Motorcar Parts of America, Inc.
MOTORCAR PARTS AMERICA INC (Form: DEF 14A, Received: 11/20/2017 15:22:49)

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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 ☑

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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)

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MOTORCAR PARTS OF AMERICA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On December 18, 2017

To Our Shareholders:

We will hold our annual meeting of the shareholders of Motorcar Parts of America, Inc. (the “Company”) on December 18, 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, 2018;
(3) The approval of our Third Amended and Restated 2010 Incentive Award Plan;
(4) The approval, on a non-binding advisory basis, of the compensation of our named executive officers (say on pay);
(5) The approval, on a non-binding advisory basis, of the frequency of future advisory votes on the compensation of our named executive officers (say on frequency); and
(6) 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 October 30, 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, 2017 and the Form 10-K/A we filed with the Securities and Exchange Commission on July 31, 2017 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 December 18, 2017.

Our proxy statement and our Annual Report on Form 10-K for the year ended March 31, 2017 and the Form 10-K/A we filed with the Securities and Exchange Commission on July 31, 2017 are available at http://www.cstproxy.com/motorcarparts/2018 .

By order of the Board of Directors


Michael M. Umansky,
Secretary

Torrance, California
November 20, 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 November 20, 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 December 18, 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 October 30, 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 November 20, 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, 2018;
for approval of our Third Amended and Restated 2010 Incentive Award Plan;
for the approval on a non-binding advisory basis of the compensation of our named executive officers;
every year for the holding of future advisory votes on 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 19,069,594 shares of common stock outstanding and approximately 12 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

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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 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, 2018) and Proposal No. 3 (the approval of our Third Amended and Restated 2010 Incentive Award Plan). 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. 4 (advisory vote on the compensation of our named executive officers). The vote on Proposal No. 5 (advisory vote on the frequency of say on pay votes) has three possible substantive responses (every 1 year, every 2 years or every 3 years). Accordingly, we will consider our shareholders to have “approved” the frequency selected by a plurality of the votes cast by holders entitled to vote at the meeting. 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.

Each of our nominees, Selwyn Joffe, Scott J. Adelson, Rudolph J. Borneo, Philip Gay, Duane Miller, Jeffrey Mirvis, Dr. David Bryan, Joseph Ferguson, Timothy D. Vargo and Barbara L. Whittaker, is currently serving as a director, and each of our nominees was elected at our last annual meeting of shareholders. Our directors will hold office until the next annual meeting of shareholders, or until their successors are elected and qualified.

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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.

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
60
Chairman of the Board of Directors, President and Chief Executive Officer
Scott J. Adelson
56
Lead Independent Director
Rudolph J. Borneo
76
Director, Chairman of the Compensation Committee and member of the Audit and Nominating and Corporate Governance Committees
Dr. David Bryan
65
Director, member of the Compensation and Nominating and Corporate Governance Committees
Joseph Ferguson
51
Director, member of the Audit Committee
Philip Gay
60
Director, Chairman of the Audit Committee, and member of the Compensation and Nominating and Corporate Governance Committees
Duane Miller
70
Director, Chairman of the Nominating and Corporate Governance Committee and member of the Audit and Compensation Committees
Jeffrey Mirvis
54
Director, member of the Audit, Compensation and Nominating and Corporate Governance Committees
Timothy D. Vargo
66
Director
Barbara L. Whittaker
66
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 a 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, Co-President and Global Co-head of Corporate Finance for Houlihan Lokey, a leading international investment bank. During his 30 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

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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 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. Dr. Bryan’s extensive experience in the education industry have led the Board of Directors to conclude that he should serve as a director of our Company.

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. Mr. Ferguson’s 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.

Philip Gay joined our Board of Directors on November 30, 2004. He chairs our Audit Committees 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 officer at Diego Pellicer Worldwide Inc. From July 2006 until June 2010, Mr. Gay served as President, Chief Executive Officer 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

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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 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 served as Chief Executive Officer and President of Kele, Inc. from August 2010 to May 2017. Kele, Inc. is a distributor of building automation peripheral products to the commercial HVAC market. He also served 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 and Chief Operating Officer 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 ownership guidelines, directors are required to own stock worth 3x their annual cash retainer 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.
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 Committees 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 responsibilities 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 his or her 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.
Each director 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 his or her annual cash retainer.
As of November 2, 2017, the Company’s Chief Executive Officer, was in compliance with these guidelines.

Certain Relationships and Related Transactions

As discussed above, we have a written policy applicable to any transaction, arrangement or relationship between us and a related party. Our practice with regards to related party transactions has been for our Audit Committee to review, approve and/or ratify such transactions as they arise in accordance with the policy.

Director Independence, Board of Directors and Committees of the Board of Directors

Board Independence . Each of Scott Adelson, Rudolf J. Borneo, Dr. David Bryan, Joseph Ferguson, Philip Gay, Duane Miller, Jeffrey Mirvis, Timothy D. Vargo, and Barbara J. Whittaker are independent within the meaning of the applicable SEC rules and the NASDAQ listing standards, and all of our committee members are independent within the meaning of the applicable SEC rules and NASDAQ listing standards.

Board Leadership Structure . The Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board of Directors believes it is in the best interests of our Company to make that determination based on the position and direction of our Company and the membership of the Board of Directors. The roles of Chairman of the Board and Chief Executive Officer are currently held by the same person, Selwyn Joffe. The Board of Directors believes that Mr. Joffe’s service as both Chairman of the Board and Chief Executive Officer is in the best interest of our Company and its stockholders. Mr. Joffe possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing our Company and its business and is in the best position to develop agendas that ensure that our Board of Directors’ time and attention are focused on the most critical matters. We believe that our Company has been well served by this model because the combined role of Chairman of the Board and Chief Executive Officer has ensured that our directors and senior management act with a common purpose and in the best interest of our Company. This model enhances our ability to communicate clearly and consistently with our stockholders, employees, customers and suppliers.

Lead Independent Director. Our board has appointed Scott J. Adelson as our Lead Independent Director to preside at executive sessions of independent directors.

Board’s Role in Risk Oversight . Our Board of Directors as a whole has responsibility for risk oversight with certain categories of risk being reviewed by particular committees of the Board of Directors, which report to the full Board of Directors as needed. The Audit Committee reviews the financial risks, including internal control, audit, financial reporting and disclosure matters, by discussing these risks with management and our internal and external auditors. The Compensation Committee reviews risks relating to our executive compensation plans and arrangements. The Nominating and Corporate Governance Committee reviews risks related to our governance structure and processes and risks arising from related person transactions. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed about such risks.

Attendance of Board and Committees. Our Board of Directors met 11 times during Fiscal 2017. Except for Scott Adelson who attended 7 of 11 meetings of the Board of Directors, each of our then directors attended 75% or more of the total number of meetings of the Board of Directors and committees thereof during Fiscal 2017. Our last annual meeting of shareholders was held on March 24, 2017. All of our then directors attended our last annual meeting of shareholders, except for Scott Adelson. Each director is encouraged to attend each meeting of the Board of Directors and the annual meeting of our shareholders.

Audit Committee. The current members of our Audit Committee are Philip Gay, Rudolph Borneo, Joseph Ferguson, Duane Miller, and Jeffrey Mirvis, with Mr. Gay serving as chairman. Mr. Ferguson joined our Audit Committee on June 9, 2016. Our Board of Directors has determined that all of the Audit Committee members are independent within the meaning of the applicable SEC rules and NASDAQ listing standards. Our Board of Directors has also determined

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that Mr. Gay is a financial expert within the meaning of the applicable SEC rules. The Audit Committee oversees our auditing procedures, receives and accepts the reports of our independent registered public accountants, oversees our internal systems of accounting and management controls and makes recommendations to the Board of Directors concerning the appointment of our auditors. The Audit Committee met five times in Fiscal 2017.

Compensation Committee. The current members of our Compensation Committee are Rudolph Borneo, Dr. David Bryan, Joseph Ferguson, Philip Gay, Duane Miller and Jeffrey Mirvis, with Mr. Borneo serving as chairman. Dr. Bryan joined our Compensation Committee on June 9, 2016. The Compensation Committee is responsible for developing our executive compensation policies. The Compensation Committee is also responsible for evaluating the performance of our Chief Executive Officer and other senior officers and making determinations concerning the salary, bonuses and equity-based awards to be awarded to these officers. No member of the Compensation Committee has a relationship that would constitute an interlocking relationship with the executive officers or directors of another entity. For further discussion of our Compensation Committee, see “Compensation Committee Interlocks and Insider Participation.” The Compensation Committee met two times in Fiscal 2017.

Nominating and Corporate Governance Committee. The current members of our Nominating and Corporate Governance Committee are Rudolph J. Borneo, David Bryan, Philip Gay, Duane Miller and Jeffrey Mirvis, with Mr. Miller serving as Chairman. Each of the members of the Nominating and Corporate Governance Committee is independent within the meaning of applicable SEC rules. Our Nominating and Corporate Governance Committee is responsible for nominating candidates to our Board of Directors. Our Nominating and Corporate Governance Committee met one time in Fiscal 2017.

In evaluating potential director nominees, including those identified by shareholders, for recommendation to our Board of Directors, our Nominating and Corporate Governance Committee seeks individuals with talent, ability and experience from a wide variety of backgrounds to provide a diverse spectrum of experience and expertise relevant to a diversified business enterprise such as ours. Our Company does not maintain a separate policy regarding the diversity of its board members. However, the Nominating and Corporate Governance Committee considers individuals with diverse and varied professional and other experiences for membership. A candidate should represent the interests of all shareholders, and not those of a special interest group, have a reputation for integrity and be willing to make a significant commitment to fulfilling the duties of a director. Our Nominating and Corporate Governance Committee will screen and evaluate all recommended director nominees based on the criteria set forth above, as well as other relevant considerations. Our Nominating and Corporate Governance Committee will retain full discretion in considering its nomination recommendations to our Board of Directors.

Engagement with Stockholders

We actively engage with our stockholders, in person, by phone and through written correspondence. During fiscal 2017, we 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
Steve Kratz
62
Vice President, New Technologies
David Lee
47
Chief Financial Officer
Doug Schooner
48
Chief Manufacturing Officer
Michael Umansky
76
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.

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Steve Kratz served as our Chief Operating Officer from May 2007 until his appointment to the newly created position of Vice President, New Technologies in May 2017. Mr. Kratz in his new role will be overseeing innovation and development of new technologies related to our business. Mr. Kratz served as our Vice President-QA/Engineering from 2001 to 2007. Mr. Kratz joined us in April 1988. Before joining us, Mr. Kratz was the General Manager of GKN Products Company, a division of Beck/Arnley-Worldparts.

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 Masters in Business Administration degree from the UCLA Anderson School of Management.

Douglas Schooner has been our Chief Manufacturing Officer since June 2014. Beginning in May 2017, Mr. Schooner will also serve as our Senior Vice President, Operations for the under-the-car product lines. Mr. Schooner joined us in 1993 and became the Vice President, Global Manufacturing Operations in January 2001 until his promotion in June 2014. Mr. Schooner has held the positions of Engineer, Production Manager, Assistant Vice President, Production and Vice President, Manufacturing prior to assuming his current position with our company. As Chief Manufacturing Officer, Mr. Schooner is responsible for all manufacturing, materials and logistic operations for our facilities. Mr. Schooner has a Bachelor of Science degree in Mechanical Engineering from the 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. To our knowledge, none of our directors or executive officers are subject to any petition under federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing, with the following exception: to the extent that such persons are involved in bankruptcy proceedings related to the Company’s subsidiary.

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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 Fiscal 2017, with the following exceptions: on October 31, 2016, Messrs. David Bryan, Duane Miller, Joseph Ferguson, Jeffrey Mirvis, Rudolph Borneo and Philip Gay filed Form 4’s that were due on October 12, 2016.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes our executive compensation program for our named executive officers for Fiscal 2017, who were:

Selwyn Joffe, President and Chief Executive Officer and Chairman of the Board
David Lee, Chief Financial Officer
Michael Umansky, Vice President, Secretary and General Counsel
Doug Schooner, Chief Manufacturing Officer
Steve Kratz, Vice President, New Technologies

The following discussion and analysis of compensation arrangements of our named executive officers for Fiscal 2017 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 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 and Key Elements.

With our compensation objectives in mind, as further described below, our executive officer compensation program consists of five primary elements:

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 Cash-Based Incentive Program . We use a cash-based incentive plan to motivate the achievement of key pre-determined financial and individual performance goals.

Longer-term, Equity-Based Incentive Plan . Equity-based awards are a part of our overall executive compensation program to align the interests of our executives with those of shareholders while rewarding individual performance and ensuring we offer competitive compensation levels.

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Deferred Compensation Benefits . We offer participation in 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 cash compensation to the plan. In addition, for Fiscal 2017 we made matching contributions of 100% of each participant’s elective contributions to the plan up to 3% of the participant’s cash compensation for the year.

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 has not been a significant component of our executive compensation program.

We believe that a significant portion of executive officer compensation should be at-risk and dependent upon the achievement of measureable and objective performance metrics. Approximately 68% of the Chief Executive Officer’s total direct Fiscal 2017 compensation was tied to the achievement of Company and individual performance goals or is subject to the future stock price, aligning interests going forward.

We have adopted various policies and practices that we believe are in shareholders’ interests, including:

What We Do
What We Don’t Do
Align pay with performance
No “single-trigger” equity acceleration in connection with a change in control
Formulaic cash-based incentive program, with 70% of total bonus opportunity tied to objective financial performance goals
Do not provide above-market interest rates on deferred compensation
Maintain rigorous stock ownership requirements: 3x base salary (CEO), 2x base salary (other named executive officers) and 3x annual cash retainer for non-employee directors
Do not re-price or exchange stock options without stockholder approval
Maintain a clawback policy
Do not allow directors or officers to hedge or pledge our equity securities
Annual say-on-pay vote
 
Independent compensation consultant
 

Fiscal 2017 Say-on-Pay Vote.

At our Annual Meeting held on February 24, 2017, approximately 84% of votes cast were voted in favor of our Say-on-Pay vote, which we believe affirms our stockholders’ support of our approach to our executive compensation program, as well as the modifications we made to our executive compensation program following the result of our 2016 Say-on-Pay proposal, including:

Adopted a clawback policy
Adopted an executive and director stock ownership policy
Adopted an anti-hedging and anti-pledging policy
Hired an executive compensation consultant to do a complete review of compensation practices

The Company has engaged with more than two-thirds of its largest shareholders that are actively managed during Fiscal 2017, on topics that include executive compensation.

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.

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Engagement of Compensation Committee Consultant.

The Compensation Committee previously retained Willis Towers Watson (“Towers”) 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 again retained Towers 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 Meeting. Towers 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 pursuant to the rules prescribed by the SEC and has concluded that no conflict of interest existed in Fiscal 2016, Fiscal 2017 or currently exists that would prevent Towers from serving as an independent consultant to the Compensation Committee.

The Compensation Committee considered analysis and advice from Towers contained in the Fiscal 2016 Review when making compensation decisions for the Chief Executive Officer and other senior executives with regards to Fiscal 2017 compensation.

Peer Group . While the Compensation Committee does not itself undertake a formalized benchmarking process, it did review the assessment provided by Towers detailing the competitiveness of our executive compensation relative to that of a peer group Towers established when making its executive compensation decisions. Towers used the following peer companies in reviewing our compensation levels for purposes of the Fiscal 2016 Review: 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. We understand that Towers selected these companies because of their close similarity to the Company in terms of industry, revenue and market capitalization. The Compensation Committee believed that this peer group was an appropriate basis for assessing the competitiveness of our executive compensation program for Fiscal 2017.

Fiscal 2016 Review . In reaching its executive compensation decisions for Fiscal 2017, the Committee considered analysis and advice contained in the Fiscal 2016 Review regarding the competitiveness of our executive compensation in comparison to our peer group and compensation surveys. Towers determined that in aggregate the compensation levels reviewed by Towers were within the competitive range with variations by position. The compensation levels assessed by Towers 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 applied the following standards for determining that compensation is in line with competitive market practices: base salary paid is between 90% and 110% of the median base salary; total cash compensation (base salary plus bonus) is between 85% and 115% of the median total cash compensation; and total direct compensation (total cash compensation plus long-term incentive grants) is between 80% and 120% of the median total direct compensation.

Determining Executive Compensation.

Base Salaries. Our general policy is to initially set the base salaries of our named executive officers at levels that are competitive with our peers. As a policy matter, we generally 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 2017. The Compensation Committee lowered Mr. Kratz’s base salary during the fiscal year when Mr. Kratz’s job title and responsibilities changed. The following table sets forth the Fiscal 2017 base salaries for each named executive officer.

Named Executive Officers
Base Salary
Selwyn Joffe
$
700,000
 
David Lee
$
290,000
 
Michael Umansky
$
506,000
 
Doug Schooner
$
294,000
 
Steve Kratz
$
180,000
 

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Annual Cash-Based Incentive Program. Each year, we administer a cash-based incentive compensation program that aims to reward our named executive officers for the achievement of key financial and individual performance goals. For Fiscal 2017, the program consisted of two components: a company-performance metric (the “Company Performance Goal”) and an individualized set of quantitative and qualitative goals for each individual officer (the “Individual Goals”).

Named Executive Officers
Target Incentive
Payment
Targeted
Incentive Payment for
Achieving Company
Performance Goal
(70% of Total)
Targeted
Incentive Payment
for Achieving
Individual Goals
(30%)
Selwyn Joffe
$
760,200
 
$
532,140
 
$
228,060
 
David Lee
$
159,500
 
$
111,650
 
$
47,850
 
Michael Umansky
$
101,200
 
$
70,840
 
$
30,360
 
Doug Schooner
$
102,900
 
$
72,030
 
$
30,870
 
Steve Kratz
$
30,750
 
$
21,525
 
$
9,225
 

With respect to Fiscal 2017, 70% of each executive’s total annual cash-based incentive opportunity was dependent on the Company achieving the Company Performance Goal. The Company Performance Goal for Fiscal 2017 was achieving Adjusted EBITDA of at least $78,128,000. Our Adjusted EBITDA is calculated as earnings before interest expense, income tax expense, depreciation and amortization and other adjustments described in our earnings releases filed with the SEC on Form 8-K. This Company Performance Goal was set at the beginning of the Fiscal Year by the Board after a full review of the Company’s business plan and budget.

If the Company Performance Goal was not achieved, the named executive officers would not receive any of the targeted compensation amounts that were tied to the Company Performance Goal. If the Company performed better than the Company Performance Goal, the named executive officers would receive a cash incentive payment in excess of the targeted amount.

In Fiscal 2017, the Company’s actual Adjusted EBITDA exceeded the levels set by the Board as the Company Performance Goal and the named executive officers each received their applicable cash-based incentive payment. Because actual Adjusted EBITDA achieved was 117.1% of the threshold goal, each executive was awarded 117.1% of the amount that was targeted for the Company Performance Goal.

The remaining 30% of the cash-based incentive program is tied to the achievement of individual goals, tailored for each named executive officer, given their role in our organization. Some of these goals are quantitative and others are qualitative. The Compensation Committee, working with the Chief Executive Officer, sets and communicates goals for each named officer at the beginning of the Fiscal Year. Those goals were as follows:

Selwyn Joffe, the Chief Executive Officer

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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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
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

At the end of Fiscal 2017, the Compensation Committee reviewed the performance of the executives and assessed the execution against the pre-set goals for each executive. The Chief Executive Officer assists the Committee in reviewing each of the named executive officers, other than his own performance. Based on its review and evaluation, the Compensation Committee made final determination of the cash-based incentive payments to be named with respect to the individual performance component of the plan. The Committee can exercise positive or negative discretion, awarding more or less than the targeted amount, depending on its assessment of the level of achievement.

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The following table sets forth each executive’s aggregate bonus opportunity and actual bonus earned with respect to Fiscal 2017.

Named Executive Officers
Target Incentive
Payment
Company
Performance Related
Incentive Payment
Individual Goal
Incentive
Payment
Total Actual
Incentive
Payment
Selwyn Joffe
$
760,200
 
$
623,000
 
$
228,000
 
$
851,000
 
David Lee
$
159,500
 
$
131,000
 
$
48,000
 
$
179,000
 
Michael Umansky
$
101,200
 
$
83,000
 
$
41,000
 
$
124,000
 
Doug Schooner
$
102,900
 
$
84,000
 
$
31,000
 
$
115,000
 
Steve Kratz
$
30,750
 
$
25,000
 
$
9,000
 
$
34,000
 

Equity-Based Incentive Program. The goals of our long-term, equity-based incentive awards are to align the interests of our named executive officers with the interests of our common shareholders. Because vesting is generally based on continued service, our equity-based incentives also encourage the retention of our named executive officers during the award vesting period. In determining the number of stock options and/or restricted stock to be granted to executives, we consider the total value of the compensation opportunity afforded to each named executive officer and the competitive levels paid by our peers, as well as the individual’s position, scope of responsibility, ability to affect profits and shareholder value. 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 stock options and full value awards, such as restricted stock awards, which generally vest over time.

The following table sets forth the number of shares covered by the option and restricted stock awards granted to each named executive officer in Fiscal 2017. Each award vests over a three-year period, subject to continued employment.

Named Executive Officers
Stock Options
Restricted Stock
Selwyn Joffe
 
51,200
 
 
11,300
 
David Lee
 
10,800
 
 
2,800
 
Michael Umansky
 
11,000
 
 
2,000
 
Doug Schooner
 
9,000
 
 
2,400
 
Steve Kratz
 
10,600
 
 
3,000
 

Employee Benefits. All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans. The Company does not provide pension benefits, other than matching contributions under the Company’s 401(k) retirement plan. The Company may also from time to time provide perquisites such as Company-paid or reimbursed automobiles, and additional coverage under our medical plans.

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 some of 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 have in the past, and may in the future, 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. In Fiscal 2017, we paid compensation to Selwyn Joffe that was not deductible under Section 162(m).

In limited circumstances, we may agree to make certain items of income payable to our named executive officers tax-neutral to them. Accordingly, we have agreed to gross-up certain payments to our Chief Executive Officer to cover any excise taxes (and related income taxes on the “gross-up” payment) that he may be obligated to pay with respect to the first $3,000,000 of “parachute payments” (as defined in Section 280G of the Code) to be made to him upon a change of control of our Company.

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Accounting Considerations

ASC Topic 718, Compensation-Stock Compensation, or ASC Topic 718, requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock options and restricted stock under our equity incentive award plans are accounted for under ASC Topic 718. The Compensation Committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity-based awards with our overall executive compensation philosophy and objectives.

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 Borneo, Chairman
Dr. David Bryan
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, do 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 2017, 2016 and 2015 compensation of our named executive officers.

Name & Principal
Position
Fiscal
Year
Salary
Bonus (1)
Stock
Awards (2)
Options
Awards (2)
Non-Equity
Incentive Plan
Compensation
All Other
Compensation (3)
Total
Selwyn Joffe
 
2017
 
$
700,000
 
$
228,100
 
$
324,084
 
$
674,719
 
$
623,000
 
$
169,200
 
$
2,719,103
 
Chairman of the
Board, President
and CEO
 
2016
 
 
700,000
 
 
47,900
 
 
389,125
 
 
374,663
 
 
652,200
 
 
327,520
 
 
2,491,408
 
 
2015
 
 
674,616
 
 
1,778,834
 
 
1,350,893
 
 
 
 
 
 
223,056
 
 
4,027,399
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
David Lee
 
2017
 
$
290,000
 
$
48,100
 
$
80,304
 
$
142,323
 
$
131,000
 
$
88,030
 
$
779,757
 
Chief Financial
Officer
 
2016
 
 
262,192
 
 
600
 
 
96,503
 
 
92,951
 
 
100,500
 
 
70,200
 
 
622,946
 
 
2015
 
 
220,000
 
 
324,260
 
 
84,841
 
 
89,510
 
 
 
 
61,990
 
 
780,601
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Steve Kratz
 
2017
 
 
310,769
(4)  
$
9,100
 
$
86,040
 
$
139,688
 
$
25,000
 
$
29,895
 
$
289,723
 
Chief Operating
Officer
 
2016
 
 
350,000
 
 
100
 
 
105,842
 
 
101,531
 
 
91,000
 
 
25,630
 
 
674,103
 
 
2015
 
 
350,000
 
 
374,646
 
 
91,720
 
 
96,247
 
 
 
 
22,696
 
 
935,309
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Doug Schooner
 
2017
 
$
294,000
 
$
31,100
 
$
68,832
 
$
118,603
 
$
84,000
 
$
88,147
 
$
684,681
 
Chief
Manufacturing
Officer
 
2016
 
 
294,000
 
 
1,800
 
 
84,051
 
 
80,081
 
 
99,300
 
 
71,246
 
 
630,478
 
 
2015
 
 
286,385
 
 
265,089
 
 
59,618
 
 
61,598
 
 
 
 
62,767
 
 
735,457
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael Umansky
 
2017
 
$
506,000
 
$
41,100
 
$
57,360
 
$
144,959
 
$
83,000
 
$
86,746
 
$
919,165
 
Vice President,
Secretary and
General Counsel
 
2016
 
 
506,000
 
 
10,000
 
 
68,486
 
 
67,211
 
 
114,000
 
 
85,551
 
 
851,248
 
 
2015
 
 
506,000
 
 
316,343
 
 
59,618
 
 
63,523
 
 
 
 
56,414
 
 
1,001,898
 
(1) Amounts in the “Bonus” column include a $100 bonus paid to each of the Company’s employees during December of each year, including the named executive officers, and bonuses awarded to the named executive officers based on the achievement of Individual Goals under the Company’s Annual Cash-Based Incentive Program. Amounts in the “Non-Equity Incentive Compensation Plan” column represent annual cash bonuses awarded to the named executive officers under the Company’s Annual Cash-Based Incentive Program based on the achievement of Company Performance Goals.
(2) Stock and option award amounts represent the aggregate grant date fair value of options granted during the fiscal years ended March 31, 2017, 2016, and 2015. We provide information regarding the assumptions used to calculate the value of all options and stock awards made to executive officers in Note 2 to the Company’s consolidated financial statements contained in its Annual Report on Form 10-K filed on June 14, 2017.
(3) 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, 2017:
Name
Automobile
Expenses
Health
Insurance
Premiums
401K
Employer’s
Contribution
Deferred
Compensation
Plan
Employer’s
Contribution
Total
Selwyn Joffe
$
18,000
 
$
103,327
 
$
5,151
 
$
42,722
 
$
169,200
 
David Lee
$
 
$
79,327
 
$
8,703
 
$
 
$
88,030
 
Steve Kratz
$
 
$
27,886
 
$
2,009
 
$
 
$
29,895
 
Doug Schooner
$
 
$
79,327
 
$
8,820
 
$
 
$
88,147
 
Michael Umansky
$
376
 
$
55,469
 
$
12,000
 
$
18,900
 
$
86,746
 
(4) Reflects mid-year salary change from $350,000 to $180,000.

18

TABLE OF CONTENTS

2017 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
 
6/24/2016
 
 
 
 
51,200
 
$
28.68
 
$
674,719
 
Selwyn Joffe
 
6/24/2016
 
 
11,300
 
 
 
$
28.68
 
$
324,084
 
David Lee
 
6/24/2016
 
 
 
 
10,800
 
$
28.68
 
$
142,323
 
David Lee
 
6/24/2016
 
 
2,800
 
 
 
$
28.68
 
$
80,304
 
Steve Kratz
 
6/24/2016
 
 
 
 
10,600
 
$
28.68
 
$
139,688
 
Steve Kratz
 
6/24/2016
 
 
3,000
 
 
 
$
28.68
 
$
86,040
 
Doug Schooner
 
6/24/2016
 
 
 
 
9,000
 
$
28.68
 
$
118,603
 
Doug Schooner
 
6/24/2016
 
 
2,400
 
 
 
$
28.68
 
$
68,832
 
Michael Umansky
 
6/24/2016
 
 
 
 
11,000
 
$
28.68
 
$
144,959
 
Michael Umansky
 
6/24/2016
 
 
2,000
 
 
 
$
28.68
 
$
57,360
 
(1) These awards vest in three equal annual installments beginning on the first anniversary of the grant date subject to continued employment.

Outstanding Equity-Based Awards at Fiscal Year End

The following table summarizes information regarding equity-based awards granted to our named executive officers that remain outstanding as of March 31, 2017.

 
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Vested
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Unvested
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109,100
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
124,100
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
83,700
 
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
8,733
 
 
17,467
(1)  
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
51,200
(4)  
$
28.68
 
 
6/23/2026
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,197
(2)  
$
528,464
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,333
(1)  
$
256,073
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,300
(4)  
$
347,249
 
David Lee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,900
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
20,900
 
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
6,200
 
 
3,100
(3)  
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
2,167
 
 
4,333
(1)  
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
10,800
(4)  
$
28.68
 
 
6/23/2026
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,234
(3)  
$
37,921
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,067
(1)  
$
63,519
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,800
(4)  
$
86,044
 
Steve Kratz
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,900
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
24,900
 
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
6,667
 
 
3,333
(3)  
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
2,367
 
 
4,733
(1)  
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
10,600
(4)  
$
28.68
 
 
6/23/2026
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,334
(3)  
$
40,994
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,267
(1)  
$
69,665
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,000
(4)  
$
92,190
 

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
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
Unvested (#)
Market Value
of Shares or
Units of Stock
Unvested ($)
Doug Schooner
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,834
 
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
4,267
 
 
2,133
(3)  
$
22.93
 
 
6/21/2024
 
 
 
1,867
 
 
3,733
(1)  
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
9,000
(4)  
$
28.68
 
 
6/23/2026
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
866
(3)  
$
26,612
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,800
(1)  
$
55,314
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,400
(4)  
$
73,752
 
Michael Umansky
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,400
 
 
 
$
6.46
 
 
12/27/2022
 
 
 
 
 
 
 
 
 
15,000
 
 
 
$
9.32
 
 
9/2/2023
 
 
 
 
 
 
 
 
 
4,400
 
 
2,200
(3)  
$
22.93
 
 
6/21/2024
 
 
 
 
 
 
 
 
 
1,567
 
 
3,133
(1)  
$
31.13
 
 
9/3/2025
 
 
 
 
 
 
 
 
 
 
 
11,000
(4)  
$
28.68
 
 
6/23/2026
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
866
(3)  
$
26,612
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,467
(1)  
$
45,081
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,000
(4)  
$
61,460
 
(1) This award vests in three equal annual installments beginning on the first anniversary of the grant date, September 4, 2015, subject to continued employment.
(2) This award vests in three equal annual installments beginning on the first anniversary of the grant date, June 11, 2014, subject to continued employment.
(3) This award vests in three equal annual installments beginning on the first anniversary of the grant date, June 24, 2014, subject to continued employment.
(4) This award vests in three equal annual installments beginning on the first anniversary of the grant date, June 24, 2016, subject to continued employment.

Option Exercises and Stock Vested

 
Option Awards
Stock Awards
Name
Number of
Shares
Acquired on
Exercise
Value
Realized on
Exercise
Number of
Shares
Acquired on
Vesting
Value
Realized on
Vesting
Selwyn Joffe