STAY BONUS AGREEMENT
Exhibit 10.3
This Stay Bonus Agreement (this “Agreement”) is made as of February 6, 2007 by and between
Wellco Enterprises, Inc., a North Carolina corporation (the “Company”), and Xxxx Xxxxxxxx
(“Executive”).
WHEREAS, Executive currently serves as an officer of the Company;
WHEREAS, the Company proposes to enter into an Agreement and Plan of Merger with Wasatch
Merger Sub, Inc. and Wasatch Boot Holdings, Inc. pursuant to which the Company is to be merged with
Wasatch Merger Sub, Inc. and as a result of such merger shares of the Company’s common stock are to
be converted into the right to receive an amount of cash set forth in such Agreement and Plan of
Merger, as it may be amended from time to time (such merger transaction and any other merger
transaction to which the Company is a constituent party and pursuant to which the shares of common
stock of the Company are to be converted into the right to receive cash, other property or the
securities of another entity, or any sale of all or substantially all of the Company’s assets are
referred herein as a “Company Sale Event”); and
WHEREAS, the Company wishes to provide an incentive to Executive to remain an employee of the
Company through the effective date of the consummation of a Company Sale Event (the “Effective
Date”);
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and Executive agree as
follows:
1. Stay Bonus. The Company shall pay and Executive shall receive a stay bonus of
$120,000, less applicable withholding (the “Stay Bonus”), payable on the business day next
succeeding the Effective Date. Notwithstanding the foregoing, the Stay Bonus will be reduced to
the extent that it would constitute an “excess parachute payment” within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder.
If an amount in excess of the limit set forth in this Section 1 is paid to Executive, Executive
must repay the excess amount to the Company upon demand, with interest at the rate provided in Code
Section 1274(b)(2)(B). Executive and the Company agree to cooperate with each other reasonably in
connection with any administrative or judicial proceedings concerning the existence or amount of
any “excess parachute payment” that may be payable hereunder. The determination of whether any
payment hereunder would constitute an “excess parachute payment” under Code Section 280G and the
regulations thereunder shall be made by the firm of independent certified public accountants
regularly retained by the Company to assist the Company on income tax matters, and if such firm is
unable or unwilling to assist the Company in such matter, then by any other firm of independent
certified public accountants selected by the Company.
2. Exclusive Bonus. Other than with respect to payment of merger consideration for
shares of Common Stock, if any, held by Executive and payment for options, if any, held by
Executive and cancelled in connection with the Company Sale Event, payment of the Stay Bonus shall
be in lieu of any other bonus or other consideration payable by the Company to Executive arising
from the Company Sale Event, including any change-in-control payment whether payable solely as a
result of a Company Sale Event or similar transaction or termination of Executive’s employment or
diminution of Executive’s responsibilities in connection with or within a specified period
following consummation of a Company Sale Event or similar transaction.
3. Expiration. This Agreement shall terminate if a Company Sale Event is not
consummated on or prior to September 30, 2007; provided, however, that if on September 30, 2007,
the Company is a party to an agreement providing for a Company Sale Event, this Agreement shall
terminate if a Company Sale Event is not consummated on or prior to December 31, 2007.
Notwithstanding the foregoing, this Agreement shall terminate, and Executive shall cease to be
entitled to receive the Stay Bonus, immediately upon Executive’s voluntary separation from
employment with the Company, or upon the Company’s termination of Executive’s employment for cause,
at any time prior to the Effective Date. As used herein, termination of employment “for cause”
shall mean termination because of any act involving Executive’s personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, failure to carry out ordinary
employee duties or lawful directives and policies of the Company’s Board of Directors or any
committee thereof, willful violation of any law, rule, regulation or court order (other than minor
traffic violations or similar offenses punishable by less than six months imprisonment), commission
of an act involving moral turpitude that brings the Company into public disrepute or disgrace or
causes material harm to the customer relations, operations or business prospects of the Company or
the entry of an order of debarment against Executive from participation in programs funded by any
governmental entity or in the award of any government contract..
4. Continued Employment. Nothing in this Agreement shall confer upon Executive the
right to continue employment with the Company for any period of specific duration or interfere with
or otherwise restrict in any way the rights of the Company or of Executive, which rights are hereby
expressly reserved by each, to terminate Executive’s employment at any time for any reason, with or
without cause.
5. Counterparts. This Agreement may be executed counterparts, each of which will
constitute an original and all of which, when taken together, will constitute one agreement.
6. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of North Carolina without regard to any choice or conflict of laws
provisions.
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IN WITNESS HEREOF, each the parties, with the undersigned Chairman of the Compensation
Committee of the Company’s Board of Directors doing so by authority duly given, have executed this
Agreement effective as of the date first set forth above.
| /s/ Xxxx Xxxxxxxx | ||||
| Xxxx Xxxxxxxx | ||||
| WELLCO ENTERPRISES, INC. |
||||
| By: | /s/ Xxxx X. Xxxxxxxx | |||
| Xxxx X. Xxxxxxxx | ||||
| Chairman, Compensation Committee of the Board of Directors | ||||
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