DEF 14A 1 h10041816x1_def14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ☑

Filed by a Party other than the Registrant o

Check the appropriate box:

o Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☑ Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material Pursuant to §240.14a-12

MOTORCAR PARTS OF AMERICA, INC.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.
 
 
 
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MOTORCAR PARTS OF AMERICA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On March 24, 2017

To Our Shareholders:

We will hold our annual meeting of the shareholders of Motorcar Parts of America, Inc. (the “Company”) on March 24, 2017 at 10:00 a.m. (PT) at the offices of the Company at 2929 California Street, Torrance, California 90503. As further described in the accompanying Proxy Statement, at this meeting we will consider and act upon:

(1)The election of the ten directors named in the accompanying proxy statement to our Board of Directors to serve for a term of one year or until their successors are duly elected and qualified;
(2)The ratification of the appointment of Ernst & Young LLP as our independent registered public accountants for the fiscal year ended March 31, 2017;
(3)The approval, on a non-binding advisory basis, of the compensation of our named executive officers (say on pay); and
(4)The transaction of such other business as may come properly before the meeting or any meetings held upon adjournment or postponement of the meeting.

Our Board of Directors (the “Board”) has fixed the close of business on January 24, 2017 as the record date for the determination of shareholders entitled to vote at the meeting or any meetings held upon adjournment or postponement of the meeting. Only record holders of our common stock at the close of business on that day will be entitled to vote. A copy of our Annual Report on Form 10-K for the year ended March 31, 2016 and the Form 10-K/A we filed with the Securities and Exchange Commission on July 29, 2016 are enclosed with this notice, but are not part of the proxy soliciting material.

We invite you to attend the meeting and vote in person. If you cannot attend, to assure that you are represented at the meeting, please sign and return the enclosed proxy card as promptly as possible in the enclosed postage prepaid envelope. If you attend the meeting, you may vote in person, even if you previously returned a signed proxy.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on March 24, 2017.

Our proxy statement and our Annual Report on Form 10-K for the year ended March 31, 2016 and the Form 10-K/A we filed with the Securities and Exchange Commission on July 29, 2016 are available at http://www.cstproxy.com/motorcarparts/2017.

By order of the Board of Directors


Michael M. Umansky,
Secretary

Torrance, California
February 24, 2017

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YOUR VOTE IS EXTREMELY IMPORTANT

In order to assure your representation at the Annual Meeting, you are requested to vote, at your earliest convenience, by any of the methods described in the accompanying Proxy Statement. If you decide to attend the Annual Meeting and vote in person, any previous vote by proxy will be revoked automatically and only your vote at the Annual Meeting will be counted.

This year’s Annual Meeting is a particularly important one, and YOUR vote is extremely important.

If you have questions or need assistance voting your shares please contact:


105 Madison Avenue
New York, New York 10016
proxy@mackenziepartners.com
Call Collect: (212) 929-5500
or
Toll-Free (800) 322-2885

Your vote is extremely important, no matter how many or how few shares you own. The Board urges you to vote your shares to elect the Board’s nominees. Even if you plan to attend the Annual Meeting in person, please promptly sign, date and return the enclosed white proxy card in the enclosed postage-paid envelope by following the instructions provided on the enclosed white proxy card to be sure that your shares are voted at the Annual Meeting.

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Notice of Annual Meeting of Stockholders
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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MOTORCAR PARTS OF AMERICA, INC.
2929 California Street
Torrance, California 90503

GENERAL INFORMATION

We are sending you this proxy statement on or about February 24, 2017 in connection with the solicitation of proxies by our Board of Directors. The proxies are for use at our annual meeting of shareholders, which we will hold at 10:00 a.m. (PT) on March 24, 2017, at the offices of the Company at 2929 California Street, Torrance, California 90503. The proxies will remain valid for use at any meetings held upon adjournment or postponement of that meeting. The record date for the meeting is the close of business on January 24, 2017. All holders of record of our common stock at the close of business on the record date are entitled to notice of the meeting and to vote at the meeting and any meetings held upon adjournment or postponement of that meeting. Our principal executive offices are located at 2929 California Street, Torrance, California 90503, and our telephone number is (310) 212-7910. The date of this Proxy Statement is February 24, 2017.

A proxy form is enclosed. Whether or not you plan to attend the meeting in person, please date, sign and return the enclosed proxy as promptly as possible, in the postage prepaid envelope provided, to ensure that your shares will be voted at the meeting. If you are a shareholder of record, you may revoke your proxies at any time prior to the voting at the meeting by submitting a later dated proxy, giving timely written notice of revocation to our secretary or attending the meeting and voting in person. If you are a holder in street name, you may revoke your proxy by following the specific voting directions provided to you by your bank, broker or other intermediary to change or revoke any instructions you have already provided to your bank, broker or other intermediary.

Unless you instruct otherwise in the proxy, any proxy, if not revoked, will be voted at the meeting:

for our Board of Directors’ slate of nominees;
to ratify the appointment of Ernst & Young LLP as our independent registered public accountants
for the fiscal year ending March 31, 2017;
for the approval on a non-binding advisory basis of the compensation of our named executive officers; and
as recommended by our Board of Directors with regard to all other matters, in its discretion.

Our only voting securities are the outstanding shares of our common stock. At the record date, we had 18,693,779 shares of common stock outstanding and approximately 14 shareholders of record. If the shareholders of record present in person or represented by their proxies at the meeting hold at least a majority of our outstanding shares of common stock, a quorum will exist for the transaction of business at the meeting. Shareholders of record who abstain from voting, including brokers holding their customers’ shares who cause abstentions to be recorded, are counted as present for quorum purposes.

For each share of common stock you hold on the record date, you are entitled to one vote on each of the matters that we will consider at this meeting. You are not entitled to cumulate your votes. Brokers holding shares of record for their customers generally are not entitled to vote on certain matters unless their customers give them specific voting instructions. If the broker does not receive specific instructions, the broker will note this on the proxy form or otherwise advise us that it lacks voting authority. The votes that the brokers would have cast if their customers had given them specific instructions are commonly called “broker non-votes.” Broker non-votes will be counted for purposes of determining whether a quorum is present, but will not be counted or deemed to be present or represented for the purpose of determining whether shareholders have approved a matter.

Pursuant to our Amended and Restated By-Laws, the voting standard for the election of directors of the Company in an uncontested election is a majority voting standard. The majority voting standard provides that to be elected in

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an uncontested election, a director nominee must receive a majority of the votes cast in the election such that the number of shares properly cast “for” the nominee exceeds the number of votes properly cast “against” that nominee, with abstentions and broker non-votes not counting as votes “for” or “against.” “Votes cast” means the votes actually cast “for” or “against” a particular proposal, whether in person or by proxy. In contested elections where the number of nominees exceeds the number of directors to be elected, the voting standard is a plurality of votes cast.

We also have adopted a director election and resignation policy (the “Director Election Policy”). The Director Election Policy requires an incumbent director, in order to be nominated by our Board of Directors for re-election as a director, to tender an irrevocable resignation effective upon (1) the failure to receive the required number of votes for re-election and (2) the acceptance of the director’s resignation by our Board of Directors. The Nominating and Corporate Governance Committee of our Board of Directors will assess the appropriateness of such nominee continuing to serve as a director and will recommend to our Board of Directors the action to be taken with respect to such tendered resignation. The Director Election Policy requires that we promptly disclose the decision of our Board of Directors with respect to the tendered resignation in a filing with the Securities and Exchange Commission (the “SEC”) of a current report on Form 8-K.

The affirmative vote of a majority of the votes cast at the meeting by the holders of shares entitled to vote is required to approve Proposal No. 2 (ratification of Ernst & Young LLP as our independent registered public accountants for the fiscal year ended March 31, 2017). The affirmative vote of a majority of the votes cast at the meeting by the holders of shares entitled to vote is required to approve, on a non-binding advisory basis, Proposal No. 3 (advisory vote on the compensation of our named executive officers). An abstention from voting on these matters will be treated as “present” for quorum purposes. However, since an abstention is not treated as a “vote” for or against these matters, it will have no effect on the outcome of the vote. Broker non-votes will not be counted and will have no effect on the outcome of the voting for these matters.

We will pay for the cost of preparing, assembling, printing and mailing this proxy statement and the accompanying form of proxy to our shareholders, as well as the cost of soliciting proxies relating to the meeting. We have requested banks and brokers to solicit their customers who beneficially own our common stock in nominee name. We will reimburse these banks and brokers for their reasonable out-of-pocket expenses regarding these solicitations. Our officers, directors and employees may supplement this solicitation of proxies by telephone and personal solicitation. We will pay no additional compensation to our officers, directors and employees for these activities. We have engaged MacKenzie Partners, Inc. as our proxy solicitor to solicit proxies for us, at an anticipated cost of approximately $25,000. In addition to the use of the mails, solicitation may be made by our proxy solicitor or our employees personally or by telephone, facsimile or electronic transmission.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

We are asking our shareholders to elect ten members to serve on our Board of Directors for a one-year term of office or until their respective successors are elected and qualified. Our Board of Directors has nominated the ten individuals named below for election as directors. Each nominee has agreed to serve as a director if elected.

All of our nominees are currently serving as directors. Of our current Board of Directors members, Selwyn Joffe, Scott J. Adelson, Rudolph J. Borneo, Philip Gay, Duane Miller and Jeffrey Mirvis were elected at the last shareholders meeting, Dr. David Bryan and Joseph Ferguson were appointed in June 2016, and Timothy D. Vargo and Barbara L. Whittaker were appointed in February 2017. Our directors will hold office until the next annual meeting of shareholders, or until their successors are elected and qualified.

The persons named as proxies in the accompanying form of proxy have advised us that at the meeting they will vote for the election of the nominees named below, unless a contrary direction is indicated. If any of these nominees becomes unavailable for election to our Board of Directors for any reason, the persons named as proxies have discretionary authority to vote for one or more alternative nominees designated by our Board of Directors.

No arrangement or understanding exists between any nominee and any other person or persons pursuant to which any nominee was or is to be selected as a director.

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The Board of Directors recommends that shareholders vote FOR each of the nominees named below.

Information Concerning our Board of Directors and our Nominees to our Board of Directors

The nominees for election to our Board of Directors, their ages and present positions with the Company, are as follows:

Name
Age
Position with the Company
Selwyn Joffe
59
Chairman of the Board of Directors, President and Chief Executive Officer
Scott J. Adelson
56
Lead Independent Director
Rudolph J. Borneo
75
Director, Chairman of the Compensation Committee and member of the Audit and Nominating and Corporate Governance Committees
Dr. David Bryan
64
Director, member of the Compensation and Nominating and Corporate Governance Committees
Joseph Ferguson
50
Director, member of the Audit Committee
Philip Gay
59
Director, Chairman of the Audit Committee, and member of the Compensation and Nominating and Corporate Governance Committees
Duane Miller
69
Director, Chairman of the Nominating and Corporate Governance Committee and member of the Audit and Compensation Committees
Jeffrey Mirvis
53
Director, member of the Audit, Compensation and Nominating and Corporate Governance Committees
Timothy D. Vargo
65
Director
Barbara L. Whittaker
65
Director

Selwyn Joffe has been our Chairman of the Board of Directors, President and Chief Executive Officer since February 2003. He has been a director of our Company since 1994 and Chairman since November 1999. From 1995 until his election to his present positions, he served as a consultant to us. Prior to February 2003, Mr. Joffe was Chairman and Chief Executive Officer of Protea Group, Inc. a company specializing in consulting and acquisition services. From September 2000 to December 2001, Mr. Joffe served as President and Chief Executive Officer of Netlock Technologies, a company that specializes in securing network communications. In 1997, Mr. Joffe co-founded Palace Entertainment, Inc., a roll-up of amusement parks and served as its President and Chief Operating Officer until August 2000. Prior to the founding of Palace Entertainment, Inc., Mr. Joffe was the President and Chief Executive Officer of Wolfgang Puck Food Company from 1989 to 1996. He currently serves on the board of directors of the Motor and Equipment Remanufacturers Association, an industry trade association. In addition, Mr. Joffe serves on the board of directors of the California, Arizona and Nevada Automotive Wholesaler's Association (CAWA), also an industry trade association. Mr. Joffe is a graduate of Emory University with degrees in both Business and Law and is an inactive member of the bar of the State of Georgia as well as a Certified Public Accountant. As our most senior executive, Mr. Joffe provides the Board of Directors with insight into our business operations, management and strategic opportunities. His history with our Company and industry experience has led the Board of Directors to conclude that he should serve as a director of our Company.

Scott J. Adelson joined our Board of Directors on January 4, 2008. Mr. Adelson is also a director and member of the compensation committee of QAD Inc., a public software company, since April 2006. Mr. Adelson is a Senior Managing Director and Global Co-Head of Corporate Finance for Houlihan Lokey, a leading international investment bank. During his 27 plus years with the firm, Mr. Adelson has helped advise hundreds of companies on a diverse and in-depth variety of corporate finance issues, including mergers and acquisitions. Mr. Adelson has written extensively on a number of corporate finance and securities valuation subjects. He is an active member of Board of Directors of various privately-held middle-market businesses as well as several recognized non-profit organizations, such as the USC Entrepreneur Program. Mr. Adelson holds a bachelor degree from the University of Southern California and a Master of Business Administration degree from the University of Chicago, Graduate School of Business. Mr. Adelson’s broad business skills and experience, leadership expertise, knowledge of complex global business and financial matters have led the Board of Directors to conclude that he should serve as a director of our Company.

Rudolph J. Borneo joined our Board of Directors on November 30, 2004. Mr. Borneo retired from R.H. Macy’s, Inc. on March 31, 2009. At the time of his retirement, his position was Vice Chairman and Director of Stores of Macy’s

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West, a division of R.H. Macy’s, Inc. Mr. Borneo served as President of Macy’s California from 1989 to 1992 and President of R.H. Macy’s West from 1992 until his appointment as Vice Chairman and Director of Stores in February 1995. In addition, Mr. Borneo is currently Board Chairman of Smoke Eaters Hot Wings Inc., a privately-held company. He earned a Bachelor of Science degree in business administration from Monmouth University. Mr. Borneo is the Chairman of our Compensation Committee and a member of our Audit and Nominating and Corporate Governance Committees. Mr. Borneo’s extensive experience in management of employees, organizational management, general business and retail knowledge and financial literacy have led the Board of Directors to conclude that he should serve as a director of our Company.

Dr. David Bryan joined our Board of Directors on June 9, 2016. Dr. Bryan is also a member of our Compensation and Nominating and Corporate Governance Committees. Dr. Bryan currently teaches at University of California at Santa Cruz. He also provides consulting expertise to multiple Santa Cruz independent and charter schools, and is involved with companies developing effective tools for online education. Dr. Bryan was founding Head of New Roads School from 1995 to 2013. Dr. Bryan received a B.A. from the State University of New York at Stony Brook, an M.S. from the University of California at Los Angeles and a J.D. and Ph.D. from the State University of New York at Buffalo. He was appointed as a director of the Company by the Board of Directors in June 2016.

Joseph Ferguson joined our Board of Directors on June 9, 2016. Mr. Ferguson is also a member of our Audit Committee. Mr. Ferguson is a Co-Founder and Managing Partner at Vicente Capital Partners, a Los Angeles-based investment firm providing capital to privately held growth companies across North America. Prior to co-founding Vicente in 2009, Mr. Ferguson was a partner at Kline Hawkes & Company, which he joined at the firm’s inception in 1995. Mr. Ferguson began his career as an investment banker for Merrill Lynch & Co where he was a member of the Energy and Natural Resources Group and the General Corporate Finance Group. From 1989 to 1994, he worked on over 30 public and private transactions for numerous emerging growth and middle market companies. Mr. Ferguson received a B.B.A in Finance from Southern Methodist University and an M.B.A from the UCLA Anderson School of Management. He was appointed as a director of the Company by the Board of Directors in June 2016.

Philip Gay joined our Board of Directors on November 30, 2004. He is the Chairman of our Audit Committee and is a member of our Compensation and Nominating and Corporate Governance Committees. Mr. Gay currently serves as Managing Director of Triple Enterprises, a business advisory service firm that assists mid-cap sized companies with financing, mergers and acquisitions and strategic financing, which he had previously managed from March 2000 until June 2004. From March 2015 to May 2015 Mr. Gay served as a director and chief executive office at Diego Pellicer Worldwide Inc. From July 2006 until June 2010 Mr. Gay served as President, Chief Executive and a Director of Grill Concepts, Inc., a company that operates a chain of upscale casual restaurants throughout the United States. From March 2000 to November 2001, Mr. Gay served as an independent consultant with El Paso Energy from time to time and assisted El Paso Energy with its efforts to reduce overall operating and manufacturing overhead costs. Previously, he has served as chief financial officer for California Pizza Kitchen (1987 to 1994) and Wolfgang Puck Food Company (1994 to 1996), and he has held various Chief Operating Officer and Chief Executive Officer positions at Color Me Mine and Diversified Food Group from 1996 to 2000. Mr. Gay is also a retired Certified Public Accountant, a former audit manager at Laventhol and Horwath and a graduate of the London School of Economics. Mr. Gay’s leadership experience, general business knowledge, financial literacy and expertise, accounting skills and competency and overall financial acumen have led the Board of Directors to conclude that he should serve as a director of our Company.

Duane Miller joined our Board of Directors on June 5, 2008. Mr. Miller is currently employed by the Flint & Genesee County Regional Chamber of Commerce as Chief Operating Officer and Executive Vice President. Prior to joining the Flint & Genesee Chamber of Commerce, he was employed by the City of Flint, Michigan, as the Director of Government Operations, from February 2009 to August 2009. Mr. Miller retired from General Motors Corporation in April 2008 after 37 years of service. At the time of his retirement, Mr. Miller served as executive director, GM Service and Parts Operations (“SPO”) Field Operations where he was responsible for all SPO field activities, running GM Parts (OE), AC Delco (after-market) and GM Accessories business channels, as well as SPO’s Global Independent Aftermarket. Mr. Miller served on the Board of Directors of OEConnection, an automotive ecommerce organization focused on applying technology to provide supply chain solutions and analysis. He currently serves on the Boards of Directors of McLaren Regional Medical Center in Flint, Michigan, the Health Coalition and Prima Civitas Foundation, headquartered in Lansing, Michigan. His experience also includes serving on the Boards of Directors and a member of its audit and compensation committees of the Urban League of Flint, Michigan, the Boys

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and Girls Club of Flint, Michigan and the Flint/Genesee County Convention and Visitor’s Bureau. Mr. Miller earned a Bachelor of Science degree in marketing from Western Michigan University, and attended the Executive Development Program at the University of California Berkeley, Haas School of Business. Mr. Miller is the Chairman of our Nominating and Corporate Governance Committee and a member of our Audit and Compensation Committees. Mr. Miller’s significant experience with the automotive parts industry, combined with his organizational, management and business understanding, have led the Board of Directors to conclude that he should serve as a director of our Company.

Jeffrey Mirvis joined our Board of Directors on February 3, 2009. Mr. Mirvis is currently the Chief Executive Officer of MGT Industries, Inc. (“MGT”), a privately-held apparel company based in Los Angeles. As Chief Executive Officer of MGT, Mr. Mirvis successfully moved all production and sourcing to Asia. During his sixteen-year tenure as chief executive, Mr. Mirvis has gained valuable knowledge of manufacturing in Asia. Prior to joining MGT in 1990, Mr. Mirvis served as a commercial loan officer at Union Bank of California following his completion of the Union Bank of California’s Commercial Lending Program. He earned a Bachelor of Arts degree in economics from the University of California at Santa Barbara. He has been as a board member of Wildwood School in Los Angeles and the Jewish Federation in Los Angeles. Mr. Mirvis is a member of our Audit, Compensation and Nominating and Corporate Governance Committees. Mr. Mirvis’ international business experience, operational and production expertise, leadership experience and organizational management have led the Board of Directors to conclude he should serve as a director of our Company.

Timothy D. Vargo serves as Chief Executive Officer and President of Kele, Inc., a company that supplies building automation equipment, and serves as a director of Kele Holdco Inc. Prior to joining Kele, he held a variety of senior executive and board positions at AutoZone, TruckPro and Auto Teile-Unger. Mr. Vargo served as the President, Chief Executive Officer and Chief Restructuring Officer of TruckPro from 2008 to 2010 and served on the board of TruckPro from 2004 to 2010. He was a board member of Kohlberg Kravis Roberts & Co. L.P.-owned Auto Teile-Unger from 2003 to 2008. He served as President of AutoZone, Inc. from March 1997 to May 2001, served as its Chief Operating Officer from December 1996 to May 2000 and served on its board of directors from 1997 to 2001. He was appointed as a director of the Company by the Board of Directors in February 2017. Mr. Vargo’s automotive experience, leadership experience and organizational management have led the Board of Directors to conclude that he should serve as a director of our company.

Barbara L. Whittaker is a business strategist and procurement and supply chain expert with extensive experience in the automotive industry, with both original equipment manufacturers and suppliers, and in the aftermarket. In 2010 Mrs. Whittaker founded BW Limited llc, which provides companies business and procurement strategies that lead to improved performance. Previously, Ms. Whittaker worked for the General Motors Corporation and Delphi Automotive in leadership positions of increasing responsibility. Prior to her retirement from General Motors, Ms. Whittaker’s position was Executive Director of Global Purchasing. Mrs. Whittaker previously served in Chevrolet’s Division of General Motors Corporation in Production Control and Scheduling, with an emphasis on Supply Chain. Mrs. Whittaker holds a Bachelor of Industrial Administration degree from General Motors Institute (now Kettering University), MBA degree from Wayne State University, and has also completed the Advanced Management Program at INSEAD in France, and the Executive Development program at University of Michigan. In addition to this formal education, she holds Six Sigma Green Belt certification and is well versed in lean production systems (including General Motors' Global Manufacturing System). She has also held board of directors positions for Detroit Manufacturing Systems, ChannelNet and Piston Group, each of which is privately held. She was appointed as a director of the Company by the Board of Directors in February 2017. Mrs. Whittaker’s automotive experience, supply chain expertise, leadership experience and organizational management have led the Board of Directors to conclude that she should serve as a director of our company.

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Corporate Governance Overview

Our corporate governance policies and practices reflect our values, and allow our Board to effectively oversee our company in the interest of creating long-term value. The key elements of our program and their benefits to our stockholders are described below.

OUR POLICY OR
PRACTICE
DESCRIPTION AND BENEFIT TO OUR STOCKHOLDERS
STOCKHOLDER RIGHTS
Annual Election
of Directors
Our directors are elected annually, allowing our stockholders to hold them accountable for the discharge of their duties.
Single Class of Outstanding
Voting Stock
We have no class of preferred stock outstanding, meaning our common stockholders control our company, with equal voting rights. All common stockholders are entitled to vote for all director nominees.
Majority Voting for
Director Elections
We have a majority vote standard for uncontested director elections, which increases Board accountability to our stockholders.
Mandatory Director
Resignation Policy
Incumbent directors must tender their resignation effective upon the failure to receive the required number of votes and the acceptance by our Board.
Ability to Amend Bylaws
Our stockholders have the ability to amend our bylaws by a majority vote.
No Exclusive Forum or Fee Shifting Bylaws
Our bylaws do not require that certain stockholder disputes be brought in a particular forum nor are stockholders required to pay our legal fees if they do not substantially prevail in any litigation brought against our company.
No Poison Pill
We do not have a stockholder rights plan (commonly referred to as a “poison pill”).
BOARD STRUCTURE
Governance
Guidelines
Our Code of Business Conduct and Ethics provide stockholders with information regarding the policies applicable to our Board and officers.
Majority
Independent
Nine of our ten director nominees, or 90%, are independent, ensuring that our Board oversees our company without undue influence from management.
Lead Independent Director
Our Lead Independent Director is selected by our independent directors to preside at executive sessions of independent directors.
Director Ownership
Guidelines
Under our owneship guidelines, directors are required to own stock worth 3x their base compensation within approximately 5 years of joining the Board.
Committee
Governance
Our Board Committees have written charters and are comprised exclusively of independent directors. Committee composition and charters are reviewed annually by our Board.
Overboarding
None of our directors serve on more than three public company boards.
Board
Refreshment Process
Our Board’s Nominating and Corporate Governance Committee annually evaluates our directors and Board composition focused on the alignment of director skills and company strategy. One director that served during 2016 has passed away. We appointed two new directors in 2016. We have appointed two new independent directors in 2017 and nominated them to be voted on by stockholders at the Annual Meeting. The nominees for this year’s annual meeting include four directors that were not on our Board at the time of our last annual meeting.
Annual
Performance Evaluations
Our Board’s Nominating and Corporate Governance Committee oversees an annual performance evaluation of our Board and its Committees and leadership to ensure that they continue to serve the best interests of stockholders.
Access to
Management and Experts
Our Board and Committes have complete access to all levels of management and can engage advisors at our expense, giving them access to employees with direct responsibility for managing our company and experts to help them fulfill their oversight responsiblities on behalf of our stockholders.
Succession Planning
Our Board’s Compensation Committee and/or the full Board reviews senior executive successors to identify and develop our future leaders and ensure business continuity if any of these key employees were to leave our company.
   
 

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Governance Policies and Guidelines

We have adopted a Code of Business Conduct and Ethics that provides policies for various matters relating to the conduct of our business, including the following key matters:

compliance with governmental laws, rules and regulations
confidentiality
conflicts of interest and corporate opportunities
insider trading, which is supplemented by a robust policy applicable to the Company’s directors, officers and employees.
director qualifications, including a statement that the Company seeks directors with a diverse set of expertise and experience, that the Company values integrity and the ability to work with other members of the board and senior management, and also that the Company will take into account the diversity of a candidate’s perspectives, background and other demographics and characteristics.

The Code of Business Conduct and Ethics is filed with the SEC and a copy is posted on our website at www.motorcarparts.com. We intend to disclose future amendments to certain provisions of the code, or waivers of such provisions granted to executive officers and directors, on our website within four business days following the date of such amendment or waivers. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request addressed to the Corporate Secretary at Motorcar Parts of America, Inc., 2929 California Street, Torrance, CA 90503.

Our Board has adopted a number of other policies and guidelines that are intended to ensure good governance and the alignment of interests between the directors and management, on the one hand, and stockholders on the other. Among the written policies are:

Related Party Transaction Policy. This policy makes certain material transactions between a company and related persons subject to approval or ratification in order to avoid conflicts of interest or the perception thereof. The policy includes the following terms:
“Related Person” includes directors, executive officers, beneficial owners of more than 5% of the Company’s securities, immediate family members of the foregoing, and other related entities.
$120,000 materiality threshold for applicability of the policy.
The policy requires annual Audit Committee status reports on related person transactions.
Various types of transactions are automatically pre-approved under the policy, including regular executive compensation reported on the Company’s proxy statement pursuant to Item 402 of Regulation S-K and ordinary-course transactions where a related person owns 10% or less of the equity interest in another party to the related party transaction.
Clawback Policy. This policy allows the Company to recoup certain compensation awards paid to executives in the event of restatement of the financial results upon which the awards were based. The policy includes the following terms:
The policy is triggered when there is a restatement to the Company’s financial statements to correct a material error that the Board or Compensation Committee determines is a result of fraud or intentional misconduct of a participant in the Company’s incentive plans.
The policy applies to all bonuses, incentive compensation, and equity-based awards granted after the end of fiscal year 2017.
Stock Ownership Guidelines. These guidelines serve to align the interests of directors and officers with the Company by requiring them to acquire and hold ) an amount of stock with an aggregate market value equal to a specified multiple of their base salary. The policy includes the following terms:
The Chief Executive Officer is expected to hold, within approximately 5 years after attaining his or her position or the date of the guidelines, shares of Company common stock worth 3 times their base salary.

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Named executive officers other than the Chief Executive Officer are expected to hold, within approximately 5 years after attaining their position or the date of the guidelines, shares of Company common stock worth 2 times their base salary.
Directors are expected to hold, within approximately 5 years after attaining their position or the date of the guidelines, shares of Company common stock worth 3 times their base compensation.
As of January 24, 2017, the Company’s Chief Executive Officer, was in compliance with these guidelines.

Engagement with stockholders

We actively engage with our stockholders, in person, by phone and through written correspondence. During fiscal 2017, we have met in person with most of our largest stockholders and many other stockholders. We take into account feedback received during those meetings and are constantly looking for ways to improve our corporate governance and executive compensation practices.

Information about Our Non-Director Executive Officers and Significant Employees

Our executive officers (other than executive officers who are also members of our Board of Directors) and significant employees, their ages and present positions with our Company, are as follows:

Name
Age
Position with the Company
Kevin Daly
57
Chief Accounting Officer
Steve Kratz
62
Chief Operating Officer
David Lee
47
Chief Financial Officer
Doug Schooner
47
Chief Manufacturing Officer
Michael Umansky
75
Vice President, Secretary and General Counsel

Our executive officers are appointed by and serve at the discretion of our Board of Directors. A brief description of the business experience of each of our executive officers other than executive officers who are also members of our Board of Directors and significant employees is set forth below.

Kevin Daly has been our Chief Accounting Officer since February 2008. Prior to this, Mr. Daly served as our Vice President, Controller since he joined us in January 2006. From May 2000 until he joined our Company, Mr. Daly served as Corporate Controller for Leiner Health Products Inc., a private label manufacturer of vitamins and over-the-counter pharmaceutical products based in Carson, California. From November 1994 until May 2000, Mr. Daly held various director level finance positions at Dexter Corporation. From November 1988 until October 1994, he held various positions in the finance and controller’s departments of FMC Corporation, based in Chicago, Illinois. From June 1985 to November 1988, Mr. Daly served as Controller of Bio-logic Systems Corp. Mr. Daly is a Certified Public Accountant and worked in the firm of Laventhol & Horwath from 1981 to 1985. Mr. Daly has a Bachelor of Science degree in Accounting from the University of Illinois and a Master of Business Administration degree from the University of Chicago, Booth Graduate School of Business.

Steve Kratz has been our Chief Operating Officer since May 2007. Prior to this, Mr. Kratz served as our Vice President-QA/Engineering since 2001. Mr. Kratz joined our Company in April 1988. Before joining us, Mr. Kratz was the General Manager of GKN Products Company, a division of Beck/Arnley-Worldparts. In addition to serving as our Chief Operating Officer, Mr. Kratz heads our quality assurance, research and development, engineering and information technology departments.

David Lee has been our Chief Financial Officer since February 2008. Prior to this, Mr. Lee served as our Vice President of Finance and Strategic Planning since January 2006, focusing primarily on financial management and strategic planning. Mr. Lee joined us in February 2005 as a Director of Finance and Strategic Planning. His primary responsibilities as Chief Financial Officer are treasury, budgeting and financial management. From August 2002 until he joined us in 2005, he served as corporate controller of Palace Entertainment, Inc., an amusement and water park organization. Prior to this, Mr. Lee held various corporate controller and finance positions for several domestic companies and served in the audit department of Deloitte LLP (formerly known as Deloitte & Touche LLP). Mr. Lee is a Certified Public Accountant. Mr. Lee earned his Bachelor of Arts degree in economics from the University of California, San Diego, and a Master’s in Business Administration degree from the University of California Los Angeles Anderson School of Management.

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Doug Schooner has been our Chief Manufacturing Officer since June 2014. Prior to this, he served as our Vice President, Manufacturing from January 2001 to June 2014. He joined the Company in June 1993. Mr. Schooner earned his Bachelor of Science degree in Mechanical Engineering from California State University, Long Beach.

Michael Umansky has been our Vice President and General Counsel since January 2004 and is responsible for all legal matters. His responsibilities also include the oversight of Human Resources. His additional appointment as Secretary became effective September 1, 2005. Mr. Umansky was a partner of Stroock & Stroock & Lavan LLP, and the founding and managing partner of its Los Angeles office from 1975 until 1997 and was Of Counsel to that firm from 1998 to July 2001. Immediately prior to joining our Company, Mr. Umansky was in the private practice of law, and during 2002 and 2003, he provided legal services to us. From February 2000 until March 2001, Mr. Umansky was Vice President, Administration and Legal, of Hiho Technologies, Inc., a venture capital financed producer of workforce management software. Mr. Umansky is admitted to practice law in California and New York and is a graduate of The Wharton School of the University of Pennsylvania and Harvard Law School.

There are no family relationships among our directors or named executive officers. There are no material proceedings to which any of our directors or executive officers or any of their associates, is a party adverse to us or any of our subsidiaries, or has a material interest adverse to us or any of our subsidiaries. To our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding during the last ten years (excluding traffic violations or similar misdemeanors), and none of our directors or executive officers was a party to any judicial or administrative proceeding during the last ten years (except for any matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on our review of copies of such forms received by us, or written representations from reporting persons that no such forms were required for those persons, we believe that our insiders complied with all applicable Section 16(a) filing requirements during the fiscal year ended March 31, 2016 with the following exceptions:

On June 17, 2015 Mr. Joffe filed a Form 4 that was due on June 15, 2015. On June 26, 2015, Mr. Kratz filed a Form 4 that was due on June 25, 2015. On June 30, 2015, Messrs. Umansky, Lee, Daly, Schooner, and Kratz, and Richard Mochulsky, the vice president of sales, filed Form 4s that were due on June 26, 2015.

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Executive Compensation

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our named executive officers for fiscal 2016 should be read together with the compensation tables and related disclosures set forth below. This discussion contains certain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.

Executive Compensation Overview. We believe that our executive compensation program has many features that reflect best practices.

What We Do

      ✓   Pay for performance – approximately 56% of our CEO’s 2016 total compensation consists of bonus and equity awards granted by the Compensation Committee based on performance

      ✓   Emphasize long-term performance – approximately 29% of our CEO’s 2016 total compensation was equity-based and tied to creating long-term stockholder value

      ✓   Use double-trigger change of control vesting provisions – Vesting of equity following a change of control requires qualifying termination of employment within two years

      ✓   Maintain rigorous stock ownership guidelines – 3x base salary for our CEO and 2x base salary for our other named executive officers, helping to ensure the alignment of their interests with those of our shareholders

      ✓   Maintain a clawback policy for executive compensation

      ✓   Use an independent compensation consultant retained directly by, and serving at the direction of, the Compensation Committee. In particular, the Compensation Committee has engaged Towers Watson to evaluate changes in the Company’s compensation practices and propose alternate approaches to address the concerns of shareholders and proxy advisory firms

      ✓   Take into account feedback from stockholders, particularly the outcome of the non-advisory vote on the compensation of the Company’s executive officers at the 2016 Annual Meeting of Stockholders

      ✓   Periodically assess risks related to our compensation policies and practices

      ✓   Following termination, obtain releases from liability from and impose restrictive covenants on our departing executives

      ✓   Annually evaluate the Compensation Committee’s performance and review its charter

What We Don’t Do

      ✗   Have employment agreements for executives other than our Chief Executive Officer

      ✗   Provide above-market interest rates in our deferred compensation plan

      ✗   Permit directors or officers to hedge or pledge company stock

      ✗   Grant stock options with an exercise price less than the fair market value on the date of grant

      ✗   Re-price or exchange stock options without stockholder approval

      ✗   Provide tax gross-ups for executives

Financial Performance Highlights.

Net sales and operating income. We are focused on growing our net sales and increasing our profitability. For the last several years, we have achieved:

Net sales: 22.3% increase in fiscal 2016 and 42.6% cumulative increase in the fiscal 2014-2016 three-year period
Operating income: 14.0% increase in fiscal 2016 and 19.3% cumulative increase in the fiscal 2014-2016 three-year period

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Total Stockholder Return. We are focused on maximizing total stockholder return (TSR). TSR measures the return that we have provided our stockholders based on price appreciation. For the last several years we have achieved TSR of:

36.7% in fiscal 2016
519.6% cumulative in the fiscal 2014-2016 three-year period

In each case, these TSR results outperformed the Nasdaq Composite Total Returns and the Zacks Retail and Wholesale Auto Parts Index.

Executive Compensation Summary.

The retention of experienced, highly-capable and dedicated executives is crucial to the long-term success of our Company. To achieve the goal of recruiting, retaining and motivating our executives, our Compensation Committee has developed an overall executive compensation program that rewards these employees for their contributions to our Company.

The primary objectives of our practices with respect to executive compensation are to:

Provide appropriate incentives to our executive officers to implement our strategic business objectives and achieve the desired company performance;
Reward our executive officers for their contribution to our success in building long-term shareholder value; and
Provide compensation that will attract and retain superior talent and reward performance.

Compensation Components.

With our compensation objectives in mind, our executive officer compensation program consists of five primary elements: (1) base salary; (2) an annual bonus; (3) long-term incentive compensation in the form of equity awards; (4) non-qualified deferred compensation arrangements; and (5) coverage under our broad-based employee benefit plans, such as our group health and 401(k) plans, and executive perquisites.

Base Salary. Base salary is the “fixed” component of our executive compensation intended to meet the objective of attracting and retaining the executive officers of superior talent that are necessary to manage and lead our Company.

Annual Bonus. We utilize annual bonuses that are designed to provide incentives to motivate the achievement of strategic business objectives, desired company performance and individual performance goals.

Equity Award Program. Equity awards are a part of our overall executive compensation program because we believe that our long-term performance will be enhanced through the use of equity awards that reward our executives for maximizing shareholder value over time. Prior to fiscal 2014, we elected to use stock options that vest over time as the primary long-term equity incentive vehicle to promote retention of our key executives, but in subsequent fiscal years we used restricted stock and restricted stock unit awards, which generally vest over time. Our named directors and executive officers currently hold a significant portion of our fully-diluted common stock, substantially through the ownership of stock options and restricted stock. In determining the number of stock options and/or restricted stock to be granted to executives, we historically have taken into account the individual’s position, scope of responsibility, ability to affect profits and shareholder value and the value of the stock options and/or restricted stock in relation to other elements of the individual executive’s total compensation. In fiscal 2011, we adopted our 2010 Incentive Award Plan, and we amended and restated this plan in fiscal 2013 to increase the number of shares of our common stock available for grant under the plan to 1,750,000. This amendment and restatement was approved by our stockholders at the Annual Meeting of Stockholders held on March 28, 2013. At our Annual Meeting of Stockholders held on March 31, 2014, our stockholders approved a second amendment and restatement of the 2010 Plan that further increased the number of shares of common stock reserved for grant under the 2010 Plan from 1,750,000 to 2,750,000.

Deferred Compensation Benefits. We offer a non-qualified deferred compensation plan to selected executive officers which provides unfunded, non-tax qualified deferred compensation benefits. We believe this program helps promote the retention of our senior executives. Participants may elect to contribute a portion of their compensation to the plan and we made matching contributions of 100% of each participant’s elective contributions to the plan up to 3% of the participant’s compensation for the year. Contributions for fiscal 2016 and year-end account balances for those executive officers can be found in the Non-Qualified Deferred Compensation table.

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Other Benefits. We provide to our executive officers medical benefits that are generally available to our other employees. Executives are also eligible to participate in our other broad-based employee benefit plans, such as our long and short-term disability, life insurance and 401(k) plan. Historically, the value of executive perquisites, as determined in accordance with the rules of the SEC related to executive compensation, has not exceeded 10% of the base salary of any of our executives.

Determination of Compensation Decisions.

The Compensation Committee is responsible for establishing, developing and maintaining our executive compensation program. The role of the Compensation Committee is to oversee our compensation and benefits plans and policies, administer our equity incentive plans and review and approve all compensation decisions relating to all executive officers and directors. In order for the Compensation Committee to perform its function, the following process for determining executive compensation decisions has been followed. In addition to the process outlined below, the Compensation Committee also may grant bonuses based on criteria developed independently of the process described below (any such bonuses are referred to as “Non-OGSM Bonuses”). For fiscal 2016, the only Non-OGSM Bonuses granted were $100 year-end bonuses.

Determining Goals.

Prior to the beginning of each fiscal year, senior executives and department heads consult with each other and establish the Objective Goals Strategies and Measures (the “OGSM”) for our Company. The OGSM sets forth performance goals for each department of our Company and for the executive employees of the Company for the upcoming fiscal year. The OGSM provides a basis for developing a base financial operating plan for the upcoming fiscal year. The base financial operating plan, which is developed in conjunction with the OGSM process, is reviewed and approved by our Board of Directors.

The single objective of the company is to build shareholder value and is defined as such as the Objective in the OGSM. The purpose of the OGSM is to build shareholder value, and the goals are designed to further that purpose. These Goals are developed to ensure two major areas are addressed. First is our shorter term operating and budgeted metrics, including targets for sales, gross margins, operating income, EBITDA and earnings both in aggregate and on a per share basis. In addition to these income statement goals, we also set goals to manage key balance sheet metrics including allocation of capital, and returns on that capital, and inventory turns relative to customer service levels. Second, the goals also are developed to accomplish our strategic objectives both for near term and longer term outlooks, including growing market share, optimum long term footprint planning, longer term succession and strategic business direction. Each of the goals set are discussed with and approved by the Board. The Strategies are the tactics we choose to accomplish our goals and the Measurements are what the Company uses to track the success of the various goals and to determine the effectiveness of the particular managers in performing their duties. The measurements are the key driver in determining management bonuses.

Once the management OGSM meetings are concluded, the management team develops a budget for the year and the OGSM and budget for the year are presented to the Board. Following approval of the relevant measures, the OGSM and budget become our key controlling document in tracking managements performance for the year. Budget to actual and discussions of initiatives are presented to the Board on a quarterly basis.

Once year-end numbers are finalized the Compensation Committee, in consultation with the CEO and CFO, analyze the results in total and determines year-end bonuses. Before any bonus for management is considered, the Company must hit a qualifying EBITDA level (which it did in fiscal 2016). If that qualifying EBITDA number is accomplished then the detail target operating metrics are evaluated relative to the measurements set by the plan and by where the responsibility of those metrics lie as identified in the OGSM. Key metrics that the Compensation Committee evaluates include sales targets, gross margins, customer service levels, EBITDA, net income, earnings per share, pre-tax return on invested capital and inventory turns. The Company believes that return on invested capital is indicative of performance relative to the key balance sheet metrics. For the bonus computation, 70% relates to these fundamental metrics and the other 30% relates to progress relative to the Company’s and the individual’s strategic objectives. Each executive is judged on the measurement of the contribution that the executive has had on accomplishing strategic objectives of the Company.

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Determining Executive Compensation.

In determining specific components of compensation, the Compensation Committee considers individual performance, level of responsibility, skills and experience, among others. The Company uses guidelines prepared by its consulting firm, relative to appropriate compensation levels after assessing our peer group, and adapts this to the position of each executive in the Company.

Our general policy for setting base salaries of our named executive officers (the “Senior Executives”) is to only increase such salaries in the case of promotions or significant increases to an officer’s duties and responsibilities. Such increases to base salaries are reviewed by the Compensation Committee on a case-by-case basis. There were no salary increases in fiscal 2016, except for (i) an increase in Mr. Daly’s salary from $208,000 to $250,000, which took effect on February 1, 2016 and was based on the Committee’s evaluation of the executive compensation review conducted by Towers Watson in August 2015 and summarized in a report dated August 31, 2015 (the “Fiscal 2016 Towers Report”) with respect to the position of Chief Accounting Officer and its review and evaluation of Mr. Daly’s performance as Chief Accounting Officer of the Company and (ii) an increase in Mr. Lee’s salary from $220,000 to $290,000, which took effect on September 7, 2015 and was based on the Committee’s evaluation of the Fiscal 2016 Towers Report with respect to the position of Chief Financial Officer and its review and evaluation of Mr. Lee’s performance as Chief Financial Officer of the Company.

At the end of the fiscal year, department heads assess their progress against the base financial operating plan and evaluate their results. These self-assessments are presented to the Chief Executive Officer who then undertakes his own evaluation of the executives’ performance. This involves a two-step process whereby the Chief Executive Officer evaluates: (i) our Company’s actual financial performance against the budget, taking into account events that may be beyond the control of any given Senior Executive’s performance initiatives and (ii) each Senior Executive’s performance against his performance goals as set by the OGSM. The Chief Executive Officer considers both the financial performance of our Company and individual performance relative to each performance goal of the Senior Executives to develop bonus recommendations for each Senior Executive guided by the framework of our compensation consultant’s most recent review and the process described above.

The Compensation Committee reviews the performance evaluations of the Senior Executives and assesses the specific OGSM goals and execution of such goals for each Senior Executive. The Chief Executive Officer then presents his bonus recommendations for the Senior Executives to the Compensation Committee (the “OGSM-based Bonus Recommendations”). The Compensation Committee then decides whether to approve or adjust the OGSM-based Bonus Recommendations. The Compensation Committee evaluates all of the factors considered by the Chief Executive Officer and reviews the compensation summaries for each Senior Executive, including base salary, bonus, equity awards (if any), deferred compensation benefits and other benefits. In determining specific components of compensation, the Compensation Committee considers individual performance measured against the target metrics described above, level of responsibility, skills and experience.

Based on its review and evaluation, the Compensation Committee makes the final determination of the bonuses to be paid to the Senior Executives based on the OGSM process (the “OGSM Bonuses”), and after taking into account any other factors (including factors that were not performance objectives) that it deems relevant in its discretion, and reports its decisions to the entire Board of Directors.

Our Compensation Committee performs an annual review of our compensation policies, including the appropriate mix of base salary, bonuses and long-term incentive compensation. The Compensation Committee also reviews and approves all long-term incentive compensation and other benefits (including our 401(k) and our non-qualified deferred compensation plan).

Determining Chief Executive Officer Compensation.

The Compensation Committee is responsible for evaluating the performance of Mr. Joffe, our Chief Executive Officer, and setting his annual compensation. In determining these elements of compensation for Mr. Joffe, the Compensation Committee considered the contributions Mr. Joffe has made to our Company both from strategic and operational perspectives. The Compensation Committee reviews the key operating results and key strategic initiatives of our Company against the goals and base financial plan contained in the OGSM to determine if the Chief Executive Officer has achieved the goal set for him to build shareholder value while maintaining favorable operating metrics. The Compensation Committee also takes into consideration the standard of living of the Los Angeles vicinity in

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which our corporate offices are located. The Compensation Committee separately reviews all relevant information, including reports provided by its outside consultant, and arrives at its decision for the Chief Executive Officer’s total compensation. The Compensation Committee uses the OGSM process outlined above to assess the overall performance of the CEO and to determine his bonus.

The Compensation Committee has determined to evaluate the Chief Executive Officer’s performance based on a variety of objective and subjective performance measures (taking into account guidelines from its consulting firm and the OGSM process described above), so that the Committee’s experience and judgment can be exercised, along with an understanding of the context and industry dynamics. The Compensation Committee believes this approach allows the directors to appropriately reward our Chief Executive Officer for outstanding performance relative to the benchmark metrics that the board has set from the OGSM process and to reduce his compensation for disappointing performance, in light of all the circumstances. Mr. Joffe does not participate in any decision regarding his compensation.

On May 18, 2012, we entered into a new employment agreement with Mr. Joffe which sets his base salary at $600,000 which will be reviewed from time to time in accordance with the Company’s established procedures for adjusting salaries of similarly situated employees. On June 12, 2014 we entered into a first amendment to the new employment agreement with Mr. Joffe which sets his base salary at $700,000 effective July 1, 2014. See the “Employment Agreements” section below for a further discussion of certain compensation amounts payable to Mr. Joffe pursuant to his employment agreement. Upon making its determination, the Compensation Committee reports its recommendations concerning Mr. Joffe’s compensation to the entire Board of Directors.

Compensation Committee Consultant.

The Compensation Committee previously retained Towers Watson in August 2015 as its outside compensation consultant to conduct a compensation review for the top eighteen executive positions at the Company (the “Fiscal 2016 Review”) and retained Towers Watson during fiscal 2017 (the “Fiscal 2017 Review”) for a further review in light of the results of our advisory vote on compensation at our 2016 annual stockholders meeting. Towers Watson does not perform any other consulting work or any other services for our Company, reports directly to the Compensation Committee, and takes direction from the Chairman of the Compensation Committee. The Compensation Committee has assessed the independence of Towers Watson pursuant to the rules prescribed by the SEC and has concluded that no conflict of interest existed in fiscal 2016 or currently exists that would prevent Towers Watson from serving as an independent consultant to the Compensation Committee. The Compensation Committee engaged Towers Watson to prepare a complete competitive assessment of our executive compensation practices in 2004, an updated assessment of the compensation of our Chief Executive Officer in 2006, a complete executive compensation assessment in 2009, a complete executive compensation review in 2011, and an updated assessment of the compensation of our Chief Executive Officer in 2012 (completed in fiscal 2013) and the Fiscal 2016 Review and the Fiscal 2017 Review.

The Compensation Committee considers analysis and advice from its outside consultant when making compensation decisions for the Chief Executive Officer and other senior executives. The outside consultant’s work for the Compensation Committee includes data analysis, market assessments, benchmarking and preparation of related reports.

Peer Group. While the Compensation Committee does not itself undertake a formalized benchmarking process, it does review the assessment provided by its outside consultant detailing the competitiveness of our executive compensation relative to our peer group when making its executive compensation decisions. Our peer group for compensation purposes included Dorman Products Inc., Drew Industries Inc., Fuel Systems Solutions, Inc., Gentex Corp., Modine Manufacturing Co., Remy International, Inc., Shiloh Industries Inc., Spartan Motors Inc., Standard Motor Products Inc., Stoneridge Inc., Strattec Security Corp., Gentherm, Inc. and Superior Industries International Inc. The Compensation Committee believed that this peer group was an appropriate basis for assessing the competitiveness of our executive compensation for fiscal 2016.

Fiscal 2016 Towers Report. In reaching its executive compensation decisions for fiscal 2016, the Compensation Committee considered analysis and advice contained in the Fiscal 2016 Towers Report regarding the competitiveness of our executive compensation in comparison to our peer group and compensation surveys. Towers Watson determined that in aggregate the compensation levels reviewed by Towers Watson were within the competitive range with variations by position. The compensation levels assessed by Towers Watson were based on actual payments or grants, as the case may be, of base salary, bonuses and long-term incentive grants. In reaching its conclusions, Towers

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Watson applied the following standards for determining that compensation is in line with competitive market practices: base salary between 90% and 110% of the median base salary; total cash compensation (base salary plus bonus) between 85% and 115% of the median total cash compensation; and total direct compensation (total cash compensation plus long-term incentive grants) between 80% and 120% of the median total direct compensation.

Current Compensation Consultant Engagement. In light of the outcome of the advisory vote on the compensation of the Company’s named executive officers at the 2016 Annual Meeting of Shareholders , the Compensation Committee has engaged Towers Watson to perform the Fiscal 2017 Review and evaluate possible changes in the Company’s compensation practices and prepare alternative approaches to address the concerns of shareholders who voted against the compensation of the Company’s named executive officers. Because our executive compensation program for fiscal 2016 (which ended March 31, 2016) was already in place at the time of our 2016 annual meeting of stockholders (which was held March 24, 2016), the Compensation Committee was unable to adjust the compensation programs for fiscal 2016 in light of the stockholder vote.

Senior Executive Compensation Decisions (Other than the Chief Executive Officer).

The Compensation Committee made its decisions for each of our Senior Executives (other than the Chief Executive Officer) with respect to OGSM Bonuses following the process described above, in each case the performance goals apply with respect to both the Company’s rotating electrical and undercar businesses:

Kevin Daly, Chief Accounting Officer

Provide timely and accurate services and information to our management, Board of Directors and other stakeholders
Improve top-level financial knowledge and accounting controls and maintain regulatory compliance with accounting standards and practices
Keep abreast of all financial accounting pronouncements that may affect our financial reporting or financial strategies

David Lee, Chief Financial Officer

Monitor all metrics that may have an impact on our financial performance
Maintain an effective treasury function, including budgeting and forecasting
Manage our cash flows
Minimize the loan and interest expenses we incur
Manage our shareholder relations

Steve Kratz, Chief Operating Officer

Evaluate and manage the key operating metrics for us
Increase quality of our product
Implement strategies aimed at reducing our product costs and warranty rates
Manage our recovery operations
Improve our customer support services
Manage and improve the performance of our information technology systems

Doug Schooner, Chief Manufacturing Officer

Maximize all manufacturing efficiencies to ensure fill rates to our customers
Ensure the quality of our products through the manufacturing process
Maintain appropriate levels of offshore production volume and capacity
Maintain a global manufacturing and multifunctional support group
Reorganize special order department to maintain changing unit technology

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Complete the reorganization of the production shop
Improve product costs

Michael Umansky, Vice President, Secretary and General Counsel

Limit our legal and other risk exposure
Manage any litigation
Control our legal and insurance costs
Maintain our compliance standards, including compliance with SEC rules and regulations
Manage our investor relations communications
Develop and protect intellectual property for our business processes
Advise on and implement any transactional business opportunities, including acquisitions, financings, SEC correspondence and customer contracts
Oversee certain administrative functions, including human resource functions
Determine and negotiate all required insurance
Supervise contractual obligations

The Compensation Committee approved the following base salaries, Non-OGSM Bonuses and OGSM Bonuses earned during fiscal 2016 for these Senior Executives:

Name
Base Salary
Non-OGSM
Bonus
OGSM Bonus
David Lee
$
290,000
 
$
100
 
$
101,000
 
Kevin Daly
$
250,000
 
$
100
 
$
58,800
 
Steve Kratz
$
350,000
 
$
100
 
$
91,000
 
Michael Umansky
$
506,000
 
$
100
 
$
123,900
 
Doug Schooner
$
294,000
 
$
100
 
$
101,000
 

Chief Executive Officer Compensation Decisions.

The Compensation Committee made its decisions for the Chief Executive Officer’s Fiscal 2016 OGSM Bonus (other than the Non-OGSM Bonus) following the process described above and has established the following key individual performance goals:

Overall responsibility for the financial results of the Company
Develop key strategies in all areas aimed at driving our Company value
Strengthen our relationships with key customers through long-term arrangements
Ensure appropriate information is communicated to our Board of Directors
Ensure that the appropriate management team and corporate focus is in place
Develop an appropriate succession plan
Maintain the appropriate financial structure for our Company, including, but not limited to, budgets and operating focus
Make decisions on all key initiatives proposed by senior management
Build sales
Evaluate and propose systems and initiatives for continuous improvement in all disciplines of our business
Identify and drive any acquisitions
Integrate acquired businesses
Prepare the infrastructure and develop plans to grow the Company

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The Compensation Committee did not review Mr. Joffe’s base salary in fiscal 2016; however, effective July 1, 2014, his base salary was set at $700,000. See the “Employment Agreement” section below for a further discussion of certain compensation amounts payable to Mr. Joffe pursuant to his employment agreement. The Compensation Committee approved a Fiscal 2016 OGSM Bonus for Mr. Joffe of $700,000.

Tax Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Code”) generally disallows a tax deduction for annual compensation in excess of $1.0 million paid to our named executive officers. Qualifying performance-based compensation (within the meaning of Section 162(m) of the Code and regulations) is not subject to the deduction limitation if specified requirements are met. We generally intend to structure the performance-based portion of our executive compensation, when feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, our Board of Directors or Compensation Committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

By Members of the Compensation Committee

Rudolph J. Borneo, Chairman
Philip Gay
Duane Miller
Jeffrey Mirvis

Compensation Risk Analysis

The preceding “Compensation Discussion and Analysis” section generally describes our compensation policies, plans and practices that are applicable for our executives and management. Our Compensation Committee reviews the relationship between our risk management policies and practices, corporate strategy and compensation practices. Our Compensation Committee has determined that these plans and practices, as applied to all of our employees, including our executive officers, does not encourage excessive risk taking at any level of our Company. The Compensation Committee does not believe that risks arising from its compensation plans, policies or practices are reasonably likely to have a material adverse effect on our Company.

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Summary Compensation Table

The following table sets forth information concerning fiscal 2016, 2015 and 2014 compensation of our named executive officers.

Name & Principal
Position
Fiscal
Year
Salary
Bonus (1)
Stock
Awards
Options
Awards (2)
Non-Equity
Incentive Plan
Compensation
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (3)
All Other
Compensation (4)
Total
Selwyn Joffe
2016
$
700,000
 
$
700,100
 
$
389,125
 
$
374,663
 
$
 
$
 
$
327,520
 
$
2,491,817
 
Chairman of the
Board, President
and CEO
2015
 
674,616
 
 
1,778,834
 
 
1,350,893
 
 
 
 
 
 
 
 
223,056
 
 
4,027,399
 
2014
 
600,000
 
 
1,174,806
 
 
434,312
 
 
374,790
 
 
 
 
 
 
729,209
 
 
3,313,117
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
David Lee
2016
$
262,192
 
$
101,100
 
$
96,503
 
$
92,951
 
$
 
$
 
$
70,200
 
$
622,946
 
Chief Financial
Officer
2015
 
220,000
 
 
324,260
 
 
84,841
 
 
89,510
 
 
 
 
 
 
61,990
 
 
780,601
 
2014
 
220,000
 
 
208,458
 
 
108,112
 
 
93,586
 
 
 
 
 
 
57,004
 
 
687,160
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kevin Daly
2016
$
214,462
 
$
58,900
 
$
52,921
 
$
50,050
 
$
 
$
 
$
29,591
 
$
405,924
 
Chief Accounting
Officer
2015
 
208,000
 
 
187,919
 
 
45,860
 
 
48,124
 
 
 
 
 
 
24,663
 
 
514,566
 
2014
 
208,000
 
 
133,386
 
 
57,784
 
 
50,151
 
 
 
 
 
 
23,493
 
 
472,815
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Steve Kratz
2016
$
350,000
 
$
91,100
 
$
105,842
 
$
101,531
 
$
 
$
 
$
25,630
 
$
674,103
 
Chief Operating
Officer
2015
 
350,000
 
 
374,646
 
 
91,720
 
 
96,247
 
 
 
 
 
 
22,696
 
 
935,309
 
2014
 
350,000
 
 
271,248
 
 
129,548
 
 
111,497
 
 
 
 
 
 
20,623
 
 
882,916
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael Umansky
2016
$
506,000
 
$
124,000
 
$
68,486
 
$
67,211
 
$
 
$
 
$
85,551
 
$
851,248
 
Vice President,
Secretary and
General Counsel
2015
 
506,000
 
 
316,343
 
 
59,618
 
 
63,523
 
 
 
 
 
 
56,414
 
 
1,001,898
 
2014
 
506,000
 
 
194,920
 
 
77,356
 
 
67,167
 
 
 
 
66,006
 
 
55,618
 
 
967,066
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Doug Schooner
2016
$
294,000
 
$
101,100
 
$
84,051
 
$
80,081
 
$
 
$
 
$
71,246
 
$
630,478
 
Chief
Manufacturing
Officer
2015
 
286,385
 
 
265,089
 
 
59,618
 
 
61,598
 
 
 
 
 
 
62,767
 
 
735,457
 
2014
 
250,000
 
 
182,388
 
 
75,492
 
 
64,928
 
 
 
 
333
 
 
56,905
 
 
630,045
 
(1)Bonus amounts for each named executive officer represent the bonus amount earned for each respective fiscal year and include a $100 bonus paid to each of the Company’s employees during December of each year, including the named executive officers.
(2)Option award amounts represent the aggregate grant date fair value of options granted during the fiscal years ended March 31, 2016, 2015, and 2014.
(3)All amounts represent nonqualified deferred compensation earnings.
(4)The following chart is a summary of the items that are included in the “All Other Compensation” totals for the fiscal year ended March 31, 2016:
Name
Automobile
Expenses
Health
Insurance
Premiums
401K
Employer’s
Contribution
Deferred
Compensation
Plan
Employer’s
Contribution
Other
Total
Selwyn Joffe
$
18,000
 
$
86,426
 
$
8,861
 
$
214,233
 
$
 
$
327,520
 
David Lee
$
 
$
62,426
 
$
7,774
 
$
 
$
 
$
70,200
 
Kevin Daly
$
 
$
21,914
 
$
6,043
 
$
1,634
 
$
 
$
29,591
 
Steve Kratz
$
 
$
21,914
 
$
3,716
 
$
 
$
 
$
25,630
 
Michael Umansky
$
1,097
 
$
43,585
 
$
11,890
 
$
28,978
 
$
 
$
85,551
 
Doug Schooner
$
 
$
62,426
 
$
8,820
 
$
 
$
 
$
71,246
 

18

TABLE OF CONTENTS

2016 Grants of Plan-Based Awards

Name
Grant
Date
All Other
Stock Awards:
Number of Shares of
Stock or Units (1)
All Other
Option Awards:
Number of Securities
Underlying Options (1)
Exercise or
Base Price of
Option Awards
Grant Date
Fair Value of
Stock and
Option Awards
Selwyn Joffe
 
9/4/2015
 
 
 
 
26,200
 
$
31.13
 
$
374,663
 
Selwyn Joffe
 
9/4/2015
 
 
12,500
 
 
 
$
31.13
 
$
389,125
 
David Lee
 
9/4/2015
 
 
 
 
6,500
 
$
31.13
 
$
92,951
 
David Lee
 
9/4/2015
 
 
3,100
 
 
 
$
31.13
 
$
96,503
 
Kevin Daly
 
9/4/2015
 
 
 
 
3,500
 
$
31.13
 
$
50,050
 
Kevin Daly
 
9/4/2015
 
 
1,700
 
 
 
$
31.13
 
$
52,921
 
Steve Kratz
 
9/4/2015
 
 
 
 
7,100
 
$
31.13
 
$
101,531
 
Steve Kratz
 
9/4/2015
 
 
3,400
 
 
 
$
31.13
 
$
105,842
 
Michael Umanksy
 
9/4/2015
 
 
 
 
4,700
 
$
31.13
 
$
67,211
 
Michael Umanksy
 
9/4/2015
 
 
2,200
 
 
 
$
31.13
 
$
68,486
 
Doug Schooner
 
9/4/2015
 
 
 
 
5,600
 
$
31.13
 
$
80,081
 
Doug Schooner
 
9/4/2015
 
 
2,700
 
 
 
$
31.13
 
$
84,051
 
(1)These awards generally vest in three equal annual installments beginning on the first anniversary of the grant date subject to continued employment.

Outstanding Equity Awards at Fiscal Year End

The following table summarizes information regarding equity awards granted to our named executive officers that remain outstanding as of March 31, 2016.

 
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Vested
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Unvested
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
Unvested (#)
Market Value
of Shares or
Units of Stock
Unvested ($)
Selwyn Joffe
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75,000
 
 
 
 
 
$
12.00
 
 
8/30/2016
 
 
 
 
 
 
 
 
 
109,100
 
 
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
124,100
 
 
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
55,800
 
 
27,900
(1)
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
 
 
26,200
(4)
 
 
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15,534
(1)
$
589,981
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34,393
(3)
$
1,306,246
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12,500
(4)
$
474,750
 
David Lee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,900
 
 
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
13,933
 
 
6,967
(1)
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
3,100
 
 
6,200
(2)
 
 
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
 
 
6,500
(4)
 
 
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,866
(1)
$
146,831
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,467
(2)
$
93,697
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,100
(4)
$
117,738
 
Kevin Daly
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,734
(1)
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
 
 
3,333
(2)
 
 
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
 
 
3,500
(4)
 
 
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,066
(1)
$
78,467
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,333
(2)
$
50,627
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,700
(4)
$
64,566
 
Steve Kratz
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,900
 
 
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
16,600
 
 
8,300
(1)
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
3,333
 
 
6,667
(2)
 
 
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
 
 
7,100
(4)
 
 
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,634
(1)
$
175,999
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,667
(2)
$
101,293
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,400
(4)
$
129,132
 

19

TABLE OF CONTENTS

 
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Vested
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Unvested
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
Unvested (#)
Market Value
of Shares or
Units of Stock
Unvested ($)
Michael Umansky
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,400
 
 
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
10,000
 
 
5,000
(1)
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
2,200
 
 
4,400
(2)
 
 
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
 
 
4,700
(4)
 
 
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,766
(1)
$
105,053
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,733
(2)
$
65,819
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,200
(4)
$
83,556
 
Doug Schooner
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,834
(1)