EMPLOYMENT AGREEMENT
AGREEMENT (the "Agreement"), dated as of November 1, 1997, by and
between FORWARD INDUSTRIES, INC., a New York corporation, having its offices at
000 Xxxxxxxxx Xxxxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxx 00000 (the "Company"), and
XXXXXXX XXXXXXXXX, residing at 000 Xxxxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx
00000 (the "Executive").
RECITALS
A. The Executive has been engaged prior to the date hereof as an
employee, officer and/or a director of the Company, and the Executive has
unique knowledge of the Company's business, operations, affairs, requirements
and trade secrets.
B. By reason of the Executive's special knowledge and experience, his
services are uniquely valuable to the Company.
C. Prior to the date hereof, the Executive has been rendering services
to the Company on an at will oral basis.
D. It is the considered judgment of the Board of Directors of the
Company (the "Board") that it is in the Company's best interest to secure the
Executive's services, and to enter this Agreement.
E. The Company and the Executive have agreed upon all the terms of the
Executive's employment as reflected in this Agreement.
Accordingly, in consideration of the mutual promises herein contained,
it is agreed as follows:
1. The Company hereby employs the Executive as Executive Vice
President and the Executive hereby accepts such employment with the Company,
for a three-year term (the
"Employment Term") commencing November 1, 1997 and expiring October 31, 2000,
unless sooner terminated as hereinafter provided.
2. During the Employment Term, the Executive will faithfully perform
his duties to the best of his abilities and in accordance with the directions
of the Company as given through the Board and Chairman of the Board. The
Company will use its best efforts to nominate and elect the Executive from year
to year as a Director. The services to be performed by the Executive will be
substantially of the same character as those presently being performed by the
Executive for the Company and for its wholly-owned subsidiary, Koszegi
Industries, Inc. The Executive will perform such additional executive services
as may, from time to time, be assigned by the Board. However, all services
required to be performed by the Executive hereunder must at all times be of a
type, nature and dignity as would normally be assigned to the Executive Vice
President of the Company or of similar companies. During the Employment Term,
the Executive will devote to the performance of such services substantially all
of his business time and attention. The Executive at all times will have such
executive powers and authority as may be required to enable him to discharge
his duties in an efficient manner.
3. If, during the Employment Term, the Executive is not serving as a
Director and as Executive Vice President of the Company (or in a more senior
capacity) or the Executive's authority and responsibility is curtailed or
diminished through action of the Board of Directors, the same will, at the
Executive's option, constitute a material breach of this Agreement by the
Company, unless the Company cures such breach within 30 days after receiving
written notice from the Executive specifically setting forth the claimed
breach. If the Company fails to cure such breach within such 30 day period, the
Executive, by written notice to the Board of Directors, may terminate his
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obligations hereunder, including, but not limited to, the rendition of any
services to the Company, but the Company will, nevertheless, remain obligated
to, and will, pay to the Executive, the Executive's widow (the "Widow") or the
estate of the Executive or the Widow, from the date of such termination, all
compensation which otherwise would have been payable to the Executive, the
Widow or the particular estate as provided in Paragraphs 4(a), (b) and (c)
hereof, but for such termination. However, if between the date of such
termination and November 1, 2000, the Executive accepts other employment, the
Company's obligation to pay salary and bonus as provided in Paragraphs 4(a) and
(b) hereof will be reduced by the amount of his compensation from such outside
employment. The Executive agrees that if he accepts such other employment after
the date of such termination, he will, promptly after commencing such
employment, notify the Company of the date such other employment commenced, the
anticipated expiration date of such other employment, and the rates and/or
amounts of compensation from such other employment. Nothing herein contained
will be deemed to impose any obligation upon the Executive to seek or continue
any such other employment. From and after the date of any such termination by
the Executive, the provisions of Paragraph 4 hereof applicable to the
Consulting Period (as defined in Paragraph 5) and of Paragraph 5 will have no
further force or effect.
4. As full compensation for all services to be rendered by Executive
pursuant to this Agreement, the Company agrees to pay to the Executive, and the
Executive agrees to accept the following:
(a) a salary at the annual rate of $150,000 payable to the Executive
in equal bi-weekly installments, or as may be the practice of the Company in
making salary payments. The Board may, if it deems it to be in the Company's
best interest, increase such salary rate from time to time.
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(b) In addition to salary, the Company will pay to the Executive for
each fiscal year of the Company during the Employment Term, bonus compensation
equal to 7.5% of Pre-Tax Earnings (as hereinafter defined) in excess of
$1,000,000. Pre-Tax Earnings shall mean the Company's net income before
provision for U.S. income taxes as disclosed by the Company's certified
financial statements for such fiscal year without taking into consideration
bonus compensation paid or payable to any employee of the Company for such
fiscal year, including the bonus payable to the Executive for such fiscal year
pursuant to this Paragraph 4(b). The calculation of bonus compensation will be
made by the certified public accountants regularly engaged by the Company. If
the Executive's employment is terminated pursuant to Paragraph 5 or if the
Executive should die, in each case, prior to the end of the Employment Term,
the Board shall determine in good faith the bonus payable to the Executive
pursuant to this Paragraph 4(b) for the fiscal years commencing after September
30, 1997. Payment of any bonus due to the Executive will be made as soon as
possible after the end of each fiscal year. In the event of the Executive's
death, any bonus due will be paid to the Executive's estate. Without limitation
to the foregoing provisions of this subparagraph (b), the Board may, if it
deems it to be in the Company's best interest, award a bonus to Executive in an
amount and on such terms (which are different than the provisions of this
subparagraph (b)) as the Board may from time to time determine.
(c) If the Executive dies during the Employment Term or during the
Consulting Period, the salary provided for in Paragraph 4(a) or the
consultative compensation provided for in Paragraph 5, as applicable, will be
paid to the end of the month in which the death occurs. Thereafter, if the
Company is the recipient of at least $1,000,000 of insurance on the life of the
Executive, the Company will pay to the Widow or, if the Executive's spouse has
pre-deceased him, to the
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Executive's estate, a monthly death benefit of $5,500, payable on the first day
of each month during the 10 year period following the date of the Executive's
death, commencing with the first calendar month following the month in which
the Executive died; if the Widow dies prior to the end of such 10 year period,
then after the Widow's death, such monthly payments will be made to the Widow's
estate for the balance of such 10 year period. If the Company is not the
recipient of at least $1,000,000 of insurance on the life of the Executive,
such monthly death benefits will be paid for a period of three years, followed
by monthly death benefits of $2,750 for seven years; if the Widow dies prior to
the end of such 10-year period, then, upon the Widow's death, such payments
shall cease. Payments will be made by mail to the recipient at such address as
the recipient may designate in writing to the Company from time to time.
(d) Both during the Employment Term and the Consulting Period, the
Company will provide the Executive with office space and facilities
commensurate with the Executive's position and adequate for the performance of
his duties and the Company will reimburse the Executive, in accordance with
past practices of the Company, for such items of travel, business entertainment
and miscellaneous expenses as may be reasonably incurred by him in the
performance of his duties hereunder.
(e) In recognition of the Executive's need for an automobile for
business purposes, the Company will provide the Executive during the Employment
Term, and if requested during the Consulting Period, with an automobile,
including maintenance, repairs, insurance and costs incident thereto, all
comparable to those presently provided to the Executive by the Company.
5.
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(a) If during the Employment Term, the Executive becomes incapacitated
so as to be unable to render the services required hereunder for a period of
120 consecutive days or 150 days in any period of 365 days, the Company may
terminate the Executive's employment hereunder by giving the Executive 30 days
written notice of termination specifying the effective date of termination (the
"Effective Date"). Upon the Effective Date,the Executive will be retained by
the Company, for a period equal to the shorter of the period of disability or
five years (the "Consulting Period"), as a consultant to render the consulting
services described in Paragraph 5(c).
(b) Until the Effective Date, the Executive will continue to receive
his full salary and other compensation provided in Paragraph 4, and from the
commencement of the Consulting Period to the earlier to occur of (i) the
expiration of the Consulting Period, or (ii) the Employment Term, or (iii) the
death of the Executive, the Company will pay to the Executive consultative
compensation at the rate of 75% of the annual salary which the Executive was
receiving on the commencement date of the Consulting Period; and at the end of
the Employment Term, until the earlier to occur of (i) the expiration of the
Consulting Period, or (ii) the death of the Executive, the Company will pay to
the Executive consultative compensation at the rate of 60% of the annual salary
which the Executive was receiving on the commencement date of the Consulting
Period. Consultative compensation will be paid in equal monthly installments on
the first day of each month, commencing with the calendar month following the
month in which the Effective Date shall have occurred and the Company shall
receive credit for any amounts paid to the Executive during the immediately
preceding month under any disability insurance, the premiums for which have
been paid by the Company.
(c) During the Consulting Period, the Executive will only be required
to render such consulting services as he is capable of rendering and the
Company determines to be appropriate, but
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the Executive's incapacity at any-time to render such consulting services or
the Executive's inability to render such services which might be detrimental to
his health will not affect the Company's obligation to pay consultative
compensation pursuant to Paragraph 5(b). The Executive is not required to
attend at the Company's offices in Brooklyn, New York or at any other place
designated by the Company in order to be entitled to any consultative
compensation, and the Executive may render any such services from his
residence.
6. In addition to the compensation provided for by this Agreement, the
Company agrees that the Executive shall be entitled to participate in any
retirement, disability, medical, pension, profit sharing, group insurance, or
any other plan or arrangement, or in any other benefits now or hereafter
generally available to executives of the Company, in each case to the extent
that the Executive shall be eligible under the general provisions thereof. The
Executive shall be entitled to vacation periods consistent with the past
practices of the Company with regard to the Executive in such matters.
7. The Company, by notice to the Executive, may terminate the
Executive's employment hereunder for Proper Cause. As used herein, "Proper
Cause" shall mean that the Executive has (a) willfully or materially refused or
failed to carry out specific directions of the Board of Directors of the
Company, or (b) willfully refused or failed to perform a material part of his
duties hereunder, or (c) materially breached the provisions of Section 8 of
this Agreement, or (d) acted fraudulently or dishonestly in his relations with
the Company, or (e) committed larceny, embezzlement, conversion or any other
act involving the misappropriation of Company funds or assets in the course of
his employment, or (f) been convicted of any crime involving an act of moral
turpitude.
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8. (a) In view of the fact that the Executive's work for the Company
has and will bring him into close contact with many confidential affairs of the
Company not readily available to the public, as well as plans for future
developments, the Executive agrees:
(1) To keep secret and retain in the strictest confidence all
confidential matters of the Company, including, without limitation, trade
"know-how", secrets, customer lists, pricing policies, operational methods,
technical processes and other business affairs of the Company, learned by him
heretofore or hereafter and not to disclose them to anyone outside the Company,
either during or after his employment with the Company except (i) in the course
of performing his duties hereunder, (ii) with the Company's express written
consent, (iii) to the extent that any such information is in the public domain,
other than as a result of the Executive's breach of any of his obligations
hereunder, or (iv) when required to be disclosed by Court order, subpoena or
other governmental process.
(2) To deliver promptly to the Company on termination of his
employment by the Company, or at any other time the Company may so request, all
memoranda, notes, records, reports, and other documents (and all copies
thereof) relating to the Company's business and all property associated
therewith, which he may then possess or have under his control.
(b) During the term of this Agreement and for a period of one (1) year
following a Termination of Employment in Breach of Executive's Obligations (as
such term is defined in Paragraph 8(d) hereof):
(1) The Executive shall not, without the prior written consent of the
Company, directly or indirectly:
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(i) enter into the employ of or render any services to any person,
firm or corporation engaged in any Competitive Business (as such term is
defined in Section 8(d) hereof) which competes directly with the Company;
(ii) engage in any Competitive Business which competes directly
with the Company for his own account; or
(iii) become interested in any Competitive Business which competes
directly with the Company as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, trustee, consultant, advisor or
in any other relationship or capacity. However, nothing in this Agreement shall
preclude the Executive from investing his personal assets in the securities of
a corporation or other business entity which is engaged in a Competitive
Business with the Company if such securities are traded on a national stock
exchange or in the over-the-counter market and if such investment does not
result in his beneficially owning, at any time, more than two (2%) percent of
the publicly-traded equity securities of such competitor.
(2) The Executive shall not, without the prior written consent of the
Company, directly or indirectly employ or retain, or have or cause any other
person or entity to employ or retain, any person who was employed in any
executive, managerial or sales capacity by the Company or any of its
subsidiaries or affiliates while the Executive was employed by the Company.
(c) If the Executive commits a breach, or threatens to commit a
breach, of any of the provisions of Paragraphs 8(a) or 8(b) hereof, the Company
shall have the following rights and remedies:
(1) The right and remedy to have the provisions of this Agreement
specifically enforced pursuant to the provisions of Paragraphs 8(a) and 8(b),
it being acknowledged and agreed by the
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Executive that the services being rendered hereunder to the Company are of a
special, unique or extraordinary character in that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company; and
(2) The right and remedy to require the Executive to account for and
pay over to the Company all compensation, profits, monies, accruals, increments
or other benefits (collectively "Benefits") derived or received by the
Executive as a result of any transactions constituting a breach of any of the
provisions of Paragraphs 8(a) or 8(b), and the Executive hereby agrees to
account for and pay over such Benefits to the Company.
(d) The following terms, as used in this Paragraph 8 or anywhere else
in this Agreement, shall have the same meaning as set forth below.
(1) The term "Termination of Employment in Breach of Executive's
Obligations" shall mean, with respect to the Executive, the occurrence of any
of the following events:
(i) the termination by the Company of this Agreement for Proper
Cause, as set forth in Paragraph 7 hereof;
(ii) the Executive's voluntary withdrawal from the employment of
the Company in breach of this Agreement.
(2) The term "Competitive Business" shall mean any line of business
engaged in or conducted by the Company, and any line of business that is
substantially the same as any line of business engaged in or conducted by the
Company (i) during the term of this Agreement, (ii) at the time the Executive's
employment hereunder was terminated as a result of a Termination of Employment
in Breach of Executive's Obligations; or (iii) which, to the knowledge of the
Executive, the Company definitively planned to engage in or conduct at the
earlier to occur of (i) or (ii). As of
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the date hereof, the Company is currently engaged in the design, manufacture
and sale of advertising specialties and looseleaf ring and post binders.
(e) Each of the rights and remedies enumerated above and elsewhere in
this Agreement shall be independent of the other, and shall be severally
enforceable, and all of such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company under
law or in equity.
9. All notices, approvals, consents, acceptances, waivers, reports,
requests and other communications required or permitted to be given hereunder
(all of the foregoing hereinafter collectively referred to as "Communications")
shall be in writing and shall be deemed to have been duly given if delivered
personally with receipt acknowledged or sent by registered or certified mail or
equivalent, if available (airmail if out-of-town), postage prepaid, or by telex
or cablegram (which shall be confirmed by a writing sent by registered or
certified mail or equivalent on the same day that such telex or cablegram is
sent), addressed to the parties at the following addresses or at such
additional address as any party shall hereafter specify by Communication to the
other party:
(a) If to the Company:
FORWARD INDUSTRIES, INC.
000 Xxxxxxxxx Xxxxxxxx
Xxxx Xxxxxxxxx, Xxx Xxxx 00000
Attention: President
with a copy to
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
(b) If to the Executive:
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Xxxxxxx Xxxxxxxxx
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Except as otherwise provided herein, all Communications shall be
deemed given, received and dated on the date when received personally, one (1)
day after being sent by cable or telex and three (3) business days after
mailing by first class mail, postage prepaid, whichever shall first occur.
10. This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements or understandings, written or oral, between the parties with respect
to the subject matter hereof. No interpretation, change, termination or waiver
of or extension of time for performance under any provision of this Agreement
shall be binding upon any party unless in writing and signed by the party
intended to be bound thereby. Except as otherwise provided in this Agreement,
no waiver of or other failure to exercise any right under or default or
extension of time for performance under any provision of this Agreement shall
affect the right of any party to exercise any subsequent right under or
otherwise enforce said provision or any other provision hereof or to exercise
any right or remedy in the event of any other default, whether or not similar.
11. If any one or more of the provisions contained in this Agreement,
or any part thereof, is hereafter construed to be invalid and unenforceable,
the same shall not affect the remainder of such provisions, which shall be
given full effect regardless of the invalid portions, and the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute for such invalid or unenforceable provision in light of
the tenor of this Agreement and, upon so agreeing, shall incorporate such
substitute provision in this Agreement. If the courts of any one or
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more jurisdictions shall hold all or any part of the provisions contained in
this Agreement wholly unenforceable by reason of the breadth or scope thereof
or otherwise, it is the intention of the parties that such determination shall
not bar or in any way affect their right to relief in the courts of any other
jurisdictions as to failure to observe such provisions in such other
jurisdictions, the above provisions as they relate to each jurisdiction being,
for this purpose, severable into diverse and independent provisions. If any of
the provisions contained in this Agreement is held to be unenforceable because
of the duration of such provision or the geographical area or the nature of the
business of the Company covered thereby, the parties agree that the court
making such determination shall have the power to reduce the duration,
geographical area and/or nature of business of the Company by such provision
and in its reduced form said provision shall then be enforceable.
12. This Agreement shall be binding upon and shall inure to the
benefit of the undersigned parties and their respective legal representatives,
heirs, successors and assigns. This Agreement may not be assigned by the
Executive.
13. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in entirety in the State of New York.
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement the date and year first above written.
FORWARD INDUSTRIES, INC.
By:
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XXXXXXX XXXXXXXXX
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