EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of October 1, 1997, between
MOTORCAR PARTS & ACCESSORIES, INC., a New York corporation currently having an
address at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (the "Company"), and
XXXXX XXXXXXX, an individual having an address at 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires that Employee be employed by it and
render services to it upon the terms and conditions stated herein, and
WHEREAS, Employee desires to be employed by the Company upon the
terms and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Employment; Term. The Company hereby agrees to employ Employee
and Employee agrees to be employed by the Company on the terms and conditions
set forth below for a term (the "Employment Term") commencing on the date hereof
(the "Commencement Date") and continuing for a period through and including the
second anniversary of the Commencement Date, unless extended in writing by both
parties or earlier terminated pursuant to the terms and conditions set forth
herein.
2. Duties. Employee shall be employed as the Company's Director
of Financial Planning. At the reasonable request of the Board of Directors (the
"Board"), the Chief Executive Officer or Chief Operating Officer of the Company,
Employee shall make herself available from time to time to render financial and
management advisory services to the Company, including without limitation advice
regarding all press releases, periodic filings, periodic financial information
and other documents and information regarding the Company. In connection with
any Transaction or Sale (as defined below), Employee shall provide the following
services, among others, if requested by the Company: review the business and
operations of each of the Company and any proposed purchaser and their
respective historical and projected financial information; contact any proposed
purchaser and/or their representatives and assist the Company in its
negotiations relating to a Transaction or Sale; evaluate and recommend financial
and strategic alternatives with respect to a Transaction or Sale; advise the
Company as to the timing, structure and pricing of a Transaction or Sale; and
provide such other financial advisory services in connection with a Transaction
or Sale as are customary for such transactions.
3. Other Business. Employee's services hereunder shall be
rendered on a non-exclusive and part-time basis and Employee shall be free to
render her services, whether as an
employee or independent contractor, to others; provided that in the event that
the rendering of such services to others shall prevent the performance of
Employee's duties hereunder, then this Agreement may be terminated at any time
pursuant to the terms of Section 7 hereof. The foregoing shall not prevent the
purchase, ownership or sale by Employee of investments or securities of publicly
held companies and any other business which is not competitive and does not have
any other business relations with the Company or any subsidiary of the Company,
provided such purchase, ownership or sale by Employee does not interfere with
the performance of her duties hereunder.
4. Compensation. (a) In consideration of the services to be
performed by Employee hereunder, the Company agrees to: (i) pay Employee a
salary (the "Salary") of $78,000, payable in equal monthly installments in
advance; (ii) pay Employee the bonuses referred to in Sections 4(b) and 4(c);
and (iii) not later than October 31, 1997, grant Employee an option to purchase,
for a period of ten years from such date of grant, Thirty Thousand (30,000)
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), pursuant to the terms of the Company's 1994 Stock Option Plan, as
amended to date (the "Plan"), and any related stock option agreement(s) required
to be executed in connection therewith. Such option shall become exercisable on
the date of grant with respect to one-half of such shares of Common Stock and on
the first anniversary thereof with respect to the remaining such shares.
(b) As compensation to Employee for services, in
accordance with Section 2, rendered by Employee to the Company in connection
with any acquisition, not in the ordinary course of the Company's business, from
a third party of a business by way of merger or consolidation, reorganization,
tender or exchange offer, negotiated purchase, leveraged buyout or similar
transaction structure, other than a Sale (as defined below) (a "Transaction"),
the Company shall pay to Employee a bonus (a "Transaction Bonus") in cash upon
the closing of the Transaction (subject to Section 4(e) below) in an amount
equal to the sum of (i) one percent of the first $40 million of Transaction
Value (as defined below) of such Transaction plus (ii) one-half of one percent
of the Transaction Value of such Transaction in excess of $40 million, if any;
provided, however, that in the event the Board of Directors of the Company shall
determine in good faith that the services of an institutional investment advisor
or bank are necessary or appropriate in connection with the Transaction and such
services are actually obtained, then the Board of Directors of the Company may
reduce the Transaction Bonus by an amount equal to the value of such services to
the extent that such services duplicate, as determined in good faith by the
Board of Directors, the services performed by Employee in connection with the
Transaction (provided that in no event shall such Transaction Bonus be so
reduced to an amount equal to less than five-sixteenths of one percent of the
Transaction Value); and provided further that a Transaction Bonus with respect
to a Transaction shall be payable only if, during the Employment Term or within
nine months following the end thereof, such Transaction is consummated or a
definitive purchase or sale agreement is entered into that subsequently results
in the closing of such Transaction.
(c) As compensation to Employee for services rendered to
the Company, in accordance with Section 2, in connection with the acquisition by
a third party of all or substantially all of the assets or securities of the
Company, whether by way of merger or consolidation,
-2-
reorganization, tender or exchange offer, negotiated purchase, leveraged buyout
or similar transaction structure (the "Sale"), the Company shall pay to Employee
a bonus (the "Sale Bonus") in cash upon the closing of the Sale (subject to
Section 4(e) below) in an amount equal to five-sixteenths of one percent of the
Transaction Value of the Sale; provided that a Sale Bonus shall be payable only
if, during the Employment Term or within nine months following the end thereof,
the Sale is consummated or a definitive purchase or sale agreement is entered
into that subsequently results in the closing of the Sale.
(d) "Transaction Value" shall mean the total proceeds and
other consideration paid or received or to be paid or received in connection
with a Transaction or Sale (which consideration shall be deemed to include
amounts in escrow), including, without limitation: (i) cash, notes, securities
and other property paid; (ii) liabilities, including long-term debt (excluding
working capital related debt), pension liabilities and guarantees, directly or
indirectly assumed, acquired or refinanced; (iii) payments made in installments;
(iv) amounts payable under consulting agreements, agreements not to compete or
similar arrangements (including such payments to management); and (v) contingent
payments (whether or not related to future earnings or operations). For purposes
of computing any bonuses payable to Employee hereunder, non-cash consideration
shall be valued as follows: (x) publicly traded securities shall be valued at
the average of their closing prices (as reported in The Wall Street Journal) for
the five trading days prior to the closing of the Transaction or Sale and (y)
any other non-cash consideration shall be valued at the fair market value
thereof as determined in good faith by the Board of Directors of the Company.
(e) Any portion of a Transaction Bonus or Sale Bonus that
is attributable to any portion of Transaction Value that is contingent or not
payable at the closing of such Transaction or Sale, as the case may be, shall be
payable to Employee only upon the actual payment of such portion of Transaction
Value.
5. Employee Benefits; Expenses. During the Employment Term,
Employee shall be entitled to such insurance, disability and health and medical
benefits and be entitled to participate in such retirement plans or programs as
generally made available to employees of the Company pursuant to the policies of
the Company; provided that Employee shall be required to comply with the
conditions attendant to coverage by such plans and shall comply with and be
entitled to benefits only in accordance with the terms and conditions of such
plans. The Company may withhold from any benefits payable to Employee all
federal, state, local and other taxes and amounts as shall be permitted or
required pursuant to law, rule or regulation. All of the benefits to which
Employee may be entitled may be changed from time to time or withdrawn at any
time in the sole discretion of the Company. Employee shall be reimbursed for
reasonable business expenses incurred by her in performing her services
hereunder up to an aggregate amount of $5,000 and, upon prior written
authorization by the Company, for amounts in excess of such $5,000.
6. Death and Disability. (a) The Employment Term shall terminate
on the date of Employee's death, in which event Employee's estate shall be
entitled to receive such portion of the consideration described in Section 4
that has been earned through the date of death. Employee's
-3-
estate will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Section 6(a).
(b) If, during the Employment Term, Employee, because of
physical or mental illness or incapacity, shall become substantially unable to
perform the duties and services required of her under this Agreement for a
period of 45 consecutive days or 60 days in the aggregate during any six-month
period the Company may, upon at least twenty (20) days' prior written notice
given at any time after the expiration of such 45 or 60 day period, as the case
may be, to Employee of its intention to do so, terminate this Agreement as of
such date which is the date 30 days after the date of such notice. In case of
such termination, Employee shall be entitled to receive such portion of the
consideration described in Section 4 that has been earned through the date of
termination. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Section 6(b). In the event of any
dispute regarding Employee's ability to perform the duties and services required
of her hereunder, the matter will be resolved by the determination of a majority
of three physicians qualified to practice medicine in New York, one to be
selected by each of Employee and the Company and the third to be selected by the
two designated physicians. For this purpose, Employee agrees to submit to
appropriate medical examinations.
7. Termination. (a) The Company may terminate the employment of
Employee for Cause (as hereinafter defined) and Employee may resign without
cause. Upon such termination, the Company shall be released from any and all
further obligations under this Agreement, except that the Company shall be
obligated to pay Employee such portion of the Salary that has already been
earned in accordance with Section 4 through the date of such termination.
Employee will not be entitled to any other compensation upon termination of this
Agreement pursuant to this Section 6(a).
(b) As used herein, the term "Cause" shall mean: (i) the
willful failure of Employee to perform her duties pursuant to Section 2 hereof,
which failure is not cured by Employee within 20 days following written demand
for substantial performance from the Company, which demand identifies the manner
in which the Company believes that Employee has not performed such duties and
the steps required to cure such failure to perform; (ii) any other material
breach of this Agreement by Employee, including any of the material
representations or warranties herein made by Employee, and including engaging in
any business preventing performance hereunder as described in Section 3 hereof,
which breach has not ceased within 20 days after written notice thereof has been
delivered to Employee by the Company, which notice identifies in reasonable
detail the manner in which the Company believes that Employee has breached this
Agreement and the steps required to cure such breach, if applicable; (iii)
Employee shall intentionally and willfully engage in misconduct toward the
Company which is materially injurious to the Company, monetarily or otherwise;
or (iv) the conviction of Employee of, or the entering of a plea of nolo
contendere by Employee with respect to, a felony.
(c) Upon the consummation of a Sale, this Agreement shall
terminate and Employee shall be entitled to receive such portion of the
consideration described in Section 4 that has been earned through the date of
such consummation. Employee will not be entitled to any other
-4-
compensation upon termination of this Agreement pursuant to this Section 7(c);
provided that Employee shall be entitled to any subsequent bonuses payable in
accordance with Section 4(e).
8. Disclosure of Information and Restrictive Covenant. Employee
acknowledges that she has been and will be in a confidential relationship with
the Company and will have access to confidential information and trade secrets
of the Company, its subsidiaries and affiliates. Confidential information and
trade secrets include, but are not limited to, customer, supplier and client
lists, price lists, marketing, distribution and sales strategies and procedures,
operational and equipment techniques, business plans and systems, quality
control procedures and systems, special projects and technological research,
including projects, research and reports for any entity or client or any
project, research, report or the like concerning sales or manufacturing or new
technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications, processes, data and information concerning the business of the
Company other than such of the foregoing which (i) is in the public domain or
known in the industry of the Company, (ii) is disclosed to Employee by a third
party who, to Employee's knowledge, was not prohibited by any fiduciary, legal,
contactual or other duty from disclosing such information, or (iii) was known to
Employee before its disclosure by the Company. Employee agrees that in
consideration of the execution of this Agreement by the Company, except in any
way with respect to foreign affiliates of the Company as of the date hereof:
(a) Employee will not, during the Employment Term or at
any time thereafter, use, or disclose to any third party, trade secrets or
confidential information of the Company, including, but not limited to,
confidential information or trade secrets belonging or relating to the Company,
its subsidiaries, affiliates, customers and clients or proprietary processes or
procedures of the Company, its subsidiaries, affiliates, customers and clients.
Proprietary processes and procedures shall include, but shall not be limited to,
all information which is known or intended to be known only to employees of the
Company, its respective subsidiaries and affiliates or others in a confidential
relationship with the Company or its respective subsidiaries and affiliates
which relates to business matters.
(b) This Section 8 and Sections 9 and 10 hereof shall
survive the expiration or termination of this Agreement for any reason.
(c) It is expressly agreed by Employee that the nature and
scope of each of the provisions set forth above in this Section 8 are reasonable
and necessary. If, for any reason, any aspect of the above provisions as it
applies to Employee is determined by a court of competent jurisdiction to be
unreasonable or unenforceable, the provisions shall only be modified to the
minimum extent required to make the provisions reasonable and/or enforceable, as
the case may be. Employee acknowledges and agrees that her services are of a
unique character and expressly grants to the Company or any subsidiary,
successor or assignee of the Company, the right to enforce the provisions above
through the use of all remedies available at law or in equity, including, but
not limited to, injunctive relief.
-5-
9. Remedy. It is mutually understood and agreed that Employee's
services are special, unique, unusual, extraordinary and of an intellectual
character giving them a peculiar value, the loss of which cannot be reasonably
or adequately compensated in damages in an action at law. Accordingly, in the
event of any breach of the non-disclosure clauses under Section 8 hereof, the
Company shall be entitled to equitable relief by way of injunction or otherwise,
in addition to damages the Company may be entitled to recover.
10. Representations and Warranties of Employee. In order to
induce the Company to enter into this Agreement, Employee hereby represents and
warrants to the Company that Employee has the legal capacity and right to
execute and deliver this Agreement and to perform all of her obligations
hereunder.
11. Indemnification. (a) Recognizing that transactions of the
type contemplated in this Agreement sometimes result in litigation and that
Employee's role is advisory, the Company agrees to indemnify and hold harmless
Employee from and against any losses, claims, damages and liabilities related to
or arising in any manner out of any Transaction or Sale contemplated hereunder,
and will promptly reimburse the Employee for all reasonable expenses (including
reasonable fees and expenses of legal counsel) as incurred in connection with
the investigation of, preparation for or defense of any pending or threatened
claim related to or arising in any manner out of any Transaction or Sale
contemplated hereunder, or any action or proceeding arising therefrom
(collectively, "Proceedings"), whether or not Employee is a formal party to any
such Proceeding. Notwithstanding the foregoing, the Company shall not be liable
in respect of any losses, claims, damages, liabilities or expenses that a court
of competent jurisdiction shall have determined by final judgment resulted
primarily from the gross negligence or willful misconduct of Employee. The
Company further agrees that it will not, without the prior written consent of
Employee, settle, compromise or consent to the entry of any judgment in any
pending or threatened Proceeding in respect of which indemnification may be
sought hereunder (whether or not Employee is an actual or potential party to
such Proceeding), unless such settlement, compromise or consent includes an
unconditional release of Employee hereunder from all liability arising out of
such Proceeding.
(b) The Company agrees that if any indemnification or
reimbursement sought pursuant to Section 11(a) were for any reason not to be
available to Employee or insufficient to hold her harmless as and to the extent
contemplated by this Agreement, then the Company shall contribute to the amount
paid or payable by Employee in respect of losses, claims, damages and
liabilities in such proportion as is appropriate to reflect the relative
benefits to the Company and its stockholders on the one hand, and Employee on
the other, in connection with any Transaction or Sale to which such
indemnification or reimbursement relates or, if such allocation is not permitted
by applicable law, not only such relative benefits but also the relative faults
of such parties as well as any other equitable considerations. It is hereby
agreed that the relative benefits to the Company and/or its stockholders and to
Employee with respect to Employee's engagement hereunder shall be deemed to be
in the same proportion as (i) the total value paid or received or to be paid or
received by the Company and/or its stockholders pursuant to the Transaction or
Sale (whether or not consummated) for which Employee renders financial services
bears to (ii) the amounts paid to Employee in
-6-
connection with such engagement. In no event shall Employee contribute or
otherwise be liable for an amount in excess of the aggregate amounts actually
received by Employee pursuant hereto (excluding amounts received by Employee as
reimbursement of expenses).
(c) The Company further agrees that Employee shall have no
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with her engagement hereunder except for losses,
claims, damages, liabilities or expenses that a court of competent jurisdiction
shall have determined by final judgment resulted primarily from the gross
negligence or willful misconduct of Employee. The indemnity, reimbursement and
contribution obligations of the Company shall be in addition to any liability
which the Company may otherwise have and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company or Employee.
(d) The indemnity, reimbursement and contribution
provisions set forth herein shall remain operative and in full force and effect
regardless of (i) any withdrawal, termination or consummation of or failure to
initiate or consummate any Transaction or Sale referred to herein, (ii) any
investigation made by or on behalf of any party hereto or any person controlling
(within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended) any party hereto,
(iii) any termination or the completion or expiration of this Agreement or
Employee's engagement hereunder and (iv) whether or not Employee shall or shall
not be called upon to render any formal or informal advice in the course of such
engagement.
(e) Notwithstanding anything to the contrary contained
above or elsewhere herein, nothing contained in this Agreement shall limit,
expand or otherwise affect in any way whatsoever Employee's duties,
responsibilities, obligations or any other legal or other relationships she may
have to the Company, its stockholders or any other party by virtue of her
position as a director of the Company.
12. Notices. All notices given hereunder shall be in writing and
shall be deemed effectively given five days after being mailed, if sent by
registered or certified mail, return receipt requested, or on the next business
day if sent by overnight courier, and in each case addressed to Employee at her
address set forth on the first page of this Agreement or to any other address
that Employee may designate in writing to the Company and to the Company at its
address set forth on the first page of this Agreement, Attention: Xxx Xxxxx,
Chairman of the Board, with a copy to Xxxxxx Xxxxxx Flattau & Klimpl, LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxx,
Esq., or at such address as such party shall have designated by a notice given
in accordance with this Section 12 or when actually received by the party for
whom intended, if sent by any other means.
13. Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to its subject matter and no change,
alteration or modification hereof may be made except in writing signed by the
parties hereto. Any prior agreements, promises, negotiations
-7-
or representations with respect to this Agreement, Employee's services to be
provided hereunder or compensation to be paid hereunder that are not expressly
set forth in this Agreement shall be of no force or effect.
14. Severability. If any provision of this Agreement shall be
unenforceable under any applicable law, then notwithstanding such
unenforceability, the remainder of this Agreement shall continue in full force
and effect.
15. Waivers, Modifications, Etc. No amendment, modification or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by each of the parties hereto, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
16. Assignment. Neither this Agreement, nor any of Employee's
rights, powers, duties or obligations hereunder, may be assigned by Employee.
This Agreement shall be binding upon and inure to the benefit of Employee and
her heirs and legal representatives and the Company and its successors and
assigns; provided that this Agreement shall terminate immediately upon the
consummation of a Sale in accordance with Section 7(c).
17. Applicable Law. This Agreement shall be negotiated and the
transactions contemplated hereby consummated and fully performed in the State of
New York and shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law rules thereof.
Nothing contained in this Agreement shall be construed so as to require the
commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the latter shall prevail, but in such event any provision of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
18. Jurisdiction and Venue. It is hereby irrevocably agreed that
all disputes or controversies between the Company and Employee arising out of,
in connection with or relating to this Agreement shall be exclusively heard,
settled and determined by arbitration to be held in the City of New York, County
of New York, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association to be conducted before a single arbitrator, who shall be
either an attorney or retired judge licensed to practice law in the State of New
York. The parties also agree that judgment may be entered on the arbitrator's
award by any court having jurisdiction thereof and the parties consent to the
jurisdiction of any court located in the City of New York, County of New York
for this purpose.
19. Full Understanding. Employee represents and agrees that she
fully understands her right to discuss all aspects of this Agreement with her
private attorney, that to the extent, if any, that she desired, she availed
herself of this right, that she has carefully read and fully understands all of
the provisions of this Agreement, that she is competent to execute this
Agreement, that her
-8-
agreement to execute this Agreement has not been obtained by any duress and that
she freely and voluntarily enters into it, and that she has read this document
in its entirety and fully understands the meaning, intent and consequences of
this document which is that it constitutes an agreement of employment.
20. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
MOTORCAR PARTS & ACCESSORIES, INC.
By:
______________________________________
Name: Xxx Xxxxx
Title: Chairman of the Board
______________________________________
XXXXX XXXXXXX
-9-
