not, without the affirmative
vote of the holders of a majority of the outstanding shares of common stock of
Wellco, increase the maximum number of shares for which options may be granted
under the Plan either in the aggregate or to any individual Director (except as
provided in the foregoing Paragraph 11) or extend beyond June 30, 2002, the
period during which options may be granted or beyond ten years after date of
grant the period within which options may be exercised. No termination or
amendment of the Plan may, without the consent of the Director whom any option
shall theretofore have been granted, adversely affect the rights of such
Director under such option.
14. EFFECTIVENESS OF THE PLAN.
Effectiveness of the Plan is contingent upon approval of the Plan at Wellco's
1997 Annual Stockholders Meeting by the affirmative vote in person or by proxy
of the holders of a majority of the outstanding shares of the common stock of
the Corporation entitled to vote at such meeting.
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<PAGE>
APPENDIX
FORM OF PROXY
WELLCO ENTERPRISES, INC.
P. O. Box 188, Waynesville, North Carolina 28786
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL STOCKHOLDERS MEETING, TUESDAY, NOVEMBER 18, 1997
The undersigned hereby acknowledges receipt of Notice of Meeting and Proxy
Statement each dated October 17, 1997, of the 1997 annual stockholders meeting
of Wellco Enterprises, Inc., and hereby revokes all proxies heretofore given for
said meeting and appoints J. Aaron Prevost, Fred K. Webb, Jr. and William M.
Cousins, Jr., (and each of them with full power of substitution, or any one or
more of them acting in the absence of the others) as attorneys and proxies
of the undersigned to represent, vote and act for the undersigned as designated
on the back of this proxy with respect to all shares of the stock of said
Company which the undersigned is entitled to vote at the annual meeting of
stockholders of the Company to be held in the cafeteria of the Company's
plant at 150 Westwood Circle, Waynesville, North Carolina, at 3:00 P.M., EST,
on Tuesday, November 18, 1997 or at any adjournment thereof.
(Continued, and to be marked, dated and signed on other side)
FOLD AND DETACH HERE.
ITEM 1: Your Board of Directors recommends a vote FOR the election of the
following Directors:
Class III, term expiring in 2000: Claude S. Abernethy, Jr., Horace Auberry, Rolf
Kaufman
__________ FOR ALL NOMINEES, except as marked to the right
__________ WITHHOLD AUTHORITY to vote for all nominees
To withhold authority to vote for any Director nominee(s), print the name(s)
below:
- -----------------------------------------------------------------------
ITEM 2: Your Board of Directors recommends a vote For approval of the 1997 Stock
Option Plan for Key Employees; __________ FOR __________ AGAINST __________
ABSTAIN
- --------------------------------------------------------------------------------
ITEM 3: Your Board of Directors recommends a vote FOR approval of the 1997 Stock
Option Plan for Non-Employee Directors:__________ FOR __________ AGAINST
____________ ABSTAIN
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ABOVE AS SET FORTH
IN THE PROXY STATEMENT AND THE HOLDERS HEREOF WILL EXERCISE THEIR DISCRETION AS
TO ALL OTHER ITEMS OF BUSINESS WHICH MAY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Signature of Stockholder(s)
Date_______________________________________, 1997
NOTE: SIGN NAME EXACTLY AS IT APPEARS HEREON AND
DATE. Co-owners must all sign. Attorneys,
executors, administrators, trustees, guardians,
etc. should sign in official capacity and give
title.
FOLD AND DETACH HERE. RETURN THIS PORTION
WELLCO ENTERPRISES, INC.
P. O. Box 188, Waynesville, North Carolina 28786
The annual meeting will be held on November 18, 1997 at 3:00 P.M. in the
cafeteria of the Company's plant at 150 Westwood Circle, Waynesville, North
Carolina.
YOUR VOTE IS VERY IMPORTANT. PLEASE MARK, SIGN, AND DATE THE ABOVE, AND
RETURN IT IN THE ENVELOPE PROVIDED.
<PAGE>
