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 Douglas W. Sabra, residing at
7441 Brunswick Circle, Boynton Beach FL 33437 ("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, and amended as of July 12, 2005 (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
Vice President and Chief Financial 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, 2008. 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.
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.
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(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
$185,000 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.
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.
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(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.
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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, 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
