UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 17, 2006
WELLCO ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 1-5555 56-0769274
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
150 Westwood Circle, P.O. Box 1888, Waynesville, NC 28786
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (828) 456-3545
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[ ] Written communication pursuant of Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
Paragraph (a) and (b) of Item 1.01.
The information concerning the Employment Agreement referred to in Item 5.02
below is incorporated in this Item 1.01 by reference.
Section 5 - Corporate Governance and Management
Item 5.02 Departure of Directors or Principal Officers, Election of
Directors; Appointment of Principal Officers.
Paragraph (c) of Item 5.02.
Lee Ferguson has been appointed as President, Chief Executive Officer, and a
Director of the Company effective March 20, 2006. Mr. Ferguson is 54 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.
The Company has entered into an employment agreement effective March 20, 2006,
with Mr. Ferguson (the "Employment Agreement"). Mr. Ferguson's employment may be
terminated by the Company without notice, 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 will receive a bonus of $35,000.00 before the end of
the Company's 2006-2007 fiscal year, which will end on June 30, 2007. Prior to
June 30, 2007 a bonus program for subsequent fiscal years under which Mr.
Ferguson could earn a bonus of $130,000.00 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 $450,000.00 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 $1,200.00 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. The Employment Agreement is filed
herewith as Exhibit 10.2.
Item 8 - Other Events
Item 8.01 Other Events
Fred K. Webb, Jr. was appointed as Acting President of the Company on February
15, 2006. On March 20, 2006, Mr. Webb will cease serving as Acting President and
he will continue to serve as Vice President of the Company. Mr. Webb is a
Director of the Company.
Section 9 -Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
Paragraph (d) of Item 9.01.
The following exhibits are filed herewith:
Exhibit No. Description
10.1 Employment agreement dated March 17, 2006, between Lee
Ferguson and the Company.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLCO ENTERPRISES, INC., Registrant
/s/ Fred K. Webb,Jr.
-----------------------------
March 17, 2006 Fred K. Webb, Jr., Acting President
Exhibit 10.1
WELLCO ENTERPRISES, INC.
150 Westwood Circle
P.O. Box 188
Waynesville, NC 28786
March 17, 2006
Mr. Lee Ferguson
12977 Buckley Road
Knoxville, TN 37922
Dear Lee:
I am pleased to advise you that the Board of Directors of Wellco
Enterprises, Inc. ("Wellco") anticipates naming you as President and Chief
Executive Officer of Wellco and a member of Wellco's Board of Directors upon
your acceptance of this letter agreement outlining the terms and conditions of
your employment, to be evidenced by your signature below.
1. Your employment will commence on March 20, 2006.
2. You will be employed at an annual salary of $260,000.00, payable
weekly, less required and authorized withholdings.
3. You will receive a bonus of $35,000.00 less required and authorized
withholdings, on or before the end of Wellco's 2006-2007 fiscal year, which will
end on June 30, 2007.
4. Prior to June 30, 2007, the Compensation Committee of Wellco's Board
of Directors will establish a bonus program under which you could earn a bonus
of $130,000.00 or more for a fiscal year based upon the goals and objectives as
detailed in your bonus program for such year when established; provided,
however, that if all of the goals and objectives in your bonus program are met
for the fiscal year, your bonus for Wellco's 2007-2008 fiscal year and
subsequent fiscal years while you are President and Chief Executive Officer will
not be less than the greater of (i) 50% of your annual base salary of
$260,000.00, or (ii) 2% of Wellco's consolidated net income and after all
bonuses, as determined and certified by Wellco's Chief Financial Officer
calculated in the same manner as bonus calculations for other members of Wellco
management have historically been calculated, less required and authorized
withholdings.
5. Between now and Wellco's fiscal year ending June 30, 2007, the
Compensation Committee of the Board of Directors will consider the
appropriateness of instituting additional stock option plans for either you
individually or you and other key employees as a group.
6. During your employment you will participate in Wellco's existing
health and dental group insurance programs and Wellco's administrative employee
Pension Plan as currently in effect. You and your wife will be covered by the
health insurance plan as a non-taxable benefit. The dental insurance plan is
voluntary and an electing participant pays for any premiums charged under that
plan.
7. You will participate in Wellco's existing group plan for all
employees for life insurance in the amount of $50,000.00 if employed at the time
of your death. In addition, Wellco will obtain and maintain additional life
insurance coverage on your life in the amount of $450,000.00 payable in the
event of your death while serving as a Wellco employee to a beneficiary
designated by you, provided, such coverage can be obtained at standard rates or
more favorable rates. The premium expense of this individual coverage will
constitute a special fringe benefit taxable to you.
8. You will participate in Wellco's existing disability plan for
administrative employees, with a benefit of $2,400.00 per month upon an
occurrence of your disability, as defined in that Plan. In addition, Wellco will
obtain supplemental disability coverage for you providing you with additional
disability benefits in the amount of $2,600.00 per month through your attained
age 65 if you become disabled as defined in the disability income insurance
policy which Wellco will own and obtain; provided, however, that in no event
shall this additional disability coverage for you exceed an annual premium cost
of $4,400.00 per year. The premium expense of this individual coverage will
constitute a special fringe benefit taxable to you.
9. You will receive a car allowance of $1,200.00 per month in addition
to your annual base salary which will be taxable to you as ordinary income in
lieu of being entitled to seek reimbursement from Wellco for actual business use
of a personal vehicle.
10. Wellco will provide you at Wellco's expense a furnished apartment
in Haywood County, North Carolina for up to March 19, 2007 if you do not obtain
a permanent residence of your own in this area during said period.
11. Wellco will furnish you with an executive relocation plan to cover
documented moving expenses and any brokerage expenses you may incur in
connection with acquisition of a home in the Waynesville, North Carolina area
prior to March 19, 2007.
12. Your performance as President and Chief Executive Officer of Wellco
is subject to Wellco's Board of Directors' continuing satisfaction with your
performance. If for any reason Wellco's Board of Directors in its sole
discretion determines that you should no longer serve in these capacities prior
to June 27, 2009, you will receive a continuation for twelve (12) months of your
salary as outlined above, any vested stock option rights which have already been
awarded to you and COBRA rights as to health insurance as provided by law.
13. If during your employment as President and Chief Executive Officer,
Wellco or substantially all of its business assets are sold to an individual or
entity not currently a stockholder of Wellco and as a result of that transaction
you no longer will continue to serve as President and Chief Executive Officer of
Wellco, you will receive a twelve-month severance package as outlined in
Paragraph 12 above.
14. If you should at any time while employed under this agreement
decide to leave your employment for whatever reason, you may resign your
positions on ninety (90) days' notice and you will receive no further benefits
from Wellco after your separation date except as to any vested stock option
rights which have already been awarded to you and any COBRA benefits as provided
by law.
All of our Board of Directors and I look forward to working with you in
your new position, which will be of significant importance to the continuing
success of Wellco's business operations.
Please indicate your agreement to the foregoing by signing and
returning to me one copy of this letter.
With kind regards,
WELLCO ENTERPRISES, INC.
George Henson
Chairman, Board of Directors
John D. Lovelace
Chairman, Compensation Committee
of the Board of Directors
cc: Board of Directors
Agreed to:
- -----------------------------------------
Lee Ferguson
March 17, 2006