FORM 10-Q/A
AMENDMENT # 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1997
Commission file number 1-7807
Champion Parts, Inc.
(Exact name of registrant as specified in its charter)
Illinois 36-2088911
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
751 Roosevelt Road, Building 7, Suite 110, Glen Ellyn, IL 60137
(Address of principal executive offices)
630-942-8317
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 1997
Common Shares - $.10 par value 3,655,266
CHAMPION PARTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONDENSED)
March 30, 1997 December 29, 1996
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 621,000 $ 707,000
Accounts Receivable,
less allowance for uncollectible
accounts 4,756,000 5,129,000
Inventories 7,273,000 7,040,000
Prepaid expenses and other 796,000 813,000
-------------- --------------
Total current assets 13,446,000 13,689,000
Property, plant and equipment (net) 5,431,000 5,509,000
Other assets 469,000 468,000
-------------- --------------
Total Assets $ 19,346,000 $ 19,666,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 7,823,000 $ 8,047,000
Accrued expenses and other payables 7,616,000 8,033,000
Current maturities on long-term
debts 7,652,000 7,550,000
-------------- --------------
Total current liabilities $ 23,091,000 $ 23,630,000
Deferred income taxes 478,000 478,000
Long-term debt, less current maturities
Notes payable to banks and other 35,000 43,000
-------------- --------------
Total liabilities $ 23,604,000 $ 24,151,000
Stockholders' Equity
Preferred stock - no par value 0 0
Authorized 10,000,000 shares
issued and outstanding, none
Common stock - $.10 par value 366,000 366,000
Authorized 50,000,000 shares
issued and outstanding 3,655,266
shares
Additional paid-in capital 15,578,000 15,578,000
Cumulative translation adjustment (674,000) (701,000)
Retained earnings (19,528,000) (19,728,000)
-------------- --------------
Total stockholders' equity $ (4,258,000) $ (4,485,000)
Total Liabilities and Stockholders'
Equity $ 19,346,000 $ 19,666,000
============== ==============
See notes to condensed consolidated financial statements.
CHAMPION PARTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (CONDENSED)
Three Months Ended
March 30, March 31,
1997 1996
-------------- --------------
(Unaudited)
NET SALES $ 7,638,000 $ 8,212,000
Cost and Expenses:
Cost of products sold 6,182,000 6,344,000
Selling, distribution and
administration 998,000 1,191,000
------------- --------------
7,180,000 7,535,000
EARNINGS BEFORE INTEREST AND INCOME TAXES 458,000 677,000
INTEREST 258,000 464,000
------------- --------------
EARNINGS BEFORE INCOME TAXES 200,000 213,000
INCOME TAX --- 7,000
------------- --------------
NET EARNINGS $ 200,000 $ 206,000
============= ==============
AVERAGE SHARES OUTSTANDING 3,655,266 3,655,266
============= ==============
NET EARNINGS PER COMMON SHARE $0.06 $0.06
See notes to condensed consolidated financial statements.
CHAMPION PARTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 30, March 31,
1997 1996
-------------- --------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 200,000 $ 206,000
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 201,000 256,000
Provision for losses on accounts
receivable 0 37,000
Deferred income taxes 1,000 0
Change in assets and liabilities:
Accounts receivable 373,000 (1,072,000)
Inventories (233,000) 1,514,000
Accounts payable and accrued expenses (641,000) 664,000
Other 20,000 (6,000)
------------- -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (79,000) 1,599,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (net) (146,000) (41,000)
Proceeds from sales of property,
plant & equipment 18,000 864,000
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (128,000) 823,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under
bank credit agreements 102,000 (2,402,000)
Principal payments on long-term debt (8,000) (41,000)
------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 94,000 (2,443,000)
------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 27,000 6,000
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (86,000) (15,000)
CASH AND CASH EQUIVALENTS, beginning of
period 707,000 874,000
------------ -------------
CASH AND CASH EQUIVALENTS, end of period $ 621,000 $ 859,000
============ =============
See notes to condensed consolidated financial statements.
CHAMPION PARTS, INC.
AND SUBSIDIARIES
________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
___________________________________________________________________________
1.The accompanying financial statements for the three months ended March 30,
1997 have been prepared, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. The condensed consolidated financial statements and these notes
should be read in conjunction with the consolidated financial statements of
the Company included in the Company's Annual Report on Form 10K for the year
ended December 29, 1996.
The consolidated balance sheet at December 29, 1996 has been derived from the
audited financial statements at that date and condensed.
2.The information furnished herein reflects, except as discussed in Note 5,
all adjustments (consisting only of normal recurring accruals) which are, in
the opinion of management, necessary for a fair presentation of the results
of operation for the interim period. Results of operations for the three
months ended March 30, 1997 are not indicative of results to be expected for
the entire year.
3.Inventories are valued at the lower of cost (first-in, first-out method)
or market. A summary of the inventories follows:
March 30, December 29,
1997 1996
---------------- ----------------
Raw Materials $ 2,009,000 $ 1,753,000
Work-in-Process 2,588,000 2,622,000
Finished Goods 2,676,000 2,665,000
---------------- ----------------
$ 7,273,000 $ 7,040,000
================ ================
Included in inventory above were cores of $2.9 million (March 30, 1997) and
$3.0 million (December 29, 1996).
4.For reporting purposes, product and core returns are offset against gross
sales in arriving at net sales. For the three months ended March 30, 1997
and March 31, 1996 returns were $3,852,000, and $5,239,000, respectively.
5.The Company's banks have extended the $6.4 million facility for short term
periods during the first quarter. The Company had used $6 million of the
available facility at March 30, 1997. The current extension expires on
May 19, 1997. The Company and banks initiated discussions regarding the
continued extension of the facility in light of the currently proposed
creditor settlement and recapitalization plan. (See Footnote 6)
There can be no assurance that the banks will continue to extend the facility
beyond the current expiration date.
The Company is also indebted to various unsecured creditors, including
current and former trade vendors. Given the Company's current financial
situation and the lack of a long-term financing agreement, it currently does
not have the ability to pay these debts should the creditors demand payment.
As indicated in Footnote 6, the Company is in negotiations with an ad hoc
panel representing certain of its unsecured creditors. There can be no
assurances that the Company and the panel will be able to reach agreement.
Without an extension of the current credit agreement or a replacement
facility, the Company would not have sufficient funds to pay its debts should
the lenders demand payment and would not be able to continue as a going
concern.
The Company's financial statements have been prepared on a going concern
basis and do not contain adjustments which may be necessary should the
Company be forced to liquidate assets or take other actions to satisfy debt
payments or discontinue its business.
6.The Company's previously disclosed negotiations are continuing with a
panel representing certain of its unsecured trade creditors and
Raymond G. Perelman, a principal shareholder and director, to recapitalize
the Company and settle certain unsecured obligations. The Company cannot
predict when such negotiations will conclude. The current proposed terms
would provide for the company to pay the holders of certain specified
unsecured claims ("settlement class") 31 cents on the dollar in full
settlement of such claims. The settlement class consists of about 40 current
and former trade vendors holding approximately $4 million in unsecured
claims against the Company. The settlement is subject to ratification by
members of the settlement class representing at least 90% of the total claims
of the class, settlement of certain insurance obligations, which the Company
values at approximately $1.5 million, and certain other conditions.
It is currently contemplated that the settlement would be made with existing
Company funds and a $1.175 million cash infusion from Raymond G. Perelman,
or an entity affiliated with him. Mr. Perelman would pay $760,000 for
1.9 million common shares plus warrants to purchase an additional 1.1 million
common shares, $140,000 for non-voting cumulative redeemable 7% preferred
shares, and to make a $275,000 partially secured loan carrying an interest
rate of 7%. For a three year period, the Company would have the right to
repurchase all the warrants for $550,000 or if the warrants have been
exercised the outstanding common shares at $550,000 plus the exercise price.
Upon the closing of these transactions, Mr. Perelman would obtain control of
the Company's Board and the Board of Directors would be reduced to five
members. It is anticipated that prior to closing a date would be set to hold
the next meeting of shareholders, and Mr. Perelman would designate a slate of
directors for election. In connection with his equity infusion, Mr. Perelman
has designated a new operating officer for the corporation. The three
current executive officers have entered into agreements providing for certain
termination benefits subject to their remaining with the Company through a
specified transition period.
These transactions would close when the requisite percentage of the
settlement class approves the agreement and the other conditions are met.
Mr. Perelman's performance would be guaranteed with a standby letter of
credit. This plan would require the acceptance of a high percentage of
unsecured creditors in the class. There is no assurance that the Company
would be able to complete this process.
If the Company cannot reach agreement with the vendor panel and Mr.
Perelman, it would seek other options which may include court protection
from creditors under Chapter 11 of the Bankruptcy Code.
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
- ----------
Recent Events
- --------------
The Company's previously disclosed negotiations are continuing with a panel
representing certain of its unsecured trade creditors and Raymond
G. Perelman, a principal shareholder and director, to recapitalize the
Company and settle certain unsecured obligations. The Company cannot predict
when such negotiations will conclude. The current proposed terms would
provide for the company to pay the holders of certain specified unsecured
claims ("settlement class") 31 cents on the dollar in full settlement of such
claims. The settlement class consists of about 40 current and former trade
vendors holding approximately $4 million in unsecured claims against the
Company. The settlement is subject to ratification by members of the
settlement class representing at least 90% of the total claims of the class,
settlement of certain insurance obligations, which the Company values at
approximately $1.5 million, and certain other conditions.
It is currently contemplated that the settlement would be made with existing
Company funds and a $1.175 million cash infusion from Raymond G. Perelman,
or an entity affiliated with him. Mr. Perelman would pay $760,000 for
1.9 million common shares plus warrants to purchase an additional 1.1 million
common shares, $140,000 for non-voting cumulative redeemable 7% preferred
shares, and to make a $275,000 partially secured loan carrying an interest
rate of 7%. For a three year period, the Company would have the right to
repurchase all the warrants for $550,000 or if the warrants have been
exercised the outstanding common shares at $550,000 plus the exercise price.
Upon the closing of these transactions, Mr. Perelman would obtain control of
the Company's Board and the Board of Directors would be reduced to five
members. It is anticipated that prior to closing a date would be set to hold
the next meeting of shareholders, and Mr. Perelman would designate a slate of
directors for election. In connection with his equity infusion, Mr. Perelman
has designated a new operating officer for the corporation. The three
current executive officers have entered into agreements providing for certain
termination benefits subject to their remaining with the Company through a
specified transition period.
These transactions would close when the requisite percentage of the
settlement class approves the agreement and the other conditions are met.
Mr. Perelman's performance would be guaranteed with a standby letter of
credit. This plan would require the acceptance of a high percentage of
unsecured creditors in the class. There is no assurance that the Company
would be able to complete this process.
If the Company cannot reach agreement with the vendor panel and Mr. Perelman,
it would seek other options which may include court protection from creditors
under Chapter 11 of the Bankruptcy Code.
Results
Net sales for the quarter ended March 30, 1997 were $7.6 million, 7% less
than net sales of $8.2 million for the same period of 1996. This decline
was primarily due to 1996 benefiting from initial stocking sales to a major
carburetor customer and to lower heavy duty product sales than in 1996.
Total product and core returns, which are reflected in reductions in net
sales, were 33% and 38% of gross sales in 1997 and 1996, respectively.
Carburetor sales were 65% and 61% of net sales in the first quarter of 1997
and 1996, respectively. The Company believes it continues to be a
significant supplier of carburetors to the aftermarket. Since the mid-1980's
carburetors have been installed in fewer new vehicles sold in the United
States and Canada due to the increased use of fuel injection systems.
However, the Company continues to sell replacement units for older vehicles,
many of which use carburetors. The Company expects that carburetor sales will
decline in future years. In addition, carburetor margins may be negatively
impacted in the future as customers seek to return product during periods of
declining demand. The Company has a customer product return policy and has
established reserves to mitigate this effect.
Cost of products sold was 82% of net sales in the first quarter of 1997
compared to 77% in the first quarter of 1996. The increase in costs of
products sold is attributed primarily to the higher labor cost during the
quarter.
Selling, distribution and administrative expenses were $1.0 million in the
first quarter of 1997 compared to $1.2 million in the first quarter of 1996.
Reductions due to downsizing of operations in early 1996 accounted for the
decrease.
Interest expense was $258,000 in the first quarter of 1997 compared to
$464,000 in the prior year due to lower average outstanding borrowings
in 1997 compared to 1996.
Net income for the 1997 first quarter was $200,000 versus $206,000 in 1996.
The Company continues to seek new business; however, without an increase in
the customer base, the Company expects sales in 1997 subsequent quarters to
be lower than in the first quarter due to lower seasonal demand for
carburetors and heavy duty and agricultural products.
Liquidity and Capital Resources
Working Capital
Net working capital on March 30, 1997 was negative $(9.6) million compared to
negative $(9.9) million on December 29, 1996.
The Company classifies outstanding loans under its bank credit agreement as
short-term obligations due to their maturity. The amount of outstanding
loans under the bank lines were $6.0 million on March 30, 1997 and
$5.9 million on December 29, 1996. The Company has also classified as
short-term obligations the outstanding principal on a $1.5 million
capitalized lease obligation which is supported with a letter of credit
issued by one of the Company's banks.
Debt
The Company's banks have extended the $6.4 million facility on short term
periods during the first quarter. The Company had used $6 million of the
available facility at March 30, 1997. The current extension expires on
May 19, 1997. The Company and banks initiated discussions regarding the
continued extension of the facility in light of the currently proposed
creditor settlement and recapitalization plan. There can be no assurance
that the banks will continue to extend the facility beyond the current
expiration date.
The Company is also indebted to various unsecured creditors, including
current and former trade vendors. Given the Company's current financial
situation and the lack of a long-term financing agreement, it currently
does not have the ability to pay these debts should the creditors demand
payment. As previously disclosed, the Company is in negotiations with an
ad hoc panel representing certain of its unsecured creditors. There can be
no assurances that the Company and the panel will be able to reach agreement.
Without an extension of the current credit agreement or a replacement
facility, the Company would not have sufficient funds to pay its debts should
the lenders demand payment and would not be able to continue as a going
concern. The Company's financial statements have been prepared on a going
concern basis and do not contain adjustments which may be necessary should
the Company be forced to liquidate assets or take other actions to satisfy
debt payments or discontinue its business.
Cash Flow
The Company decreased its long-term debt, net of cash, by $180,000 in the
quarter ended March 30, 1997. The following summarizes significant items
affecting the change in total debt, (amounts in thousands).
March 30, March 31,
1997 1996
------------- -------------
Net Income
Changes in working capital, other $ 107 $ 1,349
Depreciation and Amortization 201 256
Proceeds from Sales of Assets 18 864
Capital Expenditures (146) (41)
------------- -------------
Increase (Decrease) in total debt,
net of cash $ 180 $ 2,428
============= =============
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedules
(99.1) Management Retention Agreement
(99.2) Management Retention Agreement
(99.3) Management Retention Agreement
(99.4) Indemnification Agreement
SIGNATURES
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 thereunto duly authorized.
CHAMPION PARTS, INC.
(Registrant)
DATE: May 21, 1997 By: /s/ Mark Smetana
______________ _______________________________
Mark Smetana
Vice President - Finance
Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 621000
<SECURITIES> 0
<RECEIVABLES> 5255000
<ALLOWANCES> 499000
<INVENTORY> 7273000
<CURRENT-ASSETS> 13446000
<PP&E> 21288000
<DEPRECIATION> 15857000
<TOTAL-ASSETS> 19346000
<CURRENT-LIABILITIES> 23091000
<BONDS> 0
<COMMON> 366000
0
0
<OTHER-SE> 4624000
<TOTAL-LIABILITY-AND-EQUITY> 19346000
<SALES> 7638000
<TOTAL-REVENUES> 7638000
<CGS> 6182000
<TOTAL-COSTS> 6182000
<OTHER-EXPENSES> 998000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258000
<INCOME-PRETAX> 200000
<INCOME-TAX> 0
<INCOME-CONTINUING> 200000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200000
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
MANAGEMENT RETENTION AGREEMENT
This Management Retention Agreement (this "Agreement") is made as of this
1st day of April, 1997, by and between Champion Parts, Inc., an Illinois
corporation (the "Company"), and Thomas W. Blashill (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Company since August, 1992,
and has served as President as Chief Executive Officer of the Company since
September, 1995;
WHEREAS, the Company is involved in a debt restructuring and a possible
change of control, which restructuring is anticipated to be completed on or
about May 31, 1997 (with the period from the date hereof to May 31, 1997
referred to herein as the "Transition Period");
WHEREAS, the continuing involvement and leadership of the Executive in the
restructuring are critical to its success; and
WHEREAS, the Company's Board of Directors has authorized payment to the
Executive of certain special compensation, on the terms and conditions set
forth below, in order to induce the Executive to continue his employment with
and efforts on behalf of the Company throughout the Transition Period.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Services During Transition Period. In consideration of the special
compensation described in Section 2 below, during the Transition Period the
Executive agrees not to voluntarily terminate his employment with the Company
other than for Good Reason (as defined below), and further agrees to devote
his best efforts, within reasonable working hours, to rendering management
services to the Company in keeping with his current duties and
responsibilities, whether as its Chief Executive Officer or in another
position (including as a consultant)(the"Executive's Responsibilities").
Without limiting the foregoing, the Executive's Responsibilities shall
include working to effect the restructuring transaction, including obtaining
approval to the terms of the transaction from the Company's general
unsecured creditors.
For purposes of this Agreement, "Good Reason" shall mean any one or more of
the following (without the Executive's express written consent):
i. a permanent relocation of the Executive's principal place of employment
outside the Chicago metropolitan area, other than for reasonably required
travel on the business of the Company or a subsidiary of the Company;
ii. a reduction in the Executive's compensation. For purposes hereof,
compensation shall include Executive's base salary and car allowance, and
amounts or benefits to which Executive is entitled under any employee
benefit plan, retirement plan, incentive compensation plan, stock plan,
vacation pay, bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements as currently in effect; or
iii. a material adverse change in the Executive's Responsibilities.
2. Special Compensation.
(a) Lump Sum Bonus. On April 1, 1997, the Company shall pay the Executive,
as a retention bonus, a lump sum amount equal to three months' of the
Executive's salary (calculated as $34,612.50 for base pay including car
allowance, minus applicable withholding taxes and similar items).
(b) Payments into Escrow Account. The company shall also deposit the
following amounts with Chicago Title and Trust Company (the "Escrow Agent")
as additional special retention compensation for the account of Executive:
i. On or prior to April 3, 1997, an amount equal to the amount paid as a
lump sum retention bonus pursuant to Section 2(a) above;
ii. On or prior to April 3, 1997, and on the first business day of each full
or partial week that the Company continues to employ the Executive during
the Transition Period, for up to a total of nine (9) weeks, the additional
amount of $2,662.50 minus applicable withholding taxes and similar items,
which is equal to one week of the Executive's salary;
iii. On or prior to April 3, 1997, an amount equal to the aggregate premium
payments Executive would be required to make to continue his current medical
insurance benefits under COBRA for seven months; and
iv. On May 1, 1997, but only if the Final Payment Date (as defined in Section
2(d) below) has not occurred prior to such deposit, an amount equal to
Executive's premium payment for medical insurance under COBRA for one month.
Such funds shall be held by Escrow Agent pursuant to the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Agent shall invest all funds deposited with it
pursuant to this Section 2(b) in an interest-bearing account until the Final
Payment Date, and upon such date shall disburse the monies held in escrow as
specified therein and in the Escrow Agreement.
(c) Security Interest. As additional security for the payment of the
escrowed funds to the Executive pursuant to Section 2(e) below, the Company
hereby grants to the Executive a first priority security interest in all
amounts deposited with the Escrow Agent pursuant to this Agreement, whether
now or hereafter existing, and acknowledges that the Escrow Agent is holding
such funds as Executive's agent for perfection purposes. On April 1, 1997,
the Company shall (i) execute such financing statements and other documents
required by law to perfect such security interest (and the Company will pay
the cost of filing or recording the same in all public offices deemed
necessary by the Executive); and (ii) do such other acts as the Executive
may reasonably request to establish and maintain a valid perfected first
priority security interest in the escrowed funds, free of all liens and
claims, including without limitation, obtaining all necessary releases and
consents from the Company's lenders and other creditors.
(d) Condition Precedent to Security Interest and Escrow. Notwithstanding
anything to the contrary in Section 2(b) and 2(c) above, the Company's
obligations to grant the security interest as provided in Section 2(c), and
to establish and fund the escrow account as provided in Section 2(b), are
expressly conditioned upon and subject to the Company's receipt of a consent
and/or waiver to such actions from each of its primary secured lenders in a
form satisfactory to the Company. If such consents and/or waivers are not
obtained by April 3, 1997, the parties shall in good faith attempt to
negotiate an amendment to this Agreement which shall allow the parties to
effectuate the purposes hereof in the absence of such consents and/or
waivers.
(e) Payment from Escrow Account. On the earliest to occur of: (i) May 31,
1997; (ii) the date of the Executive's termination of employment by the
Executive or the Company for any reason, including by reason of death or
Disability (as defined below); (iii) bankruptcy; or (iv) the date that an
involuntary bankruptcy petition is filed against the Company (the "Final
Payment Date"), the Escrow Agent shall, in accordance with the terms of the
Escrow Agreement, deliver all funds deposited in the escrow account,
excluding interest thereon, to executive, and shall deliver any and all
interest earned on the escrowed funds to the Company. For purposes of this
Section 2(e), "Disability" shall be deemed to occur if, as a result of the
Executive's incapacity due to physical or mental illness, Executive shall
have been absent from the full-time performance of his duties with the
Company for two consecutive weeks.
(f) Forfeiture. Notwithstanding Section 2(e)(ii) above, in the event the
Executive voluntarily terminates his employment with the Company without
Good Reason prior to May 31, 1997, he shall forfeit his right to and
security interest in all amounts in the escrow account, and the Escrow Agent
shall return all such amounts, plus interest, to the Company.
(g) Termination Notice. Any termination by the Company shall be communicated
by a notice of termination dully authorized by the Company's Board of
Directors and executed by an authorized officer, which shall, except in the
case of Disability, specify a termination date at least five days subsequent
to the date of such notice. The Executive's receipt of a notice of
termination from the Company shall permit him to resign, effective as of the
termination date, as an officer and director of all subsidiaries and
affiliates of the Company with which he holds such positions.
(h) No Effect on Other Rights and Payments; Life Insurance. The provisions
of this Agreement, and the payments provided for hereunder, shall not reduce
any amounts otherwise payable (including but no limited to accrued vacation
pay), or in any way diminish the Executive's existing rights, or rights
which would accrue solely as a result of the passage of time, under the
Champion Parts, Inc. Executive Stock Ownership Plan, or any other benefit
plan, incentive plan, bonus plan, stock option plan or other plan, policy or
arrangement then in effect.
In addition, the Company shall continue Executive's enrollment in its group
life insurance program, and pay all premiums therefore, for the following
periods: (i) from the date hereof until six months after the Final Payment
Date; and (ii) for either one or two months thereafter, calculated by
rounding up the number of months the Executive continues employment with
the Company during the Transition Period.
3. Mutual Release.
(a) Company's Release. The Company hereby forever releases, remises and
discharges the Executive of and from, and covenants not to sue the Executive
with respect to, any and all claims, causes of action, suits, debts, sums of
money, controversies, agreements, promises, damages and demands whatsoever,
known or unknown, in law, in equity or otherwise, which the Company has or
may have arising out of any act occurring on or before the date hereof,
except with respect to any act of misappropriation, theft or fraud against
the Comapny which has not been alleged by or presented to the whole Board of
directors prior to he date hereof. Nothing in this release shall affect the
rights or obligations of the parties under this Agreement.
(b) Executive's Release. The Executive hereby forever releases, remises and
discharges the Company from, and covenants not to sue the Company with
respect to, any and all claims, causes of action, suits, debts, sums of
money, controversies, agreements, promises, damages and demands whatsoever,
known or unknown, in law, in equity or otherwise, which the Executive has or
may have arising out of his employment relationship with the Company on or
before the date hereof, except for matters referred to in Section 2(h) above.
Nothing in this release shall affect the rights or obligations of the
obligations of the parties under this Agreement.
(c) Limitation Period for Subsequent Claims. Neither party may bring any
lawsuit pursuant to this Agreement or the employment relationship between
the parties more than one year after the Final Payment Date, and all claims
forming the basis for such potential lawsuits shall be deemed released and
discharged from and after such date.
4. Non-Competition. Executive agrees that for six months following the Final
Payment Date, the Executive shall not, either as an individual on his own
account; as a partner, joint venturer, employee, agent, salesman for any
period; as an officer, director or stockholder (other than a beneficial
holder of not more than 5% of the outstanding voting stock of a company have
at least 300 holders of voting stock); or otherwise, directly or indirectly:
i. enter into or engage in any business competitive with that carried on by
the Company within any area of the United States in which the Company is
then doing business;
ii. employ or solicit, or attempt to employ or solicit, for himself or any
third party, the employment of any of the Company's employees; or
iii. induce or attempt to induce any employee, consultant or agent of the
Company to discontinue services to the Company.
The Executive agrees and acknowledges that the covenants set forth in this
Section 4 are reasonable in time and scope and essential to the preservation
of the Company's valuable proprietary interests. The Executive also
expressly acknowledges and agrees that a violation of the restrictive
covenants set forth herein may cause immediate and irreparable harm, loss
and damage to the Company not adequately compensable by a monetary award or
other remedies at law. The Executive therefore agrees that the Company shall
be entitled to seek an injuction to prevent breaches of Executive's
restrictive covenants contained herein and to specifically enforce the terms
and provisions hereof.
5. Successor to the Company.
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, absolutely
and unconditionally to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amounts are still payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
6. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses which the Executive may incur if Executive prevails in collecting
any amount payable by the Company or the Escrow Agent under this Agreement
which has been contested by the Company. The parties may agree in advance
as to amounts which are not contested, and any such amount which the Company
shall offer to pay to the Executive in settlement of any claims shall be
deemed to be a non-contested amount.
7. Entire Agreement. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement. This
Agreement constitutes the entire agreement between the parties, and expressly
supersedes and renders null and void all prior oral or written agreements or
understandings relating to the subject matter hereof, including that certain
Severance Compensation Agreement between the Executive and the Company dated
March 20, 1995.
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered to the party personally,
by telecopy or telegram, by overnight courier, or by registered or certified
mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, addressed to the party at its address
set forth below:
If to the Company:
Secretary
Champion Parts, Inc.
2525 22nd Street
Oak Brook, Illinois 60521
Facsimile: (630) 573-0348
If to the Executive:
Thomas Blashill
3659 Red Bud Court
Downers Grove, Illinois 60515
Facsimile: (630) 963-8487
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior subsequent time. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Illinois. This Agreement may be executed in counterparts, each of which
shall be deemed an original.
10. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CHAMPION PARTS, INC.
/s/ Gary S. Hopmayer
Gary S. Hopmayer, Chairman of
Special Committee of the Board
of Directors
/s/ Thomas W. Blashill
Thomas W. Blashill
MANAGEMENT RETENTION AGREEMENT
This Management Retention Agreement (this "Agreement") is made as of this 1st
day of April, 1997, by and between Champion Parts, Inc., an Illinois
corporation (the "Company"), and Mark Smetana (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Company since July, 1993, and
has served as Vice President - Finance and Secretary since September, 1995;
WHEREAS, the Company is involved in a debt restructuring and a possible
change of control, which restructuring is anticipated to be completed on or
about May 31, 1997;
WHEREAS, the continuing involvement and leadership of the Executive in
effectuating and implementing the restructuring are critical to its success;
(with the period from the date hereof to July 1, 1997 referred to herein as
the "Transition Period");
WHEREAS, the continuing involvement and leadership of the Executive in the
restructuring are critical to its success; and
WHEREAS, the Company's Board of Directors has authorized payment to the
Executive of certain special compensation, on the terms and conditions set
forth below, in order to induce the Executive to continue his employment with
and efforts on behalf of the Company throughout the Transition Period.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Services During Transition Period. In consideration of the special
compensation described in Section 2 below, during the Transition Period the
Executive agrees not to voluntarily terminate his employment with the Company
other than for Good Reason (as defined below), and further agrees to devote
his best efforts, within reasonable working hours, to rendering management
services to the Company in keeping with his position. Without limiting the
foregoing, the Executive's Responsibilities shall include working to effect
the restructuring transaction, including obtaining approval to the terms of
the transaction from the Company's general unsecured creditors.
For purposes of this Agreement, "Good Reason" shall mean any one or more of
the following (without the Executive's express written consent):
i. a permanent relocation of the Executive's principal place of employment
outside the Chicago metropolitan area, other than for reasonably required
travel on the business of the Company or a subsidiary of the Company;
ii. a reduction in the Executive's compensation. For purposes hereof,
compensation shall include Executive's base salary and car allowance, and
amounts or benefits to which Executive is entitled under any employee benefit
plan, retirement plan, incentive compensation plan, stock plan, vacation pay,
bonus or benefit arrangement, insurance or hospitalization program or any
other fringe benefit arrangements as currently in effect; or
iii. a material adverse change in the Executive's Responsibilities.
2. Special Compensation.
(a) Lump Sum Bonus. On April 1, 1997, the Company shall pay the Executive,
as a retention bonus, a lump sum amount equal to three months' of the
Executive's salary (calculated as $25,020.00 for base pay including car
allowance, minus applicable withholding taxes and similar items).
(b) Payments into Escrow Account. The company shall also deposit the
following amounts with Chicago Title and Trust Company (the "Escrow Agent")
as additional special retention compensation for the account of Executive:
i. On or prior to April 3, 1997, an amount equal to the amount paid as a lump
sum retention bonus pursuant to Section 2(a) above;
ii. On or prior to April 3, 1997, and on the first business day of each full
or partial week that the Company continues to employ the Executive during the
Transition Period, for up to a total of fourteen (14) weeks, the additional
amount of $1,924.62 minus applicable withholding taxes and similar items,
which is equal to one week of the Executive's salary;
iii. On or prior to April 3, 1997, an amount equal to the aggregate premium
payments Executive would be required to make to continue his current medical
insurance benefits under COBRA for six months; and
Such funds shall be held by Escrow Agent pursuant to the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Agent shall invest all funds deposited with it
pursuant to this Section 2(b) in an interest-bearing account until the Final
Payment Date, and upon such date shall disburse the monies held in escrow as
specified therein and in the Escrow Agreement.
c. Security Interest. As additional security for the payment of the escrowed
funds to the Executive pursuant to Section 2(e) below, the Company hereby
grants to the Executive a first priority security interest in all amounts
deposited with the Escrow Agent pursuant to this Agreement, whether now or
hereafter existing, and acknowledges that the Escrow Agent is holding such
funds as Executive's agent for perfection purposes. On April 1, 1997, the
Company shall (i) execute such financing statements and other documents
required by law to perfect such security interest (and the Company will pay
the cost of filing or recording the same in all public offices deemed
necessary by the Executive); and (ii) do such other acts as the Executive may
reasonably request to establish and maintain a valid perfected first priority
security interest in the escrowed funds, free of all liens and claims,
including without limitation, obtaining all necessary releases and consents
from the Company's lenders and other creditors.
(d) Condition Precedent to Security Interest and Escrow. Notwithstanding
anything to the contrary in Section 2(b) and 2(c) above, the Company's
obligations to grant the security interest as provided in Section 2(c), and
to establish and fund the escrow account as provided in Section 2(b), are
expressly conditioned upon and subject to the Company's receipt of a consent
and/or waiver to such actions from each of its primary secured lenders in a
form satisfactory to the Company. If such consents and/or waivers are not
obtained by Aril 3, 1997, the parties shall in good faith attempt to
negotiate an amendment to this Agreement which shall allow the parties to
effectuate the purposes hereof in the absence of such consents and/or waivers.
(e) Payment from Escrow Account. On the earliest to occur of: (i) July 1,
1997; (ii) the date of the Executive's termination of employment by the
Executive or the Company for any reason, including by reason of death or
Disability (as defined below); (iii) the first business day immediately
preceding the day that the Company files a petition in bankruptcy; or (iv)
the date that an involuntary bankruptcy petition is filed against the Company
(the "Final Payment Date"), the Escrow Agent shall, in accordance with the
terms of the Escrow Agreement, deliver all funds deposited in the escrow
account, excluding interest thereon, to Executive, and shall deliver any and
all interest earned on the escrowed funds to the Company. For purposes of
this Section 2(e), "Disability" shall be deemed to occur if, as a result of
the Executive's incapacity due to physical or mental illness, Executive shall
have been absent from the full-time performance of his duties with the
Company for two consecutive weeks.
Notwithstanding the foregoing, in the event that the Final Payment Date has
not occurred by May 31, 1997, the Escrow Agent shall deliver one-half of the
monies then deposited in the escrow account to the Executive, with the
remaining escrow funds to be disbursed upon the Final Payment Date as above
described.
(f) Forfeiture. Notwithstanding Section 2(e)(ii) above, in the event the
Executive voluntarily terminates his employment with the Company without Good
Reason prior to July 1, 1997, he shall forfeit his right to and security
interest in all amounts in the escrow account, and the Escrow Agent shall
return all such amounts, plus interest, to the Company.
(g) Termination Notice. Any termination by the Company shall be communicated
by a notice of termination dully authorized by the Company's Board of
Directors and executed by an authorized officer, which shall, except in the
case of Disability, specify a termination date at least five days subsequent
to the date of such notice. The Executive's receipt of a notice of
termination from the Company shall permit him to resign, effective as of the
termination date, as an officer and director of all subsidiaries and
affiliates of the company with which he holds such positions.
(h) No Effect on Other Rights and Payments; Life Insurance. The provisions
of this Agreement, and the payments provided for hereunder, shall not reduce
any amounts otherwise payable (including but no limited to accrued vacation
pay), or in any way diminish the Executive's existing rights, or rights which
would accrue solely as a result of the passage of time, under the Champion
Parts, Inc. Executive Stock Ownership Plan, or any other benefit plan,
incentive plan, bonus plan, stock option plan or other plan, policy or
arrangement then in effect.
In addition, the Company shall continue Executive's enrollment in its group
life insurance program, and pay all premiums therefore, for the following
periods: (i) from the date hereof until six months after the Final Payment
Date; and (ii) for either one or two months thereafter, calculated by
rounding up the number of months the Executive continues employment with the
Company during the Transition Period.
3. Mutual Release.
(a) Company's Release. The Company hereby forever releases, remises and
discharges the Executive of and from, and covenants not to sue the Executive
with respect to, any and all claims, causes of action, suits, debts, sums of
money, controversies, agreements, promises, damages and demands whatsoever,
known or unknown, in law, in equity or otherwise, which the Company has or
may have arising out of any act occurring on or before the date hereof,
except with respect to any act of misappropriation, theft or fraud against
the Company which has not been alleged by or presented to the whole Board
of Directors prior to the date hereof. Nothing in this release shall affect
the rights or obligations of the parties under this Agreement.
(b) Executive's Release. The Executive hereby forever releases, remises and
discharges the Company from, and covenants not to sue the Company with
respect to, any and all claims, causes of action, suits, debts, sums of
money, controversies, agreements, promises, damages and demands whatsoever,
known or unknown, in law, in equity or otherwise, which the Executive has or
may have arising out of his employment relationship with the Company on or
before the date hereof, except for matters referred to in Section 2(h)
above. Nothing in this release shall affect the rights or obligations of
the parties under this Agreement.
( c) Limitation Period for Subsequent Claims. Neither party may bring any
lawsuit pursuant to this Agreement or the employment relationship between the
parties more than one year after the Final Payment Date, and all claims
forming the basis for such potential lawsuits shall be deemed released and
discharged from and after such date.
4. Non-Competition. Executive agrees that for six months following the Final
Payment Date, the Executive shall not, either as an individual on his own
account; as a partner, joint venturer, employee, agent, salesman for any
period; as an officer, director or stockholder (other than a beneficial
holder of not more than 5% of the outstanding voting stock of a company have
at least 300 holders of voting stock); or otherwise, directly or indirectly:
i. enter into or engage in any business competitive with that carried on by
the Company within any area of the United States in which the Company is then
doing business;
ii. employ or solicit, or attempt to employ or solicit, for himself or any
third party, the employment of any of the Company's employees; or
iii. induce or attempt to induce any employee, consultant or agent of the
Company to discontinue services to the Company.
The Executive agrees and acknowledges that the covenants set forth in this
Section 4 are reasonable in time and scope and essential to the preservation
of the Company's valuable proprietary interests. The Executive also
expressly acknowledges and agrees that a violation of the restrictive
covenants set forth herein may cause immediate and irreparable harm, loss and
damage to the Company not adequately compensable by a monetary award or other
remedies at law. The Executive therefore agrees that the Company shall be
entitled to seek an injunction to prevent breaches of Executive's restrictive
covenants contained herein and to specifically enforce the terms and
provisions hereof.
5. Successor to the Company.
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, absolutely
and unconditionally to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform
it if no such succession or assignment had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amounts are still payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
6. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses which the Executive may incur if Executive prevails in collecting
any amount payable by the Company or the Escrow Agent under this Agreement
which has been contested by the Company.
The parties may agree in advance as to amounts which are not contested, and
any such amount which the Company shall offer to pay to the Executive in
settlement of any claims shall be deemed to be a non-contested amount.
7. Entire Agreement. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement. This
Agreement constitutes the entire agreement between the parties, and expressly
supersedes and renders null and void all prior oral or written agreements or
understandings relating to the subject matter hereof, including that certain
Severance Compensation Agreement between the Executive and the Company dated
August 9, 1994.
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered to the party personally, by
telecopy or telegram, by overnight courier, or by registered or certified
mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below:
If to the Company:
President
Champion Parts, Inc.
2525 22nd Street
Oak Brook, Illinois 60521
Facsimile: (630) 573-0348
If to the Executive:
Mark Smetana
29 Hawkins Circle
Wheaton, IL 60187
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior subsequent time. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Illinois. This Agreement may be executed in counterparts, each of which
shall be deemed an original.
10. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CHAMPION PARTS, INC.
/s/ Gary S. Hopmayer
Gary S. Hopmayer, Chairman of
Special Committee of the Board
of Directors
/s/ Mark Smetana
Mark Smetana
MANAGEMENT RETENTION AGREEMENT
This Management Retention Agreement (this "Agreement") is made as of this
1st day of April, 1997, by and between Champion Parts, Inc., an Illinois
corporation (the "Company"), and Richard B. Hebert (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Company since September, 1977,
and has served as its Treasurer since September, 1995;
WHEREAS, the Company is involved in a debt restructuring and a possible
change of control, which restructuring is anticipated to be completed on or
about May 31, 1997.
WHEREAS, the continuing involvement and leadership of the Executive in
effectuating and implementing the restructuring are critical to its success;
(with the period from the date hereof to July 1, 1997 referred to herein as
the "Transition Period");
WHEREAS, the Company's Board of Directors has authorized payment to the
Executive of certain special compensation, on the terms and conditions set
forth below, in order to induce the Executive to continue his employment
with and efforts on behalf of the Company throughout the Transition Period.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Services During Transition Period. In consideration of the special
compensation described in Section 2 below, during the Transition Period the
Executive agrees not to voluntarily terminate his employment with the
Company other than for Good Reason (as defined below), and further agrees to
devote his best efforts, within reasonable working hours, to rendering
management services to the Company in keeping with his position.
Without limiting the foregoing, the Executive's Responsibilities shall
include working to effect the restructuring transaction, including obtaining
approval to the terms of the transaction from the Company's general unsecured
creditors.
For purposes of this Agreement, "Good Reason" shall mean any one or more of
the following (without the Executive's express written consent):
i. a permanent relocation of the Executive's principal place of employment
outside the Chicago metropolitan area, other than for reasonably required
travel on the business of the Company or a subsidiary of the Company;
ii. a reduction in the Executive's compensation. For purposes hereof,
compensation shall include Executive's base salary and car allowance, and
amounts or benefits to which Executive is entitled under any employee
benefit plan, retirement plan, incentive compensation plan, stock plan,
vacation pay, bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements as currently in effect; or
iii. a material adverse change in the Executive's Responsibilities.
2. Special Compensation.
(a) Lump Sum Bonus. On April 1, 1997, the Company shall pay the Executive,
as a retention bonus, a lump sum amount equal to three months' of the
Executive's salary (calculated as $19,300.00 for base pay including car
allowance, minus applicable withholding taxes and similar items).
(b) Payments into Escrow Account. The company shall also deposit the
following amounts with Chicago Title and Trust Company (the "Escrow Agent")
as additional special retention compensation for the account of Executive:
i. On or prior to April 3, 1997, an amount equal to the amount paid as a
lump sum retention bonus pursuant to Section 2(a) above;
ii. On or prior to April 3, 1997, and on the first business day of each full
or partial week that the Company continues to employ the Executive during
the Transition Period, for up to a total of fourteen (14) weeks, the
additional amount of $1,484.62 minus applicable withholding taxes and
similar items, which is equal to one week of the Executive's salary;
iii. On or prior to April 3, 1997, an amount equal to the aggregate premium
payments Executive would be required to make to continue his current medical
insurance benefits under COBRA for six months.
Such funds shall be held by Escrow Agent pursuant to the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Agent shall invest all funds deposited with it
pursuant to this Section 2(b) in an interest-bearing account until the Final
Payment Date, and upon such date shall disburse the monies held in escrow as
specified therein and in the Escrow Agreement.
(c) Security Interest. As additional security for the payment of the
escrowed funds to the Executive pursuant to Section 2(e) below, the Company
hereby grants to the Executive a first priority security interest in all
amounts deposited with the Escrow Agent pursuant to this Agreement, whether
now or hereafter existing, and acknowledges that the Escrow Agent is holding
such funds as Executive's agent for perfection purposes. On April 1, 1997,
the Company shall (i) execute such financing statements and other documents
required by law to perfect such security interest (and the Company will pay
the cost of filing or recording the same in all public offices deemed
necessary by the Executive); and (ii) do such other acts as the Executive
may reasonably request to establish and maintain a valid perfected first
priority security interest in the escrowed funds, free of all liens and
claims, including without limitation, obtaining all necessary releases and
consents from the Company's lenders and other creditors.
(d) Condition Precedent to Security Interest and Escrow. Notwithstanding
anything to the contrary in Section 2(b) and 2(c) above, the Company's
obligations to grant the security interest as provided in Section 2(c), and
to establish and fund the escrow account as provided in Section 2(b), are
expressly conditioned upon and subject to the Company's receipt of a consent
and/or waiver to such actions from each of its primary secured lenders in a
form satisfactory to the Company. If such consents and/or waivers are not
obtained by April 3, 1997, the parties shall in good faith attempt to
negotiate an amendment to this Agreement which shall allow the parties to
effectuate the purposes hereof in the absence of such consents and/or waivers.
(e) Payment from Escrow Account. On the earliest to occur of: (i) July 1,
1997; (ii) the date of the Executive's termination of employment by the
Executive or the Company for any reason, including by reason of death or
Disability (as defined below); (iii) the first business day immediately
preceding the day that the company files a petition in bankruptcy; or (iv)
the date that an involuntary bankruptcy petition is filed against the Company
(the "Final Payment Date"), the Escrow Agent shall, in accordance with the
terms of the Escrow Agreement, deliver all funds deposited in the escrow
account, excluding interest thereon, to Executive, and shall deliver any and
all interest earned on the escrowed funds to the Company. For purposes of
this Section 2(e), "Disability" shall be deemed to occur if, as a result of
the Executive's incapacity due to physical or mental illness, Executive shall
have been absent from the full-time performance of his duties with the
Company for two consecutive weeks.
Notwithstanding the foregoing, in the event that the Final Payment Date has
not occurred by May 31, 1997, the Escrow Agent shall deliver one-half of the
monies then deposited in the escrow account to the Executive, with the
remaining escrow funds to be disbursed upon the Final Payment Date as above
described.
(f) Forfeiture. Notwithstanding Section 2(e)(ii) above, in the event the
Executive voluntarily terminates his employment with the Company without Good
Reason prior to July 1, 1997, he shall forfeit his right to and security
interest in all amounts in the escrow account, and the Escrow Agent shall
return all such amounts, plus interest, to the Company.
(g)Termination Notice. Any termination by the Company shall be communicated
by a notice of termination dully authorized by the Company's Board of
Directors and executed by an authorized officer, which shall, except in the
case of Disability, specify a termination date at least five days subsequent
to the date of such notice. The Executive's receipt of a notice of
termination from the Company shall permit him to resign, effective as of the
termination date, as an officer and director of all subsidiaries and
affiliates of the Company with which he holds such positions.
(h)No Effect on Other Rights and Payments; Life Insurance. The provisions of
this Agreement, and the payments provided for hereunder, shall not reduce any
amounts otherwise payable (including but no limited to accrued vacation pay),
or in any way diminish the Executive's existing rights, or rights which would
accrue solely as a result of the passage of time, under the Champion Parts,
Inc. Executive Stock Ownership Plan, or any other benefit plan, incentive
plan, bonus plan, stock option plan or other plan, policy or arrangement then
in effect.
In addition, the Company shall continue Executive's enrollment in its group
life insurance program, and pay all premiums therefore, for the following
periods: (i) from the date hereof until six months after the Final Payment
Date; and (ii) for either one or two months thereafter, calculated by
rounding up the number of months the Executive continues employment with the
Company during the Transition Period.
3. Mutual Release.
(a) Company's Release. The Company hereby forever releases, remises and
discharges the Executive of and from, and covenants not to sue the Executive
with respect to, any and all claims, causes of action, suits, debts, sums of
money, controversies, agreements, promises, damages and demands whatsoever,
known or unknown, in law, in equity or otherwise, which the Company has or
may have arising out of any act occurring on or before the date hereof,
except with respect to any act of misappropriation, theft or fraud against
the Company which has not been alleged by or presented to the whole Board of
Directors prior to the date hereof. Nothing in this release shall affect the
rights or obligations of the parties under this Agreement.
(b) Executive's Release. The Executive hereby forever releases, remises and
discharges the Company from, and covenants not to sue the Company with
respect to, any and all claims, causes of action, suits, debts, sums of
money, controversies, agreements, promises, damages and demands whatsoever,
known or unknown, in law, in equity or otherwise, which the Executive has or
may have arising out of his employment relationship with the Company on or
before the date hereof, except for matters referred to in Section 2(h) above.
Nothing in this release shall affect the rights or obligations of the parties
under this Agreement.
( c) Limitation Period for Subsequent Claims. Neither party may bring any
lawsuit pursuant to this Agreement or the employment relationship between the
parties more than one year after the Final Payment Date, and all claims
forming the basis for such potential lawsuits shall be deemed released and
discharged from and after such date.
4. Non-Competition. Executive agrees that for six months following the
Final Payment Date, the Executive shall not, either as an individual on his
own account; as a partner, joint venturer, employee, agent, salesman for any
period; as an officer, director or stockholder (other than a beneficial
holder of not more than 5% of the outstanding voting stock of a company have
at least 300 holders of voting stock); or otherwise, directly or indirectly:
i. employ or solicit, or attempt to employ or solicit, for himself or any
third party, the employment of any of the Company's employees; or
ii. induce or attempt to induce any employee, consultant or agent of the
Company to discontinue services to the Company.
The Executive agrees and acknowledges that the covenants set forth in this
Section 4 are reasonable in time and scope and essential to the preservation
of the Company's valuable proprietary interests. The Executive also
expressly acknowledges and agrees that a violation of the restrictive
covenants set forth herein may cause immediate and irreparable harm, loss and
damage to the Company not adequately compensable by a monetary award or other
remedies at law. The Executive therefore agrees that the Company shall be
entitled to seek an injunction to prevent breaches of Executive's restrictive
covenants contained herein and to specifically enforce the terms and
provisions hereof.
5. Successor to the Company.
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, absolutely
and unconditionally to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform
it if no such succession or assignment had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amounts are still payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
6. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses which the Executive may incur if Executive prevails in collecting
any amount payable by the Company or the Escrow Agent under this Agreement
which has been contested by the Company. The parties may agree in advance
as to amounts which are not contested, and any such amount which the Company
shall offer to pay to the Executive in settlement of any claims shall be
deemed to be a non-contested amount.
7. Entire Agreement. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement. This
Agreement constitutes the entire agreement between the parties, and expressly
supersedes and renders null and void all prior oral or written agreements or
understandings relating to the subject matter hereof, including that certain
Severance Compensation Agreement between the Executive and the Company dated
November 17, 1995.
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered to the party personally, by
telecopy or telegram, by overnight courier, or by registered or certified
mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below:
If to the Company:
President
Champion Parts, Inc.
2525 22nd Street
Oak Brook, Illinois 60521
Facsimile: (630) 573-0348
If to the Executive:
Richard B. Hebert
8333 Mending Wall Drive
Woodridge, IL 60517
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior subsequent time. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Illinois. This Agreement may be executed in counterparts, each of which
shall be deemed an original.
10. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CHAMPION PARTS, INC.
/s/ Gary S. Hopmayer
Gary S. Hopmayer, Chairman of
Special Committee of the Board
of Directors
/s/ Richard B. Hebert
Richard B. Hebert
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into as
of the 14th of April, 1997 between CHAMPION PARTS, INC., and Illinois
corporation (the "Corporation"), and JERRY A BRAGIEL ("Indemnitee").
Preliminary Recitals
A. The Corporation is engaged in the business of, among other things,
remanufacturing auto, truck and farms parts and equipment.
B. At the request of the Corporation, Indemnitee currently serves as an
officer of the Corporation and, as such, may be subjected to claims, suits or
proceedings arising as a result of such service.
C. To induce Indemnitee to become an officer of the Corporation, the
Corporation agreed to indemnify Indemnitee to the extent set forth herein and
to the fullest extent authorized by, the Illinois Business Corporation Act of
1983 as it may be in effect from time to time.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The Corporation shall forever indemnify, and keep indemnified in
accordance with, and to the fullest extent authorized by, the Illinois
Business Corporation Act of 1983 as it may be in effect from time to time,
Indemnitee, from and against and Expenses (as defined below), judgments,
fines, penalties and amounts paid in settlement actually and reasonably
incurred by Indemnitee in connection with any Proceeding (as defined below)
against Indemnitee (other than a Proceeding initiated or supported, direct
date of this Agreement.
2. As used in this agreement:
(a) The term "Proceeding" shall include any threatened, pending or completed
action, suit or proceeding, whether brought by or in the right of the
Corporation or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which Indemnitee may be or may have been involved as
a party or otherwise, by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Corporation, by reason of any
action taken by him or her or of any inaction on his or her part while acting
as such a director, officer, employee or agent, or by reason of the fact that
he or she was serving at the request of the Corporation as a director,
officer, partner, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in each case whether or not he or
she is acting or serving in any such capacity at the time any liability or
expense is incurred for which indemnification or reimbursement is provided
under this Agreement.
(b) The term "Expenses" means all costs, expenses and obligations paid or
incurred in connection with investigating, defending, being a witness, in or
participating in, or preparing to defend, be a witness in or participate in
any Proceeding, and shall include, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals, attorneys'
fees and disbursements, but shall not include the amount of amounts paid in
settlement or judgments, fines or penalties against Indemnitee.
(c) The terms "Corporation", "other enterprise", "fines", and "serving at the
request of the Corporation" shall have the meanings provided in Section 8.75
of the Illinois Business Corporation Act of 1983, as amended.
3. In the event that, under applicable law, the entitlement of Indemnitee
to be indemnified hereunder shall depend upon whether Indemnitee shall have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and with respect to
criminal actions or proceedings, had no reasonable cause to believe his or
her conduct was unlawful, or shall have acted in accordance with some other
defined standard of conduct, the burden of proof of establishing that
Indemnitee has not acted in accordance with such standard shall rest with the
Corporation and Indemnitee shall be presumed to have acted in accordance with
such standard and entitled to indemnification unless, and only unless, based
upon a preponderance of the evidence, it shall be determined by a court of
competent jurisdiction that Indemnitee has not met such standard. In any
event and not in limitation of the above, indemnification to which Indemnitee
is entitled hereunder shall be made promptly upon the determination that
Indemnitee has met such standard (i) by the Board of Directors of the
Corporation by a majority vote of a quorum consisting of Directors who were
not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or even if obtainable, if a quorum of disinterested Directors
so directs, by independent legal counsel in a written opinion, or (iii) by
the shareholders of the Corporation. The Corporation agrees to provide such
a determination within forty five days (or, in the case of determination
pursuant to clause (iii) of the preceding sentence, ninety days) of receipt
of written request from Indemnitee for such a determination. The Corporation
agrees to pay the reasonable fees of the independent legal counsel referred
to in clause (ii) of the second preceding sentence and to fully indemnify
such counsel against any and all expenses (including attorney fees), claims,
liabilities, and damages arising out of or relating to this Agreement or its
engagement pursuant thereto. Independent legal counsel shall be selected by
the Board of Directors or the executive commitee of the board.
4. Indemnitee shall notify the Corporation in writing of any matter or
Proceeding with respect to which Indemnitee intends to seek indemnification
hereunder as soon as reasonably practicable following the receipt by
Indemnitee of written threat thereof, provided, however, that failure to so
notify the Corporation shall not constitute a waiver by Indemnitee of his or
her rights hereunder.
5. In the event of any Proceeding against Indemnitee which may give rise to
a right of indemnification from the Corporation pursuant to this Agreement,
following written request to the Corporation by Indemnitee, the Corporation
shall advance to Indemnitee amounts to cover Expenses incurred by Indemnitee
in defending such Proceeding in advance of the final disposition thereof upon
receipt of (i) any undertaking by or on behalf of Indemnitee to repay such
amount if it shall ultimately be determined by final judgment of a court of
competent jurisdiction that he is not entitled to be indemnified by the
Corporation hereunder, and (ii) satisfactory evidence as to the amount of
such Expenses. Indemnitee's written certification together with a copy of
the statement paid or to be paid by Indemnitee shall constitute satisfactory
evidence absent manifest error.
6. The indemnification rights granted to Indemnitee under this Agreement
shall not be deemed exclusive of, or in limitation of, and shall be in
addition to, any rights to which Indemnitee may be entitled under Illinois
law, the Corporation's Articles of Incorporation or by-laws, any other
agreement, directors and officers insurance, vote of shareholders or
directors or otherwise.
7. Notwithstanding anything in this Agreement to the contrary, Indemnitee
shall not be entitled to indemnification pursuant to this Agreement in
connection with any action or proceeding initiated by Indemnitee against the
Corporation or any director, officer, employee, agent, or fiduciary of the
Corporation (in such capacity) unless the Corporation has joined in or
consented to the initiation of such action or proceeding.
8. In Indemnitee is entitled under this Agreement to indemnification by the
Corporation for some or a portion of the Expense, judgments, fines, penalties
or amounts paid in settlement actually and reasonably incurred by Indemnitee
in the investigation, defense, appeal or settlement of any Proceeding but
not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify Indemnitee for the portion of such Expenses, judgment,
fines, penalties or amounts paid in settlement to which Indemnitee is
entitled.
9. The indemnification, limitation of liability and advancement of Expenses
provided under this Agreement shall continue as to Indemnitee even though
Indemnitee may have ceased to be a director of the Corporation or of another
corporation, partnership, joint venture, trust or other enterprise that
Indemnitee had previously been serving in such capacity at the request of the
Corporation.
10. The rights granted to Indemnitee hereunder shall inure to the benefit
of Indemnitee, his personal representative, heirs, executors, administrators
and beneficiaries, and this Agreement shall be binding upon the Corporation,
its successors and assigns, including any director or indirect successor by
purchase, merger, consolidation or otherwise to all, substantially all, or a
substantial part, of the business and/or assets of the Corporation.
11. This Agreement shall be governed by the laws of the State of Illinois.
If any provision of this Agreement is invalid as applied to any fact or
circumstance, its invalidity shall not affect the validity of any other
provision or of the same provision as applied to any other fact or
circumstance.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above stated.
CHAMPION PARTS, INC.
By: _/s/ Thomas W. Blashill_
Title: ____President_____
INDEMNITEE
__/s/ Jerry A. Bragiel__
Jerry A. Bragiel
