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 Xxxxxxx X. Xxxxxx (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 xxx 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 xxx 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.
0000 00xx Xxxxxx
Xxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
If to the Executive:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
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/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx, Chairman of
Special Committee of the Board
of Directors
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
