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): April 25, 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.
No longer acting as President.
On February 15, 2006, David S. Lutz resigned as a Director, Chairman, Chief
Executive Officer, President and Chief Operating Officer of the Company. This
resignation was reported in a Form 8 - K, Current Report, for the Company filed
on February 21, 2006. The Company and Mr. Lutz have entered into a RESIGNATION
AGREEMENT & RELEASE OF CLAIMS effective as of February 15, 2006 (the
"Agreement"), setting forth the terms and conditions of Mr. Lutz's continued
employment with the Company.
A brief description of the terms and conditions of the Agreement are as follows:
Mr. Lutz shall remain an employee of the Company in accordance with the terms
and conditions of the Agreement.
The term of the continued employment of Mr. Lutz is for a period of twelve (12)
months, unless sooner terminated as provided in the Agreement.
Mr. Lutz's duties and responsibilities are to be available by telephone or at
the Company's place of business during stated hours to provide advice,
instruction, explanation, counsel, knowledge, and experience and engage in such
other reasonable activities to assist in the transfer of his former duties and
his current knowledge of Wellco's business to other Company personnel.
Both the Company and Mr. Lutz have the right to terminate the Agreement based on
specified terms and conditions.
Mr. Lutz covenants not to sue and releases the Company and all subsidiaries of
the Company, and all of their directors, officers, shareholders, agents,
servants, employees, and successors, from any past, present, or future claims,
demands, actions, charges, suits, administrative enforcement proceedings,
obligations, damages, or liabilities whether known or unknown, arising from
Employee's employment, affiliation, or relationship with the Company on or
before February 15, 2006 or any of the circumstances surrounding Employee's
resignation, including, without limitation, the Age Discrimination in Employment
Act of 1967 ("ADEA"). Mr. Lutz has seven (7) days from April 25, 2006 in which
he may revoke the Agreement.
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With limited exceptions as set forth in the Agreement, Lutz releases the Company
and all subsidiaries of the Company, and all of their directors, officers,
shareholders, agents, servants, employees, and successors, from any past,
present, or future claims, demands, actions, charges, suits, administrative
enforcement proceedings, obligations, damages, or liabilities whether known or
unknown, arising from Mr. Lutz's employment, affiliation, or relationship with
the Company, existing on or before February 15, 2006, or any of the
circumstances surrounding Employee's resignation.
The Company, all of the Company's subsidiaries, and all of their directors,
officers, shareholders, agents, servants, employees, representatives, assigns,
and successors, covenant not to sue and releases Mr. Lutz from any past,
present, or future claims, demands, actions, charges, suits, administrative
enforcement proceedings, obligations, damages, or liabilities whether known or
unknown, arising from Employee's employment, affiliation, or relationship with
Wellco existing on or before February 15, 2006 or any of the circumstances
surrounding Employee's resignation; provided, however, the Company does not
release Mr. Lutz from any such claims arising from activities of Mr. Lutz which
were at the time taken by him known or believed by him to be clearly in conflict
with the best interests of the Company.
Mr. Lutz agrees not to disclose confidential information of the Company (as
defined in the Agreement).
Until February 17, 2007 Mr. Lutz, directly or indirectly, will not engage in the
footwear industry in the United States or any foreign country, either as an
employee, agent, consultant, officer, independent contractor, sole proprietor,
partner, stockholder, contractor or otherwise, with any firm, partnership or
corporation other than the Company and/or any of its subsidiaries, without prior
written approval of the Company.
During Mr. Lutz's continued employment he will be paid his salary of $131,664.00
as in effect prior to February 15, 2006 plus his normal bonus for the Company's
fiscal year 2005-2006 performance as determined in prior years by the Company
for the portion of said fiscal year prior to February 15, 2006 as determined by
the Company. Mr. Lutz is entitled to other benefits as provided in the
Agreement.
The Agreement is filed herewith as Exhibit 10.1.
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Item 8 - Other Events
Item 8.01 Other Events
On April 18, 2006, the Board of Directors elected Neil Streeter to
the office of Vice President of Sales of the Corporation. Mr.
Streeter has been employed by the Company since August, 2003 His
present responsibilities include management of the Company's
commercial footwear business and technical footwear mold and press
operations. Mr. Streeter has served as President of the Company's
Ro-search, Inc. subsidiary since March 30, 2006, and Vice
President of the Company's Ro-Search, Inc. subsidiary since
January 24, 2004. Prior to joining the company Mr. Streeter served as
North American Sales Manager for DESMA - KDE Sales & Service, Inc.,
Hebron, KY, a subsidiary of Klockner Desma Elastomertechnik An der
Bara, Germany.
Item 8 - Other Events
Item 8.01 Other Events
On April 18, 2006, the Board of Directors adopted a resolution
establishing, effective January 1, 2006, the directors' fees to be paid
to the Chairman of the Board of Directors of the Company who is not an
employee of the Company as follows: (i) $3,750 per quarter for serving
as Chairman of the Board of Directors, (ii) $4,000 per meeting for each
Board of Directors meeting attended in person or by phone; (iii) $1,000
per meeting for each committee meeting attended in person that is held
apart from the day of a Board of Directors meeting; and (iv) $500 for
each committee phone meeting that is held apart from the day of a Board
meeting. The directors' fees paid to a Director who is neither an
employee of the Company nor the Chairman of the Board of Directors were
not changed and are as follows: (i) $4,250 per year; (ii) $1,000 per
meeting for each Board meeting attended in person; (iii) $1,000 per
meeting for each committee meeting attended in person that is held
apart from the day of a Board meeting; and (iv) $500 for each committee
and Board phone meeting.
In addition, the Chairman of the Audit Committee receives $1,000
quarterly in addition to other director fees. 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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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 RESIGNATION AGREEMENT & RELEASE OF CLAIMS effective
as of February 15, 2006 between David S. Lutz 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/ Lee Ferguson
-----------------------------
April 25, 2006 Lee Ferguson, President
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Exhibit 10.1
RESIGNATION AGREEMENT & RELEASE OF CLAIMS
THIS RESIGNATION AGREEMENT & RELEASE OF CLAIMS (this "Agreement") is
entered into by and between DAVID S. LUTZ ("Employee") and WELLCO ENTERPRISES,
INC., a North Carolina corporation ("Wellco" and sometimes "Company") (Employee
and Wellco being herein referred to collectively as the "Parties"). The
effective date of this Agreement shall be February 15, 2006.
WITNESSETH:
NOW THEREFORE, in consideration of the mutual promises and releases
contained herein, and for the payment by Wellco to Employee as set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
Section 1. Recitals. The parties recite the following facts:
(a) Employee presently holds the offices of Chief Executive Officer,
President and Chief Operating Officer at Wellco. In addition, Employee presently
serves as a Director of Wellco and holds the position as the Chairman of the
Board of Directors. Employee has been asked by the Board of Directors of Wellco
to resign from the offices of Chief Executive Officer, President and Chief
Operating Officer and as a Director and Chairman of the Board of Directors
effective February 15, 2006 (the "Resignation" and the "Resignation Date") and
continue his employment with Wellco following the Resignation, with Wellco
providing certain benefits to Employee to assist him in his transition,
resulting from the Resignation and this Agreement. Employee is willing to
proceed with the Resignation, provided Wellco agrees to continue his employment
with Wellco following the Resignation and provide certain other benefits to
Employee to assist him in his transition, resulting from the Resignation and
this Agreement.
(b) As no other written employment agreement presently is in effect
between the parties, the parties wish to hereafter set forth the terms and
conditions for the continuation of the employment relationship between Employee
and Wellco from and after the Resignation Date.
Section 2. Resignation and Post-Resignation Date Employment.
(a) Employee hereby agrees to resign, effective as of the Resignation
Date, the offices of Chief Executive Officer, President and Chief Operating
Officer and his positions as a Director and Chairman of the Board of Directors
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of Wellco, and any offices and positions as a director of any subsidiary of
Wellco, with such resignations being evidenced by the execution by Employee,
simultaneous with the execution of this Agreement, the resignation letter
attached hereto as Exhibit A, which exhibit is incorporated herein by reference.
As a result of such resignation, the parties agree that from and after the
Resignation Date Employee shall have no further duties, obligations,
responsibilities or authority arising from or associated with the offices and
positions from which he has resigned. Employee agrees to execute any other
documents reasonably requested by Wellco in order to effectuate and acknowledge
Employee's resignation from any and all offices held with Wellco, including, but
not limited to, any disclosure documents required by federal or state securities
laws, rules and regulations.
Employee acknowledges having received a copy of the SEC Form 8-K,
Current Report, related to his resignation as a Director of Wellco prior to it
being filed with the Securities and Exchange Commission and having been given
the opportunity to furnish Wellco with a letter addressed to Wellco stating
whether Employee agrees with the statements made by the Company in this Form
8-K, and if not, stating the respects in which he does not agree. Employee
further acknowledges having received a copy of the SEC Form 8-K, Current Report,
related to the execution and delivery of this Agreement by the parties and has
been given the opportunity to furnish Wellco with a letter addressed to Wellco
stating whether Employee agrees with the statements made by the Company in this
Form 8-K, and if not, stating the respects in which he does not agree.
(b) Wellco hereby agrees to pay Employee the compensation earned by
Employee prior to and including the Resignation Date as described on Exhibit B
attached hereto and incorporated herein.
(c) Employee shall continue to remain employed as an employee of
Wellco for a term of twelve months after the Resignation Date, so that his
employment will terminate on February 16, 2007, unless his employment is sooner
terminated as set forth herein (the "Continued Employment"). During the period
of Continued Employment, the Employee agrees as follows:
(i) Employee, upon the reasonable requests of the Chairman of
the Board of Directors, the President or the designee of the Chairman of the
Board of Directors or President, shall make himself available by telephone or at
Wellco's place of business to assist with those matters as set forth in Section
2(c)(ii) below. In no event, however, shall Employee be obligated to provide
services to Wellco outside of the hours of 8:00 a.m. to 12:00 noon and 2:00 p.m.
to 4:00 p.m. local time during the regular workdays of Monday through Friday,
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but excluding any days that are a holiday observed by Wellco. Moreover, Employee
shall be entitled to three weeks of paid vacation during the period of Continued
Employment which shall not result in any additional compensation being payable
to Employee during the Continued Employment or after the termination of
Employee's employment. Employee shall have no right to accrue vacation benefits
and shall not be entitled to any vacation after giving Wellco the Termination
Notice as provided in Section 2(g).
(ii) Employee shall assist Wellco upon request, as stated
above, by providing advice, instruction, explanation, counsel, knowledge, and
experience and engaging in such other reasonable activities to assist in the
transfer of his former duties and his current knowledge of Wellco's business to
other Company personnel. Employee shall not be responsible for making, and shall
not have authority to make, any ultimate decisions on behalf of the Company as
to the Company's business affairs. Employee shall not be required to travel on
behalf of the Company without Employee's consent. The Company shall reimburse
Employee for reasonable expenses incurred by him in connection with such travel
to which he consents. The Employee, with the advance consent of Wellco, which
consent may not be unreasonably withheld, may be absent from Waynesville, North
Carolina from time to time during the period of his Continued Employment to
pursue consultant and employment offers not inconsistent with Section 8 of this
Agreement and that during such occasions Employee will use reasonable efforts to
communicate with the Company and its appropriate representatives by telephone in
response to requests for assistance by the Company and its appropriate
representatives.
(iii) Employee shall not enter any facility of Wellco other
than as may be specifically requested or authorized by the Chairman of the Board
of Directors, the President, or the designee of the Chairman of the Board of
Directors or the President.
(d) Wellco, at its expense, shall provide Employee with such office
space, equipment and assistance as reasonably necessary or required for Employee
to perform his job responsibilities and Employee shall use the same only for
Wellco business and not for any other purpose, although Employee shall be
entitled to make and receive personal telephone calls and send and receive
e-mail messages as long as such actions do not materially interfere with
Employee's job responsibilities and Employee shall be responsible for all toll
charges related thereto.
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(e) During the period of the Continued Employment, Wellco shall provide
Employee the compensation and benefits described on Exhibit C attached hereto
and incorporated herein.
(f) If Employee fails to satisfy the employment terms as specifically
stated in Section 2(c), Wellco shall give the Employee written notice of such
conduct by Employee that Wellco deems to be a breach of the requirements of
Section 2(c). Employee shall have two (2) business days after receipt of such
written notice from Wellco within which to (i) correct or alter such conduct so
as to comply with Section 2(c), or (ii) present a plan satisfactory to Wellco,
whose consent shall not be unreasonably withheld, for correcting or altering
such conduct so as to comply with Section 2(c), or (iii) if a cure of the breach
is not possible, to take such action as may be reasonably necessary to prevent
any further breach satisfactory to Wellco, whose consent shall not be
unreasonably withheld (each of the foregoing a "Curative Measure"). Wellco may
immediately terminate the Employee's employment with Wellco for cause if
Employee breaches the employment terms as specifically stated in Section 2(c)
after Wellco has previously issued a written notice to Employee regarding a
breach of the employment terms in Section 2(c), and such earlier breach has not
been addressed with a Curative Measure, and the time period allotted to Employee
for undertaking a Curative Measure to resolve the earlier breach has expired.
(g) Employee has the right at any time during the period of Continued
Employment to terminate his employment with Wellco by giving Wellco written
notice to this effect that specifies the termination date, which notice must be
delivered to Wellco not more than 21 days and not less than 14 days in advance
of the termination date (the "Termination Notice"). Should Employee breach his
obligations to the Company under Section 2(c) after giving the Termination
Notice but before the effective date for the termination of his employment,
Wellco shall have the right in its sole discretion to immediately terminate
Employee's employment for cause, notwithstanding the cure provisions as set
forth in Section 2(f).
(h) Employee's employment with Wellco shall immediately terminate upon
the death of Employee. Moreover, in the event the Employee becomes disabled as
such term is defined in any group disability plan maintained by Wellco, and if
none, as such term is defined by the last existing disability benefit plan
maintained by Wellco Employee shall be excused from the performance of his
duties hereunder and the Employee's employment with Wellco shall terminate as of
the date of such disability.
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(i) Upon the termination of Employee's employment with Wellco, all
compensation and benefits described on Exhibit C attached hereto shall cease
except as follows:
(i) Employee shall continue to receive benefits from any
benefit plans to which he is entitled to participate following the termination
of his employment based on the terms and provisions of such benefit plans as
then in effect or as required by law.
(ii) In the event the Employee dies prior to the termination
of his employment under this Agreement, Wellco shall, in addition to any other
required payment, pay the remaining compensation the Employee would have
otherwise received during the balance of the Continued Employment term, but not
more than a total of $50,640.00, to the Employee's surviving spouse, or if the
Employee has no surviving spouse then to the Employee's estate. Wellco shall
make such payments in weekly installments, without interest, during the
remaining portion of the Continued Employment term as if the Employee had not
died.
(iii) In the event the Employee's employment terminates due to
Employee's disability, Wellco shall, in addition to any other required payment,
pay the remaining compensation the Employee would have otherwise received during
the balance of the Continued Employment term, but not more than a total of
$32,916.00 less the full value of any benefits the Employee receives, or is
expected to receive, from any then existing benefit plan maintained by Wellco on
account of his disability within the thirteen week period commencing upon the
termination of Employee's employment as a result of being disabled. Wellco shall
make such payments in weekly installments, without interest, during the
remaining portion of the Continued Employment term as if the Employee had not
become disabled.
(iv) Employee, or his estate in the event of Employee's death,
shall continue to have (i) the option to purchase 2003 Buick Park Avenue and
(ii) retain for use and ownership the Palm Tungsten and charging cradle as set
forth in Exhibit C.
(j) The terms of this Agreement are not intended to, and do not,
terminate, set aside or amend in any manner the existing Employee Stock Option
Agreements and Non-ISO Stock Option Agreement between the Parties dated as of
the dates and for the plans listed below:
Date Plan
November 19, 1996 1996 Stock Option Plan for Key Employees
November 18, 1997 1997 Stock Option Plan for Key Employees
November 14, 2000 1999 Stock Option Plan for Key Employees
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Section 3. Release of Wellco.
(a) For the purpose of this Section, "Employee" shall include Employee
and Employee's descendants, dependents, heirs, executors, administrators,
assigns, and successors. For the purpose of this Section, "Releasees" shall
include Wellco and all subsidiaries of Wellco, and all of their directors,
officers, shareholders, agents, servants, employees, representatives, assigns,
and successors.
(b) Employee hereby covenants not to sue and fully releases, acquits,
and discharges Releasees from any past, present, or future claims, demands,
actions, charges, suits, administrative enforcement proceedings, obligations,
damages, or liabilities whether known or unknown, arising from Employee's
employment, affiliation, or relationship with any of the Releasees on or before
the Resignation Date or any of the circumstances surrounding Employee's
resignation ("Claims"). In addition to the foregoing and in no way as a
limitation thereof, Employee acknowledges and agrees that the consideration set
forth herein shall be in lieu of any incentive compensation or bonuses that
might otherwise be due Employee but for this Agreement, and Employee agrees that
he will not make any claim for such compensation. This release includes, but is
not limited to, a release of all Claims for breach of contract, libel, slander,
wrongful discharge, intentional infliction of emotional harm, or any other tort.
Employee further covenants not to sue the Releasees and fully releases, acquits
and discharges the Releasees from all Claims of discrimination, harassment, or
any other claim which may arise under or pursuant to any federal or state law,
rule or regulation, and which arises from any action taken by the Releasees on
or before the Resignation Date. In consideration of the terms and conditions set
forth in this Agreement, Employee also releases the Releasees from any and all
claims under the Age Discrimination in Employment Act of 1967 ("ADEA"), which
Employee may otherwise be entitled to assert. Wellco has expressly denied that
discrimination of any kind has occurred. Employee and Wellco acknowledge that
this Agreement fully complies with the ADEA and that Employee has had the
opportunity to review this Agreement in accordance with all requirements of the
ADEA. Employee has had the opportunity to consult with counsel to the extent
that Employee deems necessary, in his sole discretion, and Employee is executing
this Agreement voluntarily. By executing this Agreement, Wellco and Employee
affirmatively declare that nothing in this Agreement constitutes the Employee's,
or the Employee's spouse or dependents, release of rights to continuation of
group health insurance coverage under COBRA.
(c) Employee represents and warrants that Employee has not assigned or
transferred or purported to assign or transfer to any person, entity, or
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individual whatsoever, any of the claims released and set forth in this Section.
Employee agrees to indemnify and hold harmless the Releasees against any claim,
demand, debt, obligation, liability, cost, expense, right of action, or cause of
action based on or arising out of any such assignment.
(d) Notwithstanding any other provisions of this Section, if Employee
is covered under any directors and officers insurance or other liability policy
maintained by Wellco for any actions taken by Employee as an officer, director
or employee of Wellco, this Agreement shall not be deemed to waive any rights
which Employee may have to require the insurer to provide to him a defense in
the event of a covered claim and other benefits available to Employee under any
such policy with respect to a covered claim. Further, Employee does not release
any of the Releasees from or with regard to (i) rights or benefits under any
employee benefit plans in which Employee is a participant or is entitled to
participate, including, without limitation, health insurance plans, disability
plans, pension plans, and retirement plans, (ii) any stock option agreements to
which Employee is a party or a beneficiary. (iii) the rights or benefits under
Article 40 of Wellco's Bylaws as in existence on the Resignation Date, except to
the extent limited or modified by law without action by Wellco or its
shareholders, and in such event, such rights or benefits shall be limited or
modified to the least extent required by law without action by Wellco or its
shareholders.
(e) Employee acknowledges that, as of the Resignation Date, he shall be
entitled to receive the compensation and benefits set forth herein.
(f) This Agreement is not intended to result in the waiver of any
rights or claims that may arise after the Resignation Date. The Employee,
moreover, is advised in writing to consult with an attorney prior to executing
this Agreement.
Section 4. Review Period. Employee acknowledges that Employee received
a copy of this Agreement on April 21, 2006 (the "Document Date"), for his
review. Employee acknowledges that Employee was given twenty-one (21) days after
his receipt of a copy of this Agreement to review this Agreement and consult
with an attorney, if Employee deems it appropriate, prior to his execution of
this Agreement. Employee acknowledges and agrees that in the event Employee
executes and returns this Agreement prior to the expiration of the twenty-one
(21) day review period, such action shall not entitle Employee to any greater
benefit than if he had used the entire twenty-one (21) day period to review this
Agreement; nor will the benefits to Employee under this Agreement be reduced,
limited, or retracted if Employee uses the entire twenty-one (21) day review
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period. Employee understands that Wellco automatically withdraws its offer and
willingness to execute this Agreement if Employee does not execute and deliver
two (2) originals of this Agreement to Wellco in person, within twenty-five (25)
days after the Document Date. This Agreement shall be deemed delivered by
Employee to Wellco only when two (2) originals of this Agreement, fully
executed, have in fact been received by the President, Secretary or Chairman of
the Board of Directors of Wellco.
Section 5. Revocation. Employee shall have seven (7) days from the
date of his execution and delivery of this Agreement to Wellco in which Employee
may revoke this Agreement by providing Wellco written notice of revocation. Any
written notice of revocation will be sent to Chairman, Wellco Enterprises, Inc.,
150 Westwood Circle, P.O. Box 188, Waynesville, North Carolina 28786. If this
Agreement is not revoked by Employee during such seven (7) day period, it shall
become final and binding. In the event that Employee revokes this Agreement in
accordance with and pursuant to this Section, then in such event Employee shall
not be entitled to any of the benefits or rights set forth in this Agreement and
this Agreement, as well as Employee's resignation as contemplated by Section
2(a) shall become void and of no further force or effect.
Section 6. Release of Employee.
(a) For the purpose of this Section, "Wellco" shall include Wellco and
all subsidiaries of Wellco, and all of their directors, officers, shareholders,
agents, servants, employees, representatives, assigns, and successors. For the
purpose of this Section, "Releasees" shall include Employee and Employee's
descendants, dependents, heirs, executors, administrators, assigns, and
successors.
(b) Wellco hereby covenants not to sue and fully releases, acquits,
and discharges Releasees from any past, present, or future claims, demands,
actions, charges, suits, administrative enforcement proceedings, obligations,
damages, or liabilities whether known or unknown, arising from Employee's
employment, affiliation, or relationship with Wellco on or before the
Resignation Date or any of the circumstances surrounding Employee's resignation
("Claims"); provided, however, Wellco does not hereby release, acquit and
discharge Releasees from any Claims arising from activities of the Employee
which were at the time taken by the Employee known or believed by him to be
clearly in conflict with the best interests of Wellco (the "Reserved Claims" ),
except that Wellco must assert any Reserved Claims" in a legal proceeding
commenced within the shorter of the period ending February 16, 2011 or the
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applicable statue of limitation for such Reserved Claims asserted or alleged by
Wellco as determined by a court having jurisdiction over such Reserved Claims
asserted or alleged by Wellco.
Section 7. Confidentiality.
(a) The parties recognize that the terms of this Agreement are
intended to be and shall remain confidential and Employee shall not disclose the
contents of this Agreement and/or concerning the circumstances of Employee's
resignation to any third person, including any employees of Wellco or any
subsidiary of Wellco who are neither an officer or director of Wellco, without
the express written consent of the Chairman of the Board of Directors of Wellco
or such person's designee, except that Employee or Wellco may disclose this
Agreement and its terms (i) to any legal counsel and/or tax advisor of Employee
or Wellco, (ii) to the extent disclosure is required by applicable law, or (iii)
in connection with any legal or other action concerning or relating to this
Agreement or its enforcement.
(b) Employee further agrees to promptly return to Wellco all of
Wellco's property, including but not limited to, any computer equipment, keys,
credit cards, records, files, and other documentation of whatever nature
relating to Wellco's business upon termination of the Employee's employment with
Wellco, except as stated in Exhibit C hereto.
(c) Employee shall not use, divulge, publish, or disclose to any
person and/or entity Confidential Information (as hereafter defined).
"Confidential Information" shall mean any corporate records, data, documents, or
information of Wellco, or any of its subsidiaries, including, but not limited
to, any records pertaining to employees of Wellco or any of its subsidiaries,
which may have been obtained by Employee while employed by Wellco or while
employed by any subsidiary of Wellco. Notwithstanding the provisions of this
subsection, nothing herein shall prevent Employee from using, divulging,
publishing or disclosing any information of Wellco or any subsidiary of Wellco
or information concerning Wellco or any subsidiary of Wellco that is generally
known to the public (including, but not limited to, information contained in
documents recorded in a public clerk's/register office).
(d) Company and Employee agree not to make any derogatory or
disparaging statements with regard to the performance, character, or reputation
of the other, nor shall Employee assert that Wellco, its employees, agents,
directors, officers, or any subsidiaries, subsidiaries employees, agents,
directors, or officers have acted improperly or unlawfully with respect to the
relationship between Wellco and Employee or with respect to any business
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dealings of Wellco. The prohibitions of this Section shall not apply (i) to any
legal counsel of the Company or Employee, (ii) to the extent disclosure is
required by applicable law, or (iii) in connection with any legal or other
action concerning or relating to this Agreement or its enforcement.
Section 8. Restrictive Covenant. Employee will not on or before
February 16, 2007 directly or indirectly engage in the footwear industry in the
United States or any foreign country, either as an employee, agent, consultant,
officer, independent contractor, sole proprietor, partner, stockholder,
contractor or otherwise, with any firm, partnership or corporation other than
Wellco and/or its subsidiary corporations, without prior written approval of
Wellco. Employee further agrees that he will not on or before February 16, 2007,
without the prior written approval of Wellco, reveal to or advise any third
person, firm or corporation in the United States or any foreign country
concerning any of the special methods or processes of manufacturing footwear
employed by Wellco and its subsidiary corporations or by its licensees or the
licensees of any of its subsidiary corporations. Employee further agrees that
if, on or before February 16, 2007 , he shall conceive of or develop any new or
improved machine, method, process or invention for the manufacture, distribution
or sale of footwear, Employee will disclose to Wellco all pertinent information
within his possession concerning such new or improved machine, method, process
or invention and shall, upon request by Wellco, transfer and assign to Wellco
all rights thereto to the end that Wellco shall thereafter have the sole right
to use, make and sell or otherwise develop and exploit in any way which it shall
deem best and in any country or territory whatsoever such new or improved
machine, method, process or invention. . Notwithstanding the foregoing or any
other provision herein to the contrary, the parties to this Agreement
acknowledge and agree that this Agreement does not preclude or prohibit Employee
from (i) purchasing, owning or disposing of any stocks, bonds or other
securities of any publicly-traded company that is engaged in the footwear
business, unless precluded or prohibited by applicable law or (ii) purchasing,
owning or disposing of any equity interest in any publicly-traded mutual fund or
any private hedge fund (such as a limited partnership or limited liability
company) that may have a direct or indirect interest in any company engaged in
the footwear business, provided that Employee is neither an officer, director,
manager, employee nor an agent of any the entity and such activities are not
precluded or prohibited by applicable law.
Section 9. Remedies for Breach of Agreement. In the event of a breach
or a threatened breach of the terms of Sections 7 and 8 this Agreement by
Employee, Wellco shall be entitled to an injunction without bond, both
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preliminary and final, enjoining and restraining such breach or threatened
breach. Such remedies shall be in addition to all of the remedies available at
law or in equity.
Section 10. Enforcement and No Admission of Liability. The parties
understand and agree that neither party hereby waives any rights to enforce the
terms and conditions of this Agreement, and all rights to enforce this Agreement
are hereby expressly reserved by both Wellco and Employee. Employee and Wellco
understand and acknowledge that this Agreement is not to be construed as an
admission of liability by any of the parties to this Agreement.
Section 11. Entire Agreement and Governing Law. This instrument
contains the entire agreement and understanding of the parties to this Agreement
with respect to this Agreement and the matters described herein. This Agreement
shall be governed by the laws of the State of North Carolina. Subject to the
provisions of the above Sections, the state courts of Haywood County, North
Carolina, shall have exclusive jurisdiction over any dispute which arises under
this Agreement, and each of the parties shall submit and hereby consent to such
court's exercising jurisdiction. If any ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumptions or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any of the provisions of this
Agreement.
Section 12. Severability. Any provision or provisions of this
Agreement which shall prove to be invalid, void, or illegal shall in no way
affect, impair, or invalidate any other provision hereof, and the remaining
provisions hereof shall nevertheless remain in full force and effect.
Section 13. Non-waiver. No waiver of any term or condition of this
Agreement by any party shall be deemed a continuing or further waiver of the
same term or condition or a waiver of any other term or condition of this
Agreement.
Section 14. Headings. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
Section 15. Legal Counsel. Employee acknowledges that Employee enters
into this Agreement freely and voluntarily and further acknowledges that he has
been advised to consult with legal counsel of Employee's own choosing if he has
the desire to do so with regard to this Agreement or any waiver of rights
contained herein. Employee further acknowledges that Employee has had an
opportunity to so consult with legal counsel.
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Section 16. Legal Fees. Wellco shall pay the reasonable legal fees
incurred by Employee in connection with the Employee reviewing, negotiating and
entering into this Agreement, but not more than $1,200 in the aggregate, to be
paid by Wellco directly to said attorney(s) or law firm(s).
Section 17. Survival. Except as otherwise herein limited, all
covenants, representations, and agreements made herein shall survive the
termination of the Employee's employment with Wellco in perpetuity, including,
without limitation, the covenants and agreements in Section 7.
The parties acknowledge that they have read the foregoing Agreement,
understand its contents, accept and agree to the provisions it contains, and
hereby execute it voluntarily and knowingly and with full understanding of its
consequences.
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PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF KNOWN AND UNKNOWN
CLAIMS.
Dated: April 25, 2006 /s/David S. Lutz
----------------------------------
DAVID S. LUTZ
Dated: April 25, 2006 WELLCO ENTERPRISES, INC., a North
Carolina corporation
By: /s/George Henson
------------------------------
Chairman
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Exhibit A
February 15, 2006
Rolf Kaufman Richard A. Wood, Jr.
Vice Chairman Secretary
Board of Directors Wellco Enterprises, Inc.
Wellco Enterprises, Inc. McGuire, Wood & Bissette, P.A.
150 Westwood Circle 48 Patton Avenue
Waynesville, NC Asheville, NC
Dear Mr. Kaufman and Mr. Wood:
This letter is intended to serve as written notice of my resignation from the
offices of Chief Executive Officer, President and Chief Operating Officer and as
a Director and Chairman of the Board of Directors of Wellco Enterprises, Inc.,
and any office and positions as a Director of any subsidiary of Wellco
Enterprises, Inc. effective February 15, 2006. I hereby waive any right to
notice of acceptance of my resignation.
With kindest regards,
David S. Lutz
Exhibit B
Compensation Owed Employee Prior to Resignation Date
1. Accrued and unpaid salary through the Resignation Date, less any
applicable tax withholdings, in the same manner as in effect prior to the
Resignation Date.
2. A bonus based on Wellco's 2005-2006 consolidated net income. The
bonus shall be calculated using the same methodology or formula Wellco used in
calculating the bonus paid to Employee during the preceding fiscal year, except
that Employee shall receive 63% of the total fiscal year 2005-2006 amount. The
bonus, less any applicable tax withholdings, shall be paid to Employee at the
same time like bonuses based on Wellco's 2005-2006 consolidated net income are
paid to certain other employees of Wellco receiving a bonus calculated based on
Wellco's 2005-2006 consolidated net income.
3. A sum of $38,359.80 (less any applicable tax withholdings) as
compensation for all accrued but unused vacation time through February 15, 2006
shall be paid Employee within thirty (30) days of the execution and delivery of
this Agreement by the Employee to the Company.
Exhibit C
Benefits During Continued Employment
During the period of his Continued Employment, Employee shall receive the
following compensation and benefits:
1. Employee shall receive his regular compensation (i.e., the same
compensation he was being paid immediately prior to the Resignation
Date), less any applicable tax withholdings, and benefits as in effect
prior to the Resignation Date subject to the terms and provisions of
any applicable benefit plans and any amendments thereto adopted by
Wellco. Such compensation shall be paid in the same manner and at the
same time Wellco customarily pays wages or salaries to its non-officer
employees.
2. Wellco shall continue to provide Employee with the 2003 Buick Park
Avenue (VIN 1G4CU541634170261) currently being provided by the
Company, subject to such usage terms in place prior to the Resignation
Date. Upon the termination of Employee's employment with Wellco,
Employee may purchase this automobile from Wellco, and Wellco
agrees to sell the automobile to Employee for a sum equal to
one-half of the NADA Guide Wholesale Price at the time of the
termination of Employee's employment with Wellco. In the event the
Employee declines to purchase this automobile from Wellco,
Employee shall be responsible for delivering this automobile in
the same condition as when acquired by Wellco less ordinary wear and
tear. A current copy of that portion of the NADA Guide showing the
present wholesale price of the automobile has been received by
Wellco and Employee.
3. Upon the expiration of Employee's employment with Wellco, Employee may
retain for his continuing use and ownership the Palm Tungsten and
charging cradle currently used by Employee.
4. Except as provided in Exhibit B, no bonus based on Wellco's
consolidated net income for a fiscal year shall be payable to Employee
with reference to any fiscal year of Wellco covered by this Agreement.