EMPLOYMENT
AGREEMENT (this "Agreement"), dated as of the 27th day of
December, 2005, and effective as of October 1, 2005 (the "Effective
Date"), 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 Michael M. Schiffman,
residing at 22153 Larkspur Trail, Boca Raton, Florida 33433
("Executive").
W I
T N E S S E T H :
WHEREAS ,
Executive has been rendering services to the Company pursuant to an
employment agreement between him and the Company effective as of
October 1, 2003 (the "Prior Agreement");
WHEREAS , the
Company desires to employ Executive to perform senior executive and
other services for the Company, and Executive desires to accept
such employment, upon the terms and conditions of this Agreement,
and the parties agree that the Prior Agreement shall be terminated
on and as of the 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. TERMINATION
OF PRIOR AGREEMENT
The parties hereto
hereby agree that, on and as of the Effective Date, (a) the Prior
Agreement shall be, and it hereby is, terminated and of no further
force or effect whatsoever, (b) the terms and conditions of this
Agreement supersede the terms and conditions of the Prior
Agreement, and (c) the Company shall have no remaining obligations
under the Prior Agreement except in respect of unused personal days
and vacation time accrued in respect of the fiscal year ended
September 30, 2005, and pension, medical benefits, and other
benefits granted to all employees generally as such benefits have
accrued on behalf of Executive consistent with the terms of the
Prior Agreement.
2. EMPLOYMENT
AND DUTIES
On the terms and
conditions hereinafter set forth, the Company hereby employs
Executive as its President and Chief Operating Officer for the term
of this Agreement, as set forth in Section 3, and Executive hereby
accepts such employment.
3. EMPLOYMENT
TERM
Unless terminated at
an earlier date in accordance with the terms of this Agreement, the
term of employment hereunder (the " Employment Term") shall
commence on the Effective Date and expire on December 31,
2007. Upon expiration of the Employment 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 Employment Term, or any renewal thereof, as the case may be,
this Agreement shall terminate at the end of the Employment Term or
such renewal term, as the case may be. Subject to the terms
of Section 6, in the event that the Company gives notice to
Executive of its determination not to renew, Executive shall be
entitled to severance in an amount equal to his Salary (as
hereinafter defined) for six months at the rate in effect at the
time that such notice is given, payable in a lump sum (less
applicable withholding and payroll taxes and other deductions in
accordance with the Company's benefit plans in which Executive is
participating at the time) on the last day of Executive's
employment. Payment of bonus compensation shall be subject to
the terms of Section 5.
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4.
SERVICES
(a) Executive shall
perform such duties of a senior executive nature for the Company,
as shall be consistent with the provisions of the Company's By-laws
in effect on the date hereof, subject to the direction of the
Company's Chief Executive Officer and its 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 as determined by the
Compensation Committee of the Board (the "Compensation
Committee"). Executive will not engage, directly or
indirectly, in any other business or occupation during the
Employment Term. It is understood, however, that the foregoing will
not prohibit 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, and (iii) engaging in charitable and
civic activities, so long as any one or more such outside interests
set forth in clauses (i), (ii) and (iii) hereof do not interfere
with or affect the performance of his duties hereunder.
(b) 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.
5. 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
$325,000 per annum (at such rate, retroactive to the Effective
Date), payable in equal installments in accordance with the
prevailing practices of the Company (but not less frequently than
monthly).
(b) Bonus .
The Executive shall be eligible to receive a bonus ("Bonus") with
respect to each full fiscal year or (except to the extent expressly
provided in Sections 5(c), 6, or 8 hereof) part thereof in respect
of his employment hereunder, as set forth in this Section
5.
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(c) Calculation and
Payment of Bonus . The amount of Bonus, if any, that
Executive may earn in any fiscal year during the Term hereof
pursuant to this Section 5(c) 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 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 of the
Company, in combination with other measures 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 Bonus
compensation. Pre-tax income is defined for purposes hereof
as the Company's consolidated net income, after giving effect to
bonuses paid to employees (including executive officers) but before
extraordinary items (whether contributions to or deductions from
net income), plus income taxes, all as determined by reference to
the results of operations set forth in the Company's audited
financial statements in respect of the fiscal year with respect to
which the calculation of the Bonus payable hereunder is being
determined. The Compensation Committee shall determine the
Target in each such fiscal year, together with the formulas for
earning Bonus hereunder, after the Board has adopted the Annual
Budget in respect thereof but not later than the 61 st
day of 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.
"Fiscal year" means
the fiscal year of the Company, ending on September 30.
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Bonus compensation,
if any, payable pursuant to Section 5(c) 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 Section 5(c) 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 the part of
the fiscal year during which Executive is employed hereunder solely
for the first fiscal quarter thereof because of expiration of the
Employment Term, or any renewal thereof as a result of notice of
non-renewal furnished pursuant to Section 3; and provided ,
further, that if Executive's employment was terminated as a result
of notice pursuant to Section 6, 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.
(d) Expenses
. Executive will be reimbursed for all reasonable and
necessary expenses reasonably 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 entitled to a monthly allowance, subject to the
approval and discretion of the Chief Executive Officer, to defray
the expense of the lease of an automobile (including monthly lease
cost, maintenance, insurance, and operating expense) for
Executive's use in connection with the discharge of his duties
under this Agreement, the amount of which allowance shall be
includible in Executive's W-2 statements and be subject to
applicable income tax withholding regulations..
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(e) 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
5.
(f)
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.
(g) 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.
6. TERMINATION
FOR CAUSE
The Board of
Directors may, by written notice given at any time during the
Employment 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: (a) willful misconduct in
connection with the performance of any of his duties or services
hereunder, including without limitation (i) misappropriation or
improper diversion of funds, rights or property of the Company or
any subsidiary of the Company ("Subsidiary"), or (ii) securing or
attempting to secure personally (including for the benefit of any
family member, person sharing the same household, or any entity (as
used herein: corporate, partnership, unincorporated
association,
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trust, or otherwise) in which Executive
has any beneficial interest unless the transaction benefiting the
entity has been approved by the Board upon the basis of full
disclosure of such benefit) any profit or benefit in connection
with any transaction entered into on behalf of the Company or any
Subsidiary, or (iii) intentional disclosure or misappropriation of
confidential information belonging to the Company or any Subsidiary
(unless disclosure is required by applicable law or court or
administrative order), or (iv) material breach of any material
covenant contained in this Agreement or (v)(x) any other action in
violation of Executive's fiduciary duty owed to the Company or (y)
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 an entity in which he or any
such person has an interest; (b) 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 of Directors of the Company;
and/or (c) conviction of, or nolo contendere plea in
connection, with a felony. Termina
