EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of October 1, 1997,
between MOTORCAR PARTS & ACCESSORIES, INC., a New York corporation currently
having an address at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (the
"Company"), and XXXX X. XXXXX, an individual having an address at 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires that Employee be employed by it and
render services to it, and Employee is willing to be so employed and to render
such services to the Company, all upon the terms and subject to the conditions
contained herein; and
WHEREAS, the Company, in order to induce Employee to remain with
the Company, agrees that Employee shall be entitled to receive a bonus payment
in the event of a change in control of the Company under the circumstances
described below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Employment. Subject to and upon the terms and conditions
contained in this Agreement, the Company hereby agrees to employ Employee and
Employee agrees to enter the employ of the Company, for the period set forth in
Section 2 hereof, to render the services to the Company described in Section 3
hereof.
2. Term. Employee's term of employment under this Agreement
shall commence on the date hereof (the "Commencement Date") and shall continue
for a period through and including the second anniversary of the Commencement
Date (the "Employment Term") unless extended in writing by both parties or
earlier terminated pursuant to the terms and conditions set forth herein and
shall automatically renew for successive two-year periods unless written notice
to the contrary is delivered by either party to the other party at least six
months prior to the end of the then-current Employment Term.
3. Duties. Subject to the authority of the Board of Directors of
the Company, Employee shall be employed as the Company's Secretary. It is agreed
that Employee shall not be required to perform his services in the Company's or
any other facilities. The rights and duties of Employee shall not in any way be
curtailed by the Company without his consent.
4. Other Business. The Company acknowledges and agrees that
Employee is a Partner in Xxxxxx Xxxxxx Flattau & Klimpl, LLP, counsel to the
Company, that services hereunder shall be rendered on a non-exclusive basis and
that Employee shall be free to render his services, whether as an employee,
independent contractor or otherwise, to others; provided that in the event that
the rendering of such services to others shall prevent the performance of duties
hereunder, then
this Agreement may be terminated at any time pursuant to the terms of Section 9
hereof. The foregoing shall not prevent the purchase, ownership or sale by
Employee of investments or securities of publicly held companies and any other
business which is not competitive and does not have any other business relations
with the Company or any subsidiary of the Company, provided such purchase,
ownership or sale by Employee does not interfere with the performance of his
duties hereunder.
5. Compensation. As compensation for his services and covenants
hereunder, the Company shall pay Employee the following:
(a) Salary. The Company shall pay Employee a salary
("Salary") of One Hundred Thousand Dollars ($100,000) per year.
(b) Options. The Company shall grant to Employee an
option to purchase, for a period of ten years from such date of grant, Fifty
Thousand (50,000) shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), pursuant to the terms of the Company's 1994 Stock Option
Plan, as amended to date (the "Plan"), and any related stock option agreement(s)
required to be executed in connection therewith. Such option shall become
exercisable on the date of grant with respect to one-half of such shares of
Common Stock and on the first anniversary thereof with respect to the remaining
such shares.
(c) Bonus. Employee shall be entitled to the bonus
referred to in Section 11 hereof upon the occurrence of a Change in Control (as
hereinafter defined).
6. Business Expenses. Employee shall be reimbursed for, and
entitled to advances (subject to repayment to the Company if not actually
incurred by Employee) with respect to, only those business expenses incurred by
him that are authorized in writing and for which Employee has submitted
receipts.
7. Employee Benefits. During the Employment Term, Employee shall
be entitled to such insurance, disability and health and medical benefits and be
entitled to participate in such retirement plans or programs as generally made
available to executive officers of the Company pursuant to the policies of the
Company; provided that Employee shall be required to comply with the conditions
attendant to coverage by such plans and shall comply with and be entitled to
benefits only in accordance with the terms and conditions of such plans. The
Company may withhold from any benefits payable to Employee all federal, state,
local and other taxes and amounts as shall be permitted or required pursuant to
law, rule or regulation. All of the benefits to which Employee may be entitled
may be changed from time to time or withdrawn at any time in the sole discretion
of the Company.
8. Death and Disability. (a) The Employment Term shall terminate
on the date of Employee's death, in which event Employee's estate shall be
entitled to receive such portion
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of his Salary that has been earned through the date of death. Employee's estate
will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Section 6(a).
(b) If, during the Employment Term, Employee,
because of physical or mental illness or incapacity, shall become substantially
unable to perform the duties and services required of him under this Agreement
for a period of 45 consecutive days or 60 days in the aggregate during any
six-month period the Company may, upon at least twenty (20) days' prior written
notice given at any time after the expiration of such 45 or 60 day period, as
the case may be, to Employee of its intention to do so, terminate this Agreement
as of such date which is the date 30 days after the date of such notice. In case
of such termination, Employee shall be entitled to receive such portion of his
Salary that has been earned through the date of termination. Employee will not
be entitled to any other compensation upon termination of this Agreement
pursuant to this Section 6(b). In the event of any dispute regarding Employee's
ability to perform the duties and services required of him hereunder, the matter
will be resolved by the determination of a majority of three physicians
qualified to practice medicine in New York, one to be selected by each of
Employee and the Company and the third to be selected by the two designated
physicians. For this purpose, Employee agrees to submit to appropriate medical
examinations.
9. Termination for Cause. (a) The Company may terminate the
employment of Employee for Cause (as hereinafter defined) and Employee may
resign without cause. Upon such termination, the Company shall be released from
any and all further obligations under this Agreement, except that the Company
shall be obligated to pay Employee his Salary, reimbursable expenses and
benefits owing to Employee through the day on which Employee is terminated.
Employee will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Section 9(a).
(b) As used herein, the term "Cause" shall mean: (i)
the willful failure of Employee to perform his duties pursuant to Section 3
hereof, which failure is not cured by Employee within 20 days following written
demand for substantial performance from the Company, which demand identifies the
manner in which the Company believes that Employee has not performed such duties
and the steps required to cure such failure to perform; (ii) any other material
breach of this Agreement by Employee, including any of the material
representations or warranties herein made by Employee, and including engaging in
any business preventing performance hereunder as described in Section 4 hereof,
which breach has not ceased within 20 days after written notice thereof has been
delivered to Employee by the Company, which notice identifies in reasonable
detail the manner in which the Company believes that Employee has breached this
Agreement and the steps required to cure such breach, if applicable; (iii)
Employee shall intentionally and willfully engage in misconduct toward the
Company which is materially injurious to the Company, monetarily or otherwise;
or (iv) the conviction of Employee of, or the entering of a plea of nolo
contendere by Employee with respect to, a felony.
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10. Termination for Good Reason. (a) Employee may
voluntarily terminate his employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean the occurrence of a Change in Control (as
defined below).
(b) Any termination by the Company or by Employee
pursuant to this Agreement shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 15. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee's employment under the provisions so
indicated.
(c) "Termination Date" shall mean if Employee's
employment is terminated pursuant to Subsection 10(a) hereof, the date specified
in the Notice of Termination (which, in the case of a termination for Good
Reason shall not be less than fifteen (15) nor more than sixty (60) days from
the date such Notice of Termination is given); provided, however, that if within
fifteen (15) days after any Notice of Termination is given, or, if later, prior
to the Termination Date (as determined without regard to this proviso), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected); and
provided, further, that the Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Employee's full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary) and continue
Employee as a participant in all compensation, benefit and insurance plans in
which Employee was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this Subsection.
Amounts paid under this Subsection are in addition to all other amounts due
under this Agreement, and shall not be offset against or reduce any other
amounts due under this Agreement.
(d) For purposes of this Agreement, a "Change in
Control" shall have occurred if:
(i) any "person", as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities;
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(ii) during any period of not more than two
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clause (a), (c) or (d) of this Section) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof;
(iii) the shareholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 30% of the combined voting
power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
11. Compensation and Certain Other Provisions in the Event of
Termination of Employment For Good Reason. If the Company shall terminate
Employee's employment other than pursuant to the provisions of Sections 8 or 9
hereof, or if Employee shall voluntarily terminate employment pursuant to the
provisions of Subsection 10(a), then the Company, as liquidated damages or
severance pay or both, shall pay to Employee and provide Employee and Employee's
dependents with the following:
(a) The Company shall pay Employee (i) Salary through
the Termination Date at the annual rate of compensation in effect immediately
prior to the Termination Date, and (ii) two and one-half times the amount of
such Salary (the "Termination Compensation"). For the purposes of the foregoing
payments, the annual rate of compensation shall be the rate paid to Employee
without regard to any purported reduction or attempted reduction of such rate by
the Company. The amount specified in clauses (i) and (ii) shall be payable in a
lump sum within ten (10) days after the Termination Date.
(b) During the five months following the Termination
Date (the "Payout Period"), the Company shall arrange to provide Employee with
life, disability, accident, group health insurance and other employee benefits
substantially similar to those which Employee was receiving immediately prior to
the Notice of Termination. Benefits otherwise receivable by Employee pursuant to
this Section shall be reduced to the extent comparable benefits are actually
received by Employee
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during the Payout Period, and any such benefits actually received by Employee
shall be reported by Employee to the Company. In addition, the remainder of the
Payout Period until Employee reaches retirement, or the period until Employee's
death if earlier, shall be considered service with the Company for the purpose
of continued service credits under applicable pension and retirement plans of
the Company.
(c) If and to the extent that benefits or service
credits for benefits provided under clause (b) above shall not be payable or
provided under any such plans to Employee and Employee's dependents by reason of
Employee no longer being an employee of the Company as the result of termination
of Employee's employment, the Company shall itself pay or provide for payment of
such benefits and service credit for benefits to Employee and Employee's
dependents.
(d) The termination of Employee's employment shall not
affect any vested benefits under the Company's pension plans to which Employee
may be entitled (including any additional service credits for benefits as
provided in Subsections (b) and (c) above), and Employee may receive retirement
payments under such pension plans on any date selected by Employee, which must
be a date on which retirement payments under such plans may commence.
(e) The Company shall pay the one-time individual
conversion fee required by the carrier in connection with Employee's conversion
of any insurance policies carried by the Company on Employee's life.
(f) Employee shall not be required to mitigate the
amount of any payment provided for in this Section 11 by seeking employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 11 be reduced by any compensation earned by Employee as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by Employee to the Company, or otherwise.
(g) Anything in this Agreement to the contrary
notwithstanding, in the event that: (i) a Change in Control occurs, (ii)
Employee's employment with the Company is terminated prior to the date of such
Change in Control and (iii) it is reasonably demonstrated by Employee that such
termination of employment (A) was at the request of a third party who has taken
steps reasonably calculated to effect the Change in Control or (B) otherwise
arose in connection with or anticipation of a Change in Control, then, for all
purposes of this Agreement, the Change in Control shall be deemed to have
occurred immediately prior to the date of such termination of employment.
(h) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Employee (whether paid or
payable pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Section 11(h))
(a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision) or any interest or penalties are incurred
by Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Employee shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by Employee of all
taxes with respect to the Gross-Up Payment (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
12. Disclosure of Information and Restrictive Covenant. Employee
acknowledges that, by his employment, he has been and will be in a confidential
relationship with the Company and will have access to confidential information
and trade secrets of the Company, its subsidiaries and affiliates. Confidential
information and trade secrets include, but are not limited to, customer,
supplier and client lists, price lists, marketing, distribution and sales
strategies and procedures, operational and equipment techniques, business plans
and systems, quality control procedures and
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systems, special projects and technological research, including projects,
research and reports for any entity or client or any project, research, report
or the like concerning sales or manufacturing or new technology, employee
compensation plans and any other information relating thereto, and any other
records, files, drawings, inventions, discoveries, applications, processes, data
and information concerning the business of the Company which are not in the
public domain. Employee agrees that in consideration of the execution of this
Agreement by the Company:
(a) Employee will not, during the term of this Agreement
or at any time thereafter, use, or disclose to any third party, trade secrets or
confidential information of the Company, including, but not limited to,
confidential information or trade secrets belonging or relating to the Company,
its subsidiaries, affiliates, customers and clients or proprietary processes or
procedures of the Company, its subsidiaries, affiliates, customers and clients.
Proprietary processes and procedures shall include, but shall not be limited to,
all information which is known or intended to be known only to employees of the
Company, its respective subsidiaries and affiliates or others in a confidential
relationship with the Company or its respective subsidiaries and affiliates
which relates to business matters.
(b) This Section 12 and Sections 13, 14 and 15 hereof
shall survive the expiration or termination of this Agreement for any reason.
(c) It is expressly agreed by Employee that the nature
and scope of each of the provisions set forth above in this Section 12 are
reasonable and necessary. If, for any reason, any aspect of the above provisions
as it applies to Employee is determined by a court of competent jurisdiction to
be unreasonable or unenforceable, the provisions shall only be modified to the
minimum extent required to make the provisions reasonable and/or enforceable, as
the case may be. Employee acknowledges and agrees that his services are of a
unique character and expressly grants to the Company or any subsidiary,
successor or assignee of the Company, the right to enforce the provisions above
through the use of all remedies available at law or in equity, including, but
not limited to, injunctive relief.
13. Remedy. It is mutually understood and agreed that Employee's
services are special, unique, unusual, extraordinary and of an intellectual
character giving them a peculiar value, the loss of which cannot be reasonably
or adequately compensated in damages in an action at law. Accordingly, in the
event of any breach of the non-disclosure clauses under Section 12 hereof, the
Company shall be entitled to equitable relief by way of injunction or otherwise,
in addition to damages the Company may be entitled to recover.
14. Representations and Warranties of Employee. In order to
induce the Company to enter into this Agreement, Employee hereby represents and
warrants to the Company that he has the legal capacity and unrestricted right to
execute and deliver this Agreement and to perform all of his obligations
hereunder.
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15. Notices. All notices given hereunder shall be in writing and
shall be deemed effectively given when mailed, if sent by registered or
certified mail, return receipt requested, addressed to Employee at his address
set forth on the first page of this Agreement and to the Company at its address
set forth on the first page of this Agreement, Attention: Xxx Xxxxx, Chairman of
the Board, or at such address as such party shall have designated by a notice
given in accordance with this Section 15, or when actually received by the party
for whom intended, if sent by any other means.
16. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to its subject matter and no change,
alteration or modification hereof may be made except in writing signed by the
parties hereto. Any prior or other agreements, promises, negotiations or
representations not expressly set forth in this Agreement are of no force or
effect.
17. Severability. If any provision of this Agreement shall be
unenforceable under any applicable law, then notwithstanding such
unenforceability, the remainder of this Agreement shall continue in full force
and effect.
18. Waivers, Modifications, Etc. No amendment, modification or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by each of the parties hereto, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
19. Assignment. Neither this Agreement, nor any of Employee's
rights, powers, duties or obligations hereunder, may be assigned by Employee.
This Agreement shall be binding upon and inure to the benefit of Employee and
his heirs and legal representatives and the Company and its successors and
assigns. Successors of the Company shall include, without limitation, any
corporation or corporations acquiring, directly or indirectly, all or
substantially all of the assets of the Company, whether by merger,
consolidation, purchase, lease or otherwise, and such successor shall thereafter
be deemed "the Company" for the purpose hereof.
20. Applicable Law. This Agreement shall be deemed to have been
made, drafted, negotiated and the transactions contemplated hereby consummated
and fully performed in the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law rules thereof. Nothing contained in this Agreement shall
be construed so as to require the commission of any act contrary to law, and
whenever there is any conflict between any provision of this Agreement and any
statute, law, ordinance, order or regulation, contrary to which the parties
hereto have no legal right to contract, the latter shall prevail, but in such
event any provision of this Agreement so affected shall be curtailed and limited
only to the extent necessary to bring it within the legal requirements.
21. Jurisdiction and Venue. It is hereby irrevocably agreed that
all disputes or controversies between the Company and Employee arising out of,
in connection with or relating to this Agreement shall be exclusively heard,
settled and determined by arbitration to be held in the City
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of New York, County of New York, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. The parties also
agree that judgment may be entered on the arbitrator's award by any court having
jurisdiction thereof and the parties consent to the jurisdiction of any court
located in the City of New York, County of New York, for this purpose.
22. Full Understanding. Employee represents and agrees that he
fully understands his right to discuss all aspects of this Agreement with his
private attorney, that to the extent, if any that he desired, he availed himself
of this right, that he has carefully read and fully understands all of the
provisions of this Agreement, that he is competent to execute this Agreement,
that his agreement to execute this Agreement has not been obtained by any duress
and that he freely and voluntarily enters into it, and that he has read this
document in its entirety and fully understands the meaning, intent and
consequences of this document which is that it constitutes an agreement of
employment.
23. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
MOTORCAR PARTS & ACCESSORIES, INC.
By:
______________________________________
Name:
Title:
______________________________________
XXXX X. XXXXX
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