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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of the 12th
day of August, 2008, between Forward Industries, Inc., a New York
corporation having its principal offices at 1801 Green Road, Suite
E, Pompano Beach, Florida 33064 (the "Company"), and James O.
McKenna, residing at 951 Mill Creek Drive, Palm Beach Gardens, FL
33410 ("Executive").
W I T N E S S E T H :
WHEREAS , the Company wished to secure the services of
Executive upon the terms and conditions of employment as set forth
herein, with effect from the date of execution of this Agreement
("Effective Date");
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the
receipt of which the parties hereby acknowledge, the parties agree
as follows:
1. EMPLOYMENT
TERM
Unless earlier terminated in accordance with the terms of this
Agreement, the term of employment hereunder (the " Term")
shall commence on the Effective Date and expire on December 31 ,
2009. Upon expiration of the Term, this Agreement shall be
automatically renewed for successive terms of one year each;
provided , however, that if either party provides written
notice to the other party of its or his determination not to so
renew not later than 90 (ninety) days prior to the expiration of
the Term, or any renewal thereof, as the case may be, this
Agreement and Executive’s employment shall terminate at the
end of the Term or such renewal term, as the case may be. In
the event that the Company is the party giving notice of
non-renewal, this shall be treated as a termination without Cause
and governed by the terms of Section 5 or Section 7, as the case
may be.
2
EMPLOYMENT DUTIES AND SERVICES
(a) On the terms and
conditions herein set forth, the Company hereby employs Executive
as its chief financial officer and treasurer for the term of this
Agreement and any renewal(s) thereof, and Executive hereby accepts
such employment. Executive shall perform such duties and
responsibilities of a chief financial officer nature for the
Company as shall be consistent with the provisions of the
Company’s By-laws in effect from time to time and as are
customary for a chief financial officer of corporations of similar
size and business as the Company, subject to the direction of the
Company’s President (chief executive officer), or in his
absence, the Board of Directors (the "Board"). Executive
shall serve the Company faithfully and to the best of his ability
and shall devote his full business time and attention to the
business and affairs of the Company, subject to reasonable absences
for vacation and illness in accordance with Company policies.
Executive will not engage, directly or indirectly, in any other
business or occupation during the Term.
(b) Nothing in this
Agreement shall preclude the Executive from (i) engaging in
personal investment activities for himself and his family, (ii)
accepting directorships unrelated to the Company, subject to the
prior, written approval of the Compensation Committee of the Board
("Compensation Committee"), (iii) engaging in charitable and civic
activities, and (iv) engaging in such other limited activities on
behalf of family interests as may be approved by the Nominating and
Governance Committee of the Board, so long as any one or more such
outside interests set forth in clauses (i), (ii), (iii), and (iv)
hereof do not interfere with or affect the performance of his
duties or responsibilities hereunder.
(c) Unless otherwise
agreed in writing by the Company and Executive, the performance of
Executive’s services during the term of this Agreement shall
be rendered at the principal executive offices of the Company,
subject to such travel in furtherance of Executive’s
performance of his duties hereunder as the business of the Company
may require.
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3.
COMPENSATION AND EXPENSE REIMBURSEMENT
(a) Salary
. Executive shall be entitled to receive for all services
rendered by Executive in any and all capacities in connection with
his employment hereunder a salary (as it may be adjusted, "Salary")
of $175,000 per annum, payable in equal installments in accordance
with the prevailing practices of the Company (but not less
frequently than monthly).
(b) Bonus;
Calculation and Payment . The Executive shall be eligible
to receive a bonus ("Bonus") with respect to each full fiscal year
or part thereof (except to the extent expressly provided in Section
3(b), 4, 5, or 6(b) hereof) in respect of his employment hereunder,
as set forth in this Section 3. The amount of Bonus, if any,
that Executive may earn in any fiscal year during the Term hereof
pursuant to this Section 3(b) shall be based on the extent to
which, if any, the Company achieves all or a percentage of, or
exceeds, Target (as defined below) in each such fiscal year, in
accordance with guidelines, or a formula, for earning such bonus as
fixed by the Compensation Committee in its sole discretion not
later than the date referred to in the next paragraph.
"Target" means, with respect to any fiscal year, the amount of
pre-tax income or other measure of operating results of the Company
as determined by the Compensation Committee of the Board in its
sole discretion, projected for achievement, in whole or in part, in
such fiscal year by the Compensation Committee for the purpose of
establishing Executive’s right to receive Bonus compensation
in respect of such fiscal year. The Compensation Committee
shall determine the Target, together with the formulas for earning
Bonus hereunder, after the Board has adopted the Annual Budget in
respect of each fiscal year during the Term hereof but not later
than the 75 th day of each such fiscal year. The
Compensation Committee may determine that the amount of Bonus for
such purposes may be pro rated based on Target being achieved,
exceeded, or missed.
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Bonus compensation, if any, payable pursuant to Section 3(b)
shall be payable to Executive not earlier than the date on which
the Company’s audited financial statements relating to the
fiscal year in respect of which such Bonus compensation is payable
are first filed with the Securities and Exchange Commission (the
"Commission’) pursuant to Section 13 or 15(d) under the
Securities Exchange Act of 1934 ("Exchange Act") nor later than the
tenth (10 th ) business day after such date. If
Executive is otherwise entitled to payment of a Bonus pursuant to
this Section 4(b) and the terms of this Agreement but has not
served as an employee for the full fiscal year in respect of which
such Bonus is payable, Executive, or his estate, shall be entitled
to payment, at the time specified in the next preceding sentence,
of a ratable portion of such Bonus to which he or his estate is
entitled, based on the ratio that the actual number of days in such
fiscal year during which he served as an Employee pursuant to this
Agreement and is so entitled bears to 365; provided ,
however, that no Bonus (pro-rated or otherwise) shall be payable in
respect of a fiscal year during which Executive is employed
hereunder solely for the first fiscal quarter thereof because of
expiration of the Term, or any renewal thereof as a result of
notice of non-renewal furnished pursuant to Section 1; and
provided , further, that if Executive’s employment was
terminated as a result of notice pursuant to Section 4, Termination
for Cause, he shall not be entitled to any Bonus compensation in
respect of the fiscal year during which such notice of termination
was given or during which such termination becomes effective.
(c) Expenses
. Executive will be reimbursed for all reasonable and
necessary expenses incurred by Executive in carrying out the duties
contemplated under this Agreement, in accordance with Company
practices and procedures in effect from time to time, as such
practices may be changed from time to time by the Board.
Executive shall be reimbursed for the expense of operating an
automobile (maintenance, gas, tolls and insurance only) for
Executive’s use in connection with the discharge of his
duties under this Agreement, the maximum amount of which
reimbursement shall be determined by the Compensation Committee and
shall be includible in Executive’s W-2 statements and be
subject to applicable income tax withholding regulations.
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(d) Benefits
. Executive shall be entitled to participate in all group
health and other insurance programs and all other fringe benefit
(including vacation) and retirement plans (including any 401(k)
plan) or other compensatory plans that the Company may hereafter
elect to make available to its executives generally on terms no
less favorable than those provided to other executives generally,
provided Executive meets the qualifications therefor. The
Company shall not be required to establish any such program or
plan, except to the extent expressly set forth in this Section
4.
(e) Withholding
. All payments required to be made by the Company hereunder
to the Executive shall be subject to the withholding of such
amounts relating to taxes and other governmental assessments as the
Company may reasonably determine it should withhold pursuant to any
applicable law, rule or regulation.
(f)
IRC§409A . Executive
and the Company agree that the provisions of this Agreement shall
be construed and implemented, and any deferrals and elections shall
be made, in order to comply with Internal Revenue Code Section
409A, as it may be amended, and the rules and regulations issued
thereunder from time to time.
4.
TERMINATION BY THE COMPANY FOR CAUSE
(a) The Board of
Directors may, by written notice given at any time during the Term,
or any renewal thereof, terminate the employment of Executive for
cause, the cause to be specified in reasonable detail in such
notice. For purposes of this Agreement, "cause" shall mean
Executive’s:
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(i) willful misconduct in connection with the performance of any of
his duties or services hereunder, including without limitation (1)
misappropriation or improper diversion of funds, rights or property
of the Company or any subsidiary of the Company ("Subsidiary"), or
(2) securing or attempting to secure personally (including for the
benefit of any family member, or person sharing the same household,
or any entity (corporate, partnership, unincorporated association,
proprietorship, limited liability company, trust, or otherwise) in
which Executive has any economic or beneficial interest) any profit
or benefit in connection with any transaction entered into on
behalf of the Company or any Subsidiary unless the transaction
benefiting the entity has been approved by the Board upon the basis
of full disclosure of such benefit, or (3) material breach of any
covenant contained in this Agreement or (4) any other action in
violation of Executive’s fiduciary duty owed to the Company
or Executive’s acting in a manner adverse to the
interests of the Company and for his own pecuniary benefit or that
of a family member (or member of his household) or any entity (as
described in clause (i)(2) of Section 4(a) above) in which he or
any such person has an economic or beneficial interest; or (5)
Executive’s failure to cooperate, if requested by the Board,
with any investigation or inquiry into his or the Company’s
business practices, whether internal or external;
(ii) willful failure, neglect or refusal to perform his duties or
services under this Agreement, which failure, neglect or refusal
shall continue for a period of 30 days after written notice thereof
shall have been given to the Executive by or on behalf of the Board
; and/or
(iii) conviction of, or nolo contendere or guilty
plea in connection with, a felony.
(b) Termination for
cause under clause (i) or (iii) of paragraph (a) of this Section 4
shall be effective immediately upon the giving of such notice; if
notice of termination for cause relates to clause (ii) of paragraph
(a) of this Section 4, termination shall be effective on the
thirtieth (30 th ) day after the notice referred to in
the first sentence of this Section 4 is given to Executive, unless
the Executive shall have, prior to such thirtieth (30 th
) day, cured the alleged cause to the satisfaction of the Board, in
which case the Board shall so notify Executive and such cause shall
be deemed to no longer exist; provided , however, that if
the Board concludes that Executive’s willful failure,
neglect, or refusal to perform has resulted in material damage to
the Company or its reputation that is not capable of being
remedied, termination shall be effective immediately upon giving of
notice.
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For purposes of this Agreement, an act or failure to act on the
Executive’s part shall be considered "willful" if it was done
or omitted to be done by him not in good faith, and shall not
include any act or failure to act resulting from any incapacity of
the Executive.
(c) Upon termination
of employment by the Company for Cause, the Executive shall be
entitled to receive, and his sole remedies under this Agreement
shall be:
(i) any earned and unpaid Salary accrued through the date of
termination for Cause, payable in a lump sum not later than 15 days
following Executive’s termination of employment;
(ii) compensation for any unused personal holidays and unused
vacation days accrued in the fiscal year in which termination
occurs through the date of termination, payable as in clause (i) of
this Section 4;
(iii) except for any Bonus compensation (for which Executive
shall not be eligible), any unpaid benefits accrued through the day
immediately prior to the date of termination that may be due the
Executive under any employee benefit plans or programs of the
Company, payable in accordance with the terms of such plans or
programs, together with any documented, unreimbursed business
expenses, payable in accordance with Company policies; and
(iv) any stock options, grants of Common Stock, restricted share
grants or other benefits under any of the Company’s
compensation plans that were vested as of 5:00 PM on the date
immediately prior to the date of termination in accordance with the
terms of such plans and any applicable plan agreements with
Executive, provided, however, that any vested but unexercised stock
options may not be exercised on or after the effective date of
termination.
(d) Termination of
Executive’s employment under this Section 4 shall be in
addition to and not exclusive of any other rights and remedies that
the Company has or may have relating to Executive with respect to
the facts and circumstances pertaining to such termination.
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5.
TERMINATION BY EXECUTIVE FOR GOOD REASON OR TERMINATION WITHOUT
CAUSE PRIOR TO CHANGE IN CONTROL
(a) In the event
Executive terminates his employment under this Agreement for Good
Reason (as hereinafter defined), or in the event Executive’s
employment is terminated without Cause (which termination shall be
effective as of the date specified by the Company in written notice
delivered to Executive not fewer than 15 days prior to the date of
termination) other than due to death or Disability (as hereinafter
defined), in either case prior to a Change in Control (as
hereinafter defined), the Executive shall be entitled to receive,
and his sole remedies under this Agreement shall be:
(i) any earned and unpaid Salary accrued through the date of
termination, payable in a lump sum not later than 15 days following
Executive’s termination of employment;
(ii) Salary, at the annualized rate in effect on the date of
termination of Executive’s employment (or, in the event a
reduction in Salary is a basis for termination for Good Reason,
then the Salary in effect immediately prior to such reduction), for
a period of six months following such termination, payable in a
lump sum not later than 15 days following termination of
employment;
(iii) compensation for any unused personal holidays and unused
vacation days accrued in the fiscal year in which termination
occurs through the date of termination, payable as in clause (i) of
this Section 6;
(iv) except in the case of the Company giving notice of
non-renewal at the end of the Term (or any renewal thereof), the
ratable amount of Bonus, if any, to which Executive would otherwise
have been entitled in the current fiscal year but for termination
under this Section, payable at the time specified in Section
3(b);
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(v) any unpaid benefits accrued through the day immediately
prior to the date of termination that may be due the Executive
under any employee benefit plans or programs of the Company,
payable in accordance with the terms of such plans or programs,
together with any documented, unreimbursed business expenses,
payable in accordance with Company policies; and
(vi) any stock options, grants of Common Stock, restricted share
grants or other benefits under any of the Company’s
compensation plans that were vested as of 5:00 PM on the date
immediately prior to the date of termination, which may be
exercised (in the case of options) or delivered (in the case of
restricted stock) in accordance with the terms of such plans and
any applicable plan agreements with Executive.
(b) Termination by the
Executive for Good Reason shall be effected by his giving prior
written notice to the Company, in which case this Agreement shall
terminate on the date specified in such notice; provided ,
however, that such notice shall specify (i) in reasonable detail
the circumstances or event asserte
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