WELLCO ENTERPRISES, INC.
150 Westwood Circle
P.O. Box 188
Waynesville, North Carolina 28786
October 13, 2006
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 14, 2006, at 3:00 P.M., EST, for the
purpose of considering and taking action upon the following:
1. The election of directors as more particularly described in the
accompanying Proxy Statement; and
2. Such other matters as may properly come before the meeting.
Only stockholders of record at the close of business on October 13, 2006, will
be entitled to vote at the meeting. This Notice and the accompanying Proxy
Statement are being mailed to stockholders on approximately October 20, 2006.
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.
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 2006 Annual Stockholders
Meeting of the Company, to be held on November 14, 2006, and at any adjournment
thereof. The cost of solicitation will be borne by the Company. Mellon
Shareholder Services LLP, 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 Mellon Shareholder Services LLP deems appropriate,
at a cost to the Company presently estimated at $8,000. 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. The accompanying proxy appoints as proxy holders
Claude S. Abernethy, Jr., John D. Lovelace and Fred K. Webb, Jr. (and each of
them with full power of substitution, or any one or more of them acting in the
absence of the others) to vote at the Annual Meeting all shares covered by the
proxy. Management does not know of any other matters which will be presented for
action at the meeting, but the appointed proxy holders 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 13, 2006, will be
entitled to vote at the meeting. On that date, there were outstanding 1,270,746
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. Cumulative voting is not
available at the meeting.
Stockholders having questions concerning the matters to be considered at the
meeting are invited to telephone the Company at (828) 456-3545, extension 167.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITS NOMINEES FOR DIRECTORS.
Your Board of Directors unanimously recommends that Directors Claude S.
Abernethy, Jr., Katherine J. Emerson, Lee Ferguson, George Henson, Rolf Kaufman,
David Kemper, John D. Lovelace, Sarah E. Lovelace, and Fred Webb, Jr. be
re-elected at the 2006 Annual Meeting for one (1) year terms expiring at the
2007 Annual Meeting or until their respective successors are duly elected and
qualified. Each of said nominees has consented in writing to serve in said
capacity if elected.
Period of service as a director, age and principal occupation for at least the
past five years of each nominee for director are as follows:
NOMINEES FOR ELECTION:
Claude S. Abernethy, Jr. has been a Director of the Company since 1997 and
previously served as a Director from 1976 until 1994 and is 79 years of age. He
is Senior Vice President of Wachovia Securities (a securities brokerage firm),
and a Director of Air T Inc., Carolina Mills, Inc. and Director Emeritus of
Wachovia Securities, a subsidiary of Wachovia Bank, N.A.
Katherine J. Emerson has been a Director of the Company since 2001 and is 51
years of age. She is the information systems controller and accountant for
Master Gauge and Tool Company (since 1994), a wholesale distributor of precision
measuring and gauging equipment and supplies. She is a certified public
accountant. Ms. Emerson is married to the nephew of Director Sarah E. Lovelace.
Her husband is also a cousin of Director/Vice President Fred K. Webb, Jr. and a
cousin of Director John D. Lovelace.
Lee Ferguson has been a Director since March 2006, when he was elected President
and Chief Executive Officer of the Company. He is 55 years of age. Mr. Ferguson
served as President of the Armor and Defense Group of Arotech Company, Inc., in
Auburn, AL, from June 2005 until December 2005. He served as Chief Operating
Officer of Specialty Defense Systems in Dunmore, PA from June 2002 to June 2005.
Mr. Ferguson served as President and Chief Operating Officer of Bike Athletic
Company, in Knoxville, TN, from August 1994 to June 2002.
George Henson has been a Director of the Company since 2005 and is 63 years of
age. Mr. Henson was Operations Senior Vice President at Blue Ridge Paper
Products, Inc. from 1999 until 2000. From 2000 until his retirement in 2002, he
was President and Chief Executive Officer of Blue Ridge Paper Products, Inc.
From 1969 through 1999, he was employed with Weyerhaeuser Company in various
engineering and corporate management positions.
Rolf Kaufman has been a Director of the Company since 1962 and is 76 years of
age. He was President of the Company and joint Chief Executive Officer 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
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position of Vice Chairman, Board of Directors. As Vice Chairman, Mr. Kaufman is
retired from full time employment, while still being involved in several areas
of the Company's business affairs.
David Kemper has been a Director of the Company since August 2006 and is 41
years of age. He is the President and a shareholder of KemperStrategy, Inc. From
January of 2001 to August of 2002, Mr. Kemper was employed by Simula, Inc. SEI
Division, Asheville, N.C. From October of 1998 to October of 2000, he was
employed by CII Technologies, Inc., Fairview, N.C., as Corporate Director of
Marketing and Group Director of Sales Operations. In addition, he presently
serves as a Director of Chemtronix, Inc., Waynesville, NC.
John D. Lovelace has been a Director of the Company since 1999 and is 57 years
of age. He is the Vice-President (since 1987) of Credit/Collections for United
Leasing Corporation, a company primarily engaged in the leasing of equipment.
Prior to joining United Leasing, he served as Assistant Vice President of Retail
Banking for United Virginia Bank. He is the son of Director Sarah E. Lovelace
and a cousin of Director/Vice President Fred K. Webb, Jr. Director Katherine J.
Emerson is married to a cousin of John D. Lovelace.
Sarah E. Lovelace has been a Director of the company since August 2005. She is
the Executrix of the estate of James T. Emerson, which owns 54.93% of the
Company's outstanding stock, and is 77 years of age. She was a Licensed
Practical Nurse (retired since 1992). She is the mother of Director John D.
Lovelace and the aunt of Director/Vice President Fred Webb, Jr. Director
Katherine J. Emerson is married to a nephew of Sarah E. Lovelace.
Fred K. Webb, Jr. has been a Director of the Company since 1996. He is Vice
President of the Company (since February 1999) and is 46 years of age. He
previously held the position of Special Projects Manager with the Company
(August 1998 until February 1999). Before joining the Company, he was employed
as an Accounting Team Leader (since 1995) and Senior Staff Accountant (since
1989) for United Guaranty Corporation (an insurance holding company). He is the
nephew of Director Sarah E. Lovelace and the cousin of Director John D.
Lovelace. Director Katherine J. Emerson is married to the cousin of Fred K.
Webb, Jr.
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.
CORPORATE GOVERNANCE MATTERS
The Board of Directors held one regular meeting and seven special meetings
during fiscal year 2006. Each of the Directors attended more than 75% of the
total number of meetings of the Board of Directors and any committee on which
they served. All members of the Board of Directors attended the 2005 Annual
Meeting of Shareholders. In addition, the Company has for a number of years
followed the practice, permissible under North Carolina corporation law, of
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approving corporate resolutions by unanimous written consent without meeting.
The Board of Directors adopted three such resolutions during the Company's last
full fiscal year.
Your Board of Directors has taken actions with reference to the structuring of
the various Committees of the Board of Directors so as to be in compliance with
the Sarbanes-Oxley Act of 2002 and the resulting revised listing requirements of
the American Stock Exchange ("the AMEX"). Since over 50% of the voting power of
the Company's common stock is held by the Estate of James T. Emerson, the
Company, under AMEX regulations is a "controlled company". As a controlled
company, the Board of Directors does not have to be made up of a majority of
independent directors.
The Company has a standing Audit Committee of the Board of Directors. On May 16,
2000 the Company's Board of Directors approved the Audit Committee's initial
Charter. The Board of Directors approved revisions to the Charter on November
19, 2002, February 17, 2004 and June 24, 2004.
All directors not otherwise associated with the Company as an officer, employee
or consultant and whom the Board of Directors, under regulations of the AMEX,
has determined to be independent are members of the Audit Committee. The Board
of Directors has determined that all Audit Committee members have the ability to
read and understand fundamental financial statements and that Audit Committee
Chairman Claude S. Abernethy, Jr. is a financial expert, all as required by
regulations of the AMEX. Accordingly, Directors Henson, Kemper and Abernethy are
currently the members of such Committee, with Director Abernethy serving as
Chairman of the Committee.
The Audit Committee held four quarterly meetings during the Company's last
fiscal year at which representatives of the Company's independent auditors,
Dixon Hughes PLLC, were present. The Audit Committee selects the firm to be the
Company's auditors, and performs other functions as stated in its Charter and in
the Audit Committee Report set forth below.
As a "controlled company" the Company is not required to and does not have a
standing Nominating Committee. Nominees to serve on the Board of Directors are
determined by a vote of the entire Board of Directors.
Though not required or prohibited by the AMEX Company Guide, the Board has had
for a number of years and continues to have a standing Compensation Committee,
with Directors Abernethy, Katherine Emerson, Henson, Kemper and Sarah E.
Lovelace being the members of such Committee for the 2006 fiscal year with
Director John D. Lovelace serving as Chairman. The Compensation Committee met
three times during the 2006 fiscal year.
The Company is also required by the AMEX Company Guide to have certain codes of
conduct for its officers, employees and directors. Copies of said Code of
Conduct were filed as Exhibit 14 to the Company's Form 10-K filed with the
Securities and Exchange Commission for the Company's 2004 fiscal year.
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Audit Committee Report
In accordance with its written charter adopted May 16, 2000, as amended November
19, 2002, February 17, 2004 and June 24, 2004 by the Board of Directors (Board),
the Audit Committee of the Board (Committee) assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. During fiscal year
2006, the Committee or the Chairman thereof, held four quarterly meetings to
discuss with management and the independent auditor the financial information
contained in the Securities and Exchange Commission Form 10-Q filing for the
three fiscal quarters and the annual Form 10-K.
In discharging its oversight responsibility as to the audit process and
consistent with Independence Standards Board Standard No. 1 ("Independence
Discussions with Audit Committees") the Audit Committee obtained from the
independent auditors a formal written statement describing all relationships
between the auditors and the Company that might bear on the auditors'
independence. The Committee also discussed with the auditors any relationships
that may impact their objectivity and independence and satisfied itself as to
the auditors' independence. The Committee also discussed with management and the
independent auditors the quality and adequacy of the Company's internal
controls. The Committee reviewed with the independent auditors their audit
plans, audit scope, and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees".
The Audit Committee reviewed with the independent auditors and management the
audited financial statements of the Company for the fiscal year ended July 1,
2006. Management has the responsibility for the preparation and content of those
statements. Based on the above-mentioned review and discussions with management
and the independent auditors, the Audit Committee recommended to the Board that
the Company's audited financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended July 1, 2006, for filing with the Securities
and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors
David Kemper Claude S. Abernethy, Jr. George Henson
Chairman
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 the executive officers of the Company. The Committee consists
of all directors not otherwise associated with the Company and, in the 2006
fiscal year, consisted of five members, including the Chairman.
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The Committee met three times during the year to consider and make
recommendations to the Board of Directors. In the 2006 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 executive officers received an annual cash bonus for said fiscal
year. 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. In
addition, Mr. Ferguson receives other perquisites whose value is approximately
$33,000.
Submitted by the Compensation Committee of the Board of Directors
John D. Lovelace, Chairman
Claude S. Abernethy David Kemper
Katherine Emerson Sarah E. Lovelace
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 whose
executive officers has ever been a member to the Company's Compensation
Committee or Board of Directors.
COMPENSATION OF DIRECTORS
Directors' fees are $4,250 per year; $1,000 per meeting for each Board meeting
attended in person except for the Chairman of the Board; $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. The Chairman
of the Audit Committee receives $1,000 quarterly in addition to other director
fees. The Chairman of the Board receives $3,750 quarterly in addition to $4,000
per meeting for each Board of Directors meeting attended in person or by phone.
Directors who are employees of the Company do not receive any directors' fees.
The Company reimburses travel expenses of directors who incurred traveling to
and from meetings.
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INDEPENDENT AUDITORS
Dixon Hughes PLLC served as the Company's independent auditors for the fiscal
years ended July 1, 2006 and July 2, 2005. The Audit Committee has not selected
independent auditors for the fiscal year beginning July 2, 2006. The Audit
Committee 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 Dixon
Hughes PLLC 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.
INDEPENDENT AUDITORS FEES AND SERVICES
The following table shows the aggregate fees billed (excluding travel and out of
pocket expenses) to the Company by its independent auditors, Dixon Hughes PLLC
for professional services rendered during the fiscal years ended July 1, 2006
and July 2, 2005:
----------------------------------------------------------------
July 1, 2006 July 2, 2005
Description of Fees
----------------------------------------------------------------
Audit Fees (1) $64,900 $60,550
----------------------------------------------------------------
Audit-Related Fees (2) 5,500 5,000
----------------------------------------------------------------
Tax Fees (3) 10,700 10,500
----------------------------------------------------------------
All Other Fees $0 $0
----------------------------------------------------------------
(1) Includes fees for audits of the July 1, 2006 and July 2, 2005
consolidated financial statements of the Company and its subsidiaries,
and reviews of the related quarterly financial statements included in
quarter reports on Form 10-Q for the 2006 and 2005 fiscal years and
direct engagement expenses.
(2) Includes fees for the audits of the June 30, 2006 and June 30, 2005 for
one of the Company's defined benefit pension plans. The Audit Committee
of the Company's Board of Directors has considered whether the
rendering of such non-audit services by Dixon Hughes PLLC is compatible
with maintaining the principal accountant's independence.
(3) Includes fees for services rendered for tax compliance including
federal and state income tax returns.
Before any accountant is engaged by the Company or its subsidiaries to render
audit or non-audit services, the Company's Audit Committee approves the
engagement. The Audit Committee approved all of the services described herein.
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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 non-athletic 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 Shoe, Inc.; Genesco, Inc.; Phoenix Footwear Group, Inc.;
McRae Industries; Rocky Brands, 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 2006 fiscal year.
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Total Stockholder Return
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2001 2002 2003 2004 2005 2006
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WELLCO $100 $159 $117 $213 $169 $172
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S & P 500 $100 $82 $82 $97 $104 $113
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PEER GROUP $100 $98 $114 $147 $186 $168
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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
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ANNUAL COMPENSATION
LONG TERM
COMPENSA
OTHER -TION
ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPEN- OPTION COMPEN-
POSITION: YEAR SATION GRANTS SATION
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Lee Ferguson,
Chief Executive
Officer and
President (1) 2006 $260,000 $35,000 $33,000(2)
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David Lutz,
Former Chief
Executive Officer,
President,
and Chairman
of the Board (3) 2006 $131,664 $7,082 $38,360(4)
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2005 $131,664 $29,519
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2004 $122,472 $38,298 $1,900(5)
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(1) Chief Executive Officer since March 20, 2006. He was paid $75,000 from March
20, 2006 through July 1, 2006.
(2) Amounts for additional life insurance of $7,000, car allowance of $14,000
and apartment rent of $12,000 for a total of $33,000 annually. Only $7,000
was paid for these perquisites during the period of March 20, 2006 through
July 1, 2006.
(3) Chief Executive Officer from January 1, 2002 until his resignation effective
February 15, 2006.
(4) Amounts represent accumulated accrued vacation paid.
(5) Amounts represent reimbursement for income taxes.
Stock Options
There were no individual grants of stock options to the named executive officers
during the fiscal year ended July 1, 2006.
The following table shows, on an aggregated basis, for executive officers named
in the Summary Compensation Table each exercise of stock options during the 2006
fiscal year and the fiscal year-end value of unexercised options.
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NUMBER OF VALUE OF
SHARES UNEXERCISED UNEXERCISED IN-
ACQUIRED OPTION SHARES THE-MONEY OPTIONS
ON VALUE EXERCISABLE/ EXERCISABILE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
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David Lutz 30,000 / 0 $66,400/ $0
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(1) Excess of the total market value at July 1, 2006 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 has entered into an employment agreement effective March 20, 2006,
with Mr. Lee Ferguson (the "Employment Agreement"). The Company without notice
may terminate Mr. Ferguson's employment, and if terminated prior to June 27,
2009, Mr. Ferguson will continue to receive his salary for twelve (12) months
following his termination. Further, if the Company or substantially all of its
business assets are sold to an individual or entity not currently a stockholder
of the Company and as a result of that transaction Mr. Ferguson will no longer
serve as President and Chief Executive Officer of the Company, Mr. Ferguson will
continue to receive his salary for twelve (12) months. Mr. Ferguson may
terminate his employment with the Company upon ninety (90) days notice. During
the term of the Employment Agreement, Mr. Ferguson will receive an annual salary
of $260,000. Mr. Ferguson has received a bonus of $35,000 with reference to the
Company's 2005-2006 fiscal year. Prior to June 30, 2007, a bonus program for
subsequent fiscal years under which Mr. Ferguson could earn a bonus of $130,000
or more upon attaining the goals and objectives for a fiscal year to be
established by the Compensation Committee of the Company's Board of Directors.
In addition, prior to June 30, 2007 the Compensation Committee of the Company's
Board of Directors will consider the appropriateness of instituting additional
stock option plans for Mr. Ferguson or him and other key employees as a group.
Mr. Ferguson will be entitled to participate in all employee benefit plans and
arrangements made available by the Company upon the terms and subject to the
conditions set forth in the applicable plan or arrangement. In addition, the
Company, subject to specified conditions, will obtain and maintain additional
life insurance coverage on Mr. Ferguson's life in the amount of $450,000 while
serving as a an employee of the Company payable in the event of his death to a
beneficiary designated by him. The Company, subject to specified conditions,
will obtain supplemental disability coverage for Mr. Ferguson providing him with
additional disability benefits in the amount of $2,600 per month through his
attained age 65 if he becomes disabled as defined in the disability income
insurance policy. The Company will pay Mr. Ferguson a car allowance of $1,200
per month. The Company will provide Mr. Ferguson a furnished apartment in
Haywood County, North Carolina, through March 19, 2007, if he does not purchase
a permanent residence in this area prior to such date, and provide an executive
relocation plan for Mr. Ferguson covering documented moving expenses and any
brokerage expenses he may incur in connection with acquisition of a residence in
Waynesville, North Carolina, area prior to March 19, 2007.
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:
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PENSION PLAN TABLE
YEARS OF SERVICE
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AVERAGE
ANNUAL
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
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$125,000 $13,900 $18,500 $23,200 $27,800 $32,400
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$150,000 17,300 23,000 28,800 34,600 40,300
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$175,000 20,700 27,500 34,400 41,300 48,200
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$200,000 24,000 32,000 40,100 48,100 56,100
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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. Lutz has 32 years of service under the plan. Mr. Ferguson will have
10 years of service assuming employment to age 65.
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:
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AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP ON SEPTEMBER 30, 2006
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SHARED
SOLE VOTING VOTING AND
AND DISPOSITIVE TOTAL PERCENT
DISPOSITIVE POWER (1) STOCK BENEFICIAL OF
POWER and (3) OPTIONS OWNERSHIP CLASS(2)
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Officers and
Directors:
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Lee Ferguson 0.00%
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Fred K. Webb, Jr. 5,000 7,000 12,000 0.91%
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George Henson 0.00%
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Rolf Kaufman 43,192 43,192 3.26%
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Directors:
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Sarah E. Lovelace* 759,284 759,284 57.38%
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Claude S.Abernethy, Jr. 2,000 2,000 4,000 0.30%
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John D. Lovelace 2,000 2,000 0.15%
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David Kemper 0.00%
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Katherine J. Emerson 300 3,600 3,900 0.29%
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Officers:
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Tammy Francis 2,000 11,500 13,500 1.02%
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Neil Streeter 10 10 0.00%
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Richard A. Wood, Jr. 1,900 1,900 0.14%
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All Officers
and Directors
as a Group (12) 813,676 3,610 22,500 839,786 63.45%
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* Ms. Lovelace is the Executrix of the Estate of James T. Emerson, which holds
747,084 shares of the Company's stock. She also owns individually 12,200 shares
of the Company's stock.
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Owners of More Than 5% of the Company's Common Shares:
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Other than Director Sarah E. Lovelace shown above, the Company is not aware of
any other beneficial owner of more than five percent of its Common Shares.
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(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) Percent of total shares outstanding (1,270,746) and shares
issuable under options exercisable within 60 days (52,500).
(3) Mr. Kaufman is the principal beneficiary of a trust, which owns
4,000 shares of the Company's stock.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Lee Ferguson was elected President and Chief Executive Officer and appointed a
Director effective March 20, 2006. He failed to file a Form 3 (one report) on a
timely basis as required by Section 16(a) of the Exchange Act during the fiscal
year ended July 1, 2006. No transactions were required to be reported by Mr.
Ferguson on a Form 4 during the fiscal year ended July 1, 2006. Neil Streeter
was elected Vice President of Sales on April 18, 2006. He failed to file a Form
3 (one report) on a timely basis as required by Section 16(a) of the Exchange
Act during the fiscal year ended July 1, 2006. No transactions were required to
be reported on a Form 4 by Mr. Streeter during the fiscal year ended July 1,
2006.
STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING AND
COMMUNICATIONS WITH DIRECTORS
Proposals of qualified stockholders intended to be presented at the Company's
2007 Annual Stockholders Meeting must be received by the Secretary at the
address stated herein no later than June 30, 2007, in order to be considered for
inclusion in the Company's Proxy Statement and Proxy for that meeting.
Any security holder who wishes to send a communication to either the entire
Board of Directors or any member(s) thereof can send such communication to the
Company's general counsel (email dwood@mwbavl.com, or by calling 828-254-8800).
Any and all communications will be forwarded to the Board members designated in
such communication.
By Order of the Board of Directors
RICHARD A. WOOD, JR.
Secretary
Waynesville, North Carolina
October 13, 2006
A copy of the Company's 2006 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.
-14-
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 14, 2006
The undersigned hereby acknowledges receipt of Notice of Meeting and Proxy
Statement each dated October 13, 2006, for the 2006 annual stockholders meeting
of Wellco Enterprises, Inc., and hereby revokes all proxies heretofore given for
said meeting and appoints Claude S. Abernethy, Jr., John D. Lovelace, Jr. and
Fred K. Webb, 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 14, 2006 or at any adjournment thereof.
(Continued, and to be marked, dated and signed on other side)
FOLD AND DETACH HERE. RETURN THIS PORTION
ITEM 1: Your Board of Directors recommends a vote FOR the election of Claude S.
Abernethy, Jr., Katherine J. Emerson, Lee Ferguson, George Henson, Rolf Kaufman,
David Kemper, John D. Lovelace, Sarah E. Lovelace, and Fred K. Webb, Jr. as
Directors of the Company, as follows:
To serve for a one-year term expiring at the 2007 Annual Stockholders Meeting.
FOR ALL NOMINEES, except as marked below
WITHHOLD AUTHORITY to vote for all nominees
To withhold authority to vote for any Director nominee(s), print
the name(s) below:
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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.
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Signature of Stockholder(s)
Date , 2006
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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.
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WELLCO ENTERPRISES, INC.
P. O. Box 188, Waynesville, North Carolina 28786
The annual meeting will be held on November 14, 2006 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.