PENOBSCOT SHOE COMPANY
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON
APRIL 16, 1999
The Annual Meeting of Stockholders of Penobscot Shoe Company will be held at
the office of Rudman and Winchell, 84 Harlow Street, 4th Floor, Bangor,
Maine, at 8:00 A.M. on April 16, 1999 for the following purposes:
1. to fix the number of directors and to elect a Board of Directors, a Treasurer
and a Clerk; and
2. to transact such other business as may properly come before the meeting or
any adjournments thereof.
Stockholders of record at the close of business on February 2, 1999, will be
entitled to vote at the meeting.
By Order of the Board of Directors
GERALD E. RUDMAN, CLERK
PENOBSCOT SHOE COMPANY
North Main Street
Old Town, Maine 04468
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the
management of Penobscot Shoe Company (hereinafter called the "Company")
of the enclosed proxy for use at the Annual Meeting of Stockholders to be held
on Friday, April 16, 1999, and at any adjournment thereof. This statement and
the form of proxy were mailed to stockholders on March 5, 1999.
The annual report of the Company for the fiscal year ended
November 27, 1998, which accompanies this proxy statement, is not to be
deemed a part of the proxy soliciting material.
The Company's only voting securities are its shares of Common Stock
having a par value of $1.00 per share (the "Common Stock"). As of the close
of business on February 2, 1999, there were outstanding 1,378,290 shares of
such stock, held by approximately 210 stockholders of record.
Holders of Common Stock of the Company are entitled to one vote at
the meeting for each share of such stock held by them of record at the close of
business of February 2, 1999, upon each matter which may come before the
meeting, including the election of directors.
In order to be considered for inclusion in the Company's proxy state-
ment and form of proxy for presentation at the Company's annual meeting for
the current fiscal year ending November 26, 1999, proposals by shareholders
must be received at the Company's principal offices by October 15, 1999.
ELECTION OF DIRECTORS, A TREASURER, AND A CLERK AND
INFORMATION RESPECTING NOMINEES, INCLUDING SECURITIES
BENEFICIALLY-OWNED
The By-Laws of the Company require that its Board of Directors
consist of not less than three, nor more than fifteen, directors as fixed at
the Annual Stockholders Meeting. Subsequent to the Annual Meeting,
stockholders may increase or decrease (within the limits above specified)
the number of directors as thus fixed, and fill any vacancy thereby created.
The management recommends that the number of directors be fixed
at five and, unless authority to do so is withheld in the accompanying proxy,
intends to vote the proxies hereby solicited for the election as directors of
the five persons hereinafter listed. Messrs. Kagan, Moody, Rudman, Guthrie, and
Riddle are presently serving as directors and were elected to
their present term of office as directors of the Company by the stockholders
on March 27, 1998. Management also recommends that Mr. Rudman be
re-elected Clerk and Mr. Keane be re-elected Treasurer. Directors hold office
for a term expiring upon the election and qualification of a successor.
Information concerning said nominees is set forth below.
The Company is not presently aware of any reason that would
prevent any of such persons from serving as a director if he is elected.
<PAGE>
<TABLE>
<CAPTION>
Shares owned
First Beneficially
Employment for Became and of record on
Name Age Past Five Years Director February 2, 1999
<S> <C> <C> <C> <C>
Irving Kagan 70 Chairman of the Board of Directors, 1960 465,498
Chief Executive Officer
Francis J. Guthrie 61 Executive Vice President, Marketing 1984 1,500
and Sales Fortis Benefits Insurance
Company; previously, Sr. VP of
Corporate Marketing and Communications,
Fortis, Inc., President and Chief
Executive Officer, The Guthrie Group
(marketing/advertising)
James L. Moody, Jr. 67 Retired, formerly Chairman of the Board, 1971 1,000
Hannaford Bros. Co. (wholesale and
retail distributor of groceries); Also
a Director of UNUM Corporation (insurance),
IDEXX Laboratories, Inc., Staples, Inc.,
and a Trustee of the Colonial Group of
Mutual Funds
John I. Riddle 61 Retail Real Estate and Shopping Center 1989 1,000
Consultant; previously, President,
Sturbridge Yankee Workshop, Inc. (retail
firm)
Gerald E. Rudman 70 Clerk of Company, Retired Senior Partner, Rudman 1975 7,000
& Winchell (law firm)
David L. Keane 46 Vice President of Finance and Admin.- _ 500
istration and Treasurer
All directors and 476,498
officers as a group 34.6% of shares
(8 persons) (outstanding)
</TABLE>
PRINCIPAL STOCKHOLDERS
The principal beneficial owners of the Company's Common Stock
are as follows:
Number of Shares % of Total
Beneficially Outstanding Shares
Owned on Owned on
Name February 2, 1999 February 2, 1999
Irving Kagan 465,498(a) 33.8
Mildred K. Striar 279,823(a) 20.3
Joseph R. Nerges 131,450 9.5
TOTAL 876,771 63.6
(a) Subject to an agreement between Mr. Kagan and Mrs. Striar
granting each a right of first refusal and certain rights of participation
with respect to the shares of the other.
The company knows of no other person owning beneficially more
than 5% of the Company's Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Commission initial reports of ownership
and reports of changes in ownership of the Common Stock of the Company. The
Company believes that during the fiscal year ended November 28, 1997, its
officers, directors and holders of more than 10% of the Company's Common Stock
complied with all Section 16(a) filing requirements.
MEETINGS OF THE BOARD OF DIRECTORS AND OF ITS COMMITTEES
During the year ended November 27, 1998, the Board of Directors
held a total of six meetings.
The chairman of the Board of Directors appoints an audit committee,
a compensation committee, and a nominating committee after the annual
meeting. Messrs. Moody, Guthrie, Rudman, and Riddle constituted the Board's
audit committee for the past fiscal year. This committee reviews with the
Company's independent certified public accountants the scope of their audit
work, the results of the audit, and the examination of the Company's internal
accounting and control procedures. During the year ended November 27, 1998,
the audit committee held one meeting.
<PAGE>
Messrs. Kagan, Rudman, Moody, Riddle, and Guthrie constituted the
Board's compensation committee for the past fiscal year. This
committee reviews, recommends and approves the Company's compensation
policies and practices, including the level of compensation of officers of the
Company, and makes recommendations concerning compensation of directors.
During the year ended November 27, 1998, the compensation committee held
three meetings.
Messrs. Kagan, Guthrie, Moody, Rudman, and Riddle are
members of the nominating committee. This committee identifies, reviews and
recommends individuals to fill Board vacancies. One meeting was held during
the year ended November 27, 1998.
COMPENSATION OF, AND TRANSACTIONS WITH, DIRECTORS,
OFFICERS AND OTHERS
The following table sets forth all direct compensation paid by the
Company during the year ended November 28, 1997, to the highest-paid officers
and directors whose aggregate direct compensation exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Long Term
Annual Compensation Compensation
Other
Annual
Name and Salary Bonus Compensation Options
Principal Position Year ($) ($)(1) ($) (#)
<S> <C> <C> <C> <C> <C>
Paul Hansen (2) 1998 169,412 59,125 8,643 -
President and Chief Executive 1997 161,178 - 6,643 -
Officer 1996 158,102 25,737 6,643 -
William Hoskins 1998 123,066 37,122 180 -
Vice President - Sales 1997 116,699 - 180 -
1996 113,103 15,442 180 -
David Keane 1998 92,678 25,013 70 -
Vice President - Finance and Admin. 1997 90,565 - 70 -
1996 88,227 9,437 41 -
</TABLE>
(1.) The objective of the incentive plan in 1996, 1997 and 1998 was to
reward the Company's employees when, in the discretion of the Board of
Directors, the Company outperformen certain standards set by the Board.
These standards, which included standards for net sales and operating
profits, were achieved in 1996 and 1998. These standards were not achieved
in 1997 and accordingly no bonus pool was funded. The Pool was allocated
among employees based on each individual's contirbution to the Company's
performance as determined by the Board of Directors in its unilateral
discretion.
(2.) Mr. Hansen passed away on December 27, 1998.
Upon the death of any employee who has served the Company for at
least 15 years and has been an officer and/or director of the Company and/or
any subsidiary for at least two years, the Company will pay the sum of $5,000
and one year's salary to the employee's widow and minor children.
Mr. Wilhelm Pfander, Vice President of Manufacturing currently qualifies
for these benefits, and the Company is currently making payment to Mr. Hansen's
widow pursuant to this plan.
Mr. Kagan, Chairman of the Board of Directors, retired as Chief
Executive Officer of the Company on December 31, 1993. On November
26, 1993, the Board of Directors voted to provide him a supplemental
retirement benefit of $20,000 per year. During 1998, Mr. Kagan received
payments totaling $20,000 as a result of this supplemental retirement benefit.
The compensation for each outside director in fiscal 1998 consisted
of an annual retainer of $7,500, and a payment of $500 for each meeting
attended. In addition, the Chairman of the Board receives an annual retainer
of $20,000. Director compensation for fiscal 1999 is expected to continue at
this rate.
<PAGE>
CONTRIBUTORY RETIREMENT PLAN
Since 1981, Penobscot Shoe Company has had a contributory
retirement plan covering substantially all employees. This is a defined
benefit plan and the amount of the Company's contribution with respect to
specified persons cannot be readily calculated by the actuaries of the plan.
The annual retirement benefits for each pension plan year of future service
are determined as .85% of annual earnings which are not in excess of
$16,200, and 1.5% of any excess of annual earnings over $16,200. Past
service (prior to January 1, 1988) benefits are determined for each year of
credited past service as .65% of average earnings of the three years ended
January 1, 1988 up to $16,200 and 1.5% of the average over $16,200.
All employees who are enrolled as members of the pension plan
contribute in each plan year .5% of their annual earnings up to $16,200, and
2.5% of their annual earnings in excess of $16,200. The following table shows
the annual pension benefit payable to employees, including officers, retiring
at age 65 using a constant salary. The table includes past and future service
as follows: for 15 years service, 10 years of past service and 5 years of
future service; for 25 years service, 20 and 5 respectively; for 30 years
service, 25 and 5 respectively; for 35 years service, 30 and 5; for 45 years
service, 40 and 5.
<TABLE>
<CAPTION>
Approximate Annual Pension Upon Retirement at Age 65
15 Years 25 Years 30 Years 35 Years 45 Years
Compensation Service Service Service Service Service
<C> <C> <C> <C> <C> <C>
$ 75,000 $ 15,198 $ 25,071 $ 30,008 $ 34,944 $ 44,817
100,000 20,823 34,446 41,258 48,069 61,692
125,000 26,448 43,821 52,508 61,194 78,567
150,000 32,073 53,196 63,758 74,319 95,442
160,000 34,323 56,946 68,258 79,569 102,192
</TABLE>
For the highest paid officers and directors, years of credited service
for pension plan purposes and the amount of compensation for the fiscal year
on which the pension benefit calculations were based are as follows:
Years of Compensation
Name of Individual Credited Service Covered
Paul Hansen 32 $ 160,000
William Hoskins 6 160,000
David Keane 13 117,691
1991 STOCK OPTION PLAN
The Company's 1991 Stock Option Plan (the "Plan") was adopted by
the Board of Directors on December 20, 1990 and approved by the Company's
stockholders at the 1991 annual meeting. The Plan provides that options for
the purchase of up to 75,000 shares of Common Stock may be granted, of which
33,000 shares remained available at December 1, 1998. The Plan is intended
to promote the growth and profitability of the Company by providing key
employees with additional incentive to achieve the Company's objectives and to
enable the Company to attract and retain key employees of outstanding ability.
The Plan is administered by the Compensation Committee of the Board
of Directors (the "Committee"), which has the authority to designate the key
employees eligible to participate, to prescribe the number of shares and other
terms of awards, to interpret the Plan and to make rules and regulations and
all other determinations for administering the Plan. None of the Directors
constituting the Committee is eligible to receive any stock options pursuant
to the Plan.
The exercise price of all options granted by the Committee will not
be less than 100% of the fair market value of the Common Stock on the date the
option is granted. All options granted under the Plan must expire ten years
after the date they were granted unless provision is made for an earlier
expiration. No option may be granted later than ten years following the date
the Plan was approved by the Board of Directors. The full purchase price for
shares acquired upon the exercise of an option must be paid in cash, Common
Stock, or the promissory note of the participant containing such terms as the
Committee shall specify, or a combination thereof, as the Committee may
determine.
If the optionee ceases to serve the Company for reasons other than
death or total and permanent disability, the optionee may exercise his or her
option for a period equal to the earlier to occur of the end of such exercise
right as set forth in the option, or three months following such termination,
to the extent the option was exercisable prior to termination. Except as so
exercised, the option expires at the end of such three month period. If the
optionee, while in the service of the Company, dies or becomes permanently
and totally disabled at any time while he or she is entitled to exercise an
option, the optionee or his or her executor, administrator, heir or legatee
may exercise the option in full at any time up to one year following the date
of such termination or the end of the tenth year following the grant of the
option, if earlier. Options may be granted on terms different from those set
forth in the Plan in substitution for options held by employees of other
companies who become employees of the Company or a subsidiary as a
result of a merger or other acquisition transaction.
<PAGE>
Options may not be transferred by an optionee otherwise than by will
or by the laws of descent and distribution and during the optionee's lifetime
can be exercised only by the optionee.
In the event that there is a change of control of the Company, as
defined in the Plan, each option held pursuant to the Plan will become fully
exercisable. In the event of a stock dividend, stock split, recapitalization or
other change in the Company's capital stock, the number and kind of shares
of stock or other securities subject to an option granted hereunder, and the
maximum number of shares or other securities available under the Plan, the
purchase price, and other relevant provisions, may be appropriately adjusted
by the Committee. The Committee may also make such adjustments in the
event of a material change in accounting principles or practices, a
consolidation or merger where the Company survives, a sale or acquisition of
significant amounts of stock or other property, or the occurrence of any other
event, if determined by the Committee to warrant such an adjustment to avoid
distortion of the Plan.
Subject to the provision dealing with changes in control, if the
Company is involved in a merger or consolidation in which it is not the
surviving corporation, or the Company's shares are converted into, or exchanged
for, the shares of another corporation, or into or for other consideration, all
options granted hereunder shall terminate upon such event. However, if such
an event occurs, the Committee shall cause replacement options to be granted
or make all outstanding options exercisable in full for a period of twenty days
prior to such event.
The Committee may amend the Plan and any option granted thereunder,
provided that, without the approval of the Stockholders of the Company, no
amendment may (except in the event of stock dividends, stock splits, certain
mergers, spin-offs, and similar events, as herein provided) increase the
maximum number of shares available under the Plan, the designation of those
eligible to participate in the Plan, reduce the minimum option price of future
options, or extend the time within which options may be granted. No
amendment may adversely affect the rights of any optionee without his or her
consent.
All grants of options under the Plan or their exercise shall be in
accordance with applicable federal and state laws and regulations, and the
Company may impose such conditions and requirements as it deems necessary
or desirable to assure such compliance.
The Plan is not intended to qualify for incentive stock option tax
treatment under the Internal Revenue Code.
No options were granted during fiscal 1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values November 27, 1998
Shares Value Number of Unexercised Value of Unexercised
Acquired on Realized Options on November 27, 1998 Options on November 27, 1998
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Paul Hansen ____ ____ 10,000 0 $46,875 0
Wilhelm Pfander ____ ____ 6,000 0 28,125 0
William Hoskins ____ ____ 5,000 0 14,063 0
David L. Keane ____ ____ 5,000 0 23,438 0
</TABLE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
No principal accountant has been selected for fiscal 1999. The firm
of BDO Seidman was principal accountant for fiscal 1998. In the past, the
Board of Directors has selected the auditors following the annual Meeting and
intends to do so again at that time. It is not expected that a representative
of the Company's principal accountant will be at the annual meeting.
<PAGE>
OTHER BUSINESS
Management does not intend to present to the meeting any business
other than the matters herein before referred to, and was not aware, a
reasonable time before this solicitation of proxies, of any other matters which
may be properly presented by others at the meeting. If any other business
should come before the meeting, the persons named on the enclosed proxy
will have discretionary authority to vote all proxies in accordance with their
judgment. The proxies solicited by management will be voted in favor of the
five nominees for election as directors and for the nominees for election as
Treasurer and Clerk named above. Although the management does not
contemplate that any of the nominees will be unavailable for election, in the
event a vacancy in the slate of nominees is occasioned by death or some other
unexpected occurrence, the proxy will be voted for the election of a nominee
according to the judgment of the person voting the proxy.
This proxy is solicited by the management of the Company and if
returned duly signed, will be voted by the person or persons therein named.
Prior to the taking of a vote, any proxy may be revoked at any time by the
stockholder appointing the proxy. It is suggested that notice of revocation be
given in writing to the Clerk prior to voting. The management owns or has
power to vote a sufficient number of shares to assure election of the nominees
herein proposed. The vote of a majority of the number of shares present or
represented at the meeting at which a quorum (a majority of the shares
outstanding) is present or represented is required for the election of
directors, Treasurer and Clerk.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be
borne by the Company. In addition to solicitation by mail, the Company is
requesting banks, brokers and other custodians, nominees, and fiduciaries to
send proxy material to the beneficial owners and to secure their voting
instruction. The Company will reimburse them for their expenses in so doing.
Officials and regular employees of the Company may solicit proxies personally,
by telephone or telegram, from some shareholders, if proxies are not promptly
received.
Upon written request, the Company will furnish any stockholder at no
cost a copy of its annual report to the Securities and Exchange Commission on
form 10-K including financial statements and schedules thereto for the last
fiscal year. Such requests must contain a representation that the person making
the request was a beneficial owner of the Company's stock on February 2, 1999,
the record date for this Proxy solicitation. Requests should be addressed to:
Vice President Finance and Administration, Penobscot Shoe Company, Old Town,
Maine 04468.
March 5, 1999
<PAGE>
Appendix: Proxy Card
Proxy
PENOBSCOT SHOE COMPANY
This proxy is solicited by the Board of Directors
The undersigned stockholder of Penobscot Shoe Company hereby constitutes and
appoints Irving Kagan and Gerald E. Rudman and either of them, Attorneys-
in-Fact, with power of substitution and revocation, for and in the name and
place of the undersigned to vote and act as proxy at the Annual Meeting of
Stockholders of the Company to be held on Friday, April 16, 1999 at the office
of Rudman and Winchell, 84 Harlow Street, Bangor, Maine at 8:00 a.m., and
at any and all adjournments thereof upon all shares of stock in said Company
held by the undersigned or upon which the undersigned will be entitled to vote,
will at the powers the undersigned would possess if personally present.
Said proxies are instructed and authorized as follows:
(1) Fixing the number of directors for the ensuing year at five
For
Against
Abstain
(2) Election of Directors
For all nominees listed to the right (except as marked to the contrary)
Withhold Authority (to vote for all nominees listed to the right.)
Instruction: to withhold authority to vote for any individual nominee strike
a line through the nominee's name in the list below:
F. J. Guthrie, I. Kagan, J. L. Moody, Jr., J. Riddle, G. E. Rudman
(3) For the election as Treasurer and Clerk of the Company of the respective
nominees named in said Proxy Statement.
To Vote
Refrain from voting
In the absence of any specification with respect to items (2) and (3), said
proxies will be deemed to have been authorized to vote for election. In the
absence of any specification with respect to item (1), said proxies will be
deemed to have been authorized to vote for the matter in such item. If
specification is made, proxies will be noted in accordance with such
specification.
Discretionary authority is hereby conferred as to all other matters which may
properly come before the meeting.
Signature
Date: 1999.
